CBSH 8-K
Commerce Bancshares Inc /Mo/ (CBSH)
8-K
2022-07-21
For: 2022-07-21
View Original
Added on
April 11, 2026
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________
Form 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): July 21, 2022
(Exact name of registrant as specified in its charter)
| (State of Incorporation) | (Commission File Number) | (IRS Employer Identification No.) | ||||||||||||
| (Address of principal executive offices) | (Zip Code) | ||||||||||
(816 ) 234-2000
(Registrant’s telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| Securities registered pursuant to Section 12(b) of the Act: | ||||||||
| Title of class | Trading symbol(s) | Name of exchange on which registered | ||||||
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 or Rule 12b-2 of the Securities Exchange Act of 1934.
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02 Results of Operations and Financial Condition
A copy of the press release issued July 21, 2022 by Commerce Bancshares, Inc. announcing Second Quarter 2022 earnings is furnished under Item 2.02 of this Current Report on Form 8-K as Exhibit 99.1. Additionally, a slide presentation for investors and analysts is being furnished as Exhibit 99.2 to this Current Report on Form 8-K.
The information in this Current Report on Form 8-K, including the exhibits, is furnished pursuant to Item 2.02 and shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities under that Section. Furthermore, the information in this Current Report on Form 8-K, including the exhibits, shall not be deemed to be incorporated by reference into the filings of Commerce Bancshares, Inc. under the Securities Act of 1933, as amended.
All information included in this Current Report on Form 8-K is available on the Company’s website at https://investor.commercebank.com/news-info/financial-news-releases/default.aspx.
Item 9.01 Financial Statements and Exhibits
Exhibits
104 The XBRL tags on the cover page of this Form 8-K are embedded within the Inline XBRL document.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| COMMERCE BANCSHARES, INC. | |||||||||||
| By: | /s/ Paul A. Steiner | ||||||||||
| Paul A. Steiner | |||||||||||
Controller (Chief Accounting Officer) | |||||||||||
Date: July 21, 2022
Exhibit 99.1
Exhibit 99.1
 | CBSH | ||||
1000 Walnut Street / Suite 700 / Kansas City, Missouri 64106 / 816.234.2000 | |||||
FOR IMMEDIATE RELEASE:
Thursday, July 21, 2022
COMMERCE BANCSHARES, INC. REPORTS
SECOND QUARTER EARNINGS PER SHARE OF $.96
Commerce Bancshares, Inc. announced earnings of $.96 per share for the three months ended June 30, 2022, compared to $1.32 per share in the same quarter last year and $.97 per share in the first quarter of 2022. Net income for the second quarter of 2022 amounted to $115.8 million, compared to $162.3 million in the second quarter of 2021 and $118.2 million in the prior quarter.
For the six months ended June 30, 2022, earnings per share totaled $1.93, compared to $2.38 for the first six months of 2021. Net income amounted to $233.9 million for the six months ended June 30, 2022, compared to $293.3 million in the comparable period last year. For the year to date, the return on average assets was 1.35%, and the return on average equity was 15.28%.
“Against the backdrop of an uncertain economy, we are pleased with our second quarter performance,” said John Kemper, Chief Executive Officer. “Consumer and commercial spending remain at healthy levels, despite supply chain impacts, inflation, and geopolitical challenges. Our balance sheet has been well-positioned for rising rates, which resulted in an expansion in net interest margin this quarter.”
“Capital levels and credit quality metrics remain very strong and we have ample liquidity to meet the increased loan demand across our markets.”
Second Quarter 2022 Financial Highlights:
•Net interest income was $232.4 million, a $23.6 million increase over the prior quarter. Net interest margin increased 34 basis points to 2.79%.
•Non-interest income totaled $139.4 million, an increase of $7.7 million compared to the prior quarter.
•Non-interest expense totaled $213.5 million, an increase of $7.9 million compared to the prior quarter.
•Average loan balances totaled $15.5 billion, an increase of $262.4 million, or 1.7%, from the prior quarter.
•Total average available for sale debt securities decreased 4.4%, or $654.6 million, over the prior quarter to $14.3 billion, at fair value. Purchases of securities during the quarter totaled $73.8 million, with a weighted average yield of approximately 3.03%.
•Compared to the prior quarter, average deposits declined $622.5 million, or 2.1%. The average rate paid on interest bearing deposits was 7 basis points.
1
Exhibit 99.1
•The ratio of annualized net loan charge-offs to average loans was .10% compared to .12% in the prior quarter.
•Non-accrual loans totaled $7.9 million compared to $8.3 million in the prior quarter. Non-accrual loans were .05% of total loans.
•At June 30, 2022, the allowance for credit losses on loans increased to $138.0 million and the ratio of allowance for credit losses on loans to total loans was .88%.
•The Company purchased 846,223 shares of its common stock this quarter at an average price of $67.77.
•Total assets at June 30, 2022 were $33.4 billion, a decrease of $1.6 billion, or 4.4%, from the prior quarter.
•For the quarter, the return on average assets was 1.36%, the return on average equity was 16.29%, and the efficiency ratio was 57.3%.
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.
* * * * * * * * * * * * * * *
For additional information, contact
Matt Burkemper, Investor Relations
(314) 746-7485
www.commercebank.com
2
Exhibit 99.1
COMMERCE BANCSHARES, INC. and SUBSIDIARIES
FINANCIAL HIGHLIGHTS
| For the Three Months Ended | For the Six Months Ended | |||||||||||||||||||
| (Unaudited) (Dollars in thousands, except per share data) | Jun. 30, 2022 | Mar. 31, 2022 | Jun. 30, 2021 | Jun. 30, 2022 | Jun. 30, 2021 | |||||||||||||||
| FINANCIAL SUMMARY | ||||||||||||||||||||
| Net interest income | $232,385 | $208,786 | $207,982 | $441,171 | $413,730 | |||||||||||||||
| Non-interest income | 139,427 | 131,769 | 139,143 | 271,196 | 275,188 | |||||||||||||||
| Total revenue | 371,812 | 340,555 | 347,125 | 712,367 | 688,918 | |||||||||||||||
| Investment securities gains | 1,029 | 7,163 | 16,804 | 8,192 | 26,657 | |||||||||||||||
| Provision for credit losses | 7,162 | (9,858) | (45,655) | (2,696) | (51,887) | |||||||||||||||
| Non-interest expense | 213,505 | 205,648 | 198,126 | 419,153 | 390,699 | |||||||||||||||
| Income before taxes | 152,174 | 151,928 | 211,458 | 304,102 | 376,763 | |||||||||||||||
| Income taxes | 32,021 | 31,902 | 45,209 | 63,923 | 77,285 | |||||||||||||||
| Non-controlling interest expense | 4,359 | 1,872 | 3,923 | 6,231 | 6,180 | |||||||||||||||
| Net income attributable to Commerce Bancshares, Inc. | $115,794 | $118,154 | $162,326 | $233,948 | $293,298 | |||||||||||||||
| Earnings per common share: | ||||||||||||||||||||
| Net income — basic | $0.96 | $0.97 | $1.32 | $1.93 | $2.38 | |||||||||||||||
| Net income — diluted | $0.96 | $0.97 | $1.32 | $1.93 | $2.38 | |||||||||||||||
| Effective tax rate | 21.66 | % | 21.26 | % | 21.78 | % | 21.46 | % | 20.85 | % | ||||||||||
| Tax equivalent net interest income | $235,010 | $211,393 | $211,060 | $446,403 | $419,834 | |||||||||||||||
Average total interest earning assets (1) | $33,839,655 | $34,937,086 | $32,556,658 | $ | 34,385,339 | $ | 31,921,220 | |||||||||||||
| Diluted wtd. average shares outstanding | 119,920,218 | 120,616,095 | 122,272,952 | 120,266,234 | 122,337,157 | |||||||||||||||
| RATIOS | ||||||||||||||||||||
Average loans to deposits (2) | 53.93 | % | 51.90 | % | 57.78 | % | 52.91 | % | 59.73 | % | ||||||||||
| Return on total average assets | 1.36 | 1.33 | 1.93 | 1.35 | 1.78 | |||||||||||||||
Return on average equity (3) | 16.29 | 14.41 | 19.12 | 15.28 | 17.42 | |||||||||||||||
| Non-interest income to total revenue | 37.50 | 38.69 | 40.08 | 38.07 | 39.94 | |||||||||||||||
Efficiency ratio (4) | 57.29 | 60.29 | 56.90 | 58.72 | 56.64 | |||||||||||||||
| Net yield on interest earning assets | 2.79 | 2.45 | 2.60 | 2.62 | 2.65 | |||||||||||||||
| EQUITY SUMMARY | ||||||||||||||||||||
| Cash dividends per share | $.265 | $.265 | $.250 | $.530 | $.500 | |||||||||||||||
| Cash dividends on common stock | $31,935 | $32,143 | $30,760 | $64,078 | $61,559 | |||||||||||||||
Book value per share (5) | $22.29 | $24.60 | $28.47 | |||||||||||||||||
Market value per share (5) | $65.65 | $71.59 | $71.01 | |||||||||||||||||
| High market value per share | $74.32 | $74.72 | $77.32 | |||||||||||||||||
| Low market value per share | $62.80 | $66.28 | $67.32 | |||||||||||||||||
Common shares outstanding (5) | 120,032,698 | 120,881,120 | 122,738,252 | |||||||||||||||||
Tangible common equity to tangible assets (6) | 7.56 | % | 8.09 | % | 9.91 | % | ||||||||||||||
| Tier I leverage ratio | 9.45 | % | 9.07 | % | 9.36 | % | ||||||||||||||
| OTHER QTD INFORMATION | ||||||||||||||||||||
| Number of bank/ATM locations | 279 | 285 | 295 | |||||||||||||||||
| Full-time equivalent employees | 4,579 | 4,563 | 4,590 | |||||||||||||||||
(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.
