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Commerce Bancshares, Inc. Reports Third Quarter Earnings Per Share Of $1.02

Commerce Bancshares, Inc. announced earnings of $1.02 per share for the three months ended September 30, 2022, compared to $.99 per share in the same quarter last year and $.96 per share in the second quarter of 2022. Net income for the third quarter of 2022 amounted to $122.8 million, compared to $122.6 million in the third quarter of 2021 and $115.8 million in the prior quarter.

For the nine months ended September 30, 2022, earnings per share totaled $2.95, compared to $3.37 for the first nine months of 2021. Net income amounted to $356.8 million for the nine months ended September 30, 2022, compared to $415.9 million in the comparable period last year. For the current year to date, the return on average assets was 1.39%, and the return on average equity was 16.08%.

“Our third quarter results reflect the strengths of our balance sheet and diverse operating model,” said John Kemper. “Our variable rate earning assets and resilient core deposit base contributed to an expanding net interest margin and drove record quarterly net interest income. Additionally, our fee-based businesses contributed nearly 36% of total revenue.”

“In an increasingly uncertain economic environment, the bank remains well-positioned. Credit quality metrics and regulatory capital levels remain robust, and we are in a strong liquidity position to accommodate future loan growth.”

Third Quarter 2022 Financial Highlights:

  • Net interest income was $246.4 million, a $14.0 million increase over the prior quarter. The net interest margin increased 22 basis points to 3.01%.
  • Non-interest income totaled $138.5 million, a decrease of $913 thousand compared to the prior quarter.
  • Non-interest expense totaled $212.9 million, a decrease of $621 thousand compared to the prior quarter.
  • Average loan balances totaled $15.6 billion, an increase of $160.4 million, or 1.0%, over the prior quarter.
  • Total average available for sale debt securities decreased 5.8%, or $826.7 million, from the prior quarter to $13.5 billion, at fair value. Purchases of securities during the quarter totaled $53.8 million, with a weighted average yield of approximately 4.52%.
  • Average deposits declined $973.9 million, or 3.4% from the prior quarter. The average rate paid on interest bearing deposits was .21%.
  • The ratio of annualized net loan charge-offs to average loans was .12% compared to .10% in the prior quarter.
  • Non-accrual loans totaled $7.2 million compared to $7.9 million in the prior quarter. Non-accrual loans were .05% of total loans.
  • The allowance for credit losses on loans increased $5.3 million during the third quarter to $143.4 million, and at September 30, 2022, the ratio of the allowance for credit losses on loans to total loans was .90% compared to .88% at June 30, 2022.
  • The Company purchased 710,879 shares of its common stock this quarter at an average price of $70.50.
  • Total assets at September 30, 2022 were $32.6 billion, a decrease of $832.8 million, or 2.5%, from the prior quarter.
  • For the quarter, the return on average assets was 1.48%, the return on average equity was 17.84%, and the efficiency ratio was 55.2%.

Commerce Bancshares, Inc. is a regional bank holding company offering a full line of banking services through its subsidiaries, including payment solutions, investment management and securities brokerage. One of its subsidiaries, Commerce Bank, leverages more than 155 years of proven strength and experience to help individuals and businesses solve financial challenges. In addition to offering payment solutions across the U.S., Commerce Bank currently operates full-service banking facilities across the Midwest including the St. Louis and Kansas City metropolitan areas, Springfield, Central Missouri, Central Illinois, Wichita, Tulsa, Oklahoma City, and Denver. It also maintains commercial offices in Dallas, Houston, Cincinnati, Nashville, Des Moines, Indianapolis, and Grand Rapids. Commerce delivers high-touch service and sophisticated financial solutions at regional branches, commercial offices, ATMs, online, mobile and through a 24/7 customer service line.

This financial news release and the supplementary Earnings Highlights presentation are available on the Company’s website at https://investor.commercebank.com/news-info/financial-news-releases/default.aspx.

COMMERCE BANCSHARES, INC. and SUBSIDIARIES

FINANCIAL HIGHLIGHTS

 

 

 

For the Three Months Ended

For the Nine Months Ended

(Unaudited)

(Dollars in thousands, except per share data)

 

Sep. 30, 2022

Jun. 30, 2022

Sep. 30, 2021

Sep. 30, 2022

Sep. 30, 2021

FINANCIAL SUMMARY

 

 

Net interest income

 

$246,373

 

$232,385

 

$214,037

 

$687,544

 

$627,767

 

Non-interest income

 

138,514

 

139,427

 

137,506

 

409,710

 

412,694

 

Total revenue

 

384,887

 

371,812

 

351,543

 

1,097,254

 

1,040,461

 

Investment securities gains

 

3,410

 

1,029

 

13,108

 

11,602

 

39,765

 

Provision for credit losses

 

15,290

 

7,162

 

(7,385

)

12,594

 

(59,272

)

Non-interest expense

 

212,884

 

213,505

 

211,620

 

632,037

 

602,319

 

Income before taxes

 

160,123

 

152,174

 

160,416

 

464,225

 

537,179

 

Income taxes

 

33,936

 

32,021

 

34,662

 

97,859

 

111,947

 

Non-controlling interest expense

 

3,364

 

4,359

 

3,193

 

9,595

 

9,373

 

Net income attributable to Commerce Bancshares, Inc.

