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Commerce Bancshares, Inc. Reports Fourth Quarter Earnings Per Share of $.84

Commerce Bancshares, Inc. announced earnings of $.84 per share for the three months ended December 31, 2023, compared to $1.00 per share in the same quarter last year and $.92 per share in the third quarter of 2023. Net income for the fourth quarter of 2023 amounted to $109.2 million, compared to $131.6 million in the fourth quarter of 2022 and $120.6 million in the prior quarter.

“We are pleased with our fourth quarter results," said John Kemper, President and Chief Executive Officer. “These results reflect the strength of our core deposit base, the impact of higher earning asset yields, and the contribution from key non-interest income categories, notably trust, bank card and deposit fees. Net interest income was generally flat to the previous quarter, while the net interest margin expanded six basis points. Non-interest income comprised 36.8% of total revenue. Our results included a one-time FDIC special assessment of $16 million.

“On the balance sheet,” Kemper added, “the final tranches of FHLB advances and brokered deposits matured during the quarter as planned. More than offsetting these brokered deposit maturities, we saw deposit growth across our three business segments of $674 million, resulting in a period end net deposit increase of $273 million.

“We continue to maintain ample levels of liquidity and capital, which positions us well moving into 2024. Book value per share increased 14.4% during the quarter as interest rates declined. Credit quality of the loan portfolio remains strong with non-accrual loans at .04% of total loans, down one basis point from the previous quarter and prior year.”

Fourth Quarter 2023 Financial Highlights:

  • Net interest income was $248.4 million, a $126 thousand decrease from the prior quarter. The net yield on interest earning assets increased 6 basis points to 3.17%.
  • Non-interest income totaled $144.9 million, an increase of $8.1 million compared to the same quarter last year.
  • Non-interest expense totaled $251.3 million, an increase of $34.5 million compared to the same quarter last year, mostly due to a $16.0 million accrual for a one-time FDIC insurance special assessment.
  • Average loan balances totaled $17.1 billion, an increase of $89.8 million, or .5%, over the prior quarter.
  • Total average available for sale debt securities decreased 6.2%, or $633.9 million, from the prior quarter to $9.6 billion, at fair value. During the fourth quarter of 2023, the unrealized loss on available for sale debt securities decreased $376.5 million to $1.2 billion, at period end.
  • Total average deposits decreased $356.2 million, or 1.4%, compared to the prior quarter, which reflected a payoff of the last tranche of brokered deposits issued during 2023. The average rate paid on interest bearing deposits in the current quarter was 1.93%.
  • The ratio of annualized net loan charge-offs to average loans was .19% compared to .23% in the prior quarter.
  • The allowance for credit losses on loans increased $151 thousand during the fourth quarter to $162.4 million, and the ratio of the allowance for credit losses on loans to total loans was .94% at December 31, 2023, compared to .95% at September 30, 2023.
  • Total assets at December 31, 2023 were $31.7 billion, an increase of $324.4 million, or 1.0%, over the prior quarter.
  • For the quarter, the return on average assets was 1.38%, the return on average equity was 16.48%, and the efficiency ratio was 63.8%.

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 nearly 160 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 Year Ended

(Unaudited)

(Dollars in thousands, except per share data)

 

Dec. 31, 2023

Sep. 30, 2023

Dec. 31, 2022

Dec. 31, 2023

Dec. 31, 2022

FINANCIAL SUMMARY

 

 

Net interest income

 

$248,421

 

$248,547

 

$254,641

 

$998,129

 

$942,185

 

Non-interest income

 

144,879

 

142,949

 

136,825

 

573,045

 

546,535

 

Total revenue

 

393,300

 

391,496

 

391,466

 

1,571,174

 

1,488,720

 

Investment securities gains (losses)

 

7,601

 

4,298

 

8,904

 

14,985

 

20,506

 

Provision for credit losses

 

5,879

 

11,645

 

15,477

 

35,451

 

28,071

 

Non-interest expense

 

251,254

 

228,010

 

216,740

 

930,982

 

848,777

 

Income before taxes

 

143,768

 

156,139

 

168,153

 

619,726

 

632,378

 

Income taxes

 

32,307

 

33,439

 

34,499

 

134,549

 

132,358

 

Non-controlling interest expense

 

2,238

 

2,104

 

2,026

 

8,117

 

11,621

 

Net income attributable to Commerce Bancshares, Inc.

$109,223

 

$120,596

 

$131,628

 

$477,060

 

$488,399

 

Earnings per common share:

 

 

 

 

 

 

Net income — basic

 

$0.84

 

$0.92

 

$1.00

 

$3.64

 

$3.68

 

Net income — diluted

 

$0.84

 

$0.92

 

$1.00

 

$3.64

 

$3.67

 

Effective tax rate

 

22.83

%

21.71

%

20.77

%

22.00

%

21.32

%

Fully-taxable equivalent net interest income

 

$250,547

 

$250,962

 

$256,675

 

$1,006,677

 

$951,815

 

Average total interest earning assets (1)

 

$31,340,958

 

$31,974,945

 

$31,991,224

 

$ 31,823,935

 

$33,384,162

 

Diluted wtd. average shares outstanding

 

129,608,322

 

130,008,840

 

130,818,789

 

130,071,644

 

131,838,406

 

RATIOS

 

 

 

 

 

 

Average loans to deposits (2)

 

67.69

%

66.39

%

59.73

%

66.31

%

55.41

%

Return on total average assets

 

1.38

 

1.49

 

1.65

 

1.49

 

1.45

 

