CBSH 8-K
Commerce Bancshares Inc /Mo/ (CBSH)
8-K
2021-01-20
For: 2021-01-20
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): January 20, 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 January 20, 2021 by Commerce Bancshares, Inc. announcing Fourth Quarter 2020 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 exhibit, 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 Internet site at http://www.commercebank.com.
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: January 20, 2021
Exhibit 99.1
Exhibit 99.1
 | CBSH | ||||
| 1000 Walnut Street / Suite 700 / Kansas City, Missouri 64106 / 816.234.2000 | |||||
 | |||||
FOR IMMEDIATE RELEASE:
Wednesday, January 20, 2021
COMMERCE BANCSHARES, INC. REPORTS
FOURTH QUARTER EARNINGS PER SHARE OF $1.11
Commerce Bancshares, Inc. announced earnings of $1.11 per share for the three months ended December 31, 2020, compared to $.88 per common share in the same quarter last year and $1.06 per common share in the prior quarter. Net income attributable to Commerce Bancshares, Inc. (net income) for the fourth quarter of 2020 amounted to $129.9 million, compared to $106.9 million in the fourth quarter of 2019 and $132.4 million in the prior quarter. For the quarter, the return on average assets was 1.63%, the return on average equity was 15.49%, and the efficiency ratio was 56.7%.
For the year ended December 31, 2020, earnings per common share totaled $2.91 compared to $3.41 in 2019. Net income attributable to Commerce Bancshares, Inc. amounted to $354.1 million in 2020 compared to $421.2 million last year. For the current year, the return on average assets was 1.20%, and the return on average common equity was 10.64%.
In announcing these results, John Kemper, Chief Executive Officer, said, “Commerce had a strong quarter to close out 2020. While economic uncertainty remains top of mind, overall economic conditions, most notably unemployment, continued to improve in the fourth quarter at a pace that exceeded economic forecasts. These factors, coupled with a forecast projecting an economic recovery, resulted in a decrease in the allowance for credit losses. Our portfolio of private equity investments saw unrealized gains recorded this quarter, partially offsetting unrealized losses recorded in the first half of 2020 and reflecting improvement in the overall economy. Although net interest margins continue to be pressured from a challenging interest rate environment, our fee-based businesses are rebounding from mid-year lows and provide us with a source of revenue diversification. Bank card and deposit account fees grew from last quarter with an increase in spending activity. Loan fees and sales, driven by our mortgage banking business, continued to be strong this quarter and increased 161 percent compared to the fourth quarter of 2019. Trust fees reached another record quarter, reflecting not only higher market values, but also the results of investments we’ve made across our wealth business. Non-interest expense grew .6% compared to the same quarter last year and remained well-controlled. Compared to the previous quarter, average deposits grew $843.3 million, or 3.4%, well surpassing our expectations. While deposit balances grew this quarter, loan demand was mixed. Average loan balances in construction, business real estate, and personal real estate grew, while lower demand for business loans kept total average loan balances relatively flat.”
Mr. Kemper continued, “This quarter, net loan charge-offs totaled $8.0 million, compared to $7.6 million in the prior quarter and $15.2 million in the fourth quarter of 2019. The ratio of annualized net loan charge-offs to average loans was .19% in the current quarter, .18% in the prior quarter and .42% in the fourth quarter of last year. Net loan charge-offs on commercial loans
Exhibit 99.1
totaled $572 thousand this quarter compared to $194 thousand in the prior quarter. Non-performing assets decreased this quarter from $40.3 million to $26.6 million. At December 31, 2020, the allowance for credit losses on loans decreased to $220.8 million.”
Total assets at December 31, 2020 were $32.9 billion, total loans were $16.3 billion, and total deposits were $26.9 billion. During the fourth quarter of 2020, the Company distributed a 5% stock dividend on its common stock. The Company also paid a cash dividend of $.257 per share, as restated for the 5% stock dividend.
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, including management's discussion of fourth quarter results, is posted to the Company's web site at www.commercebank.com.
