CBSH 8-K
Commerce Bancshares Inc /Mo/ (CBSH)
8-K
2021-10-19
For: 2021-10-19
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): October 19, 2021
(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 October 19, 2021 by Commerce Bancshares, Inc. announcing Third Quarter 2021 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: October 19, 2021
Exhibit 99.1
Exhibit 99.1
 | CBSH | ||||
| 1000 Walnut Street / Suite 700 / Kansas City, Missouri 64106 / 816.234.2000 | |||||
 | |||||
FOR IMMEDIATE RELEASE:
Tuesday, October 19, 2021
COMMERCE BANCSHARES, INC. REPORTS
THIRD QUARTER EARNINGS PER SHARE OF $1.05
Commerce Bancshares, Inc. announced earnings of $1.05 per share for the three months ended September 30, 2021, compared to $1.06 per common share in the same quarter last year and $1.38 per share in the second quarter of 2021. Net income attributable to Commerce Bancshares, Inc. (net income) for the third quarter of 2021 amounted to $122.6 million, compared to $132.4 million in the third quarter of 2020 and $162.3 million in the prior quarter. For the quarter, the return on average assets was 1.40%, the return on average equity was 13.74% and the efficiency ratio was 59.9%.
For the nine months ended September 30, 2021, earnings per common share totaled $3.54 compared to $1.80 for the first nine months of 2020. Net income attributable to Commerce Bancshares, Inc. amounted to $415.9 million for the nine months ended September 30, 2021, compared to $224.2 million in the comparable period last year. Year to date, the return on average assets was 1.65%, and the return on average equity was 16.14%.
In announcing these results, John Kemper, Chief Executive Officer, said, “We are pleased to report solid earnings again this quarter, reflecting continued robust contributions from our fee-based businesses. Trust fees grew 20.1% compared to the same quarter last year and 5.8% compared to the prior quarter. Bank card and deposit account fees continued to rebound strongly from last year’s lows. Although loan demand has been somewhat limited, we did experience increases in construction and consumer loans this quarter and our Company remains well-positioned to benefit from a strengthening economy. Our portfolio of private equity investments also performed well, driving net investment securities gains of $13.1 million. Non-interest expense increased compared to the same quarter last year, as higher incentive compensation reflected our improved financial performance in 2021 and certain business expenses that declined precipitously during the pandemic are rebounding from lows set one year ago. Additionally, other expense was elevated during the quarter, reflecting non-recurring litigation settlement expenses. Compared to the previous quarter, average deposits grew $344.0 million, or 1.2%, while average loan balances declined $731.5 million, or 4.6% (average PPP loan balances declined $689.2 million). As of September 30, 2021, 84% percent of our PPP loan balances have been forgiven.”
Mr. Kemper continued, “Credit quality of the loan portfolio remains excellent. This quarter, net loan charge-offs totaled $3.7 million, compared to $699 thousand in the prior quarter and $7.6 million in the third quarter of 2020. The ratio of annualized net loan charge-offs to average loans was .10% in the current quarter, .02% in the prior quarter and .18% in the third quarter of last year. Net charge-offs on consumer card loans declined $2.2 million from the prior quarter, and net charge-offs on consumer loans remained low. Non-performing assets totaled $10.5 million and also remained at very low levels. At September 30, 2021, the allowance for credit losses on loans
Exhibit 99.1
decreased to $162.8 million. Excluding Paycheck Protection Plan (PPP) loans, the allowance for credit losses on loans to total loans was 1.10% at September 30, 2021.”
Total assets at September 30, 2021 were $34.5 billion, total loans were $15.1 billion, and total deposits were $28.1 billion. During the quarter, the Company paid a cash dividend of $.263 per share, representing a 2.1% increase over the rate paid in the third quarter of 2020. The Company purchased 575,457 shares of its common stock this quarter.
Commerce Bancshares, Inc. is a regional bank holding company offering a full line of banking services, including payment solutions, investment management and securities brokerage. Commerce Bank, a subsidiary of Commerce Bancshares, Inc., leverages more than 150 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
Matthew Burkemper, Investor Relations
at 8000 Forsyth, Mailstop: CBIR-1
Clayton, MO 63105
or by telephone at (314) 746-7485
Web Site: http://www.commercebank.com
Email: [email protected]
Exhibit 99.1
COMMERCE BANCSHARES, INC. and SUBSIDIARIES
FINANCIAL HIGHLIGHTS
| For the Three Months Ended | For the Nine Months Ended | |||||||||||||||||||
| (Unaudited) (Dollars in thousands, except per share data) | September 30, 2021 | June 30, 2021 | September 30, 2020 | September 30, 2021 | September 30, 2020 | |||||||||||||||
FINANCIAL SUMMARY | ||||||||||||||||||||
| Net interest income | $214,037 | $207,982 | $215,962 | $627,767 | $620,084 | |||||||||||||||
| Non-interest income | 137,506 | 139,143 | 129,572 | 412,694 | 370,750 | |||||||||||||||
Total revenue | 351,543 | 347,125 | 345,534 | 1,040,461 | 990,834 | |||||||||||||||
| Investment securities gains (losses), net | 13,108 | 16,804 | 16,155 | 39,765 | (1,275) | |||||||||||||||
| Provision for credit losses | (7,385) | (45,655) | 3,101 | (59,272) | 141,593 | |||||||||||||||
| Non-interest expense | 211,620 | 198,126 | 190,858 | 602,319 | 572,068 | |||||||||||||||
Income before taxes | 160,416 | 211,458 | 167,730 | 537,179 | 275,898 | |||||||||||||||
| Income taxes | 34,662 | 45,209 | 34,375 | 111,947 | 54,209 | |||||||||||||||
| Non-controlling interest (income) expense | 3,193 | 3,923 | 907 | 9,373 | (2,479) | |||||||||||||||
Net income attributable to Commerce Bancshares, Inc. | 122,561 | 162,326 | 132,448 | 415,859 | 224,168 | |||||||||||||||
| Preferred stock dividends | — | — | 7,466 | — | 11,966 | |||||||||||||||
Net income available to common shareholders | $122,561 | $162,326 | $124,982 | $415,859 | $212,202 | |||||||||||||||
| Earnings per common share: | ||||||||||||||||||||
| Net income — basic | $1.05 | $1.38 | $1.06 | $3.55 | $1.80 | |||||||||||||||
| Net income — diluted | $1.05 | $1.38 | $1.06 | $3.54 | $1.80 | |||||||||||||||
| Effective tax rate | 22.05 | % | 21.78 | % | 20.61 | % | 21.21 | % | 19.47 | % | ||||||||||
| Tax equivalent net interest income | $216,858 | $211,060 | $219,118 | $636,692 | $629,773 | |||||||||||||||
Average total interest earning assets (1) | $ | 33,306,752 | $ | 32,556,658 | $ | 29,352,970 | $ | 32,388,139 | $ | 27,419,514 | ||||||||||
| Diluted wtd. average shares outstanding | 116,077,229 | 116,450,430 | 116,444,157 | 116,365,204 | 116,609,592 | |||||||||||||||
| RATIOS | ||||||||||||||||||||
Average loans to deposits (2) | 54.44 | % | 57.78 | % | 66.23 | % | 57.91 | % | 69.12 | % | ||||||||||
| Return on total average assets | 1.40 | 1.93 | 1.71 | 1.65 | 1.04 | |||||||||||||||
Return on average common equity (3) | 13.74 | 19.12 | 15.21 | 16.14 | 8.93 | |||||||||||||||
| Non-interest income to total revenue | 39.11 | 40.08 | 37.50 | 39.66 | 37.42 | |||||||||||||||
Efficiency ratio (4) | 59.95 | 56.90 | 55.00 | 57.76 | 57.37 | |||||||||||||||
| Net yield on interest earning assets | 2.58 | 2.60 | 2.97 | 2.63 | 3.07 | |||||||||||||||
| EQUITY SUMMARY | ||||||||||||||||||||
| Cash dividends per common share | $.263 | $.263 | $.257 | $.788 | $.771 | |||||||||||||||
| Cash dividends on common stock | $30,645 | $30,760 | $30,174 | $92,204 | $90,640 | |||||||||||||||
| Cash dividends on preferred stock | $— | $— | $7,466 | $— | $11,966 | |||||||||||||||
Book value per common share (5) | $30.01 | $29.89 | $28.23 | |||||||||||||||||
Market value per common share (5) | $69.68 | $74.56 | $53.61 | |||||||||||||||||
| High market value per common share | $75.68 | $81.19 | $59.13 | |||||||||||||||||
| Low market value per common share | $64.90 | $70.69 | $50.50 | |||||||||||||||||
Common shares outstanding (5) | 116,332,177 | 116,893,573 | 117,109,209 | |||||||||||||||||
Tangible common equity to tangible assets (6) | 9.71 | % | 9.91 | % | 10.11 | % | ||||||||||||||
| Tier I leverage ratio | 9.31 | % | 9.36 | % | 9.39 | % | ||||||||||||||
| OTHER QTD INFORMATION | ||||||||||||||||||||
| Number of bank/ATM locations | 292 | 295 | 308 | |||||||||||||||||
| Full-time equivalent employees | 4,582 | 4,590 | 4,825 | |||||||||||||||||
(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 available to common shareholders divided by average total equity less preferred stock.
