Commerce Bancshares, Inc. · NASDAQ:CBSH
Commerce Bancshares — Q3 2023 Earnings Presentation
52 slides from Commerce Bancshares's earnings presentation, 2023
Slide 1: Commerce Bancshares Investor Update 3rd Quarter 2023
PEOPLE, GROWTH AND POSSIBILITIES COMMERCE BANCSHARES, INC. INVESTOR UPDATE 3rd Quarter 2023
Slide 2: Cautionary Statement
CAUTIONARY STATEMENT A number of statements we will be making in our presentation and in the accompanying slides are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, such as statements of the Corporation’s plans, goals, objectives, expectations
Slide 3: Commerce Bancshares at a glance
COMMERCE BANCSHARES TOTAL ASSETS $31.4 158 YEARS IN BUSINESS BILLION TOTAL DEPOSITS $25.1 BILLION 40TH LARGEST U.S. BANK BASED ON ASSET SIZE1 MARKET CAP TOTAL $17.1 LOANS2 BILLION $6.0 BILLION $10.4 COMMERCIAL CARD VOLUME 20TH BILLION AS OF DECEMBER 31, 2022 LARGEST U.S. BANK BASED ON MARKET CAP1 TO
Slide 4: Super-Community Bank Platform
SUPER-COMMUNITY BANK PLATFORM A consistent strategy with a long-term view Customer relationship-based: Community Bank Challenge Accepted.® Super-Regional Bank • Award-winning High-performing teams and • Sophisticated payment customer service system capabilities engaged workforce • Focus on the full
Slide 5: Track Record of Long-Term Outperformance
TRACK RECORD OF LONG-TERM OUTPERFORMANCE Revenue Diversification Deposit Franchise Continued Long-Term Investments Balanced earnings profile, fee $23.3 billion in low-cost, diverse revenue at 36%1 of total revenue, deposits2 with peer-leading Core banking system bolstered by growing wealth and histo
Slide 6: A Full-Service, Diversified Operating Model
A FULL-SERVICE, DIVERSIFIED OPERATING MODEL Card, Wealth & Deposit fees provide stable, growing revenue source Revenue Source Diversification Non-Interest Income Compared to Peers1 $ in millions 5% $525 $560 $547 2% $506 $410 $428 7% 3% 5% 3% 11% 3% 6% Commerce 2019 2020 2021 2022 YTD YTD Bank Peers
Slide 7: Well-Diversified Loan Portfolio
WELL-DIVERSIFIED LOAN PORTFOLIO Loan Portfolio Diversification YTD Average Loans2 $s in millions Compared to Peers1 5% $16,688 30% $15,916 $15,686 $15,570 21% 3% 11% $13,946 $14,243 36% 21% Commerce Peers 2018 2019 2020 2021 2022 YTD Bank Banks 2023 2023 Loan Growth by Category (Average loans Sep. 2
Slide 8: A Strong Culture Is the Foundation of Our Success
A STRONG CULTURE IS THE FOUNDATION OF OUR SUCCESS At Commerce, our core values shape the way we live and work: We have a We collaborate We act with We are We strive for long-term as one team integrity customer- excellence view focused How we put our culture into practice: What defines us, ultimately
Slide 9: Commerce's Focus Extends Beyond Banking
COMMERCE’S FOCUS EXTENDS BEYOND BANKING Supporting our communities, our customers and our team members “ MORE THAN 500 As a socially responsible corporate citizen, we continuously seek opportunities to “ 2023 Engagement and Enablement2 Consistently scoring above the U.S. High Performance and U.S. ma
Slide 10: Our Commitment to Diversity, Equity and Inclusion
OUR COMMITMENT TO DIVERSITY, EQUITY AND INCLUSION Our longstanding approach of “doing what’s right” continues to guide our focus on our team members, customers and communities A Blue Chip initiative centered on A culture that celebrates inclusion and diversity Commerce offers a variety of internal r
Slide 11: Recent Recognition