Return on average equity (3)

 

16.48

 

17.73

 

21.88

 

17.94

 

17.31

 

Non-interest income to total revenue

 

36.84

 

36.51

 

34.95

 

36.47

 

36.71

 

Efficiency ratio (4)

 

63.80

 

58.15

 

55.26

 

59.17

 

56.90

 

Net yield on interest earning assets

 

3.17

 

3.11

 

3.18

 

3.16

 

2.85

 

EQUITY SUMMARY

 

 

 

 

 

 

Cash dividends per share

 

$.257

 

$.257

 

$.240

 

$1.029

 

$.961

 

Cash dividends on common stock

 

$33,574

 

$33,657

 

$31,648

 

$134,734

 

$127,466

 

Book value per share (5)

 

$22.77

 

$19.90

 

$18.90

 

 

 

Market value per share (5)

 

$53.41

 

$45.70

 

$64.83

 

 

 

High market value per share

 

$56.75

 

$52.37

 

$69.14

 

 

 

Low market value per share

 

$40.91

 

$44.10

 

$60.16

 

 

 

Common shares outstanding (5)

 

130,176,048

 

130,586,153

 

131,249,055

 

 

 

Tangible common equity to tangible assets (6)

 

8.85

%

7.78

%

7.32

%

 

 

Tier I leverage ratio

 

11.25

%

10.87

%

10.34

%

 

 

OTHER QTD INFORMATION

 

 

 

 

 

 

Number of bank/ATM locations

 

257

 

266

 

275

 

 

 

Full-time equivalent employees

 

4,718

 

4,714

 

4,594

 

 

 

(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 total revenue.

(5)

As of period end.

(6)

The tangible common equity ratio is a non-gaap ratio and 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 2023.
 

COMMERCE BANCSHARES, INC. and SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

 

(Unaudited)

(In thousands, except per share data)

 

For the Three Months Ended

For the Year Ended

 

Dec. 31, 2023

Sep. 30, 2023

Jun. 30, 2023

Mar. 31, 2023

Dec. 31, 2022

Dec. 31, 2023

Dec. 31, 2022

Interest income

 

$362,609

 

$361,162

 

$348,663

 

$308,857

 

$286,377

 

$1,381,291

 

$998,979

 

Interest expense

 

114,188

 

112,615

 

99,125

 

57,234

 

31,736

 

383,162

 

56,794

 

Net interest income

 

248,421

 

248,547

 

249,538

 

251,623

 

254,641

 

998,129

 

942,185

 

Provision for credit losses

 

5,879

 

11,645

 

6,471

 

11,456

 

15,477

 

35,451

 

28,071

 

Net interest income after credit losses

242,542

 

236,902

 

243,067

 

240,167

 

239,164

 

962,678

 

914,114

 

NON-INTEREST INCOME

 

 

 

 

 

 

 

 

Trust fees

 

49,154

 

49,207

 

47,265

 

45,328

 

44,710

 

190,954

 

184,719

 

Bank card transaction fees

 

47,878

 

46,899

 

49,725

 

46,654

 

44,588

 

191,156

 

176,144

 

Deposit account charges and other fees

23,517

 

23,090

 

22,633

 

21,752

 

21,989

 

90,992

 

94,381

 

Consumer brokerage services

 

3,641

 

3,820

 

4,677

 

5,085

 

4,518

 

17,223

 

19,117

 

Capital market fees

 

4,269

 

3,524

 

2,945

 

3,362

 

3,386

 

14,100

 

14,231

 

Loan fees and sales

 

2,875

 

2,966

 

2,735

 

2,589

 

2,566

 

11,165

 

13,141

 

Other

 

13,545

 

13,443

 

17,625

 

12,842

 

15,068

 

57,455

 

44,802

 

Total non-interest income

 

144,879

 

142,949

 

147,605

 

137,612

 

136,825

 

573,045

 

546,535

 

INVESTMENT SECURITIES GAINS (LOSSES), NET

7,601

 

4,298

 

3,392

 

(306

)

8,904

 

14,985

 

20,506

 

NON-INTEREST EXPENSE

 

 

 

 

 

 

 

 

Salaries and employee benefits

 

147,456

 

146,805

 

145,429

 

144,373

 

138,458

 

584,063

 

554,047

 

Data processing and software

 

31,141

 

30,744

 

28,719

 

28,154

 

27,991

 

118,758

 

110,692

 

Net occupancy

 

13,927

 

13,948

 

12,995

 

12,759

 

11,774

 

53,629

 

49,117

 

Deposit insurance

 

20,304

 

4,029

 

4,187

 

4,643

 

3,153

 

33,163

 

10,583

 

Marketing

 

6,505

 

6,167

 

6,368

 

5,471

 

5,419

 

24,511

 

23,827

 

Equipment

 

5,137

 

4,697

 

4,864

 

4,850

 

5,021

 

19,548

 

19,359

 

Supplies and communication

 

5,242

 

4,963

 

4,625

 

4,590

 

4,446

 

19,420

 

18,101

 

Other

 

21,542

 

16,657

 

20,424

 

19,267

 

20,478

 

77,890

 

63,051

 

Total non-interest expense

 

251,254

 

228,010

 

227,611

 

224,107

 

216,740

 

930,982

 

848,777

 

Income before income taxes

 

143,768

 

156,139

 

166,453

 

153,366

 

168,153

 

619,726

 

632,378

 

Less income taxes

 

32,307

 

33,439

 

35,990

 

32,813

 

34,499

 

134,549

 

132,358

 

Net income

 

111,461

 

122,700

 

130,463

 

120,553

 

133,654

 

485,177

 

500,020

 

Less non-controlling interest expense (income)

2,238

 

2,104

 

2,674

 

1,101

 

2,026

 

8,117

 

11,621

 

Net income attributable to Commerce Bancshares, Inc.