(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 preferred stock, 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 2020.
Exhibit 99.1
COMMERCE BANCSHARES, INC. and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
| For the Three Months Ended | For the Nine Months Ended | |||||||||||||||||||||||||
| (Unaudited) (In thousands, except per share data) | September 30, 2021 | June 30, 2021 | March 31, 2021 | December 31, 2020 | September 30, 2020 | September 30, 2021 | September 30, 2020 | |||||||||||||||||||
| Interest income | $216,981 | $211,133 | $209,697 | $214,726 | $223,114 | $637,811 | $657,922 | |||||||||||||||||||
| Interest expense | 2,944 | 3,151 | 3,949 | 4,963 | 7,152 | 10,044 | 37,838 | |||||||||||||||||||
| Net interest income | 214,037 | 207,982 | 205,748 | 209,763 | 215,962 | 627,767 | 620,084 | |||||||||||||||||||
| Provision for credit losses | (7,385) | (45,655) | (6,232) | (4,403) | 3,101 | (59,272) | 141,593 | |||||||||||||||||||
Net interest income after credit losses | 221,422 | 253,637 | 211,980 | 214,166 | 212,861 | 687,039 | 478,491 | |||||||||||||||||||
| NON-INTEREST INCOME | ||||||||||||||||||||||||||
| Bank card transaction fees | 42,815 | 42,608 | 37,695 | 39,979 | 37,873 | 123,118 | 111,818 | |||||||||||||||||||
| Trust fees | 48,950 | 46,257 | 44,127 | 41,961 | 40,769 | 139,334 | 118,676 | |||||||||||||||||||
| Deposit account charges and other fees | 25,161 | 23,988 | 22,575 | 24,164 | 23,107 | 71,724 | 69,063 | |||||||||||||||||||
| Capital market fees | 3,794 | 3,327 | 4,981 | 3,826 | 3,194 | 12,102 | 10,756 | |||||||||||||||||||
| Consumer brokerage services | 4,900 | 4,503 | 4,081 | 3,996 | 4,011 | 13,484 | 11,099 | |||||||||||||||||||
| Loan fees and sales | 6,842 | 7,446 | 10,184 | 9,031 | 9,769 | 24,472 | 17,653 | |||||||||||||||||||
| Other | 5,044 | 11,014 | 12,402 | 12,160 | 10,849 | 28,460 | 31,685 | |||||||||||||||||||
| Total non-interest income | 137,506 | 139,143 | 136,045 | 135,117 | 129,572 | 412,694 | 370,750 | |||||||||||||||||||
INVESTMENT SECURITIES GAINS (LOSSES), NET | 13,108 | 16,804 | 9,853 | 12,307 | 16,155 | 39,765 | (1,275) | |||||||||||||||||||
| NON-INTEREST EXPENSE | ||||||||||||||||||||||||||
| Salaries and employee benefits | 132,824 | 130,751 | 129,033 | 129,983 | 127,308 | 392,608 | 383,004 | |||||||||||||||||||
| Net occupancy | 12,329 | 11,527 | 12,021 | 11,570 | 12,058 | 35,877 | 35,075 | |||||||||||||||||||
| Equipment | 4,440 | 4,605 | 4,353 | 4,526 | 4,737 | 13,398 | 14,313 | |||||||||||||||||||
| Supplies and communication | 4,530 | 4,033 | 4,125 | 4,193 | 4,141 | 12,688 | 13,226 | |||||||||||||||||||
| Data processing and software | 25,598 | 24,954 | 25,463 | 24,323 | 23,610 | 76,015 | 71,002 | |||||||||||||||||||
| Marketing | 5,623 | 5,680 | 5,158 | 5,028 | 4,926 | 16,461 | 14,706 | |||||||||||||||||||
| Other | 26,276 | 16,576 | 12,420 | 16,687 | 14,078 | 55,272 | 40,742 | |||||||||||||||||||
| Total non-interest expense | 211,620 | 198,126 | 192,573 | 196,310 | 190,858 | 602,319 | 572,068 | |||||||||||||||||||
| Income before income taxes | 160,416 | 211,458 | 165,305 | 165,280 | 167,730 | 537,179 | 275,898 | |||||||||||||||||||
| Less income taxes | 34,662 | 45,209 | 32,076 | 33,084 | 34,375 | 111,947 | 54,209 | |||||||||||||||||||
| Net income | 125,754 | 166,249 | 133,229 | 132,196 | 133,355 | 425,232 | 221,689 | |||||||||||||||||||
Less non-controlling interest expense (income) | 3,193 | 3,923 | 2,257 | 2,307 | 907 | 9,373 | (2,479) | |||||||||||||||||||
Net income attributable to Commerce Bancshares, Inc. | 122,561 | 162,326 | 130,972 | 129,889 | 132,448 | 415,859 | 224,168 | |||||||||||||||||||
| Less preferred stock dividends | — | — | — | — | 7,466 | — | 11,966 | |||||||||||||||||||
Net income available to common shareholders | $122,561 | $162,326 | $130,972 | $129,889 | $124,982 | $415,859 | $212,202 | |||||||||||||||||||
| Net income per common share — basic | $1.05 | $1.38 | $1.12 | $1.11 | $1.06 | $3.55 | $1.80 | |||||||||||||||||||
| Net income per common share — diluted | $1.05 | $1.38 | $1.11 | $1.11 | $1.06 | $3.54 | $1.80 | |||||||||||||||||||
| OTHER INFORMATION | ||||||||||||||||||||||||||
| Return on total average assets | 1.40 | % | 1.93 | % | 1.63 | % | 1.63 | % | 1.71 | % | 1.65 | % | 1.04 | % | ||||||||||||
Return on average common equity (1) | 13.74 | 19.12 | 15.69 | 15.49 | 15.21 | 16.14 | 8.93 | |||||||||||||||||||
Efficiency ratio (2) | 59.95 | 56.90 | 56.37 | 56.68 | 55.00 | 57.76 | 57.37 | |||||||||||||||||||
| Effective tax rate | 22.05 | 21.78 | 19.67 | 20.30 | 20.61 | 21.21 | 19.47 | |||||||||||||||||||
| Net yield on interest earning assets | 2.58 | 2.60 | 2.71 | 2.80 | 2.97 | 2.63 | 3.07 | |||||||||||||||||||
| Tax equivalent net interest income | $216,858 | $211,060 | $208,774 | $213,017 | $219,118 | $636,692 | $629,773 | |||||||||||||||||||
(1)Annualized net income available to common shareholders divided by average total equity less preferred stock.
(2)The efficiency ratio is calculated as non-interest expense (excluding intangibles amortization) as a percent of revenue.