3
Exhibit 99.1
COMMERCE BANCSHARES, INC. and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
| (Unaudited) (In thousands, except per share data) | For the Three Months Ended | For the Six Months Ended | ||||||||||||||||||||||||
| Jun. 30, 2022 | Mar. 31, 2022 | Dec. 31, 2021 | Sep. 30, 2021 | Jun. 30, 2021 | Jun. 30, 2022 | Jun. 30, 2021 | ||||||||||||||||||||
| Interest income | $238,154 | $211,782 | $210,479 | $216,981 | $211,133 | $449,936 | $420,830 | |||||||||||||||||||
| Interest expense | 5,769 | 2,996 | 2,822 | 2,944 | 3,151 | 8,765 | 7,100 | |||||||||||||||||||
| Net interest income | 232,385 | 208,786 | 207,657 | 214,037 | 207,982 | 441,171 | 413,730 | |||||||||||||||||||
| Provision for credit losses | 7,162 | (9,858) | (7,054) | (7,385) | (45,655) | (2,696) | (51,887) | |||||||||||||||||||
| Net interest income after credit losses | 225,223 | 218,644 | 214,711 | 221,422 | 253,637 | 443,867 | 465,617 | |||||||||||||||||||
| NON-INTEREST INCOME | ||||||||||||||||||||||||||
| Bank card transaction fees | 43,873 | 42,045 | 44,773 | 42,815 | 42,608 | 85,918 | 80,303 | |||||||||||||||||||
| Trust fees | 46,792 | 47,811 | 48,893 | 48,950 | 46,257 | 94,603 | 90,384 | |||||||||||||||||||
| Deposit account charges and other fees | 25,564 | 22,307 | 25,493 | 25,161 | 23,988 | 47,871 | 46,563 | |||||||||||||||||||
| Capital market fees | 3,327 | 4,125 | 3,841 | 3,794 | 3,327 | 7,452 | 8,308 | |||||||||||||||||||
| Consumer brokerage services | 5,068 | 4,446 | 4,878 | 4,900 | 4,503 | 9,514 | 8,584 | |||||||||||||||||||
| Loan fees and sales | 3,246 | 4,235 | 5,248 | 6,842 | 7,446 | 7,481 | 17,630 | |||||||||||||||||||
| Other | 11,557 | 6,800 | 14,573 | 5,044 | 11,014 | 18,357 | 23,416 | |||||||||||||||||||
| Total non-interest income | 139,427 | 131,769 | 147,699 | 137,506 | 139,143 | 271,196 | 275,188 | |||||||||||||||||||
| INVESTMENT SECURITIES GAINS (LOSSES), NET | 1,029 | 7,163 | (9,706) | 13,108 | 16,804 | 8,192 | 26,657 | |||||||||||||||||||
| NON-INTEREST EXPENSE | ||||||||||||||||||||||||||
| Salaries and employee benefits | 142,243 | 135,953 | 132,640 | 132,824 | 130,751 | 278,196 | 259,784 | |||||||||||||||||||
| Net occupancy | 12,503 | 12,296 | 12,308 | 12,329 | 11,527 | 24,799 | 23,548 | |||||||||||||||||||
| Equipment | 4,734 | 4,568 | 4,691 | 4,440 | 4,605 | 9,302 | 8,958 | |||||||||||||||||||
| Supplies and communication | 4,361 | 4,713 | 4,430 | 4,530 | 4,033 | 9,074 | 8,158 | |||||||||||||||||||
| Data processing and software | 27,635 | 27,016 | 25,777 | 25,598 | 24,954 | 54,651 | 50,417 | |||||||||||||||||||
| Marketing | 5,836 | 6,344 | 5,395 | 5,623 | 5,680 | 12,180 | 10,838 | |||||||||||||||||||
| Other | 16,193 | 14,758 | 18,341 | 26,276 | 16,576 | 30,951 | 28,996 | |||||||||||||||||||
| Total non-interest expense | 213,505 | 205,648 | 203,582 | 211,620 | 198,126 | 419,153 | 390,699 | |||||||||||||||||||
| Income before income taxes | 152,174 | 151,928 | 149,122 | 160,416 | 211,458 | 304,102 | 376,763 | |||||||||||||||||||
| Less income taxes | 32,021 | 31,902 | 33,764 | 34,662 | 45,209 | 63,923 | 77,285 | |||||||||||||||||||
| Net income | 120,153 | 120,026 | 115,358 | 125,754 | 166,249 | 240,179 | 299,478 | |||||||||||||||||||
| Less non-controlling interest expense | 4,359 | 1,872 | 452 | 3,193 | 3,923 | 6,231 | 6,180 | |||||||||||||||||||
| Net income attributable to Commerce Bancshares, Inc. | $115,794 | $118,154 | $114,906 | $122,561 | $162,326 | $233,948 | $293,298 | |||||||||||||||||||
| Net income per common share — basic | $0.96 | $0.97 | $0.94 | $1.00 | $1.32 | $1.93 | $2.38 | |||||||||||||||||||
| Net income per common share — diluted | $0.96 | $0.97 | $0.94 | $0.99 | $1.32 | $1.93 | $2.38 | |||||||||||||||||||
| OTHER INFORMATION | ||||||||||||||||||||||||||
| Return on total average assets | 1.36 | % | 1.33 | % | 1.28 | % | 1.40 | % | 1.93 | % | 1.35 | % | 1.78 | % | ||||||||||||
Return on average equity (1) | 16.29 | 14.41 | 13.11 | 13.74 | 19.12 | 15.28 | 17.42 | |||||||||||||||||||
Efficiency ratio (2) | 57.29 | 60.29 | 57.29 | 59.95 | 56.90 | 58.72 | 56.64 | |||||||||||||||||||
| Effective tax rate | 21.66 | 21.26 | 22.71 | 22.05 | 21.78 | 21.46 | 20.85 | |||||||||||||||||||
| Net yield on interest earning assets | 2.79 | 2.45 | 2.43 | 2.58 | 2.60 | 2.62 | 2.65 | |||||||||||||||||||
| Tax equivalent net interest income | $235,010 | $211,393 | $210,424 | $216,858 | $211,060 | $446,403 | $419,834 | |||||||||||||||||||
(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.