$109,223

 

$120,596

 

$127,789

 

$119,452

 

$131,628

 

$477,060

 

$488,399

 

Net income per common share — basic

$0.84

 

$0.92

 

$0.97

 

$0.91

 

$1.00

 

$3.64

 

$3.68

 

Net income per common share — diluted

$0.84

 

$0.92

 

$0.97

 

$0.91

 

$1.00

 

$3.64

 

$3.67

 

 

 

 

 

 

 

 

 

 

OTHER INFORMATION

 

 

 

 

 

 

 

Return on total average assets

 

1.38

%

1.49

%

1.56

%

1.54

%

1.65

%

1.49

%

1.45

%

Return on average equity (1)

16.48

 

17.73

 

18.81

 

18.75

 

21.88

 

17.94

 

17.31

 

Efficiency ratio (2)

 

63.80

 

58.15

 

57.22

 

57.49

 

55.26

 

59.17

 

56.90

 

Effective tax rate

 

22.83

 

21.71

 

21.97

 

21.55

 

20.77

 

22.00

 

21.32

 

Net yield on interest earning assets

3.17

 

3.11

 

3.12

 

3.26

 

3.18

 

3.16

 

2.85

 

Fully-taxable equivalent net interest income

 

$250,547

 

$250,962

 

$251,757

 

$253,411

 

$256,675

 

$1,006,677

 

$951,815

 

(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 total revenue.

The statement above reflects the reclassification of non-interest income of $406 thousand and $1.1 million from other non-interest income to capital market fees for the second and third quarters of 2023.
 

COMMERCE BANCSHARES, INC. and SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS - PERIOD END

 

(Unaudited)

(In thousands)

 

Dec. 31, 2023

Sep. 30, 2023

Dec. 31, 2022

ASSETS

 

 

 

 

Loans

 

 

 

 

Business

 

$ 6,019,036

 

$ 5,908,330

 

$ 5,661,725

 

Real estate — construction and land

 

1,446,764

 

1,539,566

 

1,361,095

 

Real estate — business

 

3,719,306

 

3,647,168

 

3,406,981

 

Real estate — personal

 

3,026,041

 

3,024,639

 

2,918,078

 

Consumer

 

2,077,723

 

2,125,804

 

2,059,088

 

Revolving home equity

 

319,894

 

305,237

 

297,207

 

Consumer credit card

 

589,913

 

574,829

 

584,000

 

Overdrafts

 

6,802

 

3,753

 

14,957

 

Total loans

 

17,205,479

 

17,129,326

 

16,303,131

 

Allowance for credit losses on loans

 

(162,395

)

(162,244

)

(150,136

)

Net loans

 

17,043,084

 

16,967,082

 

16,152,995

 

Loans held for sale

 

4,177

 

5,120

 

4,964

 

Investment securities:

 

 

 

 

Available for sale debt securities

 

9,684,760

 

9,860,828

 

12,238,316

 

Trading debt securities

 

28,830

 

35,564

 

43,523

 

Equity securities

 

12,701

 

12,212

 

12,304

 

Other securities

 

222,473

 

230,792

 

225,034

 

Total investment securities

 

9,948,764

 

10,139,396

 

12,519,177

 

Federal funds sold

 

5,025

 

2,735

 

49,505

 

Securities purchased under agreements to resell

 

450,000

 

450,000

 

825,000

 

Interest earning deposits with banks

 

2,239,010

 

1,847,641

 

389,140

 

Cash and due from banks

 

443,147

 

358,010

 

452,496

 

Premises and equipment — net

 

469,059

 

460,830

 

418,909

 

Goodwill

 

146,539

 

146,539

 

138,921

 

Other intangible assets — net

 

14,179

 

14,432

 

15,234

 

Other assets

 

938,077

 

984,907

 

909,590

 

Total assets

 

$ 31,701,061

 

$ 31,376,692

 

$ 31,875,931

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

Deposits:

 

 

 

 

Non-interest bearing

 

$ 7,975,935

 

$ 7,961,402

 

$ 10,066,356

 

Savings, interest checking and money market

 

14,512,273

 

14,154,275

 

15,126,981

 

Certificates of deposit of less than $100,000

 

930,432

 

1,210,169

 

387,336

 

Certificates of deposit of $100,000 and over

 

1,945,258

 

1,764,611

 

606,767

 

Total deposits

 

25,363,898

 

25,090,457

 

26,187,440

 

Federal funds purchased and securities sold under agreements to repurchase

 

2,908,815

 

2,745,181

 

2,841,734

 

Other borrowings

 

1,404

 

503,589

 

9,672

 

Other liabilities

 

462,714

 

438,199

 

355,508

 

Total liabilities

 

28,736,831

 

28,777,426

 

29,394,354

 

Stockholders’ equity:

 

 

 

 

Common stock

 

655,322

 

629,319

 

629,319

 

Capital surplus

 

3,162,622

 

2,924,211

 

2,932,959

 

Retained earnings

 

53,183

 

298,297

 

31,620

 

Treasury stock

 

(35,599

)

(76,888

)

(41,743

)

Accumulated other comprehensive income (loss)

 

(891,412

)

(1,193,534

)

(1,086,864

)

