COMMERCE BANCSHARES, INC.

EARNINGS HIGHLIGHTS

4th Quarter 2020

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, projections, estimates and intentions. These forward- looking statements involve significant risks and uncertainties and are subject to change based on various factors (some of which are beyond the Corporation's control). Factors that could cause the Corporation's actual results to differ materially from such forward- looking statements made herein or by management of the Corporation are set forth in the Corporation's 2019 Annual Report on Form 10-K, 3RD Quarter 2020 Report on Form 10-Q and the Corporation's Current Reports on Form 8-K.

2

4Q2020 EARNINGS HIGHLIGHTS

Highlights

PPNR1

$148.6 million

Allowance for Credit

Losses on Loans

$15.5 million decrease

Income Available to Common

$129.9 million

EPS

$1.11

ROAA

1.63%

ROACE

15.49%

Deposit Growth3

Well-positioned in a challenging environment

  • Allowance for credit losses on loans to total loans decreased to 1.35%
    • Decreased to 1.48% excluding Paycheck Protection Program ("PPP") loans.
  • Net charge-offs to total loans of .19% and Non-performing assets to total loans of .16%.
  • Loans on deferral of .6% of total loans.
  • Non-interestincome to total revenue of 39.2%.
  • Non-interestincome up 4.3% over Q3.
  • QTD average loans flat to Q3 at $16.4B.
  • QTD average deposits increased by $843MM in Q4 compared to Q3.
  • Tangible common equity to tangible assets of 9.92%.
  • Net interest margin decreased 17 bps from Q3 to 2.80% (8 bps excluding adjustments4).
  • Wealth management client assets increased in Q4 by 11.9% to $61.2MM.

$1.2 billion

  1. See the non-GAAP reconciliation on page 13; 2 Compared to 3Q2020; 3 Compared to 3Q2020, based on period-end balances;
  1. Adjustments include a -$3.5 million adjustment to premium amortization on mortgage-backed securities for prepayment

speed changes and a -$2.1 million decrease in inflation income on our Treasury inflation-protected securities.

3

BALANCE SHEET HIGHLIGHTS

Average Balances

4Q20

Change vs.

$ in millions

3Q20

4Q19

Highlights

• Linked quarter reflects lower business

loans offset by higher construction and

Commercial1

$10,643.0

$(30.2)

$1,559.4

business real estate

• YoY reflects PPP

• Linked quarter reflects higher personal

Consumer

5,718.3

25.5

358.2

real estate partially offset by lower auto,

credit card, home equity

Total Loans

$16,361.3

$(4.7)

$1,917.6

Investment Securities

$12,302.5

$846.9

$3,480.2

• Reflects net purchase activity

Interest Earning Deposits with Banks

$1,082.6

$58.2

$692.5

• Reflects liquidity from deposit growth

Deposits

$25,590.7

$843.3

$5,433.9

• 3.4% quarterly growth, 27% annual

growth

Equity

$3,336.1

$(30.0)

$204.6

• Linked quarter reflects Q3 redemption of

preferred stock

Book Value per Common Share2

$29.03

$0.80

$3.60

• 2.8% quarterly growth, 14.2% annual

growth

  1. PPP average balances were $1,476.2 million and $1,505.7 million as of December 31, 2020 and September 30, 2020, respectively
  2. For the quarters ended December 31, 2020

4

BALANCE SHEET

Loans

QTD Average Balances $ billions

+13%

$14.5

$16.3

$16.3

$5.7

$5.7

$5.4

4.47%

3.69%

3.69%

$9.1

$10.6

$10.6

4Q19

3Q20

4Q20

Consumer Loans

Loan Yield

Commercial Loans

Deposits

QTD Average Balances

$ billions

+27%

$25.6

$24.7

$20.2

$9.8

$10.3

$6.6

$13.6

$14.9

$15.3

0.52%

0.18%

0.12%

4Q19

3Q20

4Q20

Non-Interest Bearing

Interest Bearing Deposit Yield

Interest Bearing Deposit

5

INCOME STATEMENT HIGHLIGHTS

Change vs.

$ in millions

4Q20

3Q20

4Q19

Highlights

Net Interest Income

$209.8

$(6.2)

$7.1

• Linked quarter (LQ) decline due to lower

earning asset yields partially offset by lower

deposit costs and larger balance sheet.

• LQ increase in bank card, trust fees and

Non-Interest Income

$135.1

$5.5

$(8.3)

mortgage loan sales.

• Excluding the one-time gain of the corporate

trust business sale in Q419, non-interest income

grew $3.1MM, or 2.4%.