4
Exhibit 99.1
COMMERCE BANCSHARES, INC. and SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS - PERIOD END
| (Unaudited) (In thousands) | Jun. 30, 2022 | Mar. 31, 2022 | Jun. 30, 2021 | |||||||||||
| ASSETS | ||||||||||||||
| Loans | ||||||||||||||
| Business | $ | 5,441,592 | $ | 5,508,508 | $ | 5,803,760 | ||||||||
| Real estate — construction and land | 1,266,260 | 1,144,411 | 1,103,661 | |||||||||||
| Real estate — business | 3,215,578 | 3,109,668 | 3,017,560 | |||||||||||
| Real estate — personal | 2,836,835 | 2,820,076 | 2,793,213 | |||||||||||
| Consumer | 2,089,592 | 2,053,160 | 2,049,166 | |||||||||||
| Revolving home equity | 271,854 | 264,401 | 283,568 | |||||||||||
| Consumer credit card | 558,102 | 544,579 | 586,358 | |||||||||||
| Overdrafts | 6,814 | 14,211 | 2,978 | |||||||||||
| Total loans | 15,686,627 | 15,459,014 | 15,640,264 | |||||||||||
| Allowance for credit losses on loans | (138,039) | (134,710) | (172,395) | |||||||||||
| Net loans | 15,548,588 | 15,324,304 | 15,467,869 | |||||||||||
| Loans held for sale | 6,467 | 8,908 | 23,697 | |||||||||||
| Investment securities: | ||||||||||||||
| Available for sale debt securities | 13,700,308 | 14,780,494 | 13,291,506 | |||||||||||
| Trading debt securities | 34,195 | 31,380 | 29,002 | |||||||||||
| Equity securities | 8,546 | 9,284 | 8,678 | |||||||||||
| Other securities | 207,989 | 199,576 | 176,439 | |||||||||||
| Total investment securities | 13,951,038 | 15,020,734 | 13,505,625 | |||||||||||
| Federal funds sold | 26,000 | — | 5,945 | |||||||||||
| Securities purchased under agreements to resell | 1,450,000 | 1,825,000 | 1,300,000 | |||||||||||
| Interest earning deposits with banks | 684,994 | 1,260,813 | 2,161,644 | |||||||||||
| Cash and due from banks | 355,524 | 326,549 | 358,122 | |||||||||||
| Premises and equipment — net | 397,877 | 394,028 | 371,989 | |||||||||||
| Goodwill | 138,921 | 138,921 | 138,921 | |||||||||||
| Other intangible assets — net | 15,853 | 15,885 | 14,148 | |||||||||||
| Other assets | 860,108 | 671,651 | 508,202 | |||||||||||
| Total assets | $ | 33,435,370 | $ | 34,986,793 | $ | 33,856,162 | ||||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||||
| Deposits: | ||||||||||||||
| Non-interest bearing | $ | 11,102,585 | $ | 11,428,372 | $ | 11,085,286 | ||||||||
| Savings, interest checking and money market | 16,063,064 | 16,751,632 | 14,654,696 | |||||||||||
| Certificates of deposit of less than $100,000 | 404,096 | 422,992 | 478,838 | |||||||||||
| Certificates of deposit of $100,000 and over | 601,488 | 716,345 | 1,267,417 | |||||||||||
| Total deposits | 28,171,233 | 29,319,341 | 27,486,237 | |||||||||||
| Federal funds purchased and securities sold under agreements to repurchase | 2,234,296 | 2,317,461 | 2,318,228 | |||||||||||
| Other borrowings | 6,025 | 9,057 | 2,194 | |||||||||||
| Other liabilities | 348,503 | 367,532 | 555,673 | |||||||||||
| Total liabilities | 30,760,057 | 32,013,391 | 30,362,332 | |||||||||||
| Stockholders’ equity: | ||||||||||||||
| Common stock | 610,804 | 610,804 | 589,352 | |||||||||||
| Capital surplus | 2,682,161 | 2,678,025 | 2,424,157 | |||||||||||
| Retained earnings | 262,363 | 178,504 | 304,739 | |||||||||||
| Treasury stock | (129,588) | (72,293) | (53,018) | |||||||||||
| Accumulated other comprehensive income | (766,894) | (434,400) | 220,390 | |||||||||||
| Total stockholders’ equity | 2,658,846 | 2,960,640 | 3,485,620 | |||||||||||
| Non-controlling interest | 16,467 | 12,762 | 8,210 | |||||||||||
| Total equity | 2,675,313 | 2,973,402 | 3,493,830 | |||||||||||
| Total liabilities and equity | $ | 33,435,370 | $ | 34,986,793 | $ | 33,856,162 | ||||||||
5
Exhibit 99.1
COMMERCE BANCSHARES, INC. and SUBSIDIARIES
AVERAGE BALANCE SHEETS
| (Unaudited) (In thousands) | For the Three Months Ended | ||||||||||||||||
| Jun. 30, 2022 | Mar. 31, 2022 | Dec. 31, 2021 | Sep. 30, 2021 | Jun. 30, 2021 | |||||||||||||
| ASSETS: | |||||||||||||||||
| Loans: | |||||||||||||||||
| Business | $ | 5,385,181 | $ | 5,324,172 | $ | 5,191,844 | $ | 5,437,498 | $ | 6,211,610 | |||||||
| Real estate — construction and land | 1,225,267 | 1,134,902 | 1,228,237 | 1,168,566 | 1,088,433 | ||||||||||||
| Real estate — business | 3,163,508 | 3,095,068 | 3,003,459 | 2,982,847 | 3,014,955 | ||||||||||||
| Real estate — personal | 2,825,578 | 2,808,980 | 2,785,095 | 2,775,638 | 2,804,388 | ||||||||||||
| Consumer | 2,070,560 | 2,040,200 | 2,043,690 | 2,041,263 | 2,004,625 | ||||||||||||
| Revolving home equity | 272,280 | 273,859 | 276,464 | 281,689 | 287,031 | ||||||||||||
| Consumer credit card | 537,681 | 540,844 | 559,429 | 566,406 | 575,725 | ||||||||||||
| Overdrafts | 5,524 | 5,178 | 4,926 | 5,110 | 3,735 | ||||||||||||
Total loans | 15,485,579 | 15,223,203 | 15,093,144 | 15,259,017 | 15,990,502 | ||||||||||||
| Allowance for credit losses on loans | (134,670) | (149,685) | (162,428) | (172,112) | (200,801) | ||||||||||||
| Net loans | 15,350,909 | 15,073,518 | 14,930,716 | 15,086,905 | 15,789,701 | ||||||||||||
| Loans held for sale | 7,933 | 9,383 | 11,203 | 16,021 | 23,389 | ||||||||||||
| Investment securities: | |||||||||||||||||
| U.S. government and federal agency obligations | 1,119,305 | 1,103,749 | 1,009,025 | 727,566 | 719,849 | ||||||||||||
| Government-sponsored enterprise obligations | 55,762 | 51,770 | 50,777 | 50,785 | 50,793 | ||||||||||||
| State and municipal obligations | 2,126,380 | 2,077,600 | 2,095,517 | 2,039,942 | 1,966,673 | ||||||||||||
| Mortgage-backed securities | 7,158,252 | 7,316,609 | 7,141,249 | 7,115,419 | 6,685,407 | ||||||||||||
| Asset-backed securities | 4,038,113 | 3,933,061 | 3,514,541 | 3,028,076 | 2,653,928 | ||||||||||||
Other debt securities | 643,463 | 636,247 | 629,643 | 608,642 | 605,772 | ||||||||||||
| Unrealized gain (loss) on debt securities | (851,110) | (174,297) | 86,020 | 230,058 | 197,124 | ||||||||||||