Total stockholders’ equity

 

2,944,116

 

2,581,405

 

2,465,291

 

Non-controlling interest

 

20,114

 

17,861

 

16,286

 

Total equity

 

2,964,230

 

2,599,266

 

2,481,577

 

Total liabilities and equity

 

$ 31,701,061

 

$ 31,376,692

 

$ 31,875,931

 

 

COMMERCE BANCSHARES, INC. and SUBSIDIARIES

AVERAGE BALANCE SHEETS

 

(Unaudited)

(In thousands)

For the Three Months Ended

Dec. 31, 2023

Sep. 30, 2023

Jun. 30, 2023

Mar. 31, 2023

Dec. 31, 2022

ASSETS:

 

 

 

 

 

Loans:

 

 

 

 

 

Business

$ 5,861,229

 

$ 5,849,227

 

$ 5,757,388

 

$ 5,656,104

 

$ 5,478,241

 

Real estate — construction and land

1,523,682

 

1,508,850

 

1,450,196

 

1,410,835

 

1,268,900

 

Real estate — business

3,644,589

 

3,642,010

 

3,540,851

 

3,478,382

 

3,300,697

 

Real estate — personal

3,027,664

 

2,992,500

 

2,960,962

 

2,933,750

 

2,886,686

 

Consumer

2,117,268

 

2,102,281

 

2,098,523

 

2,067,385

 

2,089,912

 

Revolving home equity

310,282

 

304,055

 

300,623

 

296,748

 

293,681

 

Consumer credit card

568,112

 

564,039

 

555,875

 

556,223

 

559,463

 

Overdrafts

5,258

 

5,341

 

4,630

 

4,449

 

7,428

 

Total loans

17,058,084

 

16,968,303

 

16,669,048

 

16,403,876

 

15,885,008

 

Allowance for credit losses on loans

(161,932

)

(158,335

)

(159,068

)

(150,117

)

(143,285

)

Net loans

16,896,152

 

16,809,968

 

16,509,980

 

16,253,759

 

15,741,723

 

Loans held for sale

5,392

 

5,714

 

5,957

 

5,708

 

6,567

 

Investment securities:

 

 

 

 

 

U.S. government and federal agency obligations

889,390

 

986,284

 

1,035,651

 

1,099,067

 

1,055,602

 

Government-sponsored enterprise obligations

55,661

 

55,676

 

55,751

 

87,086

 

55,732

 

State and municipal obligations

1,363,649

 

1,391,541

 

1,532,519

 

1,793,756

 

1,990,643

 

Mortgage-backed securities

6,022,502

 

6,161,348

 

6,316,224

 

6,454,408

 

6,605,936

 

Asset-backed securities

2,325,089

 

2,553,562

 

2,827,911

 

3,233,757

 

3,714,092

 

Other debt securities

510,721

 

514,787

 

519,988

 

528,941

 

560,951

 

Unrealized gain (loss) on debt securities

(1,595,845

)

(1,458,141

)

(1,331,002

)

(1,387,196

)

(1,582,061

)

Total available for sale debt securities

9,571,167

 

10,205,057

 

10,957,042

 

11,809,819

 

12,400,895

 

Trading debt securities

37,234

 

35,044

 

46,493

 

45,757

 

44,626

 

Equity securities

12,249

 

12,230

 

12,335

 

12,458

 

10,534

 

Other securities

222,378

 

237,518

 

273,587

 

229,867

 

219,354

 

Total investment securities

9,843,028

 

10,489,849

 

11,289,457

 

12,097,901

 

12,675,409

 

Federal funds sold

1,194

 

2,722

 

7,484

 

38,978

 

27,683

 

Securities purchased under agreements to resell

450,000

 

712,472

 

824,974

 

825,000

 

1,174,457

 

Interest earning deposits with banks

2,387,415

 

2,337,744

 

2,284,162

 

809,935

 

640,039

 

Other assets

1,797,849

 

1,750,222

 

1,941,340

 

1,376,551

 

1,339,554

 

Total assets

$ 31,381,030

 

$ 32,108,691

 

$ 32,863,354

 

$ 31,407,832

 

$ 31,605,432

 

 

 

 

 

 

 

LIABILITIES AND EQUITY:

 

 

 

 

 

Non-interest bearing deposits

$ 7,748,654

 

$ 7,939,190

 

$ 8,224,475

 

$ 9,114,512

 

$ 10,360,834

 

Savings

1,357,733

 

1,436,149

 

1,516,887

 

1,550,215

 

1,567,113

 

Interest checking and money market

13,166,783

 

13,048,199

 

12,918,399

 

13,265,485

 

13,693,974

 

Certificates of deposit of less than $100,000

1,097,224

 

1,423,965

 

1,075,110

 

415,367

 

388,304

 

Certificates of deposit of $100,000 and over

1,839,057

 

1,718,126

 

1,472,208

 

903,393

 

596,703

 

Total deposits

25,209,451

 

25,565,629

 

25,207,079

 

25,248,972

 

26,606,928

 

Borrowings:

 

 

 

 

 

Federal funds purchased

473,534

 

508,851

 

507,165

 

493,721

 

143,630

 

Securities sold under agreements to repurchase

2,467,118

 

2,283,020

 

2,206,612

 

2,418,726

 

2,260,263

 

Other borrowings

179,587

 

685,222

 

1,617,952

 

551,267

 

179,552

 

Total borrowings

3,120,239

 

3,477,093

 

4,331,729

 

3,463,714

 

2,583,445

 