$122,823

 

$115,794

 

$122,561

 

$356,771

 

$415,859

 

Earnings per common share:

 

 

 

 

 

 

Net income — basic

 

$1.03

 

$0.96

 

$1.00

 

$2.96

 

$3.38

 

Net income — diluted

 

$1.02

 

$0.96

 

$0.99

 

$2.95

 

$3.37

 

Effective tax rate

 

21.65

%

21.66

%

22.05

%

21.52

%

21.21

%

Fully-taxable equivalent net interest income

 

$248,737

 

$235,010

 

$216,858

 

$695,140

 

$636,692

 

Average total interest earning assets (1)

 

$32,807,393

 

$33,839,655

 

$33,306,752

 

$33,853,577

 

$32,388,139

 

Diluted wtd. average shares outstanding

 

119,158,652

 

119,920,218

 

121,881,091

 

119,892,983

 

122,183,464

 

 

 

 

 

 

 

 

RATIOS

 

 

 

 

 

 

Average loans to deposits (2)

 

56.40

%

53.93

%

54.44

%

54.05

%

57.91

%

Return on total average assets

 

1.48

 

1.36

 

1.40

 

1.39

 

1.65

 

Return on average equity (3)

 

17.84

 

16.29

 

13.74

 

16.08

 

16.14

 

Non-interest income to total revenue

 

35.99

 

37.50

 

39.11

 

37.34

 

39.66

 

Efficiency ratio (4)

 

55.19

 

57.29

 

59.95

 

57.48

 

57.76

 

Net yield on interest earning assets

 

3.01

 

2.79

 

2.58

 

2.75

 

2.63

 

 

 

 

 

 

 

 

EQUITY SUMMARY

 

 

 

 

 

 

Cash dividends per share

 

$.265

 

$.265

 

$.250

 

$.795

 

$.750

 

Cash dividends on common stock

 

$31,740

 

$31,935

 

$30,645

 

$95,818

 

$92,204

 

Book value per share (5)

 

$19.86

 

$22.29

 

$28.58

 

 

 

Market value per share (5)

 

$66.16

 

$65.65

 

$66.36

 

 

 

High market value per share

 

$73.97

 

$74.32

 

$72.08

 

 

 

Low market value per share

 

$64.20

 

$62.80

 

$61.81

 

 

 

Common shares outstanding (5)

 

119,361,141

 

120,032,698

 

122,148,786

 

 

 

Tangible common equity to tangible assets (6)

 

6.80

%

7.56

%

9.71

%

 

 

Tier I leverage ratio

 

9.87

%

9.45

%

9.31

%

 

 

 

 

 

 

 

 

 

OTHER QTD INFORMATION

 

 

 

 

 

 

Number of bank/ATM locations

 

277

 

279

 

292

 

 

 

Full-time equivalent employees

 

4,595

 

4,579

 

4,582

 

 

 

(1)

Excludes allowance for credit losses on loans and unrealized gains/(losses) on available for sale debt securities.

(2)

Includes loans held for sale.

(3)

Annualized net income attributable to Commerce Bancshares, Inc. divided by average total equity.

(4)

The efficiency ratio is calculated as non-interest expense (excluding intangibles amortization) as a percent of revenue.

(5)

As of period end.

(6)

The tangible common equity ratio is calculated as stockholders’ equity reduced by goodwill and other intangible assets (excluding mortgage servicing rights) divided by total assets reduced by goodwill and other intangible assets (excluding mortgage servicing rights).

All share and per share amounts have been restated to reflect the 5% stock dividend distributed in December 2021.

COMMERCE BANCSHARES, INC. and SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

 

(Unaudited)

(In thousands, except per share data)

 

For the Three Months Ended

For the Nine Months Ended

 

Sep. 30, 2022

Jun. 30, 2022

Mar. 31, 2022

Dec. 31, 2021

Sep. 30, 2021

Sep. 30, 2022

Sep. 30, 2021

Interest income

 

$262,666

 

$238,154

 

$211,782

 

$210,479

 

$216,981

 

$712,602

 

$637,811

 

Interest expense

 

16,293

 

5,769

 

2,996

 

2,822

 

2,944

 

25,058

 

10,044

 

Net interest income

 

246,373

 

232,385

 

208,786

 

207,657

 

214,037

 

687,544

 

627,767

 

Provision for credit losses

 

15,290

 

7,162

 

(9,858

)

(7,054

)

(7,385

)

12,594

 

(59,272

)

Net interest income after credit losses

231,083

 

225,223

 

218,644

 

214,711

 

221,422

 

674,950

 

687,039

 

NON-INTEREST INCOME

 

 

 

 

 

 

 

 

Trust fees

 

45,406

 

46,792

 

47,811

 

48,893

 

48,950

 

140,009

 

139,334

 

Bank card transaction fees

 

45,638

 

43,873

 

42,045

 

44,773

 

42,815

 

131,556

 

123,118

 

Deposit account charges and other fees

24,521

 

25,564

 

22,307

 

25,493

 

25,161

 

72,392

 

71,724

 

Consumer brokerage services

 

5,085

 

5,068

 

4,446

 

4,878

 

4,900

 

14,599

 

13,484

 

Capital market fees

 

3,393

 

3,327

 

4,125

 

3,841

 

3,794

 

10,845

 

12,102

 

Loan fees and sales

 

3,094

 

3,246

 

4,235

 

5,248

 

6,842

 

10,575

 

24,472

 

Other

 

11,377

 

11,557

 

6,800

 

14,573

 

5,044

 

29,734

 

28,460

 

Total non-interest income

 

138,514

 

139,427

 

131,769

 

147,699

 

137,506

 

409,710

 

412,694

 

INVESTMENT SECURITIES GAINS (LOSSES), NET

3,410

 

1,029

 

7,163

 

(9,706

)

13,108

 

11,602

 

39,765

 