* * * * * * * * * * * * * * *
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 Year Ended | |||||||||||||||||||
| (Unaudited) (Dollars in thousands, except per share data) | December 31, 2020 | September 30, 2020 | December 31, 2019 | December 31, 2020 | December 31, 2019 | |||||||||||||||
FINANCIAL SUMMARY | ||||||||||||||||||||
| Net interest income | $209,763 | $215,962 | $202,659 | $829,847 | $821,293 | |||||||||||||||
| Non-interest income | 135,117 | 129,572 | 143,461 | 505,867 | 524,703 | |||||||||||||||
Total revenue | 344,880 | 345,534 | 346,120 | 1,335,714 | 1,345,996 | |||||||||||||||
| Investment securities gains (losses), net | 12,307 | 16,155 | (248) | 11,032 | 3,626 | |||||||||||||||
| Provision for credit losses | (4,403) | 3,101 | 15,206 | 137,190 | 50,438 | |||||||||||||||
| Non-interest expense | 196,310 | 190,858 | 195,174 | 768,378 | 767,398 | |||||||||||||||
Income before taxes | 165,280 | 167,730 | 135,492 | 441,178 | 531,786 | |||||||||||||||
| Income taxes | 33,084 | 34,375 | 28,214 | 87,293 | 109,074 | |||||||||||||||
| Non-controlling interest (income) expense | 2,307 | 907 | 398 | (172) | 1,481 | |||||||||||||||
Net income attributable to Commerce Bancshares, Inc. | 129,889 | 132,448 | 106,880 | 354,057 | 421,231 | |||||||||||||||
| Preferred stock dividends | — | 7,466 | 2,250 | 11,966 | 9,000 | |||||||||||||||
Net income available to common shareholders | $129,889 | $124,982 | $104,630 | $342,091 | $412,231 | |||||||||||||||
| Earnings per common share: | ||||||||||||||||||||
| Net income — basic | $1.11 | $1.06 | $.89 | $2.91 | $3.42 | |||||||||||||||
| Net income — diluted | $1.11 | $1.06 | $.88 | $2.91 | $3.41 | |||||||||||||||
| Effective tax rate | 20.30 | % | 20.61 | % | 20.88 | % | 19.78 | % | 20.57 | % | ||||||||||
| Tax equivalent net interest income | $213,017 | $219,118 | $206,156 | $842,790 | $835,421 | |||||||||||||||
Average total interest earning assets (1) | $ | 30,297,922 | $ | 29,352,970 | $ | 24,372,575 | $ | 28,143,048 | $ | 24,034,631 | ||||||||||
| Diluted wtd. average shares outstanding | 116,507,841 | 116,444,157 | 117,611,663 | 116,584,015 | 119,769,634 | |||||||||||||||
| RATIOS | ||||||||||||||||||||
Average loans to deposits (2) | 64.05 | % | 66.23 | % | 71.73 | % | 67.73 | % | 71.54 | % | ||||||||||
| Return on total average assets | 1.63 | 1.71 | 1.65 | 1.20 | 1.67 | |||||||||||||||
Return on average common equity (3) | 15.49 | 15.21 | 13.90 | 10.64 | 14.06 | |||||||||||||||
| Non-interest income to total revenue | 39.18 | 37.50 | 41.45 | 37.87 | 38.98 | |||||||||||||||
Efficiency ratio (4) | 56.68 | 55.00 | 56.29 | 57.19 | 56.87 | |||||||||||||||
| Net yield on interest earning assets | 2.80 | 2.97 | 3.36 | 2.99 | 3.48 | |||||||||||||||
| EQUITY SUMMARY | ||||||||||||||||||||
| Cash dividends per common share | $.257 | $.257 | $.236 | $1.029 | $.943 | |||||||||||||||
| Cash dividends on common stock | $30,178 | $30,174 | $27,933 | $120,818 | $113,466 | |||||||||||||||
Cash dividends on preferred stock (7) | $— | $7,466 | $2,250 | $11,966 | $9,000 | |||||||||||||||
Book value per common share (5) | $29.03 | $28.23 | $25.43 | |||||||||||||||||
Market value per common share (5) | $65.70 | $53.61 | $64.70 | |||||||||||||||||
| High market value per common share | $68.09 | $59.13 | $65.38 | |||||||||||||||||
| Low market value per common share | $52.10 | $50.50 | $51.96 | |||||||||||||||||
Common shares outstanding (5) | 117,138,431 | 117,109,209 | 117,738,126 | |||||||||||||||||
Tangible common equity to tangible assets (6) | 9.92 | % | 10.11 | % | 10.99 | % | ||||||||||||||
| Tier I leverage ratio | 9.45 | % | 9.39 | % | 11.38 | % | ||||||||||||||
| OTHER QTD INFORMATION | ||||||||||||||||||||
| Number of bank/ATM locations | 306 | 308 | 316 | |||||||||||||||||
| Full-time equivalent employees | 4,766 | 4,825 | 4,858 | |||||||||||||||||
(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).
(7)For the period ended September 30, 2020, preferred stock dividends includes $5.2 million related to the preferred stock redemption. The $5.2 million is the excess of the redemption costs over the book value of the preferred stock and is considered a dividend.