Other liabilities

421,402

 

367,741

 

598,915

 

112,052

 

28,745

 

Total liabilities

28,751,092

 

29,410,463

 

30,137,723

 

28,824,738

 

29,219,118

 

Equity

2,629,938

 

2,698,228

 

2,725,631

 

2,583,094

 

2,386,314

 

Total liabilities and equity

$ 31,381,030

 

$ 32,108,691

 

$ 32,863,354

 

$ 31,407,832

 

$ 31,605,432

 

 

COMMERCE BANCSHARES, INC. and SUBSIDIARIES

AVERAGE RATES

 

(Unaudited)

For the Three Months Ended

Dec. 31, 2023

Sep. 30, 2023

Jun. 30, 2023

Mar. 31, 2023

Dec. 31, 2022

ASSETS:

 

 

 

 

 

Loans:

 

 

 

 

 

Business (1)

5.91

%

5.77

%

5.58

%

5.31

%

4.68

%

Real estate — construction and land

8.34

 

8.17

 

7.92

 

7.33

 

6.80

 

Real estate — business

6.18

 

6.13

 

5.96

 

5.65

 

5.15

 

Real estate — personal

3.85

 

3.73

 

3.68

 

3.61

 

3.45

 

Consumer

6.21

 

5.97

 

5.63

 

5.31

 

4.77

 

Revolving home equity

7.70

 

7.76

 

7.55

 

7.03

 

5.89

 

Consumer credit card

13.83

 

13.77

 

13.77

 

13.68

 

12.64

 

Overdrafts

 

 

 

 

 

Total loans

6.15

 

6.02

 

5.84

 

5.56

 

5.03

 

Loans held for sale

9.93

 

10.55

 

10.17

 

10.30

 

10.09

 

Investment securities:

 

 

 

 

 

U.S. government and federal agency obligations

2.32

 

2.31

 

3.42

 

1.90

 

2.01

 

Government-sponsored enterprise obligations

2.36

 

2.36

 

2.38

 

3.21

 

2.36

 

State and municipal obligations (1)

1.94

 

1.95

 

2.04

 

2.26

 

2.29

 

Mortgage-backed securities

2.05

 

2.06

 

2.09

 

2.06

 

1.88

 

Asset-backed securities

2.30

 

2.20

 

2.08

 

2.01

 

1.96

 

Other debt securities

1.85

 

1.75

 

1.86

 

1.93

 

1.89

 

Total available for sale debt securities

2.10

 

2.08

 

2.19

 

2.07

 

1.97

 

Trading debt securities (1)

5.05

 

5.11

 

4.53

 

4.59

 

3.81

 

Equity securities (1)

27.47

 

23.06

 

23.25

 

23.24

 

28.44

 

Other securities (1)

8.60

 

13.13

 

9.40

 

7.11

 

6.67

 

Total investment securities

2.27

 

2.33

 

2.37

 

2.18

 

2.07

 

Federal funds sold

6.65

 

6.56

 

5.63

 

5.09

 

4.27

 

Securities purchased under agreements to resell

1.64

 

2.08

 

1.99

 

1.94

 

2.36

 

Interest earning deposits with banks

5.47

 

5.39

 

5.14

 

4.67

 

3.69

 

Total interest earning assets

4.62

 

4.51

 

4.34

 

4.00

 

3.59

 

 

 

 

 

 

 

LIABILITIES AND EQUITY:

 

 

 

 

 

Interest bearing deposits:

 

 

 

 

 

Savings

.05

 

.05

 

.05

 

.05

 

.06

 

Interest checking and money market

1.57

 

1.33

 

.93

 

.61

 

.38

 

Certificates of deposit of less than $100,000

4.21

 

4.32

 

3.78

 

1.39

 

.73

 

Certificates of deposit of $100,000 and over

4.55

 

4.37

 

3.93

 

2.98

 

1.42

 

Total interest bearing deposits

1.93

 

1.76

 

1.29

 

.71

 

.40

 

Borrowings:

 

 

 

 

 

Federal funds purchased

5.40

 

5.33

 

5.06

 

4.59

 

3.56

 

Securities sold under agreements to repurchase

3.25

 

3.20

 

3.09

 

2.93

 

2.29

 

Other borrowings

5.45

 

5.30

 

5.24

 

4.94

 

4.02

 

Total borrowings

3.71

 

3.93

 

4.13

 

3.49

 

2.48

 

Total interest bearing liabilities

2.20

%

2.12

%

1.87

%

1.20

%

.69

%

 

 

 

 

 

 

Net yield on interest earning assets

3.17

%

3.11

%

3.12

%

3.26

%

3.18

%

 

(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 Year Ended

(Unaudited)

(In thousands, except ratios)

 

Dec. 31, 2023

Sep. 30, 2023

Jun. 30, 2023

Mar. 31, 2023

Dec. 31, 2022

Dec. 31, 2023

Dec. 31, 2022

ALLOWANCE FOR CREDIT LOSSES ON LOANS

 

 

 

 

 

 

 

 

Balance at beginning of period

 

$162,244

 

$158,685

 

$159,317

 

$150,136

 

$143,377

 

$150,136

 

$150,044

 

Provision for credit losses on loans

 

8,170

 

13,343

 

5,864

 

15,948

 

12,404

 

43,325

 

19,155

 

Net charge-offs (recoveries):

 

 

 

 

 

 

 

 

Commercial portfolio:

 

 

 

 

 

 

 

 

Business

 

96

 

2,613

 

165

 

230

 

496

 

3,104

 