NON-INTEREST EXPENSE

 

 

 

 

 

 

 

 

Salaries and employee benefits

 

137,393

 

142,243

 

135,953

 

132,640

 

132,824

 

415,589

 

392,608

 

Data processing and software

 

28,050

 

27,635

 

27,016

 

25,777

 

25,598

 

82,701

 

76,015

 

Net occupancy

 

12,544

 

12,503

 

12,296

 

12,308

 

12,329

 

37,343

 

35,877

 

Equipment

 

5,036

 

4,734

 

4,568

 

4,691

 

4,440

 

14,338

 

13,398

 

Supplies and communication

 

4,581

 

4,361

 

4,713

 

4,430

 

4,530

 

13,655

 

12,688

 

Marketing

 

6,228

 

5,836

 

6,344

 

5,395

 

5,623

 

18,408

 

16,461

 

Other

 

19,052

 

16,193

 

14,758

 

18,341

 

26,276

 

50,003

 

55,272

 

Total non-interest expense

 

212,884

 

213,505

 

205,648

 

203,582

 

211,620

 

632,037

 

602,319

 

Income before income taxes

 

160,123

 

152,174

 

151,928

 

149,122

 

160,416

 

464,225

 

537,179

 

Less income taxes

 

33,936

 

32,021

 

31,902

 

33,764

 

34,662

 

97,859

 

111,947

 

Net income

 

126,187

 

120,153

 

120,026

 

115,358

 

125,754

 

366,366

 

425,232

 

Less non-controlling interest expense

3,364

 

4,359

 

1,872

 

452

 

3,193

 

9,595

 

9,373

 

Net income attributable to Commerce Bancshares, Inc.

$122,823

 

$115,794

 

$118,154

 

$114,906

 

$122,561

 

$356,771

 

$415,859

 

Net income per common share — basic

$1.03

 

$0.96

 

$0.97

 

$0.94

 

$1.00

 

$2.96

 

$3.38

 

Net income per common share — diluted

$1.02

 

$0.96

 

$0.97

 

$0.94

 

$0.99

 

$2.95

 

$3.37

 

 

 

 

 

 

 

 

 

 

OTHER INFORMATION

 

 

 

 

 

 

 

Return on total average assets

 

1.48

%

1.36

%

1.33

%

1.28

%

1.40

%

1.39

%

1.65

%

Return on average equity (1)

17.84

 

16.29

 

14.41

 

13.11

 

13.74

 

16.08

 

16.14

 

Efficiency ratio (2)

 

55.19

 

57.29

 

60.29

 

57.29

 

59.95

 

57.48

 

57.76

 

Effective tax rate

 

21.65

 

21.66

 

21.26

 

22.71

 

22.05

 

21.52

 

21.21

 

Net yield on interest earning assets

3.01

 

2.79

 

2.45

 

2.43

 

2.58

 

2.75

 

2.63

 

Fully-taxable equivalent net interest income

 

$248,737

 

$235,010

 

$211,393

 

$210,424

 

$216,858

 

$695,140

 

$636,692

 

(1)

Annualized net income attributable to Commerce Bancshares, Inc. divided by average total equity.

(2)

The efficiency ratio is calculated as non-interest expense (excluding intangibles amortization) as a percent of revenue.

COMMERCE BANCSHARES, INC. and SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS - PERIOD END

 

(Unaudited)

(In thousands)

 

Sep. 30, 2022

Jun. 30, 2022

Sep. 30, 2021

ASSETS

 

 

 

 

Loans

 

 

 

 

Business

 

$

5,528,895

 

$

5,441,592

 

$

5,277,850

 

Real estate — construction and land

 

 

1,206,955

 

 

1,266,260

 

 

1,257,836

 

Real estate — business

 

 

3,331,627

 

 

3,215,578

 

 

2,937,852

 

Real estate — personal

 

 

2,862,519

 

 

2,836,835

 

 

2,769,292

 

Consumer

 

 

2,116,371

 

 

2,089,592

 

 

2,049,559

 

Revolving home equity

 

 

286,026

 

 

271,854

 

 

281,442

 

Consumer credit card

 

 

563,349

 

 

558,102

 

 

569,976

 

Overdrafts

 

 

3,216

 

 

6,814

 

 

4,583

 

Total loans

 

 

15,898,958

 

 

15,686,627

 

 

15,148,390

 

Allowance for credit losses on loans

 

 

(143,377

)

 

(138,039

)

 

(162,775

)

Net loans

 

 

15,755,581

 

 

15,548,588

 

 

14,985,615

 

Loans held for sale

 

 

8,062

 

 

6,467

 

 

16,043

 

Investment securities:

 

 

 

 

Available for sale debt securities

 

 

12,632,510

 

 

13,700,308

 

 

14,165,656

 

Trading debt securities

 

 

39,222

 

 

34,195

 

 

40,114

 

Equity securities

 

 

8,954

 

 

8,546

 

 

9,174

 

Other securities

 

 

222,742

 

 

207,989

 

 

184,450

 

Total investment securities

 

 

12,903,428

 

 

13,951,038

 

 

14,399,394

 

Federal funds sold

 

 

14,020

 

 

26,000

 

 

 

Securities purchased under agreements to resell

 

 

1,275,000

 

 

1,450,000

 

 

1,750,000

 

Interest earning deposits with banks

 

 

642,943

 

 

684,994

 

 

1,888,545

 

Cash and due from banks

 

 

344,178

 

 

355,524

 

 

344,460

 

Premises and equipment — net

 

 

407,833

 

 

397,877

 

 

377,476

 

Goodwill

 

 