| Total available for sale debt securities | 14,290,165 | 14,944,739 | 14,526,772 | 13,800,488 | 12,879,546 | ||||||||||||
Trading debt securities | 43,904 | 40,686 | 46,513 | 32,238 | 34,955 | ||||||||||||
| Equity securities | 9,094 | 9,498 | 9,171 | 8,756 | 4,914 | ||||||||||||
| Other securities | 195,090 | 192,311 | 190,346 | 183,397 | 156,984 | ||||||||||||
| Total investment securities | 14,538,253 | 15,187,234 | 14,772,802 | 14,024,879 | 13,076,399 | ||||||||||||
| Federal funds sold | 4,269 | 1,053 | 564 | 792 | 1,338 | ||||||||||||
| Securities purchased under agreements to resell | 1,703,569 | 1,733,887 | 1,669,835 | 1,633,205 | 937,372 | ||||||||||||
| Interest earning deposits with banks | 1,248,942 | 2,608,029 | 2,856,992 | 2,602,896 | 2,724,782 | ||||||||||||
| Other assets | 1,238,493 | 1,304,400 | 1,288,323 | 1,261,277 | 1,258,989 | ||||||||||||
| Total assets | $ | 34,092,368 | $ | 35,917,504 | $ | 35,530,435 | $ | 34,625,975 | $ | 33,811,970 | |||||||
| LIABILITIES AND EQUITY: | |||||||||||||||||
| Non-interest bearing deposits | $ | 11,209,680 | $ | 11,544,701 | $ | 11,919,268 | $ | 11,475,113 | $ | 11,109,198 | |||||||
| Savings | 1,609,694 | 1,563,093 | 1,507,199 | 1,484,923 | 1,474,391 | ||||||||||||
| Interest checking and money market | 14,847,306 | 14,949,727 | 13,873,985 | 13,343,180 | 13,283,481 | ||||||||||||
| Certificates of deposit of less than $100,000 | 411,655 | 429,852 | 441,920 | 464,367 | 491,446 | ||||||||||||
| Certificates of deposit of $100,000 and over | 648,728 | 862,232 | 1,105,480 | 1,289,665 | 1,354,685 | ||||||||||||
| Total deposits | 28,727,063 | 29,349,605 | 28,847,852 | 28,057,248 | 27,713,201 | ||||||||||||
| Borrowings: | |||||||||||||||||
| Federal funds purchased | 113,128 | 23,356 | 20,848 | 13,606 | 23,292 | ||||||||||||
| Securities sold under agreements to repurchase | 2,258,184 | 2,712,468 | 2,620,348 | 2,347,270 | 2,142,404 | ||||||||||||
| Other borrowings | 2,029 | 768 | 1,078 | 347 | 978 | ||||||||||||
| Total borrowings | 2,373,341 | 2,736,592 | 2,642,274 | 2,361,223 | 2,166,674 | ||||||||||||
| Other liabilities | 139,986 | 505,644 | 562,102 | 667,786 | 527,401 | ||||||||||||
| Total liabilities | 31,240,390 | 32,591,841 | 32,052,228 | 31,086,257 | 30,407,276 | ||||||||||||
| Equity | 2,851,978 | 3,325,663 | 3,478,207 | 3,539,718 | 3,404,694 | ||||||||||||
| Total liabilities and equity | $ | 34,092,368 | $ | 35,917,504 | $ | 35,530,435 | $ | 34,625,975 | $ | 33,811,970 | |||||||
6
Exhibit 99.1
COMMERCE BANCSHARES, INC. and SUBSIDIARIES
AVERAGE RATES
| (Unaudited) | For the Three Months Ended | ||||||||||||||||
| Jun. 30, 2022 | Mar. 31, 2022 | Dec. 31, 2021 | Sep. 30, 2021 | Jun. 30, 2021 | |||||||||||||
| ASSETS: | |||||||||||||||||
| Loans: | |||||||||||||||||
Business (1) | 3.16 | % | 2.93 | % | 3.16 | % | 3.43 | % | 3.15 | % | |||||||
| Real estate — construction and land | 4.09 | 3.76 | 3.61 | 3.51 | 3.56 | ||||||||||||
| Real estate — business | 3.70 | 3.38 | 3.41 | 3.46 | 3.49 | ||||||||||||
| Real estate — personal | 3.27 | 3.28 | 3.21 | 3.27 | 3.31 | ||||||||||||
| Consumer | 3.62 | 3.59 | 3.65 | 3.71 | 3.84 | ||||||||||||
| Revolving home equity | 3.69 | 3.48 | 3.47 | 3.46 | 3.43 | ||||||||||||
| Consumer credit card | 11.32 | 11.35 | 11.06 | 11.29 | 11.22 | ||||||||||||
| Overdrafts | — | — | — | — | — | ||||||||||||
| Total loans | 3.72 | 3.54 | 3.62 | 3.74 | 3.65 | ||||||||||||
| Loans held for sale | 8.14 | 6.48 | 5.10 | 4.63 | 4.20 | ||||||||||||
| Investment securities: | |||||||||||||||||
| U.S. government and federal agency obligations | 4.93 | 3.42 | 3.11 | 5.74 | 5.52 | ||||||||||||
| Government-sponsored enterprise obligations | 2.39 | 2.33 | 2.30 | 2.30 | 2.33 | ||||||||||||
State and municipal obligations (1) | 2.30 | 2.29 | 2.26 | 2.35 | 2.41 | ||||||||||||
| Mortgage-backed securities | 1.99 | 1.98 | 1.40 | 1.53 | 1.11 | ||||||||||||
| Asset-backed securities | 1.35 | 1.13 | 1.03 | 1.08 | 1.25 | ||||||||||||
| Other debt securities | 1.97 | 2.00 | 2.07 | 2.04 | 2.06 | ||||||||||||
| Total available for sale debt securities | 2.08 | 1.91 | 1.59 | 1.80 | 1.64 | ||||||||||||
Trading debt securities (1) | 2.46 | 1.84 | 1.54 | 1.01 | 1.19 | ||||||||||||
Equity securities (1) | 26.90 | 26.00 | 27.64 | 23.92 | 43.10 | ||||||||||||
Other securities (1) | 22.38 | 5.91 | 18.39 | 7.46 | 11.90 | ||||||||||||
| Total investment securities | 2.36 | 1.97 | 1.82 | 1.89 | 1.78 | ||||||||||||
| Federal funds sold | 1.79 | .39 | .70 | .50 | .60 | ||||||||||||
| Securities purchased under agreements to resell | 1.03 | 1.24 | 1.62 | 2.19 | 4.46 | ||||||||||||
| Interest earning deposits with banks | .78 | .18 | .15 | .15 | .11 | ||||||||||||
| Total interest earning assets | 2.86 | 2.49 | 2.47 | 2.62 | 2.64 | ||||||||||||
| LIABILITIES AND EQUITY: | |||||||||||||||||
| Interest bearing deposits: | |||||||||||||||||
| Savings | .04 | .05 | .08 | .08 | .08 | ||||||||||||
| Interest checking and money market | .06 | .04 | .04 | .05 | .05 | ||||||||||||
| Certificates of deposit of less than $100,000 | .20 | .13 | .14 | .18 | .27 | ||||||||||||
| Certificates of deposit of $100,000 and over | .29 | .20 | .14 | .14 | .20 | ||||||||||||
| Total interest bearing deposits | .07 | .05 | .05 | .06 | .07 | ||||||||||||
| Borrowings: | |||||||||||||||||
| Federal funds purchased | .79 | .12 | .11 | .10 | .05 | ||||||||||||
| Securities sold under agreements to repurchase | .48 | .10 | .08 | .08 | .06 | ||||||||||||
| Other borrowings | 2.37 | .53 | — | 1.14 | .82 | ||||||||||||
| Total borrowings | .50 | .10 | .08 | .08 | .06 | ||||||||||||
| Total interest bearing liabilities | .12 | % | .06 | % | .06 | % | .06 | % | .07 | % | |||||||
| Net yield on interest earning assets | 2.79 | % | 2.45 | % | 2.43 | % | 2.58 | % | 2.60 | % | |||||||
(1) Stated on a tax equivalent basis using a federal income tax rate of 21%.