1,053

 

Real estate — construction and land

 

 

 

(115

)

 

 

(115

)

 

Real estate — business

 

128

 

(15

)

(5

)

(4

)

(4

)

104

 

(20

)

 

 

224

 

2,598

 

45

 

226

 

492

 

3,093

 

1,033

 

Personal banking portfolio:

 

 

 

 

 

 

 

 

Consumer credit card

 

5,325

 

4,716

 

4,687

 

4,325

 

3,467

 

19,053

 

12,658

 

Consumer

 

1,903

 

1,797

 

1,273

 

1,275

 

1,522

 

6,248

 

3,790

 

Overdraft

 

588

 

683

 

517

 

978

 

230

 

2,766

 

1,716

 

Real estate — personal

 

(11

)

(9

)

(6

)

(11

)

(40

)

(37

)

(74

)

Revolving home equity

 

(10

)

(1

)

(20

)

(26

)

(26

)

(57

)

(60

)

 

 

7,795

 

7,186

 

6,451

 

6,541

 

5,153

 

27,973

 

18,030

 

Total net loan charge-offs

 

8,019

 

9,784

 

6,496

 

6,767

 

5,645

 

31,066

 

19,063

 

Balance at end of period

 

$162,395

 

$162,244

 

$158,685

 

$159,317

 

$150,136

 

$162,395

 

$150,136

 

LIABILITY FOR UNFUNDED LENDING COMMITMENTS

 

$25,246

 

$27,537

 

$29,235

 

$28,628

 

$33,120

 

 

 

NET CHARGE-OFF RATIOS (1)

 

 

 

 

 

 

 

 

Commercial portfolio:

 

 

 

 

 

 

 

 

Business

 

.01

%

.18

%

.01

%

.02

%

.04

%

.05

%

.02

%

Real estate — construction and land

 

 

 

(.03

)

 

 

(.01

)

 

Real estate — business

 

.01

 

 

 

 

 

 

 

 

 

.01

 

.09

 

 

.01

 

.02

 

.03

 

.01

 

Personal banking portfolio:

 

 

 

 

 

 

 

 

Consumer credit card

 

3.72

 

3.32

 

3.38

 

3.15

 

2.46

 

3.40

 

2.31

 

Consumer

 

.36

 

.34

 

.24

 

.25

 

.29

 

.30

 

.18

 

Overdraft

 

44.37

 

50.73

 

44.79

 

89.15

 

12.28

 

56.19

 

30.40

 

Real estate — personal

 

 

 

 

 

(.01

)

 

 

Revolving home equity

 

(.01

)

 

(.03

)

(.04

)

(.04

)

(.02

)

(.02

)

 

 

.51

 

.48

 

.44

 

.45

 

.35

 

.47

 

.31

 

Total

 

.19

%

.23

%

.16

%

.17

%

.14

%

.19

%

.12

%

CREDIT QUALITY RATIOS

 

 

 

 

 

 

 

 

Non-accrual loans to total loans

 

.04

%

.05

%

.04

%

.05

%

.05

%

 

 

Allowance for credit losses on loans to total loans

 

.94

 

.95

 

.94

 

.96

 

.92

 

 

 

NON-ACCRUAL AND PAST DUE LOANS

 

 

 

 

 

 

 

 

Non-accrual loans:

 

 

 

 

 

 

 

 

Business

 

$3,622

 

$6,602

 

$4,732

 

$6,361

 

$6,751

 

 

 

Real estate — business

 

60

 

76

 

153

 

171

 

189

 

 

 

Real estate — personal

 

1,653

 

1,531

 

1,276

 

1,269

 

1,366

 

 

 

Revolving home equity

 

1,977

 

 

 

 

 

 

 

Total

 

7,312

 

8,209

 

6,161

 

7,801

 

8,306

 

 

 

Loans past due 90 days and still accruing interest

$21,864

 

$18,580

 

$15,351

 

$14,800

 

$15,830

 

 

 

 

(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 Fourth Quarter Results

December 31, 2023

For the quarter ended December 31, 2023, net income amounted to $109.2 million, compared to $120.6 million in the previous quarter and $131.6 million in the same quarter last year. The decrease in net income compared to the previous quarter was primarily the result of higher non-interest expense, partly offset by lower provision for credit losses and higher net gains on investment securities. The net yield on interest earning assets increased six basis points from the previous quarter to 3.17%. Average loans grew $89.8 million compared to the previous quarter, while average deposits, borrowings and available for sale debt securities, at fair value, declined $356.2 million, $356.9 million, and $633.9 million, respectively. For the quarter, the return on average assets was 1.38%, the return on average equity was 16.48%, and the efficiency ratio was 63.8%.

Balance Sheet Review

During the 4th quarter of 2023, average loans totaled $17.1 billion, an increase of $89.8 million over the prior quarter, and $1.2 billion, or 7.4%, over the same quarter last year. Compared to the previous quarter, average balances of personal real estate, consumer, construction, and business loans grew $35.2 million, $15.0 million, $14.8 million, and $12.0 million, respectively. During the current quarter, the Company sold certain fixed rate personal real estate loans totaling $8.7 million, compared to $9.2 million in the prior quarter.

Total average available for sale debt securities decreased $633.9 million compared to the previous quarter to $9.6 billion, at fair value. The decrease in investment securities was mainly the result of lower average balances of asset-backed, mortgage-backed, and U.S. government and federal agency obligation securities. During the 4th quarter of 2023, the unrealized loss on available for sale securities decreased $376.5 million to $1.2 billion, at period end, and maturities and pay downs were $598.7 million. At December 31, 2023, the duration of the available for sale investment portfolio was 4.1 years. The Company does not have any investment securities classified as held-to-maturity.