138,921

 

 

138,921

 

 

138,921

 

Other intangible assets — net

 

 

15,599

 

 

15,853

 

 

14,458

 

Other assets

 

 

1,097,031

 

 

860,108

 

 

582,631

 

Total assets

 

$

32,602,596

 

$

33,435,370

 

$

34,497,543

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

Deposits:

 

 

 

 

Non-interest bearing

 

$

10,468,591

 

$

11,102,585

 

$

11,622,855

 

Savings, interest checking and money market

 

 

16,014,487

 

 

16,063,064

 

 

14,907,654

 

Certificates of deposit of less than $100,000

 

 

391,145

 

 

404,096

 

 

452,432

 

Certificates of deposit of $100,000 and over

 

 

597,093

 

 

601,488

 

 

1,163,343

 

Total deposits

 

 

27,471,316

 

 

28,171,233

 

 

28,146,284

 

Federal funds purchased and securities sold under agreements to repurchase

 

 

2,314,590

 

 

2,234,296

 

 

2,253,753

 

Other borrowings

 

 

1,831

 

 

6,025

 

 

4,006

 

Other liabilities

 

 

443,752

 

 

348,503

 

 

602,279

 

Total liabilities

 

 

30,231,489

 

 

30,760,057

 

 

31,006,322

 

Stockholders’ equity:

 

 

 

 

Common stock

 

 

610,804

 

 

610,804

 

 

589,352

 

Capital surplus

 

 

2,683,631

 

 

2,682,161

 

 

2,427,544

 

Retained earnings

 

 

353,446

 

 

262,363

 

 

396,655

 

Treasury stock

 

 

(176,943

)

 

(129,588

)

 

(92,047

)

Accumulated other comprehensive income

 

 

(1,119,344

)

 

(766,894

)

 

159,166

 

Total stockholders’ equity

 

 

2,351,594

 

 

2,658,846

 

 

3,480,670

 

Non-controlling interest

 

 

19,513

 

 

16,467

 

 

10,551

 

Total equity

 

 

2,371,107

 

 

2,675,313

 

 

3,491,221

 

Total liabilities and equity

 

$

32,602,596

 

$

33,435,370

 

$

34,497,543

 

 

COMMERCE BANCSHARES, INC. and SUBSIDIARIES

AVERAGE BALANCE SHEETS

 

(Unaudited)

(In thousands)

For the Three Months Ended

Sep. 30, 2022

Jun. 30, 2022

Mar. 31, 2022

Dec. 31, 2021

Sep. 30, 2021

ASSETS:

 

 

 

 

 

Loans:

 

 

 

 

 

Business

$

5,317,696

 

$

5,385,181

 

$

5,324,172

 

$

5,191,844

 

$

5,437,498

 

Real estate — construction and land

 

1,288,721

 

 

1,225,267

 

 

1,134,902

 

 

1,228,237

 

 

1,168,566

 

Real estate — business

 

3,258,128

 

 

3,163,508

 

 

3,095,068

 

 

3,003,459

 

 

2,982,847

 

Real estate — personal

 

2,844,376

 

 

2,825,578

 

 

2,808,980

 

 

2,785,095

 

 

2,775,638

 

Consumer

 

2,101,622

 

 

2,070,560

 

 

2,040,200

 

 

2,043,690

 

 

2,041,263

 

Revolving home equity

 

280,923

 

 

272,280

 

 

273,859

 

 

276,464

 

 

281,689

 

Consumer credit card

 

550,058

 

 

537,681

 

 

540,844

 

 

559,429

 

 

566,406

 

Overdrafts

 

4,438

 

 

5,524

 

 

5,178

 

 

4,926

 

 

5,110

 

Total loans

 

15,645,962

 

 

15,485,579

 

 

15,223,203

 

 

15,093,144

 

 

15,259,017

 

Allowance for credit losses on loans

 

(137,833

)

 

(134,670

)

 

(149,685

)

 

(162,428

)

 

(172,112

)

Net loans

 

15,508,129

 

 

15,350,909

 

 

15,073,518

 

 

14,930,716

 

 

15,086,905

 

Loans held for sale

 

7,170

 

 

7,933

 

 

9,383

 

 

11,203

 

 

16,021

 

Investment securities:

 

 

 

 

 

U.S. government and federal agency obligations

 

1,113,442

 

 

1,119,305

 

 

1,103,749

 

 

1,009,025

 

 

727,566

 

Government-sponsored enterprise obligations

 

55,753

 

 

55,762

 

 

51,770

 

 

50,777

 

 

50,785

 

State and municipal obligations

 

2,052,908

 

 

2,126,380

 

 

2,077,600

 

 

2,095,517

 

 

2,039,942

 

Mortgage-backed securities

 

6,847,912

 

 

7,158,252

 

 

7,316,609

 

 

7,141,249

 

 

7,115,419

 

Asset-backed securities

 

3,870,953

 

 

4,038,113

 

 

3,933,061

 

 

3,514,541

 

 

3,028,076

 

Other debt securities

 

587,026

 

 

643,463

 

 

636,247

 

 

629,643

 

 

608,642

 

Unrealized gain (loss) on debt securities

 

(1,064,534

)

 

(851,110

)

 

(174,297

)

 

86,020

 

 

230,058

 

Total available for sale debt securities

 

13,463,460

 

 

14,290,165

 

 

14,944,739

 

 

14,526,772

 

 

13,800,488

 

Trading debt securities

 

35,621

 

 

43,904

 

 

40,686

 

 

46,513

 

 

32,238

 

Equity securities

 

8,838

 

 

9,094

 