Non-Interest Expense

$196.3

$5.5

$1.1

• Increase of 2.9% over LQ, .6% over prior year.

• LQ increase due to higher incentive

compensation.

Pre-Tax,Pre-Provision Net Revenue1

$148.6

$(6.1)

$(2.4)

Investment Securities Gains

$12.3

$(3.8)

$12.6

• Q4 fair value gains on private equity portfolio

(Losses), Net

and MBS sale gains.

Provision for Credit Losses

$(4.4)

$(7.5)

$(19.6)

• Declines primarily driven by improvement in

economic forecast

Net-Income Available to Common

$129.9

$4.9

$25.3

Shareholders

4Q20

3Q20

4Q19

Net Income per Common Share -

$1.11

$1.06

$.88

Diluted

Efficiency Ratio

56.68%

55.00%

56.29%

• Continued expense discipline

Net Yield on Interest Earning Assets

2.80%

2.97%

3.36%

• Lower earning asset yields partially offset by

lower deposit costs.

1 See the non-GAAP reconciliation on page 13

6

PRE-TAX,PRE-PROVISION NET REVENUE (PPNR)

Net Interest Income (+) Non-Interest Income (+)

Non-Interest Expense (-)

Pre-Tax,Pre-Provision Net Revenue (=)

$346

$203

$195

$151

$143

4Q2019

$346

$216

$191

$155

$130

3Q2020

$345

4Q2020

$210

$196

Comparison

vs. 4Q2019

-1.6%

vs. 3Q2020

-3.9%

$149

$135

4Q2020

See the non-GAAP reconciliation on page 13

7

SOUND CAPITAL AND LIQUIDITY POSITION

Total Risk-Based Capital Ratio1

Loan to Deposit Ratio

SFNC

Peer Median: 14.1%

15.8%

Large, stable deposit base and low

OZK

15.3%

loan to deposit ratio

UBSI

15.1%

Core Deposits

64%Commerce

Average Loan

3to

UMPQ

15.0%

CFR

14.7%

$25.1

Deposit Ratio

CBSH

14.6%

90%

Average Loan to

PB

14.3%

Billion2

Deposit Ratio1

PNFP

14.2%

Peer Average

BXS

14.2%

Total Deposits

UMBF

14.2%

BOKF

14.1%

FULT

13.8%

Core Deposits

ASB

13.8%

- Non-Interest

FCNC.A

13.7%

Certificates of 7%

Bearing

WBS

13.5%

93% - Interest Checking

HWC

12.9%

Deposit

- Savings and

WTFC

12.9%

Money Market

ONB

12.8%

VLY

12.4%

FNB

12.2%

1S&P Global Market Intelligence, Information as of September 30, 2020

2Period-end balances, as of December 31, 2020

8

3Includes loans held for sale, for the quarter ended December 31, 2020

MAINTAINING STRONG CREDIT QUALITY

Net Loan Charge-Offs (NCOs)

$ in millions

$15.2

$10.4

$8.3

$7.6

$8.0

.42%

.18%

.18%

.18%

.19%

4Q193Q204Q20

Allowance for Credit

Losses on Loans (ACL)

$ in millions

$236.4

$301.8

$220.8

$160.7

$143.0

1.44%

1.42%

1.35%

1.09%

.73%

4Q193Q204Q20

NCOs- CBSH

NCO/Average Loans1

- CBSH

ACL - CBSH

ACL / Total Loans - CBSH

NCOs - Peer Average

NCO/Average Loans1

- Peer Average

ACL - Peer Average

ACL / Total Loans - Peer Average

Non-Performing Loans (NPLs)

Allowance for Credit Losses on Loans (ACL) to NPLs

$ in millions

15.7x

.71%

.65%

$150.7

$121.1

8.3x

.25%

.07%

.16%

5.9x

$40.3

$26.5

2.7x

$10.2

1.5x

4Q19

3Q20

4Q20

4Q19

3Q20

4Q20

NPLs - CBSH

NPLs / Total Loans - CBSH

ACL / NPLs - CBSH

ACL / NPLs - Peer Average

NPLs - Peer Average

NPLs / Total Loans - Peer Average

Percentages are illustrative and not to scale; Peer Banks include: ASB, BOKF, BXS CFR, FCNC.A, FNB, FULT, HWC, ONB, OZK, PB, PNFP, SFNC, UBSI, UMBF, UMPQ, VLY, WBS, WTFC

9

1As a percentage of average loans (excluding loans held for sale)