7
Exhibit 99.1
COMMERCE BANCSHARES, INC. and SUBSIDIARIES
CREDIT QUALITY
| For the Three Months Ended | For the Six Months Ended | |||||||||||||||||||||||||
| (Unaudited) (In thousands, except ratios) | Jun. 30, 2022 | Mar. 31, 2022 | Dec. 31, 2021 | Sep. 30, 2021 | Jun. 30, 2021 | Jun. 30, 2022 | Jun. 30, 2021 | |||||||||||||||||||
| ALLOWANCE FOR CREDIT LOSSES ON LOANS | ||||||||||||||||||||||||||
| Balance at beginning of period | $134,710 | $150,044 | $162,775 | $172,395 | $200,527 | $150,044 | $220,834 | |||||||||||||||||||
| Provision for credit losses on loans | 7,287 | (10,686) | (8,474) | (5,961) | (27,433) | (3,399) | (37,788) | |||||||||||||||||||
| Net charge-offs (recoveries): | ||||||||||||||||||||||||||
| Commercial portfolio: | ||||||||||||||||||||||||||
| Business | 19 | 77 | 90 | 65 | (4,909) | 96 | (4,913) | |||||||||||||||||||
| Real estate — construction and land | — | — | — | — | — | — | 1 | |||||||||||||||||||
| Real estate — business | (1) | (7) | 6 | (5) | (85) | (8) | (65) | |||||||||||||||||||
| 18 | 70 | 96 | 60 | (4,994) | 88 | (4,977) | ||||||||||||||||||||
| Personal banking portfolio: | ||||||||||||||||||||||||||
| Consumer credit card | 2,937 | 3,372 | 2,964 | 2,908 | 5,155 | 6,309 | 14,136 | |||||||||||||||||||
| Consumer | 633 | 808 | 919 | 496 | 378 | 1,441 | 1,141 | |||||||||||||||||||
| Overdraft | 425 | 358 | 375 | 243 | 148 | 783 | 301 | |||||||||||||||||||
| Real estate — personal | (41) | 22 | (71) | (26) | (16) | (19) | (1) | |||||||||||||||||||
| Revolving home equity | (14) | 18 | (26) | (22) | 28 | 4 | 51 | |||||||||||||||||||
| 3,940 | 4,578 | 4,161 | 3,599 | 5,693 | 8,518 | 15,628 | ||||||||||||||||||||
| Total net loan charge-offs | 3,958 | 4,648 | 4,257 | 3,659 | 699 | 8,606 | 10,651 | |||||||||||||||||||
| Balance at end of period | $138,039 | $134,710 | $150,044 | $162,775 | $172,395 | $138,039 | $172,395 | |||||||||||||||||||
| LIABILITY FOR UNFUNDED LENDING COMMITMENTS | $24,907 | $25,032 | $24,204 | $22,784 | $24,208 | |||||||||||||||||||||
NET CHARGE-OFF RATIOS (1) | ||||||||||||||||||||||||||
| Commercial portfolio: | ||||||||||||||||||||||||||
| Business | — | % | .01 | % | .01 | % | — | % | (.32 | %) | — | % | (.16 | %) | ||||||||||||
| Real estate — construction and land | — | — | — | — | — | — | — | |||||||||||||||||||
| Real estate — business | — | — | — | — | (.01) | — | — | |||||||||||||||||||
| — | — | — | — | (.19) | — | (.10) | ||||||||||||||||||||
| Personal banking portfolio: | ||||||||||||||||||||||||||
| Consumer credit card | 2.19 | 2.53 | 2.10 | 2.04 | 3.59 | 2.36 | 4.81 | |||||||||||||||||||
| Consumer | .12 | .16 | .18 | .10 | .08 | .14 | .12 | |||||||||||||||||||
| Overdraft | 30.86 | 28.04 | 30.20 | 18.87 | 15.89 | 29.50 | 16.67 | |||||||||||||||||||
| Real estate — personal | (.01) | — | (.01) | — | — | — | — | |||||||||||||||||||
| Revolving home equity | (.02) | .03 | (.04) | (.03) | .04 | — | .04 | |||||||||||||||||||
| .28 | .33 | .29 | .25 | .40 | .30 | .55 | ||||||||||||||||||||
| Total | .10 | % | .12 | % | .11 | % | .10 | % | .02 | % | .11 | % | .13 | % | ||||||||||||
| CREDIT QUALITY RATIOS | ||||||||||||||||||||||||||
| Non-accrual loans to total loans | .05 | % | .05 | % | .06 | % | .07 | % | .07 | % | ||||||||||||||||
| Allowance for credit losses on loans to total loans | .88 | .87 | .99 | 1.07 | 1.10 | |||||||||||||||||||||
| NON-ACCRUAL AND PAST DUE LOANS | ||||||||||||||||||||||||||
| Non-accrual loans: | ||||||||||||||||||||||||||
| Business | $6,314 | $6,756 | $7,312 | $8,293 | $8,839 | |||||||||||||||||||||
| Real estate — construction and land | — | — | — | — | — | |||||||||||||||||||||
| Real estate — business | 167 | 190 | 214 | 577 | 655 | |||||||||||||||||||||
| Real estate — personal | 1,436 | 1,389 | 1,631 | 1,551 | 1,672 | |||||||||||||||||||||
| Total | 7,917 | 8,335 | 9,157 | 10,421 | 11,166 | |||||||||||||||||||||
| Loans past due 90 days and still accruing interest | $11,909 | $10,670 | $11,726 | $10,496 | $12,338 | |||||||||||||||||||||
(1) Net charge-offs are annualized and calculated as a percentage of average loans (excluding loans held for sale).
8
COMMERCE BANCSHARES, INC.
Management Discussion of Second Quarter Results
June 30, 2022
For the quarter ended June 30, 2022, net income amounted to $115.8 million, compared to $118.2 million in the previous quarter and $162.3 million in the same quarter last year. The decrease in net income compared to the previous quarter was primarily the result of an increase in the provision for credit losses, higher non-interest expense and lower securities gains. These decreases to net income were partly offset by higher net interest income and non-interest income. The net yield on interest earning assets grew 34 basis points to 2.79%. Average loans grew $262.4 million compared to the previous quarter, while average available for sale debt securities and average deposits declined $654.6 million and $622.5 million, respectively. For the quarter, the return on average assets was 1.36%, the return on average equity was 16.29%, and the efficiency ratio was 57.3%.
Balance Sheet Review
During the 2nd quarter of 2022, average loans totaled $15.5 billion, an increase of $262.4 million over the prior quarter, and declined $504.9 million, or 3.2%, from the same quarter last year. Compared to the previous quarter, average balances of business loans grew $61.0 million (includes a decline of $45.1 million in Paycheck Protection Program (PPP) average loan balances). Average construction and business real estate loan balances grew $90.4 million and $68.4 million, respectively. Period end loans increased $227.6 million compared to the prior quarter. During the current quarter, the Company sold certain fixed rate personal real estate loans totaling $36.6 million, compared to $55.6 million in the prior quarter.
Total average available for sale debt securities decreased $654.6 million compared to the previous quarter to $14.3 billion, at fair value. The decrease in investment securities was mainly the result of lower balances of mortgage-backed securities. During the current quarter, purchases of securities totaled $73.8 million with a weighted average yield of approximately 3.03%. Sales, maturities and pay downs were $715.4 million. At June 30, 2022, the duration of the investment portfolio was 3.8 years, and maturities and pay downs of approximately $2.2 billion are expected to occur during the next 12 months.
Total average deposits decreased $622.5 million this quarter compared to the previous quarter. The decrease in deposits mostly resulted from lower demand deposits and certificates of deposits of $335.0 million, and $231.7 million, respectively. Compared to the previous quarter, total average commercial and wealth deposits declined $672.4 million and $256.2 million, respectively, while total average consumer deposits increased $307.5 million. The average loans to deposits ratio was 53.9% in the current quarter and 51.9% in the prior quarter. The Company’s average borrowings, which include customer repurchase agreements, were $2.4 billion
in the 2nd quarter of 2022 and $2.7 billion in the prior quarter.