 

9,498

 

 

9,171

 

 

8,756

 

Other securities

 

208,708

 

 

195,090

 

 

192,311

 

 

190,346

 

 

183,397

 

Total investment securities

 

13,716,627

 

 

14,538,253

 

 

15,187,234

 

 

14,772,802

 

 

14,024,879

 

Federal funds sold

 

13,486

 

 

4,269

 

 

1,053

 

 

564

 

 

792

 

Securities purchased under agreements to resell

 

1,379,341

 

 

1,703,569

 

 

1,733,887

 

 

1,669,835

 

 

1,633,205

 

Interest earning deposits with banks

 

980,273

 

 

1,248,942

 

 

2,608,029

 

 

2,856,992

 

 

2,602,896

 

Other assets

 

1,256,498

 

 

1,238,493

 

 

1,304,400

 

 

1,288,323

 

 

1,261,277

 

Total assets

$

32,861,524

 

$

34,092,368

 

$

35,917,504

 

$

35,530,435

 

$

34,625,975

 

 

 

 

 

 

 

LIABILITIES AND EQUITY:

 

 

 

 

 

Non-interest bearing deposits

$

10,758,353

 

$

11,209,680

 

$

11,544,701

 

$

11,919,268

 

$

11,475,113

 

Savings

 

1,595,857

 

 

1,609,694

 

 

1,563,093

 

 

1,507,199

 

 

1,484,923

 

Interest checking and money market

 

14,423,713

 

 

14,847,306

 

 

14,949,727

 

 

13,873,985

 

 

13,343,180

 

Certificates of deposit of less than $100,000

 

397,071

 

 

411,655

 

 

429,852

 

 

441,920

 

 

464,367

 

Certificates of deposit of $100,000 and over

 

578,158

 

 

648,728

 

 

862,232

 

 

1,105,480

 

 

1,289,665

 

Total deposits

 

27,753,152

 

 

28,727,063

 

 

29,349,605

 

 

28,847,852

 

 

28,057,248

 

Borrowings:

 

 

 

 

 

Federal funds purchased

 

51,929

 

 

113,128

 

 

23,356

 

 

20,848

 

 

13,606

 

Securities sold under agreements to repurchase

 

2,199,866

 

 

2,258,184

 

 

2,712,468

 

 

2,620,348

 

 

2,347,270

 

Other borrowings

 

2,010

 

 

2,029

 

 

768

 

 

1,078

 

 

347

 

Total borrowings

 

2,253,805

 

 

2,373,341

 

 

2,736,592

 

 

2,642,274

 

 

2,361,223

 

Other liabilities

 

123,691

 

 

139,986

 

 

505,644

 

 

562,102

 

 

667,786

 

Total liabilities

 

30,130,648

 

 

31,240,390

 

 

32,591,841

 

 

32,052,228

 

 

31,086,257

 

Equity

 

2,730,876

 

 

2,851,978

 

 

3,325,663

 

 

3,478,207

 

 

3,539,718

 

Total liabilities and equity

$

32,861,524

 

$

34,092,368

 

$

35,917,504

 

$

35,530,435

 

$

34,625,975

 

 

COMMERCE BANCSHARES, INC. and SUBSIDIARIES

AVERAGE RATES

 

(Unaudited)

For the Three Months Ended

Sep. 30, 2022

Jun. 30, 2022

Mar. 31, 2022

Dec. 31, 2021

Sep. 30, 2021

ASSETS:

 

 

 

 

 

Loans:

 

 

 

 

 

Business (1)

3.94

%

3.16

%

2.93

%

3.16

%

3.43

%

Real estate — construction and land

5.27

 

4.09

 

3.76

 

3.61

 

3.51

 

Real estate — business

4.40

 

3.70

 

3.38

 

3.41

 

3.46

 

Real estate — personal

3.36

 

3.27

 

3.28

 

3.21

 

3.27

 

Consumer

4.17

 

3.62

 

3.59

 

3.65

 

3.71

 

Revolving home equity

4.82

 

3.69

 

3.48

 

3.47

 

3.46

 

Consumer credit card

12.05

 

11.32

 

11.35

 

11.06

 

11.29

 

Overdrafts

 

 

 

 

 

Total loans

4.37

 

3.72

 

3.54

 

3.62

 

3.74

 

Loans held for sale

8.80

 

8.14

 

6.48

 

5.10

 

4.63

 

Investment securities:

 

 

 

 

 

U.S. government and federal agency obligations

4.51

 

4.93

 

3.42

 

3.11

 

5.74

 

Government-sponsored enterprise obligations

2.36

 

2.39

 

2.33

 

2.30

 

2.30

 

State and municipal obligations (1)

2.27

 

2.30

 

2.29

 

2.26

 

2.35

 

Mortgage-backed securities

1.93

 

1.99

 

1.98

 

1.40

 

1.53

 

Asset-backed securities

1.62

 

1.35

 

1.13

 

1.03

 

1.08

 

Other debt securities

1.93

 

1.97

 

2.00

 

2.07

 

2.04

 

Total available for sale debt securities

2.09

 

2.08

 

1.91

 

1.59

 

1.80

 

Trading debt securities (1)

2.74

 

2.46

 

1.84

 

1.54

 

1.01

 

Equity securities (1)

27.11

 

26.90

 

26.00

 

27.64

 

23.92

 

Other securities (1)

7.09

 

22.38

 

5.91

 

18.39

 

7.46

 

Total investment securities

2.18

 

2.36

 

1.97

 

1.82

 

1.89

 

Federal funds sold

2.77

 

1.79

 

.39

 