Exhibit 99.1
COMMERCE BANCSHARES, INC. and SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS - PERIOD END
| (Unaudited) (In thousands) | September 30, 2021 | June 30, 2021 | September 30, 2020 | |||||||||||
| ASSETS | ||||||||||||||
| Loans | ||||||||||||||
| Business | $ | 5,277,850 | $ | 5,803,760 | $ | 6,683,413 | ||||||||
| Real estate — construction and land | 1,257,836 | 1,103,661 | 1,009,729 | |||||||||||
| Real estate — business | 2,937,852 | 3,017,560 | 2,993,192 | |||||||||||
| Real estate — personal | 2,769,292 | 2,793,213 | 2,753,867 | |||||||||||
| Consumer | 2,049,559 | 2,049,166 | 2,006,360 | |||||||||||
| Revolving home equity | 281,442 | 283,568 | 324,203 | |||||||||||
| Consumer credit card | 569,976 | 586,358 | 647,893 | |||||||||||
| Overdrafts | 4,583 | 2,978 | 2,270 | |||||||||||
| Total loans | 15,148,390 | 15,640,264 | 16,420,927 | |||||||||||
| Allowance for credit losses on loans | (162,775) | (172,395) | (236,360) | |||||||||||
| Net loans | 14,985,615 | 15,467,869 | 16,184,567 | |||||||||||
| Loans held for sale | 16,043 | 23,697 | 39,483 | |||||||||||
| Investment securities: | ||||||||||||||
| Available for sale debt securities | 14,165,656 | 13,291,506 | 11,539,061 | |||||||||||
| Trading debt securities | 40,114 | 29,002 | 25,805 | |||||||||||
| Equity securities | 9,174 | 8,678 | 4,203 | |||||||||||
| Other securities | 184,450 | 176,439 | 122,532 | |||||||||||
| Total investment securities | 14,399,394 | 13,505,625 | 11,691,601 | |||||||||||
| Federal funds sold | — | 5,945 | 2,275 | |||||||||||
| Securities purchased under agreements to resell | 1,750,000 | 1,300,000 | 850,000 | |||||||||||
| Interest earning deposits with banks | 1,888,545 | 2,161,644 | 1,171,697 | |||||||||||
| Cash and due from banks | 344,460 | 358,122 | 357,616 | |||||||||||
| Premises and equipment — net | 377,476 | 371,989 | 377,853 | |||||||||||
| Goodwill | 138,921 | 138,921 | 138,921 | |||||||||||
| Other intangible assets — net | 14,458 | 14,148 | 7,183 | |||||||||||
| Other assets | 582,631 | 508,202 | 632,621 | |||||||||||
| Total assets | $ | 34,497,543 | $ | 33,856,162 | $ | 31,453,817 | ||||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||||
| Deposits: | ||||||||||||||
| Non-interest bearing | $ | 11,622,855 | $ | 11,085,286 | $ | 10,727,827 | ||||||||
| Savings, interest checking and money market | 14,907,654 | 14,654,696 | 12,983,505 | |||||||||||
| Certificates of deposit of less than $100,000 | 452,432 | 478,838 | 556,870 | |||||||||||
| Certificates of deposit of $100,000 and over | 1,163,343 | 1,267,417 | 1,433,577 | |||||||||||
| Total deposits | 28,146,284 | 27,486,237 | 25,701,779 | |||||||||||
| Federal funds purchased and securities sold under agreements to repurchase | 2,253,753 | 2,318,228 | 1,653,064 | |||||||||||
| Other borrowings | 4,006 | 2,194 | 782 | |||||||||||
| Other liabilities | 602,279 | 555,673 | 791,928 | |||||||||||
| Total liabilities | 31,006,322 | 30,362,332 | 28,147,553 | |||||||||||
| Stockholders’ equity: | ||||||||||||||
| Common stock | 589,352 | 589,352 | 563,978 | |||||||||||
| Capital surplus | 2,427,544 | 2,424,157 | 2,140,410 | |||||||||||
| Retained earnings | 396,655 | 304,739 | 326,890 | |||||||||||
| Treasury stock | (92,047) | (53,018) | (69,050) | |||||||||||
| Accumulated other comprehensive income | 159,166 | 220,390 | 343,435 | |||||||||||
| Total stockholders’ equity | 3,480,670 | 3,485,620 | 3,305,663 | |||||||||||
| Non-controlling interest | 10,551 | 8,210 | 601 | |||||||||||
| Total equity | 3,491,221 | 3,493,830 | 3,306,264 | |||||||||||
| Total liabilities and equity | $ | 34,497,543 | $ | 33,856,162 | $ | 31,453,817 | ||||||||
Exhibit 99.1
COMMERCE BANCSHARES, INC. and SUBSIDIARIES
AVERAGE BALANCE SHEETS
| (Unaudited) (In thousands) | For the Three Months Ended | ||||||||||||||||
| September 30, 2021 | June 30, 2021 | March 31, 2021 | December 31, 2020 | September 30, 2020 | |||||||||||||
| ASSETS: | |||||||||||||||||
| Loans: | |||||||||||||||||
| Business | $ | 5,437,498 | $ | 6,211,610 | $ | 6,532,921 | $ | 6,580,300 | $ | 6,709,200 | |||||||
| Real estate — construction and land | 1,168,566 | 1,088,433 | 1,091,969 | 1,032,891 | 974,346 | ||||||||||||
| Real estate — business | 2,982,847 | 3,014,955 | 3,022,979 | 3,029,799 | 2,989,652 | ||||||||||||
| Real estate — personal | 2,775,638 | 2,804,388 | 2,826,112 | 2,778,462 | 2,722,300 | ||||||||||||
| Consumer | 2,041,263 | 2,004,625 | 1,947,322 | 1,981,033 | 1,992,314 | ||||||||||||
| Revolving home equity | 281,689 | 287,031 | 299,371 | 316,895 | 329,361 | ||||||||||||
| Consumer credit card | 566,406 | 575,725 | 608,747 | 638,161 | 646,185 | ||||||||||||
| Overdrafts | 5,110 | 3,735 | 3,546 | 3,762 | 2,689 | ||||||||||||
Total loans | 15,259,017 | 15,990,502 | 16,332,967 | 16,361,303 | 16,366,047 | ||||||||||||
| Allowance for credit losses on loans | (172,112) | (200,801) | (220,512) | (235,484) | (240,286) | ||||||||||||
| Net loans | 15,086,905 | 15,789,701 | 16,112,455 | 16,125,819 | 16,125,761 | ||||||||||||
| Loans held for sale | 16,021 | 23,389 | 35,814 | 30,577 | 24,728 | ||||||||||||
| Investment securities: | |||||||||||||||||
U.S. government and federal agency obligations | 727,566 | 719,849 | 725,367 | 774,640 | 770,361 | ||||||||||||
Government-sponsored enterprise obligations | 50,785 | 50,793 | 50,801 | 69,133 | 102,749 | ||||||||||||
| State and municipal obligations | 2,039,942 | 1,966,673 | 1,958,637 | 1,967,408 | 1,767,526 | ||||||||||||
Mortgage-backed securities | 7,115,419 | 6,685,407 | 6,998,521 | 6,646,345 | 6,259,926 | ||||||||||||
| Asset-backed securities | 3,028,076 | 2,653,928 | 2,085,491 | 1,819,467 | 1,520,988 | ||||||||||||
Other debt securities | 608,642 | 605,772 | 570,115 | 533,646 | 514,166 | ||||||||||||