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 Year Ended | |||||||||||||||||||||||||
| (Unaudited) (In thousands, except per share data) | December 31, 2020 | September 30, 2020 | June 30, 2020 | March 31, 2020 | December 31, 2019 | December 31, 2020 | December 31, 2019 | |||||||||||||||||||
| Interest income | $214,726 | $223,114 | $213,323 | $221,485 | $226,665 | $872,648 | $924,685 | |||||||||||||||||||
| Interest expense | 4,963 | 7,152 | 10,266 | 20,420 | 24,006 | 42,801 | 103,392 | |||||||||||||||||||
| Net interest income | 209,763 | 215,962 | 203,057 | 201,065 | 202,659 | 829,847 | 821,293 | |||||||||||||||||||
| Provision for credit losses | (4,403) | 3,101 | 80,539 | 57,953 | 15,206 | 137,190 | 50,438 | |||||||||||||||||||
Net interest income after credit losses | 214,166 | 212,861 | 122,518 | 143,112 | 187,453 | 692,657 | 770,855 | |||||||||||||||||||
| NON-INTEREST INCOME | ||||||||||||||||||||||||||
| Bank card transaction fees | 39,979 | 37,873 | 33,745 | 40,200 | 41,079 | 151,797 | 167,879 | |||||||||||||||||||
| Trust fees | 41,961 | 40,769 | 37,942 | 39,965 | 40,405 | 160,637 | 155,628 | |||||||||||||||||||
| Deposit account charges and other fees | 24,164 | 23,107 | 22,279 | 23,677 | 24,974 | 93,227 | 95,983 | |||||||||||||||||||
| Capital market fees | 3,826 | 3,194 | 3,772 | 3,790 | 2,536 | 14,582 | 8,146 | |||||||||||||||||||
| Consumer brokerage services | 3,996 | 4,011 | 3,011 | 4,077 | 4,139 | 15,095 | 15,804 | |||||||||||||||||||
| Loan fees and sales | 9,031 | 9,769 | 4,649 | 3,235 | 3,465 | 26,684 | 15,767 | |||||||||||||||||||
| Other | 12,160 | 10,849 | 12,117 | 8,719 | 26,863 | 43,845 | 65,496 | |||||||||||||||||||
| Total non-interest income | 135,117 | 129,572 | 117,515 | 123,663 | 143,461 | 505,867 | 524,703 | |||||||||||||||||||
INVESTMENT SECURITIES GAINS (LOSSES), NET | 12,307 | 16,155 | (4,129) | (13,301) | (248) | 11,032 | 3,626 | |||||||||||||||||||
| NON-INTEREST EXPENSE | ||||||||||||||||||||||||||
| Salaries and employee benefits | 129,983 | 127,308 | 126,759 | 128,937 | 126,901 | 512,987 | 492,927 | |||||||||||||||||||
| Net occupancy | 11,570 | 12,058 | 11,269 | 11,748 | 12,218 | 46,645 | 47,157 | |||||||||||||||||||
| Equipment | 4,526 | 4,737 | 4,755 | 4,821 | 4,859 | 18,839 | 19,061 | |||||||||||||||||||
| Supplies and communication | 4,193 | 4,141 | 4,427 | 4,658 | 4,851 | 17,419 | 20,394 | |||||||||||||||||||
| Data processing and software | 24,323 | 23,610 | 23,837 | 23,555 | 23,934 | 95,325 | 92,899 | |||||||||||||||||||
| Marketing | 5,028 | 4,926 | 3,801 | 5,979 | 3,951 | 19,734 | 21,914 | |||||||||||||||||||
| Other | 16,687 | 14,078 | 12,664 | 14,000 | 18,460 | 57,429 | 73,046 | |||||||||||||||||||
| Total non-interest expense | 196,310 | 190,858 | 187,512 | 193,698 | 195,174 | 768,378 | 767,398 | |||||||||||||||||||
| Income before income taxes | 165,280 | 167,730 | 48,392 | 59,776 | 135,492 | 441,178 | 531,786 | |||||||||||||||||||
| Less income taxes | 33,084 | 34,375 | 9,661 | 10,173 | 28,214 | 87,293 | 109,074 | |||||||||||||||||||
| Net income | 132,196 | 133,355 | 38,731 | 49,603 | 107,278 | 353,885 | 422,712 | |||||||||||||||||||
Less non-controlling interest expense (income) | 2,307 | 907 | (1,132) | (2,254) | 398 | (172) | 1,481 | |||||||||||||||||||
Net income attributable to Commerce Bancshares, Inc. | 129,889 | 132,448 | 39,863 | 51,857 | 106,880 | 354,057 | 421,231 | |||||||||||||||||||