Net Interest Income
Net interest income in the 2nd quarter of 2022 amounted to $232.4 million, an increase of $23.6 million compared to the previous quarter. On a tax equivalent basis, net interest income for the current quarter increased $23.6 million over the previous quarter to $235.0 million. The increase in net interest income was mainly due to higher income earned on investment securities and loans. The net yield on earning assets (tax equivalent) increased to 2.79%, compared to 2.45% in the prior quarter.
Compared to the previous quarter, interest income on loans (tax equivalent) increased $10.5 million, due to higher average rates this quarter. Interest on business, business real estate, and construction loans grew mostly due to higher average rates coupled with higher average loan balances. The average tax-equivalent yield on the loan portfolio increased 18 basis points to 3.72% this quarter.
Interest income on investment securities (tax equivalent) increased $15.6 million compared to the prior quarter, due to higher rates earned. Interest income earned on U.S. government and federal agency securities increased due to higher rates earned, which included the impact of $4.4 million in higher inflation income from Treasury inflation-protected securities. Additionally, $6.5 million of non-accrual interest was received on the sale of a private equity investment this quarter. At June 30, 2022, the Company recorded a $5.0 million adjustment to premium amortization, which increased interest income to reflect considerably slower forward prepayment speed estimates on mortgage-backed securities, but it was less than the $7.5 million adjustment recorded in the prior quarter. The yield on total investment securities was 2.36% in the current quarter, compared to 1.97% in the previous quarter.
The average rate paid on interest bearing deposits totaled .07% in the current quarter compared to .05% in the prior quarter. Interest expense on deposits increased $627 thousand this quarter compared to the previous quarter, while interest expense on securities sold under agreements to repurchase increased $2.0 million, due to a 38 basis point increase in the average rate paid. The overall rate paid on interest bearing liabilities was .12% in the current quarter compared to .06% in the prior quarter.
Non-Interest Income
In the 2nd quarter of 2022, total non-interest income amounted to $139.4 million, an increase of $284 thousand compared to the same period last year, and increased $7.7 million compared to the prior quarter. The increase in non-interest income compared to the same period last year was mainly
COMMERCE BANCSHARES, INC.
Management Discussion of Second Quarter Results
June 30, 2022
due to higher deposit, bank card, and sweep fees, mostly offset by lower loan fees and sales and a fair value adjustment on the Company’s deferred compensation plan assets. The increase in non-interest income compared to the prior quarter was mainly due to higher deposit account, sweep, bank card, and other fees.
Total net bank card fees in the current quarter increased $1.3 million, or 3.0%, over the same period last year, and increased $1.8 million compared to the prior quarter. Net corporate card fees increased $1.6 million, or 6.9%, 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 $28 thousand, or .3% and net merchant fees increased $39 thousand, or .8%, while net credit card fees decreased $393 thousand, or 9.6%. Total net bank card fees this quarter were comprised of fees on corporate card ($24.7 million), debit card ($10.5 million), merchant ($4.9 million) and credit card ($3.7 million) transactions.
In the current quarter, trust fees increased $535 thousand, or 1.2%, over the same period last year, resulting from higher private client fee income. Compared to the same period last year, deposit account fees increased $1.6 million, or 6.6%, mainly due to higher corporate cash management fees. Loan fees and sales, mostly mortgage banking revenue, declined $4.2 million, or 56.4%, compared to amounts recorded in the same quarter last year. Consumer brokerage fees increased $565 thousand, or 12.5%, compared to the same quarter last year.
Other non-interest income increased from the same period last year primarily due to higher sweep fees of $2.3 million and income of $2.2 million from a life insurance death benefit. These items were mostly offset by a $3.7 million decrease in fair value adjustment on the Company’s deferred compensation plan assets, which are held in a trust and recorded as both an asset and liability, affecting both other income and other expense. For the 2nd quarter of 2022, non-interest income comprised 37.5% of the Company’s total revenue.
Investment Securities Gains and Losses
The Company recorded net securities gains of $1.0 million in the current quarter, compared to gains of $7.2 million in the prior quarter and gains of $16.8 million in the 2nd quarter of 2021. Net securities gains in the current quarter primarily resulted from net fair value gains of $15.6 million in the Company’s private equity investment portfolio, mostly offset by losses of $9.6 million on sales of available for sale securities and a $4.3 million loss on the sale of an investment in the Company’s private equity portfolio. The Company received $6.5 million in nonaccrual interest, recorded in net interest income, upon the sale of the investment.
Non-Interest Expense
Non-interest expense for the current quarter amounted to $213.5 million, compared to $198.1 million in the same period last year and $205.6 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. The increase in non-interest expense compared to the prior quarter was mainly due to higher salaries expense, partially offset by lower benefits expense.
Compared to the 2nd quarter of last year, salaries and employee benefits expense increased $11.5 million, mostly due to higher full-time salaries expense, of $4.9 million and an accrual of $5.4 million for special bonuses to be paid to non-incentivized part-time and full-time employees in the 2nd half of 2022. Full-time equivalent employees totaled 4,579 and 4,590 at June 30, 2022 and 2021, respectively.
Compared to the same period last year, data processing and software expense increased $2.7 million due to higher software amortization, bank card processing fees and increased costs for service providers this quarter. Other non-interest expense decreased $383 thousand, mainly due to a decline of $3.7 million in the deferred compensation adjustment previously mentioned, mostly offset by increases in travel and entertainment expense, loan collection fees, and legal and professional fees of $1.3 million, $430 thousand, and $339 thousand, respectively.
Income Taxes
The effective tax rate for the Company was 21.7% in the current quarter, 21.3% in the previous quarter, and 21.8% in the 2nd quarter of 2021.
Credit Quality
Net loan charge-offs in the 2nd quarter of 2022 amounted to $4.0 million, compared to $4.6 million in the prior quarter and $699 thousand in the same period last year. The ratio of annualized net loan charge-offs to total average loans was .10% in the current quarter, .12% in the previous quarter, and .02% in the 2nd quarter of last year. Net loan charge-offs on personal banking loans decreased $638 thousand to $3.9 million.
In the 2nd quarter of 2022, annualized net loan charge-offs on average consumer credit card loans were 2.19%, compared to 2.53% in the previous quarter, and 3.59% in the same quarter last year. Consumer loan net charge-offs were .12% of average consumer loans in the current quarter, .16% in the prior quarter, and .08% in the same quarter last year.
At June 30, 2022, the allowance for credit losses on loans totaled $138.0 million, or .88% of total loans. Additionally, the liability for unfunded lending commitments at June 30, 2022 was $24.9 million, a
10
COMMERCE BANCSHARES, INC.
Management Discussion of Second Quarter Results
June 30, 2022
decrease of $125 thousand compared to the liability at March 31, 2022.
At June 30, 2022, total non-accrual loans amounted to $7.9 million, a decrease of $418 thousand from the previous quarter. At June 30, 2022, the balance of non-accrual loans, which represented .05% of loans outstanding, included business loans of $6.3 million, personal real estate loans of $1.4 million, and business real estate loans of $167 thousand. Loans more than 90 days past due and still accruing interest totaled $11.9 million at June 30, 2022.
Other
During the 2nd 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 846,223 shares of treasury stock during the current quarter at an average price of $67.77.
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.