| Unrealized gain on debt securities | 230,058 | 197,124 | 283,511 | 329,477 | 368,154 | ||||||||||||
| Total available for sale debt securities | 13,800,488 | 12,879,546 | 12,672,443 | 12,140,116 | 11,303,870 | ||||||||||||
Trading debt securities | 32,238 | 34,955 | 32,320 | 28,040 | 27,267 | ||||||||||||
| Equity securities | 8,756 | 4,914 | 4,321 | 4,221 | 4,193 | ||||||||||||
| Other securities | 183,397 | 156,984 | 154,030 | 130,145 | 120,253 | ||||||||||||
| Total investment securities | 14,024,879 | 13,076,399 | 12,863,114 | 12,302,522 | 11,455,583 | ||||||||||||
| Federal funds sold | 792 | 1,338 | 7 | 355 | 337 | ||||||||||||
| Securities purchased under agreements to resell | 1,633,205 | 937,372 | 849,999 | 849,998 | 849,994 | ||||||||||||
| Interest earning deposits with banks | 2,602,896 | 2,724,782 | 1,480,331 | 1,082,644 | 1,024,435 | ||||||||||||
| Other assets | 1,261,277 | 1,258,989 | 1,308,105 | 1,291,907 | 1,389,683 | ||||||||||||
| Total assets | $ | 34,625,975 | $ | 33,811,970 | $ | 32,649,825 | $ | 31,683,822 | $ | 30,870,521 | |||||||
| LIABILITIES AND EQUITY: | |||||||||||||||||
Non-interest bearing deposits | $ | 11,475,113 | $ | 11,109,198 | $ | 10,438,637 | $ | 10,275,735 | $ | 9,801,562 | |||||||
| Savings | 1,484,923 | 1,474,391 | 1,333,177 | 1,234,481 | 1,193,079 | ||||||||||||
| Interest checking and money market | 13,343,180 | 13,283,481 | 12,970,629 | 12,198,928 | 11,731,494 | ||||||||||||
Certificates of deposit of less than $100,000 | 464,367 | 491,446 | 516,728 | 542,212 | 573,207 | ||||||||||||
Certificates of deposit of $100,000 and over | 1,289,665 | 1,354,685 | 1,230,075 | 1,339,301 | 1,447,968 | ||||||||||||
| Total deposits | 28,057,248 | 27,713,201 | 26,489,246 | 25,590,657 | 24,747,310 | ||||||||||||
| Borrowings: | |||||||||||||||||
Federal funds purchased and securities sold under agreements to repurchase | 2,360,876 | 2,165,696 | 2,166,072 | 2,028,457 | 1,855,971 | ||||||||||||
| Other borrowings | 347 | 978 | 831 | 1,013 | 1,225 | ||||||||||||
| Total borrowings | 2,361,223 | 2,166,674 | 2,166,903 | 2,029,470 | 1,857,196 | ||||||||||||
| Other liabilities | 667,786 | 527,401 | 608,212 | 727,569 | 899,890 | ||||||||||||
| Total liabilities | 31,086,257 | 30,407,276 | 29,264,361 | 28,347,696 | 27,504,396 | ||||||||||||
| Equity | 3,539,718 | 3,404,694 | 3,385,464 | 3,336,126 | 3,366,125 | ||||||||||||
| Total liabilities and equity | $ | 34,625,975 | $ | 33,811,970 | $ | 32,649,825 | $ | 31,683,822 | $ | 30,870,521 | |||||||
Exhibit 99.1
COMMERCE BANCSHARES, INC. and SUBSIDIARIES
AVERAGE RATES
| (Unaudited) | For the Three Months Ended | ||||||||||||||||
| September 30, 2021 | June 30, 2021 | March 31, 2021 | December 31, 2020 | September 30, 2020 | |||||||||||||
| ASSETS: | |||||||||||||||||
| Loans: | |||||||||||||||||
Business (1) | 3.43 | % | 3.15 | % | 3.09 | % | 3.01 | % | 2.95 | % | |||||||
| Real estate — construction and land | 3.51 | 3.56 | 3.54 | 3.72 | 3.74 | ||||||||||||
| Real estate — business | 3.46 | 3.49 | 3.52 | 3.51 | 3.53 | ||||||||||||
| Real estate — personal | 3.27 | 3.31 | 3.40 | 3.44 | 3.56 | ||||||||||||
| Consumer | 3.71 | 3.84 | 4.02 | 4.07 | 4.19 | ||||||||||||
| Revolving home equity | 3.46 | 3.43 | 3.38 | 3.37 | 3.29 | ||||||||||||
| Consumer credit card | 11.29 | 11.22 | 10.97 | 11.60 | 11.40 | ||||||||||||
| Overdrafts | — | — | — | — | — | ||||||||||||
| Total loans | 3.74 | 3.65 | 3.66 | 3.69 | 3.69 | ||||||||||||
| Loans held for sale | 4.63 | 4.20 | 3.44 | 3.54 | 4.25 | ||||||||||||
| Investment securities: | |||||||||||||||||
U.S. government and federal agency obligations | 5.74 | 5.52 | 2.54 | 2.63 | 3.71 | ||||||||||||
Government-sponsored enterprise obligations | 2.30 | 2.33 | 2.36 | 2.23 | 2.17 | ||||||||||||
State and municipal obligations (1) | 2.35 | 2.41 | 2.46 | 2.44 | 2.53 | ||||||||||||
Mortgage-backed securities | 1.53 | 1.11 | 1.39 | 1.37 | 1.95 | ||||||||||||
| Asset-backed securities | 1.08 | 1.25 | 1.39 | 1.59 | 1.90 | ||||||||||||
| Other debt securities | 2.04 | 2.06 | 2.15 | 2.19 | 2.35 | ||||||||||||
| Total available for sale debt securities | 1.80 | 1.64 | 1.67 | 1.70 | 2.18 | ||||||||||||
Trading debt securities (1) | 1.01 | 1.19 | 1.08 | 1.40 | 1.66 | ||||||||||||
Equity securities (1) | 23.92 | 43.10 | 49.56 | 50.71 | 47.15 | ||||||||||||
Other securities (1) | 7.46 | 11.90 | 5.26 | 10.03 | 6.74 | ||||||||||||
| Total investment securities | 1.89 | 1.78 | 1.72 | 1.81 | 2.24 | ||||||||||||
| Federal funds sold | .50 | .60 | — | 1.12 | — | ||||||||||||
| Securities purchased under agreements to resell | 2.19 | 4.46 | 5.31 | 5.24 | 5.26 | ||||||||||||
| Interest earning deposits with banks | .15 | .11 | .10 | .10 | .10 | ||||||||||||
| Total interest earning assets | 2.62 | 2.64 | 2.76 | 2.86 | 3.07 | ||||||||||||
| LIABILITIES AND EQUITY: | |||||||||||||||||
| Interest bearing deposits: | |||||||||||||||||
| Savings | .08 | .08 | .08 | .09 | .09 | ||||||||||||
| Interest checking and money market | .05 | .05 | .06 | .07 | .10 | ||||||||||||
Certificates of deposit of less than $100,000 | .18 | .27 | .37 | .51 | .71 | ||||||||||||
Certificates of deposit of $100,000 and over | .14 | .20 | .35 | .47 | .69 | ||||||||||||
| Total interest bearing deposits | .06 | .07 | .09 | .12 | .18 | ||||||||||||
| Borrowings: | |||||||||||||||||
Federal funds purchased and securities sold under agreements to repurchase | .08 | .06 | .06 | .06 | .09 | ||||||||||||
| Other borrowings | 1.14 | .82 | .98 | — | — | ||||||||||||
| Total borrowings | .08 | .06 | .06 | .06 | .09 | ||||||||||||
| Total interest bearing liabilities | .06 | % | .07 | % | .09 | % | .11 | % | .17 | % | |||||||
| Net yield on interest earning assets | 2.58 | % | 2.60 | % | 2.71 | % | 2.80 | % | 2.97 | % | |||||||
(1) Stated on a tax equivalent basis using a federal income tax rate of 21%.