RECENT RECOGNITION 2022 BEST 2022 90 2023 Forbes World’s Customer Service, FROM TEMENOS Forbes America’s Human Rights Forbes America’s Best Banks1 Newsweek’s Best Modernized Core Best Banks4 Campaign Best Midsize Banks 2022 List2 Banking Platform to Corporate Equality Employers6 4 consecutive years
Slide 12: Commerce Bank Maintains Solid Performance Over Time
COMMERCE BANK MAINTAINS SOLID PERFORMANCE OVER TIME Return on Average Assets 2.0% 1.5% ROAA 15-yr average 1.0% CBSH: 1.30% 0.5% Peers: 0.98% 0.0% 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Commerce Peer Median Large Bank Median Return on Average Common Equity 20.0% 15
Slide 13: Long-Term View: Net Income and Earnings Per Share
LONG-TERM VIEW: NET INCOME AND EARNINGS PER SHARE $600 $4.50 Earnings Per Share Earnings per Share (EPS) $550 $4.00 $500 Net Income $450 $3.50 Net Income $ in millions $400 $3.00 $350 $2.50 $300 $250 $2.00 $200 $1.50 $150 $100 $1.00 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Dividends $0.55 $
Slide 14: Steady Shareholder Returns
STEADY SHAREHOLDER RETURNS as of September 30, 2023 Annualized Comparison Total Shareholder Returns Indexed, 09/30/2008 = $100 Total Shareholder Returns $500 CBSH KBW Bank S&P 500 30% KBW Regional S&P 500 20% $400 10% 0% $300 COMMERCE -10% -20% KBW -30% $200 REGIONAL 1 Year 3 Year 5 Year 10 Year 15
Slide 15: Strategic Position
STRATEGIC POSITION 15
Slide 16: Strategic Posture: Maintaining the Balance
STRATEGIC POSTURE: MAINTAINING THE BALANCE Disciplined focus on PRIORITY STRONG PERFORMANCE with BLUE CHIP investments ongoing refinement of the “Core Bank” • Diversity, Equity and Inclusion • Super-Community Bank platform • Enhancing our People • Relationship-based banking Leadership • High-touch c
Slide 17: Digital Technology: Application Modernization
DIGITAL TECHNOLOGY: APPLICATION MODERNIZATION Payments BUSINESS DRIVERS • Instant Payments (RTP, FedNow) • New Capabilities • Wires System Refresh • Improved User Experience • Flexibility • ACH System Refresh • Reduced Operational Expense Lending • Risk Management • Private Banking Loan Origination
Slide 18: CBI Blue Chip: Enterprise Digital Strategy
CBI BLUE CHIP: ENTERPRISE DIGITAL STRATEGY Our Vision • Creates a single Digital Strategy expanding across all segments of the bank Transform the digital experience by staying current on digital trends and creating • Committed to delivering customer digital solutions rapidly seamless digital ecosyst
Slide 19: Commercial Banking
COMMERCIAL BANKING Revenue growth opportunities Financing solutions and deposit capabilities customized for your business • Working Capital Line of Credit • Commercial Real Estate • Full suite of cash management solutions • Term Loans • ESOP Loans • Robust Card and Merchant acceptance • Equipment Fi
Slide 20: Industry-Leading Commercial Payments Capabilities
INDUSTRY-LEADING COMMERCIAL PAYMENTS CAPABILITIES Innovative payments solutions to manage payables and receivables to streamline cash flow $200 $63 $10.4 $7.7 MILLION MILLION BILLION BILLION Payments Treasury Commercial Merchant Revenue Management Card Volume Revenue Volume Information as of Decembe
Slide 21: Healthcare banking specialty
We don’t just serve the healthcare industry. It’s our specialty. Partner to 3,000+ healthcare providers and 500+ hospitals in all 48 contiguous states 100+ entities and over 42 million patient transactions annually Patient Engagement Receivables Accounts Payable Traditional Banking Solutions Managem
Slide 22: Expansion Markets Offer Growth Opportunities