11
COMMERCE BANCSHARES, INC. EARNINGS HIGHLIGHTS 2nd Quarter 2022
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 2021 Annual Report on Form 10-K, 1ST Quarter 2022 Report on Form 10-Q and the Corporation’s Current Reports on Form 8-K. 2
$0.96 EPS 3 • PPNR1 increased 17.3% over Q1. • Net interest income increased 11.3% over Q1. • Net interest margin increased 34 bps over Q1 to 2.79%. • Non-interest income increased 5.8% over Q1 (37.5% of total revenue). • Wealth management client assets of $58.6 billion at June 30, 2022. • Non-interest expense increased 3.8% over Q1. • QTD average loans up 1.7% over Q1. Period ending loans up 1.5% over Q1. • QTD average deposits decreased $622.5 million from Q1. • Net charge-offs to total average loans of .10% and non-accrual loans to total loans of .05%. • Tangible common equity to tangible assets of 7.56%. Highlights Well-positioned for growth 2Q2022 EARNINGS HIGHLIGHTS $158.3 million PPNR1 $115.8 million Net Income 16.29% ROACE 1 See the non-GAAP reconciliation on page 18 1.36% ROAA 57.29% Efficiency Ratio
Quarterly Average Balances Change vs. $ in millions 2Q22 1Q22 2Q21 Highlights Commercial1 $9,774.0 $219.8 $(541.0) • Linked quarter (LQ) reflects growth in construction, business real estate and business (offset by a decline in PPP loans of $45.1 million and a decline in seasonal utilization) Consumer 5,711.6 42.6 36.1 Total Loans $15,485.6 $262.4 $(504.9) Investment Securities $14,538.3 $(649.0) $1,461.9 • LQ decrease mainly due to sales, maturities and pay downs of $715.4 million Interest Earning Deposits with Banks $1,248.9 $(1,359.1) $(1,475.8) • LQ decrease resulting from lower deposit balances and loan growth Deposits $28,727.1 $(622.5) $1,013.9 • 2.1% LQ decline, 3.7% growth over prior year (PY) Book Value per Share2 $22.29 $(2.31) $(6.18) • AOCI impact from higher interest rates BALANCE SHEET HIGHLIGHTS 4 1 PPP QTD average balances were $41.8 million and $86.9 million as of June 30, 2022 and March 31, 2022 , respectively 2 For the quarters ended June 30, 2022, March 31, 2022, and June 30, 2021
$16.6 $17.8 $17.5 $11.1 $11.5 $11.2 1Q222Q21 2Q22 $27.7 $29.3 $28.7 +4% $10.3 $9.5 $9.8 $5.7 $5.7 $5.7 1Q22 $16.0 2Q21 2Q22 $15.2 $15.5 -3% BALANCE SHEET 5 Loans Consumer Loans Commercial Loans Loan Yield Deposits QTD Average Balances $ billions Non-Interest Bearing Interest Bearing Deposit Interest Bearing Deposit Yield QTD Average Balances $ billions 3.65% 3.54% 3.72% .07% .05% .07%
LOAN PORTFOLIO 6 $ in 000s 6/30/2022 3/31/2022 6/30/2021 QoQ YoY Business $5,441,592 $5,508,508 $5,803,760 -1.2% -6.2% Business excl. PPP 5,406,321 5,455,089 4,949,459 -.9% 9.2% Construction 1,266,260 1,144,411 1,103,661 10.6% 14.7% Business Real Estate 3,215,578 3,109,668 3,017,560 3.4% 6.6% Personal Real Estate 2,836,835 2,820,076 2,793,213 .6% 1.6% Consumer 2,089,592 2,053,160 2,049,166 1.8% 2.0% Revolving Home Equity 271,854 264,401 283,568 2.8% -4.1% Consumer Credit Card 558,102 544,579 586,358 2.5% -4.8% Overdrafts 6,814 14,211 2,978 -52.1% 128.8% Total Loans $15,686,627 $15,459,014 $15,640,264 1.5% .3% PPP1 35,271 53,419 854,301 -34.0% -95.9% Total Loans excl. PPP $15,651,356 $15,405,595 $14,785,963 1.6% 5.9% Period-End Balances $ in 000s 6/30/2022 3/31/2022 6/30/2021 QoQ YoY Business $5,385,181 $5,324,172 $6,211,610 1.1% -13.3% Business excl. PPP 5,343,373 5,237,235 4,947,477 2.0% 8.0% Construction 1,225,267 1,134,902 1,088,433 8.0% 12.6% Business Real Estate 3,163,508 3,095,068 3,014,955 2.2% 4.9% Personal Real Estate 2,825,578 2,808,980 2,804,388 .6% .8% Consumer 2,070,560 2,040,200 2,004,625 1.5% 3.3% Revolving Home Equity 272,280 273,859 287,031 -.6% -5.1% Consumer Credit Card 537,681 540,844 575,725 -.6% -6.6% Overdrafts 5,524 5,178 3,735 6.7% 47.9% Total Loans $15,485,579 $15,223,203 $15,990,502 1.7% -3.2% PPP1 41,808 86,937 1,264,133 -51.9% -96.7% Total Loans excl. PPP $15,443,771 $15,136,266 $14,726,369 2.0% 4.9% QTD Average Balances 1Paycheck protection program (PPP) loans are included in the business loan category
Change vs. $ in millions 2Q22 1Q22 2Q21 Highlights Net Interest Income $232.4 $23.6 $24.4 • Linked quarter (LQ) increase due to higher income earned on investment securities and loans Non-Interest Income $139.4 $7.7 $0.3 • See page 8 Non-Interest Expense $213.5 $7.9 $15.4 • See page 9 Pre-Tax, Pre-Provision Net Revenue1 $158.3 $23.4 $9.3 Investment Securities Gains, Net $1.0 $(6.1) $(15.8) • $11.3 million Q2 net gains on the private equity investment portfolio, partly offset by losses of $9.6 million on sales of AFS securities Provision for Credit Losses $7.2 $17.0 $52.8 • Q2 provision reflects $3.3 million build of ACL on loans ($2.7 million related to the construction loan category) Net-Income Attributable to Commerce Bancshares, Inc. $115.8 $(2.4) $(46.5) For the three months ended 2Q22 1Q22 2Q21 Net Income per Common Share – Diluted $.96 $.97 $1.32 Net Yield on Interest Earning Assets 2.79% 2.45% 2.60% • Higher rates on earning assets supported quarterly margin expansion INCOME STATEMENT HIGHLIGHTS 1 See the non-GAAP reconciliation on page 18 7
Change vs. $ in millions 2Q22 1Q22 2Q21 Highlights Bank Card Transaction Fees $43.9 $1.8 $1.3 • Increase of 3.0% over prior year (PY) driven by growth in net corporate card fees Trust Fees $46.8 $(1.0) $.5 • 2Q2022 reflects lower market values on assets under management Deposit Account Charges and Other Fees $25.6 $3.3 $1.6 • Increase of 6.6% over PY was mostly to higher corporate cash management fees Capital Market Fees $3.3 $(.8) — Consumer Brokerage Services $5.1 $.6 $.6 Loan Fees and Sales $3.2 $(1.0) $(4.2) • Declined mostly in mortgage banking revenue, which was down 70.7% from PY Other $11.6 $4.8 $.5 • Increase over LQ due to higher cash sweep commissions and tax credit sales fees and a life insurance death benefit, offset by adjustments on deferred compensation Total Non-Interest Income $139.4 $7.7 $.3 NON-INTEREST INCOME HIGHLIGHTS 8
Change vs. $ in millions 2Q22 1Q22 2Q21 Highlights Salaries and Employee Benefits $142.2 $6.3 $11.5 • Increase of 8.8% over prior year (PY) mostly due to higher full-time salaries of $4.9 million and an accrual of $5.4 million for special bonuses to be paid to non-incentivized part-time and full-time employees Net Occupancy $12.5 $.2 $1.0 Equipment $4.7 $.2 $.1 Supplies $4.4 $(.4) $.3 Data Processing and Software $27.6 $.6 $2.7 • Increase of 10.7% over PY due to higher software amortization, bank card processing fees and an increase in costs for service providers Marketing $5.8 $(.5) $.2 Other $16.2 $1.4 $(.4) • Increase over last quarter (LQ) due to higher travel and entertainment expense, loan collection fees, and professional fees, offset by deferred compensation adjustment Total Non-Interest Expense $213.5 $7.9 $15.4 NON-INTEREST EXPENSE HIGHLIGHTS 9