Exhibit 99.1
COMMERCE BANCSHARES, INC. and SUBSIDIARIES
CREDIT QUALITY
| For the Three Months Ended | For the Nine Months Ended | |||||||||||||||||||||||||
| (Unaudited) (In thousands, except per share data) | September 30, 2021 | June 30, 2021 | March 31, 2021 | December 31, 2020 | September 30, 2020 | September 30, 2021 | September 30, 2020 | |||||||||||||||||||
| ALLOWANCE FOR CREDIT LOSSES ON LOANS | ||||||||||||||||||||||||||
| Balance at beginning of period | $172,395 | $200,527 | $220,834 | $236,360 | $240,744 | $220,834 | $160,682 | |||||||||||||||||||
| Adoption of ASU 2016-13 | — | — | — | — | — | — | (21,039) | |||||||||||||||||||
| Provision for credit losses on loans | (5,961) | (27,433) | (10,355) | (7,510) | 3,200 | (43,749) | 123,559 | |||||||||||||||||||
| Net charge-offs (recoveries): | ||||||||||||||||||||||||||
| Commercial portfolio: | ||||||||||||||||||||||||||
Business | 65 | (4,909) | (4) | 581 | 208 | (4,848) | 3,084 | |||||||||||||||||||
Real estate — construction and land | — | — | 1 | (2) | (1) | 1 | (1) | |||||||||||||||||||
Real estate — business | (5) | (85) | 20 | (7) | (13) | (70) | (40) | |||||||||||||||||||
| 60 | (4,994) | 17 | 572 | 194 | (4,917) | 3,043 | ||||||||||||||||||||
| Personal banking portfolio: | ||||||||||||||||||||||||||
Consumer credit card | 2,908 | 5,155 | 8,981 | 5,975 | 7,263 | 17,044 | 20,004 | |||||||||||||||||||
Consumer | 496 | 378 | 763 | 1,160 | 211 | 1,637 | 3,284 | |||||||||||||||||||
Overdraft | 243 | 148 | 153 | 335 | 200 | 544 | 942 | |||||||||||||||||||
Real estate — personal | (26) | (16) | 15 | (18) | (198) | (27) | (273) | |||||||||||||||||||
Revolving home equity | (22) | 28 | 23 | (8) | (86) | 29 | (158) | |||||||||||||||||||
| 3,599 | 5,693 | 9,935 | 7,444 | 7,390 | 19,227 | 23,799 | ||||||||||||||||||||
| Total net loan charge-offs | 3,659 | 699 | 9,952 | 8,016 | 7,584 | 14,310 | 26,842 | |||||||||||||||||||
| Balance at end of period | $162,775 | $172,395 | $200,527 | $220,834 | $236,360 | $162,775 | $236,360 | |||||||||||||||||||
| LIABILITY FOR UNFUNDED LENDING COMMITMENTS | $22,784 | $24,208 | $42,430 | $38,307 | $35,200 | |||||||||||||||||||||
NET CHARGE-OFF RATIOS (1) | ||||||||||||||||||||||||||
| Commercial portfolio: | ||||||||||||||||||||||||||
| Business | — | % | (.32 | %) | — | % | .04 | % | .01 | % | (.11 | %) | .07 | % | ||||||||||||
| Real estate — construction and land | — | — | — | — | — | — | — | |||||||||||||||||||
| Real estate — business | — | (.01) | — | — | — | — | — | |||||||||||||||||||
| — | (.19) | — | .02 | .01 | (.06) | .04 | ||||||||||||||||||||
| Personal banking portfolio: | ||||||||||||||||||||||||||
| Consumer credit card | 2.04 | 3.59 | 5.98 | 3.72 | 4.47 | 3.91 | 3.93 | |||||||||||||||||||
| Consumer | .10 | .08 | .16 | .23 | .04 | .11 | .22 | |||||||||||||||||||
| Overdraft | 18.87 | 15.89 | 17.50 | 35.43 | 29.59 | 17.59 | 39.16 | |||||||||||||||||||
| Real estate — personal | — | — | — | — | (.03) | — | (.01) | |||||||||||||||||||
| Revolving home equity | (.03) | .04 | .03 | (.01) | (.10) | .01 | (.06) | |||||||||||||||||||
| .25 | .40 | .71 | .52 | .52 | .45 | .57 | ||||||||||||||||||||
| Total | .10 | % | .02 | % | .25 | % | .19 | % | .18 | % | .12 | % | .23 | % | ||||||||||||
| CREDIT QUALITY RATIOS | ||||||||||||||||||||||||||
| Non-performing assets to total loans | .07 | % | .07 | % | .14 | % | .16 | % | .25 | % | ||||||||||||||||
| Non-performing assets to total assets | .03 | .03 | .07 | .08 | .13 | |||||||||||||||||||||
Allowance for credit losses on loans to total loans(2) | 1.07 | 1.10 | 1.22 | 1.35 | 1.44 | |||||||||||||||||||||
| NON-PERFORMING ASSETS | ||||||||||||||||||||||||||
| Non-accrual loans: | ||||||||||||||||||||||||||
| Business | $8,293 | $8,839 | $20,215 | $22,524 | $37,295 | |||||||||||||||||||||
| Real estate — construction and land | — | — | — | — | 1 | |||||||||||||||||||||
| Real estate — business | 577 | 655 | 1,572 | 2,230 | 1,063 | |||||||||||||||||||||
| Real estate — personal | 1,551 | 1,672 | 1,719 | 1,786 | 1,911 | |||||||||||||||||||||
| Total | 10,421 | 11,166 | 23,506 | 26,540 | 40,270 | |||||||||||||||||||||
| Foreclosed real estate | 115 | 229 | 208 | 93 | 57 | |||||||||||||||||||||
| Total non-performing assets | $10,536 | $11,395 | $23,714 | $26,633 | $40,327 | |||||||||||||||||||||
| Loans past due 90 days and still accruing interest | $10,496 | $12,338 | $21,512 | $22,190 | $14,436 | |||||||||||||||||||||
(1) Net charge-offs are annualized and calculated as a percentage of average loans (excluding loans held for sale).
(2) Excluding PPP loans, the allowance for credit losses on loans to total loans was 1.10% and 1.17% as of September 30, 2021 and June 30, 2021, respectively.
Exhibit 99.1
COMMERCE BANCSHARES, INC.
Management Discussion of Third Quarter Results
September 30, 2021
For the quarter ended September 30, 2021, net income attributable to Commerce Bancshares, Inc. (net income) amounted to $122.6 million, compared to $162.3 million in the previous quarter and $132.4 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 investment securities gains, partly offset by higher net interest income and lower income tax expense. Compared to the prior quarter, the provision for credit losses increased due to a smaller decrease in the estimate of the allowance for credit losses on loans and unfunded lending commitments and higher net loan charge-offs. The net yield on interest earning assets declined two basis points to 2.58%. Average loans declined $731.5 million compared to the previous quarter, while average available for sale debt securities grew $920.9 million, and average deposits increased $344.0 million. For the quarter, the return on average assets was 1.40%, the return on average common equity was 13.74%, and the efficiency ratio was 59.9%.
Balance Sheet Review
During the 3rd quarter of 2021, average loans totaled $15.3 billion, a decrease of $731.5 million from the prior quarter, and declined $1.1 billion, or 6.8%, from the same quarter last year. Period end loans decreased $491.9 million compared to the prior quarter. Compared to the previous quarter, average balances of business, business real estate and personal real estate loans declined $774.1 million (includes a decline of $689.2 million in Paycheck Protection Program (PPP) loan balances), $32.1 million and $28.7 million, respectively. This decline was partially offset by growth in construction and consumer loans of $80.1 million and $36.6 million, respectively. The period end balance of PPP loans decreased $546.4 million during the 3rd quarter of 2021 and totaled $307.9 million at September 30, 2021. As of September 30, 2021, 97% of round 1 and 35% of round 2 PPP loan balances have been forgiven. During the current quarter, the Company sold certain fixed rate personal real estate loans totaling $119.3 million, compared to $164.6 million in the prior quarter.
Total average available for sale debt securities increased $920.9 million over the previous quarter to $13.8 billion, at fair value. The increase in investment securities was mainly the result of growth in mortgage-backed and asset-backed securities. During the current quarter, purchases of securities totaled $1.8 billion with a weighted average yield of approximately 1.20%. Maturities and pay downs were $817.2 million, and there were no sales during the quarter. At September 30, 2021, the duration of the investment portfolio was 3.5 years, and maturities and pay downs of approximately $2.8 billion are expected to occur during the next 12 months.
Total average deposits increased $344.0 million this quarter compared to the previous quarter. The increase in deposits mostly resulted from growth in demand deposits of $365.9 million. Additionally, interest checking and money market deposits grew $59.7 million, while certificate of deposit balances declined $92.1 million. Compared to the previous quarter, total average commercial deposits grew $360.1 million. The average loans to deposits ratio was 54.4% in the current quarter and 57.8% in the prior quarter. The Company’s average borrowings, which include customer repurchase agreements, were $2.4 billion in the 3rd quarter of 2021 and $2.2 billion in the prior quarter.