EXPANSION MARKETS OFFER GROWTH OPPORTUNITIES Team Overview for Expansion Markets 2022 Fee Income Expansion Market Loan Growth Growth # of team members per market (includes open positions) 102% $ in millions Expansion 44 Market Loan $3,280 Growth Oklahoma since 2017 72% 47 $2,615 $2,466 since 2017
Slide 23: Commerce Trust Company wealth management
For high-net-worth individuals who are looking to simplify their complex financial life, Commerce Trust Company provides a full-service approach to wealth management. 20TH $60 $37 $618 Largest Among Bank-Managed BILLION BILLION MILLION Trust Total Client Assets Under Managed Companies1 Assets2 Manag
Slide 24: Wealth Key Growth Initiatives
Wealth Key Growth Initiatives Strengthening our Wealth Brands • Utilize new private banking loan and deposit system to offer special products, services and automation • Continued expansion into new concentrated wealth markets through de novo and acquisition efforts • Expand our integrated referral s
Slide 25: Consumer Banking Snapshot
CONSUMER BANKING SNAPSHOT 148 Full-service branches 293 ATMs $13.0 $1.9 812 BILLION BILLION THOUSAND Consumer Consumer Consumer Deposits1 Loans2 Households1 Focus on Digital 4.7 4.7 68.6% $73,345 28.2% Commerce Bank Digital HH Digital Loan Mobile App Rating Penetration Sales (000s) Deposit Use Perio
Slide 26: Distinctive Digital Offerings
DISTINCTIVE DIGITAL OFFERINGS Commerce Bank CONNECT® Mobile App Personalized experience allowing customers to engage with a banker they choose, right from their smartphone • First in the region to introduce this innovation, enabling high- 98% customer touch service through a digital channel satisfac
Slide 27: Liquidity and Capital
LIQUIDITY AND CAPITAL 27
Slide 28: Liquidity and Capital Highlights
LIQUIDITY AND CAPITAL HIGHLIGHTS Liquidity / Borrowing Deposits • $1.8B of cash at Federal Reserve Bank (FRB) • Average loan to deposit ratio of 66%. at Q3. • Uninsured deposits1 of 32% of total deposits at Q3. • Average FHLB advances declined $932MM. • Brokered deposits of $503MM matured in Q3 • AF
Slide 29: Deposit Balance Trends
DEPOSIT BALANCE TRENDS Segment view $ in billions Commercial Consumer Wealth $13.4 $12.8 $12.0 $11.9 $12.3 $12.1 $12.3 $12.3 $11.3 $10.5 $10.3 $10.2 $9.9 $10.1 $10.0 $7.8 $3.0 $2.8 $2.3 $2.4 $2.3 $2.3 $2.3 $1.8 2019 2020 2021 2022 2Q23 3Q23 2Q23 3Q23 2019 2020 2021 2022 2Q23 3Q23 2Q23 3Q23 2019 2020
Slide 30: Deposit Portfolio Characteristics
DEPOSIT PORTFOLIO CHARACTERISTICS Percent of accounts under $250,000 99% Uninsured Deposit Analysis $ in billions 9/30/2023 Uninsured Deposits $ 10.2 Percent of deposits ($) uninsured1 32% Less: Affiliate Deposits $ 0.4 Less: Collateralized Deposits $ 1.7 Average balance of accounts $25,479 Uninsure
Slide 31: FHLB Advances & Brokered CDs
FHLB ADVANCES & BROKERED CDS Current Maturity Schedule as of 9/30/2023 Brokered CDs FHLB Advance • Short-term, wholesale $1,904MM funding decreased as short-term brokered $904MM CDs and FHLB advances matured $901MM $401MM • Remaining FHLB $1,000MM advances and $500MM brokered CDs mature $0MM by Dece
Slide 32: Well-Positioned for Multiple Rate Environments
WELL-POSITIONED FOR MULTIPLE RATE ENVIRONMENTS Opportunities to enhance and protect NII in a Cost of Total Deposits & Deposit Beta: Prior & Current Fed Cycle rising rate environment. Cost of Total Deposits • Net yield on interest earning assets decreased 1 bps Before Fed Rate End of Fed Rate Deposit
Slide 33: High Quality, Highly Liquid and Diverse Investment Portfolio