Total average deposits decreased $356.2 million this quarter compared to the previous quarter. The decrease in deposits mostly resulted from lower certificates of deposit, demand deposits, and savings average deposits of $205.8 million, $190.5 million, and $78.4 million, respectively, partly offset by higher interest checking and money market average deposits of $118.6 million. Compared to the previous quarter, total average commercial and wealth deposits increased $93.4 million and $23.0 million, respectively, while consumer deposits declined $5.9 million. During the 4th quarter, the Company paid off its final tranche of brokered deposits, which decreased average certificate of deposit balances by $471.3 million compared to the prior quarter. The average loans to deposits ratio was 67.7% in the current quarter and 66.4% in the prior quarter. The Company’s average borrowings, which included customer repurchase agreements of $2.5 billion, decreased $356.9 million to $3.1 billion in the 4th quarter of 2023, mostly due to a decline of $505.4 million in Federal Home Loan Bank (FHLB) borrowings.

Net Interest Income

Net interest income in the 4th quarter of 2023 amounted to $248.4 million, a decrease of $126 thousand compared to the previous quarter. On a fully taxable-equivalent (FTE) basis, net interest income for the current quarter decreased $415 thousand from the previous quarter to $250.5 million. The decrease in net interest income was mostly due to higher interest expense on deposits and lower interest income on investment securities, partly offset by higher interest earned on loans and lower interest expense on borrowings. The net yield (FTE) on earning assets increased to 3.17%, from 3.11% in the prior quarter.

Compared to the previous quarter, interest income on loans (FTE) increased $6.8 million, due to higher average rates earned in most loan categories, coupled with higher average balances in almost all loan categories. The average yield (FTE) on the loan portfolio increased 13 basis points to 6.15% this quarter.

Interest income on investment securities (FTE) decreased $4.9 million compared to the prior quarter, mostly due to lower average balances of available for sale securities and a $2.3 million dividend from a private equity investment in the prior quarter that did not repeat in the current quarter. Interest income earned on U.S. government and federal agency securities decreased due to lower average balances, which included the impact of $473 thousand in lower inflation income from Treasury inflation-protected securities this quarter. Additionally, the Company recorded a $629 thousand adjustment to premium amortization at December 31, 2023, which increased interest income to reflect slower forward prepayment speed estimates on mortgage-backed securities, but was lower than the $1.3 million adjustment that increased interest income in the prior quarter. The average yield (FTE) on total investment securities was 2.27% in the current quarter, compared to 2.33% in the previous quarter.

Compared to the previous quarter, interest income on deposits with banks increased $1.2 million, due to higher average rates earned and higher average balances. The average yield on deposits with banks was 5.47% in the current quarter, compared to 5.39% in the prior quarter.

Interest expense increased $1.6 million, mostly due to higher rates paid on deposits, partly offset by lower average balances of borrowings and deposits. The average rate paid on interest bearing deposits totaled 1.93% in the current quarter compared to 1.76% in the prior quarter. Interest expense on deposits increased $6.9 million this quarter compared to the previous quarter. Interest expense on borrowings decreased $5.3 million, mostly due to a decline in average FHLB borrowings of $505.4 million. The overall rate paid on interest bearing liabilities was 2.20% in the current quarter compared to 2.12% in the prior quarter.

Non-Interest Income

In the 4th quarter of 2023, total non-interest income amounted to $144.9 million, an increase of $8.1 million compared to the same period last year and an increase of $1.9 million compared to the prior quarter. The increase in non-interest income compared to the same period last year was mainly due to higher trust fees, bank card fees, deposit account fees, and capital market fees, partly offset by lower consumer brokerage fees and lower gains on sales of real estate. The increase in non-interest income compared to the prior quarter was mainly due to higher bank card fees, capital market fees, deposit account fees, and sweep fees, partly offset by lower tax credit sales income, and lower gains on sales of real estate. Additionally, an increase of $2.3 million in fair value adjustments was recorded on the Company’s deferred compensation plan, which are held in a trust and recorded as both an asset and liability, affecting both other income and other expense.

Total net bank card fees in the current quarter increased $3.3 million, or 7.4%, compared to the same period last year, and increased $979 thousand compared to the prior quarter. Net corporate card fees increased $2.3 million, or 9.3%, over the same quarter of last year mainly due to lower rewards and network expense. Net debit card fees increased $790 thousand, or 7.6%, mostly due to lower network expense. Net merchant fees increased $159 thousand, or 2.9%, due to higher interchange fees, while net credit card fees increased $3 thousand. Total net bank card fees this quarter were comprised of fees on corporate card ($27.6 million), debit card ($11.2 million), merchant ($5.6 million) and credit card ($3.5 million) transactions.

In the current quarter, trust fees increased $4.4 million, or 9.9%, over the same period last year, mostly resulting from higher private client trust fees. Compared to the same period last year, deposit account fees increased $1.5 million, or 6.9%, mostly due to higher corporate cash management fees. Capital market fees increased $883 thousand, or 26.1%, over the same period last year due to higher underwriting fees, while consumer brokerage fees decreased $877 thousand, or 19.4%.

Other non-interest income decreased compared to the same period last year primarily due to lower tax credit sales income of $1.0 million and lower gains on sales of real estate and other assets of $1.2 million. These decreases were partly offset by higher fair value adjustments on the Company’s deferred compensation plan this quarter. For the 4th quarter of 2023, non-interest income comprised 36.8% of the Company’s total revenue.