.70

 

.50

 

Securities purchased under agreements to resell

1.72

 

1.03

 

1.24

 

1.62

 

2.19

 

Interest earning deposits with banks

2.25

 

.78

 

.18

 

.15

 

.15

 

Total interest earning assets

3.21

 

2.86

 

2.49

 

2.47

 

2.62

 

 

 

 

 

 

 

LIABILITIES AND EQUITY:

 

 

 

 

 

Interest bearing deposits:

 

 

 

 

 

Savings

.04

 

.04

 

.05

 

.08

 

.08

 

Interest checking and money market

.20

 

.06

 

.04

 

.04

 

.05

 

Certificates of deposit of less than $100,000

.41

 

.20

 

.13

 

.14

 

.18

 

Certificates of deposit of $100,000 and over

.60

 

.29

 

.20

 

.14

 

.14

 

Total interest bearing deposits

.21

 

.07

 

.05

 

.05

 

.06

 

Borrowings:

 

 

 

 

 

Federal funds purchased

2.41

 

.79

 

.12

 

.11

 

.10

 

Securities sold under agreements to repurchase

1.37

 

.48

 

.10

 

.08

 

.08

 

Other borrowings

1.78

 

2.37

 

.53

 

 

1.14

 

Total borrowings

1.39

 

.50

 

.10

 

.08

 

.08

 

Total interest bearing liabilities

.34

%

.12

%

.06

%

.06

%

.06

%

 

 

 

 

 

 

Net yield on interest earning assets

3.01

%

2.79

%

2.45

%

2.43

%

2.58

%

(1) Stated on a fully taxable-equivalent basis using a federal income tax rate of 21%.

 

COMMERCE BANCSHARES, INC. and SUBSIDIARIES

CREDIT QUALITY

 

 

 

For the Three Months Ended

For the Nine Months Ended

(Unaudited)

(In thousands, except ratios)

 

Sep. 30, 2022

Jun. 30, 2022

Mar. 31, 2022

Dec. 31, 2021

Sep. 30, 2021

Sep. 30, 2022

Sep. 30, 2021

ALLOWANCE FOR CREDIT LOSSES ON LOANS

 

 

 

 

 

 

 

 

Balance at beginning of period

 

$138,039

 

$134,710

 

$150,044

 

$162,775

 

$172,395

 

$150,044

 

$220,834

 

Provision for credit losses on loans

 

10,150

 

7,287

 

(10,686

)

(8,474

)

(5,961

)

6,751

 

(43,749

)

Net charge-offs (recoveries):

 

 

 

 

 

 

 

 

Commercial portfolio:

 

 

 

 

 

 

 

 

Business

 

461

 

19

 

77

 

90

 

65

 

557

 

(4,848

)

Real estate — construction and land

 

 

 

 

 

 

 

1

 

Real estate — business

 

(8

)

(1

)

(7

)

6

 

(5

)

(16

)

(70

)

 

 

453

 

18

 

70

 

96

 

60

 

541

 

(4,917

)

Personal banking portfolio:

 

 

 

 

 

 

 

 

Consumer credit card

 

2,882

 

2,937

 

3,372

 

2,964

 

2,908

 

9,191

 

17,044

 

Consumer

 

827

 

633

 

808

 

919

 

496

 

2,268

 

1,637

 

Overdraft

 

703

 

425

 

358

 

375

 

243

 

1,486

 

544

 

Real estate — personal

 

(15

)

(41

)

22

 

(71

)

(26

)

(34

)

(27

)

Revolving home equity

 

(38

)

(14

)

18

 

(26

)

(22

)

(34

)

29

 

 

 

4,359

 

3,940

 

4,578

 

4,161

 

3,599

 

12,877

 

19,227

 

Total net loan charge-offs

 

4,812

 

3,958

 

4,648

 

4,257

 

3,659

 

13,418

 

14,310

 

Balance at end of period

 

$143,377

 

$138,039

 

$134,710

 

$150,044

 

$162,775

 

$143,377

 

$162,775

 

LIABILITY FOR UNFUNDED LENDING COMMITMENTS

 

$30,047

 

$24,907

 

$25,032

 

$24,204

 

$22,784

 

 

 

 

 

 

 

 

 

 

 

 

NET CHARGE-OFF RATIOS (1)

 

 

 

 

 

 

 

 

Commercial portfolio:

 

 

 

 

 

 

 

 

Business

 

.03

%

%

.01

%

.01

%

%

.01

%

(.11

%)

Real estate — construction and land

 

 

 

 

 

 

 

 

Real estate — business

 

 

 

 

 

 

 

 

 

 

.02

 

 

 

 

 

.01

 

(.06

)

Personal banking portfolio:

 

 

 

 

 

 

 

 

Consumer credit card

 

2.08

 

2.19

 

2.53

 

2.10

 

2.04

 

2.26

 

3.91

 

Consumer

 

.16

 

.12

 

.16

 

.18

 

.10

 

.15

 

.11

 

Overdraft

 

62.85

 

30.86

 

28.04

 

30.20

 

18.87

 

39.39

 

17.59

 

Real estate — personal

 

 

(.01

)

 

(.01

)

 

 

 

Revolving home equity

 

(.05

)

(.02

)

.03

 

(.04

)

(.03

)

(.02

)

.01

 

 

 

.30

 

.28

 

.33

 

.29

 

.25

 

.30

 

.45

 

Total

 

.12

%

.10

%

.12

%

.11

%

.10

%

.12

%

.12

%

 

 

 

 

 

 

 

 

 

CREDIT QUALITY RATIOS

 

 