Net Interest Income
Net interest income in the 3rd quarter of 2021 amounted to $214.0 million, an increase of $6.1 million compared to the previous quarter. On a tax equivalent basis, net interest income for the current quarter increased $5.8 million over the previous quarter to $216.9 million. The increase in net interest income was mainly due to higher income earned on investment securities, partly offset by lower interest earned on loans and securities purchased under agreements to resell. The net yield on earning assets (tax equivalent) decreased to 2.58%, compared to 2.60% in the prior quarter.
Compared to the previous quarter, interest income on loans (tax equivalent) decreased $1.7 million. This decrease was mostly a result of lower average business loan balances, partially offset by higher yields on business loans and higher average construction loan balances. The increase in the yield on business loans was driven primarily by an increase in the yield on PPP loans, which grew to 7.73% this quarter. Excluding PPP loans, the yield on business loans was 2.92% in the 3rd quarter of 2021 compared to 3.00% in the prior quarter. The average tax-equivalent yield on the loan portfolio increased nine basis points to 3.74% this quarter.
Interest income on investment securities (tax equivalent) increased $8.6 million over the previous quarter, due to both higher rates earned and average balances. Interest income earned on U.S. government and federal agency securities increased modestly, as inflation income from Treasury inflation-protected securities inflation income increased $591 thousand this quarter to $7.4 million. At September 30, 2021, the Company recorded a $5.0 million adjustment to premium amortization, which increased interest income this quarter to reflect moderately slower forward prepayment speed estimates on mortgage-backed securities. The yield on total investment securities was 1.89% in the current quarter, compared to 1.78% in the previous quarter.
The average rate paid on interest bearing deposits totaled .06% in the 3rd quarter of 2021, compared .07% in the prior quarter. Interest expense on deposits decreased $359 thousand this quarter compared to the previous quarter mainly due to lower rates paid on certificate of deposit accounts. The overall rate paid on interest bearing liabilities was .06% in the current quarter, compared to .07% in the prior quarter.
Non-Interest Income
In the 3rd quarter of 2021, total non-interest income amounted to $137.5 million, an increase of $7.9 million, or 6.1%, compared to the same period last year and decreased $1.6 million compared to the prior quarter. The increase in non-interest income over the same period last year was mainly due to growth in trust fees, bank card fees, and deposit account fees, partially offset by lower loan fees and sales.
Total net bank card fees in the current quarter increased $4.9 million, or 13.0%, over the same period last year, and increased $207 thousand compared to the prior quarter. Net corporate card fees increased $3.1 million, or 15.3%, 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 $681 thousand, or 7.0%, mainly due to higher interchange fees. Net merchant income increased $651 thousand, or 14.3%, and net credit card fees increased $504 thousand, or 15.0%. Total net
COMMERCE BANCSHARES, INC. Exhibit 99.1
Management Discussion of Third Quarter Results
September 30, 2021
bank card fees this quarter were comprised of fees on corporate card ($23.3 million), debit card ($10.4 million), merchant ($5.2 million) and credit card ($3.9 million) transactions.
In the current quarter, trust fees increased $8.2 million, or 20.1%, over the same period last year, resulting mostly from higher private client fee income. Compared to the same period last year, deposit account fees increased $2.1 million, or 8.9%, mainly due to higher overdraft and return item fees and corporate cash management fees. Loan fees and sales, mostly mortgage banking revenue, declined $2.9 million, or 30.0%, over amounts recorded in the same quarter last year. Consumer brokerage fees increased $889 thousand, or 22.2%, compared to the same quarter last year, mainly due to growth in annuity and advisory fees.
Other non-interest income decreased from the same period last year mainly due to lower cash sweep commissions and tax credit sales fees of $1.6 million and $1.1 million, respectively. Additionally, a $2.0 million loss was recorded this quarter on an equity method investment. For the 3rd quarter of 2021, non-interest income comprised 39.1% of the Company’s total revenue.
Investment Securities Gains and Losses
The Company recorded investment net gains of $13.1 million in the current quarter, compared to net gains of $16.8 million in the prior quarter and net gains of $16.2 million in the 3rd quarter of 2020. Net gains on investments in the current quarter primarily resulted from unrealized fair value gains of $13.0 million in the Company’s private equity investment portfolio.
Non-Interest Expense
Non-interest expense for the current quarter amounted to $211.6 million, compared to $190.9 million in the same period last year and $198.1 million in the prior quarter. The increase in non-interest expense compared to the same period last year and the prior quarter was mainly due to litigation settlement expense, higher salaries and benefits expense and data processing and software expense.
Compared to the 3rd quarter of last year, salaries and employee benefits expense increased $5.5 million, mostly due to higher incentive compensation. Full-time equivalent employees totaled 4,582 and 4,825 at September 30, 2021 and 2020, respectively.
Data processing and software expense increased $2.0 million due to higher bank card processing fees and increased costs for service providers. Other non-interest expense increased mainly due to $8.2 million in litigation settlement costs. Additionally, legal and professional fees and travel and entertainment expense increased $1.3 million and $1.1 million, respectively.
Income Taxes
The effective tax rate for the Company was 22.0% in the current quarter, 21.8% in the previous quarter, and 20.6% in the 3rd quarter of 2020.
Credit Quality
Net loan charge-offs in the 3rd quarter of 2021 amounted to $3.7 million, compared to $699 thousand in the prior quarter and $7.6 million in the same period last year. The ratio of annualized net loan charge-offs to total average loans was .10% in the current
quarter, .02% in the previous quarter, and .18% in the 3rd quarter of last year. Net loan charge-offs on personal banking loans decreased $2.1 million to $3.6 million.
In the 3rd quarter of 2021, annualized net loan charge-offs on average consumer credit card loans were 2.04%, compared to 3.59% in the previous quarter, and 4.47% in the same quarter last year. Consumer loan net charge-offs were .10% of average consumer loans in the current quarter, .08% in the prior quarter and .04% in the same quarter last year.
During the 3rd quarter of 2021, the economy continued to recover from the pandemic and the economic forecast utilized in the allowance for credit loss model continued to improve. This improvement, coupled with other model inputs, resulted in a decrease in the allowance for credit losses as of September 30, 2021. At September 30, 2021, the allowance for credit losses on loans totaled $162.8 million, or 1.07% of total loans and 1.10% of total loans excluding PPP loans. Additionally, the liability for unfunded lending commitments at September 30, 2021 was $22.8 million, a decrease of $1.4 million from the liability at June 30, 2021.
At September 30, 2021, total non-performing assets amounted to $10.5 million, a decrease of $859 thousand from the previous quarter. Non-performing assets are comprised of non-accrual loans and foreclosed real estate ($10.4 million and $115 thousand, respectively). At September 30, 2021, the balance of non-accrual loans, which represented .07% of loans outstanding, included business loans of $8.3 million, personal real estate loans of $1.6 million, and business real estate loans of $577 thousand. Loans more than 90 days past due and still accruing interest totaled $10.5 million at September 30, 2021.
Other
During the 3rd quarter of 2021, the Company paid a cash dividend of $.263 per common share, representing a 2.1% increase over the same period last year. The Company purchased 575,457 shares of treasury stock during the current quarter at an average price of $69.80.
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.