Investment Securities Gains and Losses

The Company recorded net securities gains of $7.6 million in the current quarter, compared to gains of $4.3 million in the prior quarter and $8.9 million in the 4th quarter of 2022. Net securities gains in the current quarter primarily resulted from net fair value gains of $7.1 million on the Company’s portfolio of private equity investments.

Non-Interest Expense

Non-interest expense for the current quarter amounted to $251.3 million, compared to $216.7 million in the same period last year and $228.0 million in the prior quarter. The increase in non-interest expense compared to the same period last year was mainly due to higher FDIC insurance expense, salaries and employee benefits expense, data processing and software expense, and occupancy expense. The increase in non-interest expense compared to the prior quarter was mainly due to higher FDIC insurance expense.

Compared to the 4th quarter of last year, salaries and employee benefits expense increased $9.0 million, or 6.5%, mostly due to higher full-time salaries expense of $7.3 million and higher employee benefits expense of $2.0 million. Full-time equivalent employees totaled 4,718 and 4,594 at December 31, 2023 and 2022, respectively.

Compared to the same period last year, data processing and software expense increased $3.1 million due to higher bank card fees expense and increased costs for service providers. Occupancy expense increased $2.2 million mostly due to higher real estate taxes and depreciation expense, partly offset by higher rent income. FDIC insurance expense increased $17.2 million, mostly due to a $16.0 million accrual in the current quarter of a one-time special assessment by the FDIC to replenish the Deposit Insurance Fund.

Income Taxes

The effective tax rate for the Company was 22.8% in the current quarter, 21.7% in the previous quarter, and 20.8% in the 4th quarter of 2022. The increase in the effective tax rate compared to the prior quarter was mostly due to higher state and local income taxes. The increase in the effective tax rate compared to the same quarter last year was mostly due to higher state income taxes and lower tax-exempt income.

Credit Quality

Net loan charge-offs in the 4th quarter of 2023 amounted to $8.0 million, compared to $9.8 million in the prior quarter and $5.6 million in the same period last year. The ratio of annualized net loan charge-offs to total average loans was .19% in the current quarter, .23% in the previous quarter, and .14% in the 4th quarter of last year. Compared to the prior quarter, net loan charge-offs on commercial loans decreased $2.4 million to $224 thousand, while net loan charge-offs on personal banking loans increased $609 thousand to $7.8 million, mainly due to $609 thousand of higher consumer credit card loan net charge-offs.

In the 4th quarter of 2023, annualized net loan charge-offs on average consumer credit card loans were 3.72%, compared to 3.32% in the previous quarter, and 2.46% in the same quarter last year. Consumer loan net charge-offs were .36% of average consumer loans in the current quarter, .34% in the prior quarter, and .29% in the same quarter last year.

At December 31, 2023, the allowance for credit losses on loans totaled $162.4 million, or .94% of total loans, and increased $151 thousand compared to the prior quarter. Additionally, the liability for unfunded lending commitments at December 31, 2023 was $25.2 million, a decrease of $2.3 million compared to the liability at September 30, 2023.

At December 31, 2023, total non-accrual loans amounted to $7.3 million, a decrease of $897 thousand compared to the previous quarter. At December 31, 2023, the balance of non-accrual loans, which represented .04% of loans outstanding, included business loans of $3.6 million, revolving home equity loans of $2.0 million, personal real estate loans of $1.7 million, and business real estate loans of $60 thousand. Loans more than 90 days past due and still accruing interest totaled $21.9 million at December 31, 2023.

Liquidity

During the 4th quarter of 2023, the Company increased its interest earning deposit at the Federal Reserve Bank (FRB) by $391.4 million to $2.2 billion. The change in the balance at the FRB was mostly the result of $598.7 million of maturities and paydowns in the available for sale debt securities portfolio, a $408.7 million increase in securities sold under agreements to repurchase, and a $273.4 million increase in total deposits, which includes a $401.0 million decrease in brokered certificates of deposit, partly offset by a $500.0 million decrease in FHLB advances and a $245.1 million decrease in federal funds purchased.

The Company regularly pledges loans and securities to the FRB and at December 31, 2023 and September 30, 2023, the Company’s pledging resulted in a total borrowing capacity of $4.9 billion and $5.0 billion, respectively. The Company did not have any borrowings from the FRB’s Discount Window or the Bank Term Funding Program during the current quarter. The Company also pledges loans and securities and borrows from the FHLB. At December 31, 2023, the Company did not have any outstanding borrowings and had $1.9 billion of available borrowing capacity from the FHLB. Additionally, the Company pledges portions of its investment securities portfolio to secure public fund deposits, trust funds, and securities sold under agreements to repurchase.

The Company has an available for sale debt securities portfolio with a fair market value of $9.7 billion at December 31, 2023. Approximately $1.8 billion is expected to mature or pay down over the next 12 months. At December 31, 2023, the Company had pledged $7.5 billion of the securities portfolio. The Company also has a portfolio of $450.0 million in securities purchased under agreements to resell, of which $325.0 million are expected to mature over the next 12 months.

Other

During the 4th quarter of 2023, the Company distributed a 5% stock dividend on its common stock and paid a cash dividend of $.26 per common share (as restated for the stock dividend), representing a 7.1% increase over the same period last year. The Company purchased 412,921 shares of treasury stock during the current quarter at an average price of $48.84.

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.

Contacts

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