 

 

 

 

 

 

Non-accrual loans to total loans

 

.05

%

.05

%

.05

%

.06

%

.07

%

 

 

Allowance for credit losses on loans to total loans

 

.90

 

.88

 

.87

 

.99

 

1.07

 

 

 

 

 

 

 

 

 

 

 

 

NON-ACCRUAL AND PAST DUE LOANS

 

 

 

 

 

 

 

 

Non-accrual loans:

 

 

 

 

 

 

 

 

Business

 

$5,645

 

$6,314

 

$6,756

 

$7,312

 

$8,293

 

 

 

Real estate — construction and land

 

 

 

 

 

 

 

 

Real estate — business

 

149

 

167

 

190

 

214

 

577

 

 

 

Real estate — personal

 

1,390

 

1,436

 

1,389

 

1,631

 

1,551

 

 

 

Total

 

7,184

 

7,917

 

8,335

 

9,157

 

10,421

 

 

 

Loans past due 90 days and still accruing interest

$12,538

 

$11,909

 

$10,670

 

$11,726

 

$10,496

 

 

 

(1) Net charge-offs are annualized and calculated as a percentage of average loans (excluding loans held for sale).

COMMERCE BANCSHARES, INC.

Management Discussion of Third Quarter Results

September 30, 2022

For the quarter ended September 30, 2022, net income amounted to $122.8 million, compared to $115.8 million in the previous quarter and $122.6 million in the same quarter last year. The increase in net income compared to the previous quarter was primarily the result of an increase in net interest income, partly offset by an increase in the provision for credit losses. The net yield on interest earning assets grew 22 basis points to 3.01%. Average loans grew $160.4 million compared to the previous quarter, while average available for sale debt securities and average deposits declined $826.7 million and $973.9 million, respectively. For the quarter, the return on average assets was 1.48%, the return on average equity was 17.84%, and the efficiency ratio was 55.2%.

Balance Sheet Review

During the 3rd quarter of 2022, average loans totaled $15.6 billion, an increase of $160.4 million over the prior quarter, and $386.9 million, or 2.5%, over the same quarter last year. Compared to the previous quarter, average balances of business real estate, construction, and consumer loans grew $94.6 million, $63.5 million, and $31.1 million, respectively, while business loans declined $67.5 million. Period end loans increased $212.3 million compared to the prior quarter. During the current quarter, the Company sold certain fixed rate personal real estate loans totaling $16.7 million, compared to $36.6 million in the prior quarter.

Total average available for sale debt securities decreased $826.7 million compared to the previous quarter to $13.5 billion, at fair value. The decrease in investment securities was mainly the result of lower balances of mortgage-backed and other asset-backed securities. During the current quarter, purchases of securities totaled $53.8 million with a weighted average yield of approximately 4.52%. Sales, maturities and pay downs were $658.2 million. At September 30, 2022, the duration of the investment portfolio was 3.9 years, and maturities and pay downs of approximately $2.4 billion are expected to occur during the next 12 months.

Total average deposits decreased $973.9 million this quarter compared to the previous quarter. The decrease in deposits mostly resulted from lower demand deposits and interest checking and money market deposits of $451.3 million and $423.6 million, respectively. Compared to the previous quarter, total average commercial, wealth, and consumer deposits declined $353.4 million, $327.3 million, and $291.1 million, respectively. The average loans to deposits ratio was 56.4% in the current quarter and 53.9% in the prior quarter. The Company’s average borrowings, which include customer repurchase agreements, were $2.3 billion in the 3rd quarter of 2022 and $2.4 billion in the prior quarter.

Net Interest Income

Net interest income in the 3rd quarter of 2022 amounted to $246.4 million, an increase of $14.0 million compared to the previous quarter. On a fully taxable-equivalent (FTE) basis, net interest income for the current quarter increased $13.7 million over the previous quarter to $248.7 million. The increase in net interest income was due to higher interest earned on loans, partly offset by lower interest earned on investment securities and higher interest expense. The net yield (FTE) on earning assets increased to 3.01%, compared to 2.79% in the prior quarter.

Compared to the previous quarter, interest income on loans (FTE) increased $28.9 million, mostly due to higher average rates on business, business real estate, construction, and consumer loans. The average yield (FTE) on the loan portfolio increased 65 basis points to 4.37% this quarter.

Interest income on investment securities (FTE) decreased $9.1 million compared to the prior quarter, due to lower rates earned, coupled with lower average balances. Interest income earned on U.S. government and federal agency securities decreased due to lower rates earned, which included the impact of $1.0 million in lower inflation income from Treasury inflation-protected securities this quarter. Additionally, $6.5 million of non-accrual interest was received on the sale of a private equity investment last quarter. At September 30, 2022, the Company recorded a $1.5 million adjustment to premium amortization, which increased interest income to reflect slower forward prepayment speed estimates on mortgage-backed securities, but it was less than the $5.0 million adjustment recorded in the prior quarter. The average yield (FTE) on total investment securities was 2.18% in the current quarter, compared to 2.36% in the previous quarter.

The average rate paid on interest bearing deposits totaled .21% in the current quarter compared to .07% in the prior quarter. Interest expense on deposits increased $5.9 million this quarter compared to the previous quarter, while interest expense on securities sold under agreements to repurchase increased $4.9 million, due to an 89 basis point increase in the average rate paid. The overall rate paid on interest bearing liabilities was .34% in the current quarter compared to .12% in the prior quarter.