COMMERCE BANCSHARES, INC. EARNINGS HIGHLIGHTS 3rd Quarter 2021
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 2020 Annual Report on Form 10-K, 2ND Quarter 2021 Report on Form 10-Q and the Corporation’s Current Reports on Form 8-K. 2
$1.05 EPS 3 • Net interest income increased 2.9% over Q2. • Net interest margin decreased 2 bps from Q2 to 2.58%. • Non-interest income totaled $137.5 million in Q3. – Non-interest income to total revenue of 39.1%. • Wealth management client assets increased 2.9% in Q3 to $66.8 billion. • Non-interest expense increased $13.5 million over Q2, driven by $8.2 million of non-recurring items. • QTD average loans (excl. PPP) down .3% from Q2. • QTD average deposits increased $344.0 million over Q2. • Net charge-offs to total average loans of .10% and non-performing assets to total loans of .07%. • Tangible common equity to tangible assets of 9.71%. Highlights Well-positioned in a challenging environment 3Q2021 EARNINGS HIGHLIGHTS $139.9 million PPNR1 $122.6 million Net Income 13.74% ROACE 1 See the non-GAAP reconciliation on page 19 1.40% ROAA 59.95% Efficiency Ratio
Quarterly Average Balances Change vs. $ in millions 3Q21 2Q21 3Q20 Highlights Commercial1 $9,588.9 $(726.1) $(1,084.3) • Linked quarter (LQ) reflects lower business loans, mostly driven by PPP forgiveness (-$689.2 million) and lower business R/E Consumer 5,670.1 (5.4) (22.7) • LQ reflects decrease in personal real estate, which was offset by growth in consumer loans Total Loans $15,259.0 $(731.5) $(1,107.0) Investment Securities $13,794.8 $915.5 $2,707.4 • LQ increase due to growth in mortgage- backed and asset-backed securities Interest Earning Deposits with Banks $2,602.9 $(121.9) $1,578.5 • Prudently deploying excess deposits into higher-yielding assets Deposits $28,057.2 $344.0 $3,309.9 • 1.2% quarterly growth, 13.4% annual growth Book Value per Common Share2 $30.01 $ .12 $1.78 • 6.3% annual growth BALANCE SHEET HIGHLIGHTS 4 1 PPP QTD average balances were $575.0 million and $1,264.1 million as of September 30, 2021 and June 30, 2021, respectively 2 For the quarters ended September 30, 2021, June 30, 2021, and September 30, 2020
$14.9 $16.6 $16.6 $9.8 $11.1 $11.5 3Q20 2Q21 3Q21 $24.7 $27.7 $28.1 +13% $10.7 $10.3 $9.6 $5.7 $5.7 $5.7 2Q213Q20 3Q21 $16.4 $16.0 $15.3 -7% BALANCE SHEET 5 Loans Consumer Loans Commercial Loans Loan Yield Deposits QTD Average Balances $ billions Non-Interest Bearing Interest Bearing Deposit Yield Interest Bearing Deposit QTD Average Balances $ billions 3.69% 3.65% 3.74% .18% .07% .06%
LOAN PORTFOLIO 6 $ in 000s 9/30/2021 6/30/2021 9/30/2020 QoQ YoY Business $5,277,850 $5,803,760 $6,683,413 -9.1% -21.0% Business excl. PPP 4,969,914 4,949,459 5,175,827 .4% -4.0% Construction 1,257,836 1,103,661 1,009,729 14.0% 24.6% Business Real Estate 2,937,852 3,017,560 2,993,192 -2.6% -1.8% Personal Real Estate 2,769,292 2,793,213 2,753,867 -.9% .6% Consumer 2,049,559 2,049,166 2,006,360 — 2.2% Revolving Home Equity 281,442 283,568 324,203 -.7% -13.2% Consumer Credit Card 569,976 586,358 647,893 -2.8% -12.0% Overdrafts 4,583 2,978 2,270 53.9% 101.9% Total Loans $15,148,390 $15,640,264 $16,420,927 -3.1% -7.7% PPP1 307,936 854,301 1,507,586 -64.0% -79.6% Total Loans excl. PPP $14,840,454 $14,785,963 $14,913,341 .4% -.5% Period-End Balances $ in 000s 9/30/2021 6/30/2021 9/30/2020 QoQ YoY Business $5,437,498 $6,211,610 $6,709,200 -12.5% -19.0% Business excl. PPP 4,862,523 4,947,477 5,203,444 -1.7% -6.6% Construction 1,168,566 1,088,433 974,346 7.4% 19.9% Business Real Estate 2,982,847 3,014,955 2,989,652 -1.1% -.2% Personal Real Estate 2,775,638 2,804,388 2,722,300 -1.0% 2.0% Consumer 2,041,263 2,004,625 1,992,314 1.8% 2.5% Revolving Home Equity 281,689 287,031 329,361 -1.9% -14.5% Consumer Credit Card 566,406 575,725 646,185 -1.6% -12.3% Overdrafts 5,110 3,735 2,689 36.8% 90.0% Total Loans $15,259,017 $15,990,502 $16,366,047 -4.6% -6.8% PPP1 574,975 1,264,133 1,505,756 -54.5% -61.8% Total Loans excl. PPP $14,684,042 $14,726,369 $14,860,291 -.3% -1.2% QTD Average Balances 1Paycheck protection program (PPP) loans are included in the business loan category
$0 $15 $30 $5 $10 $20 $25 3Q20 2Q214Q20 1Q21 3Q21 0.09% 0.07% 0.06% 0.00% 0.05% 0.10% 0.15% 0.20% 0.18% 0.12% BALANCE SHEET: LOW-COST DEPOSITS Non Interest-Bearing Deposits (left) Interest-bearing Deposits (left) Av er ag e Ba la nc e $ in b illi on s Cost of Interest-Bearing Deposits (right) 7 – 41% of Q3 average deposits were non-interest bearing. – Cost of interest-bearing deposits declined slightly.
EARNING ASSET OPTIMIZATION 8 Av er ag e Ba la nc e $ in b illi on s 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% 9.0% $0.0 $15.0 $20.0 $10.0 $5.0 $14.0 $12.9 $0.2 $1.0 $0.7 $2.7 $0.8 $0.3 $16.5 $0.8 1Q19 $0.3 $8.7 3Q20 $1.1 $0.7 $0.8 2Q19 $0.9 $8.7 $0.7 $1.6 $0.9 3Q19 $8.6 2Q20 $9.6 $13.8 $0.8 $0.4 $9.8 $8.6 4Q19 $2.6 $18.0 $8.5 2Q21 $0.9 $1.5 $0.6 1Q20 $9.5 $1.8 $11.3 $12.1 4Q20 1Q21 $13.1 3Q21 $12.2 $9.7 $9.6 $10.0 $15.0 $12.7 AFS Securities1 Asset REPOs2 FRB Balance3 as a % of Interest Earning AssetsFRB Balances3 1Available for Sale (AFS) securities are reported at fair value 2Asset REPOs defined as Securities purchased under agreements to resell 3Interest earning deposits at Federal Reserve Bank Prudently deploying excess deposits into higher-yielding assets
Change vs. $ in millions 3Q21 2Q21 3Q20 Highlights Net Interest Income $214.0 $6.1 $(1.9) • Linked quarter (LQ) increase due to higher income on investment securities, partially offset by lower interest earned on loans and securities purchased under agreements to resell Non-Interest Income $137.5 $(1.6) $7.9 • See page 10 Non-Interest Expense $211.6 $13.5 $20.8 • See page 11 Pre-Tax, Pre-Provision Net Revenue1 $139.9 $(9.1) $(14.8) Investment Securities Gains, Net $13.1 $(3.7) $(3.0) • Q3 unrealized fair value gains of $13.0 million on private equity investment portfolio Provision for Credit Losses $(7.4) $38.3 $(10.5) • LQ increase due to a smaller decrease in the estimate of the allowance for credit losses on loans and unfunded lending commitments and higher net loan charge-offs Net-Income Available to Common Shareholders $122.6 $(39.8) $(2.4) 3Q21 2Q21 3Q20 Net Income per Common Share – Diluted $1.05 $1.38 $1.06 Net Yield on Interest Earning Assets 2.58% 2.60% 2.97% • Lower earning asset yields, slightly offset by lower deposit costs INCOME STATEMENT HIGHLIGHTS 1 See the non-GAAP reconciliation on page 19 9