10 PRE-TAX, PRE-PROVISION NET REVENUE (PPNR) $139 $149 $208 $198 $347 2Q2021 $132 $135 $209 $206 1Q2022 $341 $140 $158 $232 $214 2Q2022 $372 Non-Interest Income (+) Net Interest Income (+) Non-Interest Expense (-) Pre-Tax, Pre-Provision Net Revenue (=) 2Q2022 Comparison vs. 2Q2021 6.2% vs. 1Q2022 17.3% See the non-GAAP reconciliation on page 18
$0.7 $4.6 $4.0 $7.8 $3.3 2Q21 1Q22 2Q22 MAINTAINING STRONG CREDIT QUALITY 11 Net Loan Charge-Offs (NCOs) $ in millions NCOs- CBSH NCOs - Peer Average NCO/Average Loans1 - CBSH $172.4 $134.7 $138.0 $284.2 $265.7 2Q21 1Q22 2Q22 Allowance for Credit Losses on Loans (ACL) $ in millions ACL - CBSH ACL - Peer Average ACL / Total Loans - CBSH $11.2 $8.3 $7.9 $111.7 $111.4 2Q222Q21 1Q22 Non-Accrual Loans (NALs) $ in millions NALs - CBSH NALs - Peer Average 15.4x 16.2x 17.4x 3.4x 3.8x 2Q21 1Q22 2Q22 Allowance for Credit Losses on Loans (ACL) to NALs ACL / NALs - CBSH ACL / NALs - Peer Average Percentages are illustrative and not to scale; Peer Banks include: ABCB, ASB, BOKF, CFR, FNB, FULT, HWC, ONB, OZK, PB, PNFP, SFNC, SNV, SSB, UMBF, UMPQ, UBSI, VLY, WTFC 1As a percentage of average loans (excluding loans held for sale) NALs / Total Loans - CBSH NCO/Average Loans1 – Peer Average .07% NALs / Total Loans – Peer Average .05% .05% .53% .49% ACL / Total Loans – Peer Average 1.10% .87% .88% 1.34% 1.18% .02% .12% .10% .14% .06% $0.7
ALLOCATION OF ALLOWANCE 12 CECL allowances reflect the economic and market outlook March 31, 2022 June 30, 2022 $ in millions Allowance for Credit Losses (ACL) % of Outstanding Loans Allowance for Credit Losses (ACL) % of Outstanding Loans Business $ 40.9 .74% $ 41.5 .76% Bus R/E 28.5 .92% 29.9 .93% Construction 25.4 2.22% 28.1 2.22% Commercial total $ 94.8 .97% $ 99.5 1.0% Consumer 9.7 .47% 9.3 .45% Consumer CC 22.7 4.16% 21.3 3.81% Personal R/E 6.2 .22% 6.5 .23% Revolving H/E 1.2 .47% 1.3 .47% Overdrafts .1 .53% .1 1.22% Consumer total $ 39.9 .70% $ 38.5 .67% Allowance for credit losses on loans $ 134.7 .87% $ 138.0 .88% 1.07% 0.88% 0.60% 0.80% 1.00% 1.20% 1.40% 1.60%$250 $100 $150 $200 4Q $139.6 $162.8 $171.7 0.95% 1/1 1.22% 2Q1Q $240.7$236.4 0.87% 3Q $220.8 $200.5 1Q 1.47% 2Q $172.4 3Q $150.0 0.99% 4Q $134.7 1Q 2Q $138.0 1.14% 1.35% 1.10% 1.44% Allowance for Credit Losses (ACL) on Loans ACL - Loans (left) ACL / Total Loans (right) $ in millions 202220212020
13 WELL-POSITIONED FOR A RISING RATE ENVIRONMENT
0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 1Q20173Q2015 4Q2015 1Q2016 2Q2016 3Q2016 1Q20184Q2016 2Q2017 4Q20183Q2017 4Q2017 2Q2018 3Q2018 1Q2019 2Q2019 WELL-POSITIONED FOR HIGHER RATES 14 Opportunities to enhance NII in a rising rate environment. • As of December 31, 2021, 53% of loans were variable rate, (62% commercial, 37% consumer). • Investment securities portfolio duration of 3.8 years. • Cash flows from maturities and paydowns of securities of $2.2 billion expected over the next twelve months. • Securities purchased under agreements to resell of $1.5 billion maturing through 2024. • 100 bps of gradual rate hikes adds $12.9MM - $31.5MM of NII over twelve months. • Large core deposit base and historically low betas. Previous Cycle Deposit Beta Cost of Total Deposits Deposit Beta As of 3Q2015 As of 2Q2019 Prior Fed Cycle (+225 bps) Commerce .12% .38% 12% Peer Median .23% .85% 27% Effective Fed Funds Rate Source: S&P Global Market Intelligence, 2021 10-K , 1Q2022 10-Q
Over 50% of total loans are variable; 62% of commercial loans have floating rates SUMMARY OF FIXED & FLOATING LOANS 42% 58% Business Total Loans: $5.3B Fixed Variable C om m er ci al 73% 27% Personal RE Total Loans: $2.8B C on su m er 99% 1% HELOC Total Loans: $0.3B 44% 56% Business RE Total Loans: $3.1B 95% 5% Consumer Card Total Loans: $0.6B 74% 26% Consumer Total Loans: $2.0B 15 96% 4% Construction Total Loans: $1.1B Source: 2021 10-K
Average Loan to Deposit Ratio3 SOUND CAPITAL AND LIQUIDITY POSITION 16 Tier 1 Risk-Based Capital Ratio1 1S&P Global Market Intelligence, Information as of March 31, 2022 2Period-end balances, as of June 30, 2022 3Includes loans held for sale, for the quarter ended June 30, 2022 15.3% 14.4% 13.9% 13.5% 13.3% 13.0% 11.8% 11.4% 11.4% 11.3% 11.2% 11.1% 10.9% 10.9% 10.8% 10.6% 10.5% 10.3% 10.3% 9.6% SFNC UMBF OZK PB UBSI CBSH CFR BOKF ONB SSB ASB PNFP UMPQ HWC FULT FNB VLY SNV ABCB WTFC Peer Median: 11.3% Core Deposits $27.2 Billion2 Large, stable deposit base Loan to Deposit Ratio Total Deposits 54% Average Loan to Deposit Ratio174% Peer Average Commerce 96%Certificates of Deposit Core Deposits - Non-Interest Bearing - Interest Checking - Savings and Money Market 4%
Quick Facts: Small Business Investment Company (SBIC) founded in 1959 Nationwide footprint with Greater Midwest Focus 35 Portfolio Companies Representing $909 million in Revenue Over 3,500 Employees Fair Value as of June 30, 2022: $161.8 million Investment Criteria • Manufacturing, distribution and certain service companies • Cash flow positive • Good management • Consistent financial performers • Operate in niche markets • Significant and defensible market positions • Differentiated products and services • Scalable business platforms Target Parameters • Revenues - $10 million to $100 million • EBITDA - $2 million to $7 million CAPITAL FOR BUSINESS® A middle-market private equity firm focused on the success of industrial growth companies Transaction Types Management buyouts Leveraged buyouts Succession plans Recapitalizations Corporate divestitures Investment Structures Subordinated debt Preferred stock Common stock Warrants Other Information Co-investors Majority control Target 5-7 year hold period Management participation 17
NON-GAAP RECONCILIATIONS 18 For The Three Months Ended (DOLLARS IN THOUSANDS) Jun. 30, 2022 Mar. 31, 2022 Jun. 30, 2021 A Net Interest Income $ 232,385 $ 208,786 $ 207,982 B Non-Interest Income $ 139,427 $ 131,769 $ 139,143 C Non-Interest Expense $ 213,505 $ 205,648 $ 198,126 Pre-Provision Net Revenue (A+B-C) $ 158,307 $ 134,907 $ 148,999 Pre-tax, Pre-provision Net Revenue