HIGH QUALITY, HIGHLY LIQUID AND DIVERSE INVESTMENT PORTFOLIO Composition of AFS Portfolio As of September 30, 2023 Total available for sale securities Average balance: $10.2 billion, at fair value Duration QTD – Sept. 30, 2023 Avg Rate (yrs) Treasury & agency Treasury & agency1 1.04% 2.0 4% 9% Munic
Slide 34: Sound Capital and Liquidity Position
SOUND CAPITAL AND LIQUIDITY POSITION Tier 1 Risk-Based Capital Ratio1 Loan to Deposit Ratio Peer Median: 11.0% Large, stable deposit base CBSH 14.7% 14.5% 66% Average PB Core Deposits Loan to CFR 13.9% Deposit Ratio 3 UBSI 12.8% 12.7% $22.1 84% Average UCBI Loan to BOKF 12.1% Billion2 Deposit Ratio
Slide 35: Summary of Fixed & Floating Loans
SUMMARY OF FIXED & FLOATING LOANS Over 55% of total loans are variable; 64% of commercial loans have floating rates Fixed Variable Business Construction Business RE Commercial Total Loans: $5.7B Total Loans: $1.4B Total Loans: $3.4B 5% 40% 43% 60% 57% 95% Personal RE Consumer HELOC Consumer Card Tot
Slide 36: Commercial Real Estate Breakdown
COMMERCIAL REAL ESTATE BREAKDOWN Real Estate - Business Loans: Office Outstanding Balances by Geography1 Other Real Estate - Business Loans Midwest Other States States Real Estate - % of Total Business Loans Loans $3.6 billion CO OH 7.3% 0.8% IL 4.9% Owner – Occupied 6.6% Owner- OK 31.0% occupied 2.
Slide 37: Maintaining Strong Credit Quality
MAINTAINING STRONG CREDIT QUALITY Net Loan Charge-Offs (NCOs) Allowance for Credit $ in millions Losses on Loans (ACL) $14.5 $ in millions $298.0 $304.6 $260.6 $9.8 $8.2 $6.5 .23% $143.4 $158.7 1.21% $162.2 1.22% $4.8 .22% 1.15% $3.4 .16% .94% .95% .14% .90% .12% .06% 3Q22 2Q23 3Q23 3Q22 2Q23 3Q23 N
Slide 38: Allocation of Allowance
ALLOCATION OF ALLOWANCE CECL allowances reflect the economic and market outlook Allowance for Credit Losses (ACL) on Loans June 30, 2023 Sept. 30, 2023 $ in millions $250 1.47% 1.60% 1.44% Allowance Allowance for Credit % of for Credit % of Losses Outstanding Losses Outstanding 1.35% $ in millions (
Slide 39: Strong Capital Position - Flexibility in Capital Planning
STRONG CAPITAL POSITION – FLEXIBILITY IN CAPITAL PLANNING 55 consecutive years of regular common cash dividend increases1 Capital Returned to Common Shareholders as a percentage of Net Income2 Cash dividends paid on common stock (left) Total Payout - % (right) Total Payout Ratio (%) $300 Common shar
Slide 40: Financial Results 3Q2023
FINANCIAL RESULTS 3Q2023 40
Slide 41: Financial Performance vs. Prior Years
FINANCIAL PERFORMANCE VS. PRIOR YEARS Net Income Attributable to Earnings per Common Return on Total Average CBI ($ in Millions) Share As of Sept 30 Assets As of Sept 30 $531 As of Sept 30 $4.11 $488 $3.85 1.55% 1.53% 1.45% 1.39% $368 $2.81 $2.93 $357 YE 2021 YE 2022 YTD 2022 YTD 2023 YE 2021 YE 202
Slide 42: 3Q2023 Highlights
3Q2023 HIGHLIGHTS Highlights Well-positioned for current environment PPNR1 • Average loans up 1.8% over Q2. $163.5 million • Total average assets declined $755MM from Q2, driven by Net Income $1B of wholesale funding maturities. $120.6 million • Period end non-interest bearing deposits to total depo
Slide 43: Balance Sheet Highlights
BALANCE SHEET HIGHLIGHTS Quarterly Average Balances 3Q23 vs. 2Q23 3Q23 vs. 3Q22 $ in millions 3Q23 $ Change % Change $ Change % Change Loans: Quarterly growth in all categories. Commercial $11,000.1 $251.7 2% $1,135.5 12% Consumer 5,968.2 1% 186.8 3% Investment securities: 47.6 Continues to decline.