Non-Interest Income

In the 3rd quarter of 2022, total non-interest income amounted to $138.5 million, an increase of $1.0 million compared to the same period last year and decreased $913 thousand compared to the prior quarter. The increase in non-interest income compared to the same period last year was mainly due to sweep and bank card fees, mostly offset by lower loan fees and sales and trust fees. The decrease in non-interest income compared to the prior quarter was mainly due to lower trust and deposit account fees, and income of $2.2 million recorded last quarter from a life insurance death benefit. These decreases were mostly offset by higher bank card and sweep fees.

Total net bank card fees in the current quarter increased $2.8 million, or 6.6%, over the same period last year, and increased $1.8 million compared to the prior quarter. Net corporate card fees increased $3.0 million, or 12.6%, over the same quarter of last year mainly due to higher interchange fee income, partly offset by higher rewards expense. Net debit card fees increased $106 thousand, or 1.0%, and net merchant fees increased $30 thousand, or .6%, while net credit card fees decreased $266 thousand, or 6.9%. Total net bank card fees this quarter were comprised of fees on corporate card ($26.3 million), debit card ($10.5 million), merchant ($5.2 million) and credit card ($3.6 million) transactions.

In the current quarter, trust fees decreased $3.5 million, or 7.2%, from the same period last year, resulting from lower private client fee income. Compared to the same period last year, deposit account fees decreased $640 thousand, or 2.5%, mainly due to lower overdraft and return item fees. Loan fees and sales, mostly mortgage banking revenue, declined $3.7 million, or 54.8%, compared to amounts recorded in the same quarter last year.

Other non-interest income increased over the same period last year primarily due to higher sweep fees of $3.4 million and a $2.0 million loss on an equity method investment recorded in the 3rd quarter of 2021. For the 3rd quarter of 2022, non-interest income comprised 36.0% of the Company’s total revenue.

Investment Securities Gains and Losses

The Company recorded net securities gains of $3.4 million in the current quarter, compared to gains of $1.0 million in the prior quarter and gains of $13.1 million in the 3rd quarter of 2021. Net securities gains in the current quarter primarily resulted from net fair value gains of $14.1 million in the Company’s private equity investment portfolio, mostly offset by a loss of $10.7 million on the sale of an available for sale security.

Non-Interest Expense

Non-interest expense for the current quarter amounted to $212.9 million, compared to $211.6 million in the same period last year and $213.5 million in the prior quarter. The increase in non-interest expense compared to the same period last year was mainly due to higher salaries expense, data processing and software expense, and travel and entertainment expense, mostly offset by $8.2 million in litigation settlement costs recorded last year. The decrease in non-interest expense compared to the prior quarter was mainly due to lower salaries expense driven by an accrual of $5.4 million for special bonuses recorded last quarter, and higher other non-interest expense.

Compared to the 3rd quarter of last year, salaries and employee benefits expense increased $4.6 million, due to higher full-time salaries expense of $5.6 million, or 6.4%, partly offset by lower incentive compensation expense of $2.5 million. Full-time equivalent employees totaled 4,595 and 4,582 at September 30, 2022 and 2021, respectively.

Compared to the same period last year, data processing and software expense increased $2.5 million due to higher software amortization, bank card processing fees and increased costs for service providers this quarter. Marketing expense increased $605 thousand, while other non-interest expense decreased $7.2 million. This decrease was mainly due to $8.2 million in litigation settlement costs recorded last year, lower legal and professional fees of $1.1 million and higher deferred loan origination costs of $755 thousand. These decreases to expense were partly offset by increases in travel and entertainment expense and insurance expense of $1.5 million and $619 thousand, respectively.

Income Taxes

The effective tax rate for the Company was 21.6% in the current quarter, 21.7% in the previous quarter, and 22.0% in the 3rd quarter of 2021.

Credit Quality

Net loan charge-offs in the 3rd quarter of 2022 amounted to $4.8 million, compared to $4.0 million in the prior quarter and $3.7 million in the same period last year. The ratio of annualized net loan charge-offs to total average loans was .12% in the current quarter, .10% in the previous quarter, and .10% in the 3rd quarter of last year. Net loan charge-offs on personal banking loans increased $419 thousand to $4.4 million.

In the 3rd quarter of 2022, annualized net loan charge-offs on average consumer credit card loans were 2.08%, compared to 2.19% in the previous quarter, and 2.04% in the same quarter last year. Consumer loan net charge-offs were .16% of average consumer loans in the current quarter, .12% in the prior quarter, and .10% in the same quarter last year.

At September 30, 2022, the allowance for credit losses on loans totaled $143.4 million, or .90% of total loans, and increased $5.3 million compared to the prior quarter. Additionally, the liability for unfunded lending commitments at September 30, 2022 was $30.0 million, an increase of $5.1 million compared to the liability at June 30, 2022.

At September 30, 2022, total non-accrual loans amounted to $7.2 million, a decrease of $733 thousand from the previous quarter. At September 30, 2022, the balance of non-accrual loans, which represented .05% of loans outstanding, included business loans of $5.6 million, personal real estate loans of $1.4 million, and business real estate loans of $149 thousand. Loans more than 90 days past due and still accruing interest totaled $12.5 million at September 30, 2022.

Other

During the 3rd quarter of 2022, the Company paid a cash dividend of $.265 per common share, representing a 6.0% increase over the same period last year. The Company purchased 710,879 shares of treasury stock during the current quarter at an average price of $70.50.

Forward Looking Information

This information contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements include future financial and operating results, expectations, intentions, and other statements that are not historical facts. Such statements are based on current beliefs and expectations of the Company’s management and are subject to significant risks and uncertainties. Actual results may differ materially from those set forth in the forward-looking statements.

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