Change vs. $ in millions 3Q21 2Q21 3Q20 Highlights Bank Card Transaction Fees $42.8 $0.2 $4.9 • Increase of 13.0% over prior year (PY) driven by net corporate card fees Trust Fees $49.0 $2.7 $8.2 • Increase of 5.8% over linked quarter (LQ), 20.1% over PY resulting mostly from higher private client fee income Deposit Account Charges and Other Fees $25.2 $1.2 $2.1 • Increase of 8.9% over PY as fees continue to rebound strongly from last year’s lows Capital Market Fees $3.8 $0.5 $0.6 Consumer Brokerage Services $4.9 $0.4 $0.9 • Consumer brokerage fees up 22.2%, compared PY, mainly due to growth in annuity and advisory fees Loan Fees and Sales $6.8 $(0.6) $(2.9) • Decline mostly from mortgage banking revenue, down 30.0% from PY Other $5.0 $(6.0) $(5.8) • Decrease from the PY mainly due to lower cash sweep commissions, tax credit sales fees and a $2.0 million loss this quarter on an equity method investment Total Non-Interest Income $137.5 $(1.6) $7.9 NON-INTEREST INCOME HIGHLIGHTS 10
Change vs. $ in millions 3Q21 2Q21 3Q20 Highlights Salaries and Employee Benefits $132.8 $2.1 $5.5 • Increase of 1.6% over linked quarter (LQ), 4.3% over prior year (PY) mostly due to higher incentive compensation Net Occupancy $12.3 $0.8 $0.3 Equipment $4.4 $(0.2) $(0.3) Supplies $4.5 $0.5 $0.4 Data Processing and Software $25.6 $0.6 $2.0 • Increase of 2.6% over LQ and 8.4% over PY due to higher bank card processing fees and increase in costs for service providers Marketing $5.6 $(0.1) $0.7 Other $26.3 $9.7 $12.2 • Increase mainly due non-recurring costs Total Non-Interest Expense $211.6 $13.5 $20.8 NON-INTEREST EXPENSE HIGHLIGHTS 11
12 PRE-TAX, PRE-PROVISION NET REVENUE (PPNR) $130 $155 $216 $191 3Q2020 $346 $139 $149 $208 $198 $347 2Q2021 $138 $140 $214 $212 3Q2021 $352 Non-Interest Income (+) Net Interest Income (+) Non-Interest Expense (-) Pre-Tax, Pre-Provision Net Revenue (=) 3Q2021 Comparison vs. 3Q2020 (9.5)% vs. 2Q2021 (6.1)% See the non-GAAP reconciliation on page 19
Average Loan to Deposit Ratio3 SOUND CAPITAL AND LIQUIDITY POSITION 13 Tier 1 Risk-Based Capital Ratio1 1S&P Global Market Intelligence, Information as of June 30, 2021 2Period-end balances, as of September 30, 2021 3Includes loans held for sale, for the quarter ended September 30, 2021 14.5% 14.2% 14.2% 14.2% 13.7% 12.4% 12.3% 12.1% 12.0% 12.0% 11.9% 11.8% 11.8% 11.7% 11.3% 11.0% 11.0% 10.7% 10.3% 10.1% ASB CFR FNB BXS WTFC SSB SFNC WBS OZK CBSH UMBF UBSI UMPQ BOKF ONB FMBI PNFP HWC VLY FULT Peer Median: 11.9% Core Deposits $26.5 Billion2 Large, stable deposit base Loan to Deposit Ratio Total Deposits 54% Average Loan to Deposit Ratio179% Peer Average Commerce 94%6% Core Deposits - Non-Interest Bearing - Interest Checking - Savings and Money Market Certificates of Deposit
$7.6 $0.7 $3.7 $10.6 $7.0 3Q20 2Q21 3Q21 MAINTAINING STRONG CREDIT QUALITY 14 Net Loan Charge-Offs (NCOs) $ in millions NCOs- CBSH NCOs - Peer Average NCO/Average Loans1 - CBSH $236.4 $172.4 $162.8 $311.3 $273.4 3Q213Q20 2Q21 Allowance for Credit Losses on Loans (ACL) $ in millions ACL - CBSH ACL - Peer Average ACL / Total Loans - CBSH $40.3 $11.2 $10.4 $154.7 $115.7 3Q213Q20 2Q21 Non-Performing Loans (NPLs) $ in millions NPLs - CBSH NPLs - Peer Average 5.9x 15.4x 15.6x 5.7x 3.0x 3Q20 2Q21 3Q21 Allowance for Credit Losses on Loans (ACL) to NPLs ACL / NPLs - CBSH ACL / NPLs - Peer Average Percentages are illustrative and not to scale; Peer Banks include: ASB, BXS, OZK, BOKF, CFR, FNB, FMBI, FULT, HWC, ONB, PNFP, SFNC, SSB, UMBF, UMPQ, UBSI, VLY, WBS, WTFC 1As a percentage of average loans (excluding loans held for sale) NPLs / Total Loans - CBSH NCO/Average Loans1 – Peer Average .25% NPLs / Total Loans – Peer Average .07% .07% .75% .58% ACL / Total Loans – Peer Average 1.44% 1.10% 1.07% 1.48% 1.37% .18% .02% .10% .19% .14%
PAYCHECK PROTECTION PROGRAM IMPACT AND UPDATE 15 Yield and Interest Income2 Q3 2021, $ in millions 3.43% 7.73% 2.92% Yield Business Loans PPP Yield and Fee Recognition Business Loans (ex PPP) $47.0 $11.2 $35.8 Interest Income Total Loan Originations1: $1.9 Billion Total SBA Fees: $60.4 Million 1Includes Round 1 and Round 2 fundings. Period-end balance as of 9/30 was $307.9 million; 2Tax equivalent basis 84% 16%Forgiven Remaining 85% 15%Recognized Remaining
PAYCHECK PROTECTION PROGRAM IMPACT AND UPDATE 16 Loan Portfolio Impact QTD Average Balances, $ in millions $5,494 $5,517 $5,203 $5,104 $5,159 $4,947 $4,863 $1,244 $1,506 $1,476 $1,374 $1,264 3Q202Q20 $6,761 1Q211Q20 4Q20 $6,533 2Q21 $5,494 $6,709 $6,580 $6,211 3Q21 $575 $5,437 Interest Income Impact $ in millions $47.9 $41.6 $38.3 $38.1 $37.7 $36.9 $35.8 $7.3 $11.4 $11.7 $12.0 $11.9 $11.2 1Q20 2Q211Q212Q20 3Q20 $47.9 4Q20 $48.9 $49.7 $49.8 $49.7 $48.8 3Q21 $47.0 PPP LoansBusiness Loans (excl PPP) Business Loans1 (excl PPP) PPP Loans 1Tax equivalent basis
ALLOCATION OF ALLOWANCE 17 CECL allowances reflect the economic and market outlook June 30, 2021 September 30, 2021 $ in millions Allowance for Credit Losses (ACL) % of Outstanding Loans Allowance for Credit Losses (ACL) % of Outstanding Loans Business $ 44.9 .77% $ 41.0 .78% Bus R/E 29.6 .98% 32.3 1.10% Construction 23.5 2.13% 24.8 1.97% Commercial total $ 98.0 .99% $ 98.2 1.04% Consumer 12.3 .60% 11.4 .56% Consumer CC 55.2 9.41% 46.4 8.15% Personal R/E 5.6 .20% 5.4 .19% Revolving H/E 1.1 .39% 1.1 .40% Overdrafts .2 7.29% .3 6.66% Consumer total $ 74.4 1.30% $ 64.6 1.14% Allowance for credit losses on loans $ 172.4 1.10% $ 162.8 1.07% 1.47% 1.44% 1.22% 1.07% 0.60% 0.80% 1.00% 1.20% 1.40% 1.60% $200 $100 $150 $250 $139.6 $162.8 2Q21 0.95% 1/1/2020 $171.7 $200.5 1.14% $240.7 1Q20 2Q20 $236.4 3Q20 $220.8 1.35% 4Q20 1Q21 $172.4 3Q21 1.10% Allowance for Credit Losses (ACL) on Loans ACL - Loans (left) ACL / Total Loans (right) $ in millions
Quick Facts: Small Business Investment Company (SBIC) founded in 1959 Nationwide footprint with Greater Midwest Focus 33 Portfolio Companies Representing $733 million in Revenue Over 2,900 Employees Fair Value as of September 30, 2021: $138.1 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 18
NON-GAAP RECONCILIATIONS 19 For The Three Months Ended (DOLLARS IN THOUSANDS) Sept. 30, 2021 Jun. 31, 2021 Sept. 30, 2020 A Net Interest Income $ 214,037 $ 207,982 $ 215,962 B Non-Interest Income $ 137,506 $ 139,143 $ 129,572 C Non-Interest Expense $ 211,620 $ 198,126 $ 190,858 Pre-Provision Net Revenue (A+B-C) $ 139,923 $ 148,999 $ 154,676 Pre-tax, Pre-provision Net Revenue