Slide 44: Balance Sheet
BALANCE SHEET Loans Deposits QTD Average Balances QTD Average Balances $ billions $ billions +8% -8% $27.8 $25.2 $25.6 6.02% 5.84% $10.8 $7.9 $8.2 $16.7 $17.0 $15.6 1.76% $5.9 $6.0 $5.8 1.29% 4.37% $17.0 $17.0 $17.7 $9.8 $10.8 $11.0 .21% 3Q22 2Q23 3Q23 3Q22 2Q23 3Q23 Consumer Loans Loan Yield Non-In
Slide 45: Loan Portfolio
LOAN PORTFOLIO Period-End Balances QTD Average Balances $ in 000s 9/30/2023 6/30/2023 9/30/2022 QoQ YoY $ in 000s 9/30/2023 6/30/2023 9/30/2022 QoQ YoY Business $5,908,330 $5,906,493 $5,528,895 0.0% 6.9% Business $5,849,227 $5,757,388 $5,317,696 1.6% 10.0% Construction 1,539,566 1,451,783 1,206,955
Slide 46: Income Statement Highlights
INCOME STATEMENT HIGHLIGHTS Pre-Tax, Pre-Provision Net Revenue (PPNR) Net Interest Income (+) 3Q23 Comparison Non-Interest Income (+) vs. 3Q22 (5.0)% Revenue was down Non-Interest Expense (-) Pre-Tax, Pre-Provision Net Revenue (=) vs. 2Q23 (3.6)% 1.4% from 2Q and up 1.7% over the same $398 $391 $385
Slide 47: Income Statement
INCOME STATEMENT 3Q23 vs. 2Q23 3Q23 vs. 3Q22 $ in millions 3Q23 $ Change % Change $ Change % Change Net Interest Income $248.5 $(1.0) (0)% $2.2 1% Non-Interest Income 142.9 (4.7) (3)% 4.4 3% Non-Interest Expense 228.0 .4 0% 15.1 7% Pre-Tax, Pre-Provision Net Revenue1 $163.4 $(6.0) (4)% $(8.5) (5)% I
Slide 48: Non-Interest Income Highlights
NON-INTEREST INCOME HIGHLIGHTS 3Q23 vs. 2Q23 3Q23 vs. 3Q22 Bank Card: Corporate card fees $ in millions 3Q23 $ Change % Change $ Change % Change decreased from Q2 due to lower interchange fees and Bank Card Transaction Fees $46.9 $(2.8) (6)% $1.3 3% higher rewards expense. Trust Fees 49.2 1.9 4% 3.8
Slide 49: Non-Interest Expense Highlights
NON-INTEREST EXPENSE HIGHLIGHTS 3Q23 vs. 2Q23 3Q23 vs. 3Q22 $ in millions 3Q23 $ Change % Change $ Change % Change Salaries and employee Salaries and Employee Benefits $146.8 $1.4 1% $9.4 7% benefits: Increased over the prior year Net Occupancy 13.9 1.0 7% 1.4 11% due to higher full-time salaries an
Slide 50: Net Interest Income: QTD - September 30, 2023
NET INTEREST INCOME: QTD – September 30, 2023 Quarterly Net Interest Income (Fully taxable-equivalent) • Net interest income (fully taxable-equivalent) $260 3.6% decreased $795 thousand from the prior quarter. Net interest income – 3.4% $240 • The net yield on interest earning assets 3.2% $ in milli
Slide 51: Non-GAAP Reconciliations
NON-GAAP RECONCILIATIONS Pre-tax, Pre-provision Net Revenue For The Three Months Ended (DOLLARS IN THOUSANDS) Sep. 30, 2023 Jun. 30, 2023 Sep. 30, 2022 A Net Interest Income $ 248,547 $ 249,538 $ 246,373 B Non-Interest Income $ 142,949 $ 147,605 $ 138,514 C Non-Interest Expense $ 228,010 $ 227,611 $
Slide 52: Investor Relations
PEOPLE, GROWTH AND POSSIBILITIES Investor Relations Contact Information: Matt Burkemper Senior Vice President, Commerce Bank Corporate Development and Investor Relations 314.746.7485 Matthew.Burkemper@commercebank.com Commerce Bancshares, Inc. Investor Relations website: http://investor.commercebank