IMPACT OF CECL: ALLOCATION OF ALLOWANCE

CECL allowances reflect the economic and market outlook due to COVID-19

December 31, 2019

September 30, 2020

December 31, 2020

Incurred Model

CECL Model

CECL Model

Allowance

% of

Allowance

% of

Allowance

% of

for Credit

for Credit

$ in millions

for Loan

Outstanding

Losses

Outstanding

Losses

Outstanding

Losses

Loans

(ACL)

Loans

(ACL)

Loans

Business

$

44.3

.80%

$ 78.7

1.18%

$

63.7

.97%

Bus R/E

25.9

.91%

31.3

1.05%

30.1

.99%

Construction

21.6

2.40%

18.4

1.83%

27.7

2.72%

Commercial total

$

91.8

.99%

$

128.4

1.20%

$

121.5

1.15%

Consumer

15.9

.81%

18.2

.90%

15.2

.78%

Consumer CC

48.0

6.27%

79.2

12.23%

74.0

11.30%

Personal R/E

3.1

.13%

8.7

.32%

8.3

.29%

Revolving H/E

.6

.18%

1.8

.55%

1.5

.48%

Overdrafts

1.2

19.51%

.1

2.56%

.3

8.29%

Consumer total

$

68.9

1.27%

$

108.0

1.88%

$

99.3

1.73%

Allowance for credit losses on loans

$

160.7

1.09%

$

236.4

1.44%

$ 220.8

1.35%

Liability for unfunded lending

1.1

35.2

38.3

commitments

Total allowance for credit losses

$

161.8

$ 271.6

$

259.1

Methodology and Variables

  • CECL model utilizes 3rd party baseline forecast
  • Key variables include: GDP, disposable income, unemployment rate, various interest rates, CPI inflation rate, HPI, CREPI and market volatility

* Note: The Liability for unfunded lending commitments is included in Other liabilities on the consolidated balance sheets.

10

PROVIDING RELIEF TO OUR CUSTOMERS

Active deferral exposure reduced as pandemic continues

Payment Relief Requests

Active deferrals1

Active deferrals1

as of September 30, 2020

as of December 31, 2020

Number

% of Portfolio

Total

Number

% of Portfolio

Total

Loan Type

of

Amount of

of

Amount of

(by $ amount)

(by $ amount)

Requests

Requests

Requests

Requests

Commercial

11

.5%

$48MM

8

.6%

$57MM

Mortgage

111

1.0%

$25MM

86

.7%

$18MM

Consumer Card

73

.1%

$0.5MM

93

.1%

$0.6MM

Installment

553

.8%

$11MM

500

.6%

$8MM

Med/HSF2

76

.1%

$0.2MM

109

.1%

$0.3MM

TOTAL

824

.6%

$85MM

796

.6%

$84MM

1Deferrals are defined as modifications, payment deferrals, forbearance agreements, or change in terms, % of Portfolio calculated on Total Loans (excluding PPP loans); 2 No direct consumer credit exposure

11

LOAN PORTFOLIO: LIMITED EXPOSURE TO PANDEMIC-SENSITIVE INDUSTRIES

While we expect nearly every industry to be impacted to some degree by Coronavirus-related disruptions, we have identified eight industries that will be most impacted.

Loan Portfolio

Outstandings

Highest

Impacted

$ in

$ in

% of

Highest Impacted

Loan

millions

millions

Portfolio

Industries

9/30

12/31

12/31

Hospitals

$758

$729

4.9%

All

Other

Loans

18% Industries

82%

Multifamily / Student Housing

608

550

3.7%

CRE Retail

389

387

2.6%

Senior Living

310

311

2.1%

Hotels

291

303

2.0%

Energy

150

173

1.1%

Retail Stores

141

111

.7%

Restaurants

67

67

.4%

Total

$2,714

$2,631

17.5%

Industry breakdowns represent outstanding balances, excluding PPP loans, as of December 31, 2020, segmented by NAICS codes

12

NON-GAAP RECONCILIATIONS

Pre-tax,Pre-provision Net Revenue

For The Three Months Ended

(DOLLARS IN THOUSANDS)

Dec. 31, 2020

Sept. 30, 2020

Dec. 31, 2019

A

Net Interest Income

$

209,763

$

215,962

$

202,659

B

Non-Interest Income

$

135,117

$

129,572

$

143,461

C

Non-Interest Expense

$

196,310

$

190,858

$

195,174

Pre-Provision Net Revenue (A+B-C)

$

148,570

$

154,676

$

150,946

13

Attachments

  • Original document
  • Permalink

Disclaimer

Commerce Bancshares Inc. published this content on 20 January 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 20 January 2021 12:07:01 UTC