| Less preferred stock dividends | — | 7,466 | 2,250 | 2,250 | 2,250 | 11,966 | 9,000 | |||||||||||||||||||
Net income available to common shareholders | $129,889 | $124,982 | $37,613 | $49,607 | $104,630 | $342,091 | $412,231 | |||||||||||||||||||
| Net income per common share — basic | $1.11 | $1.06 | $.32 | $.42 | $.89 | $2.91 | $3.42 | |||||||||||||||||||
| Net income per common share — diluted | $1.11 | $1.06 | $.32 | $.42 | $.88 | $2.91 | $3.41 | |||||||||||||||||||
| OTHER INFORMATION | ||||||||||||||||||||||||||
| Return on total average assets | 1.63 | % | 1.71 | % | .54 | % | .80 | % | 1.65 | % | 1.20 | % | 1.67 | % | ||||||||||||
Return on average common equity (1) | 15.49 | 15.21 | 4.77 | 6.48 | 13.90 | 10.64 | 14.06 | |||||||||||||||||||
Efficiency ratio (2) | 56.68 | 55.00 | 58.10 | 59.17 | 56.29 | 57.19 | 56.87 | |||||||||||||||||||
| Effective tax rate | 20.30 | 20.61 | 19.51 | 16.40 | 20.88 | 19.78 | 20.57 | |||||||||||||||||||
| Net yield on interest earning assets | 2.80 | 2.97 | 2.94 | 3.33 | 3.36 | 2.99 | 3.48 | |||||||||||||||||||
| Tax equivalent net interest income | $213,017 | $219,118 | $206,253 | $204,402 | $206,156 | $842,790 | $835,421 | |||||||||||||||||||
(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) | December 31, 2020 | September 30, 2020 | December 31, 2019 | |||||||||||
| ASSETS | ||||||||||||||
| Loans | ||||||||||||||
| Business | $ | 6,546,087 | $ | 6,683,413 | $ | 5,565,449 | ||||||||
| Real estate — construction and land | 1,021,595 | 1,009,729 | 899,377 | |||||||||||
| Real estate — business | 3,026,117 | 2,993,192 | 2,833,554 | |||||||||||
| Real estate — personal | 2,820,030 | 2,753,867 | 2,354,760 | |||||||||||
| Consumer | 1,950,502 | 2,006,360 | 1,964,145 | |||||||||||
| Revolving home equity | 307,083 | 324,203 | 349,251 | |||||||||||
| Consumer credit card | 655,078 | 647,893 | 764,977 | |||||||||||
| Overdrafts | 3,149 | 2,270 | 6,304 | |||||||||||
| Total loans | 16,329,641 | 16,420,927 | 14,737,817 | |||||||||||
| Allowance for credit losses on loans | (220,834) | (236,360) | (160,682) | |||||||||||
Net loans | 16,108,807 | 16,184,567 | 14,577,135 | |||||||||||
| Loans held for sale | 45,089 | 39,483 | 13,809 | |||||||||||
| Investment securities: | ||||||||||||||
| Available for sale debt securities | 12,449,264 | 11,539,061 | 8,571,626 | |||||||||||
| Trading debt securities | 35,321 | 25,805 | 28,161 | |||||||||||
| Equity securities | 4,363 | 4,203 | 4,209 | |||||||||||
| Other securities | 156,745 | 122,532 | 137,892 | |||||||||||
Total investment securities | 12,645,693 | 11,691,601 | 8,741,888 | |||||||||||
Federal funds sold and short-term securities purchased under agreements to resell | — | 2,275 | — | |||||||||||
Long-term securities purchased under agreements to resell | 850,000 | 850,000 | 850,000 | |||||||||||
| Interest earning deposits with banks | 1,747,363 | 1,171,697 | 395,850 | |||||||||||
| Cash and due from banks | 437,563 | 357,616 | 491,615 | |||||||||||
| Premises and equipment — net | 371,083 | 377,853 | 370,637 | |||||||||||
| Goodwill | 138,921 | 138,921 | 138,921 | |||||||||||
| Other intangible assets — net | 11,207 | 7,183 | 9,534 | |||||||||||
| Other assets | 567,248 | 632,621 | 476,400 | |||||||||||
Total assets | $ | 32,922,974 | $ | 31,453,817 | $ | 26,065,789 | ||||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||||
| Deposits: | ||||||||||||||
| Non-interest bearing | $ | 10,497,598 | $ | 10,727,827 | $ | 6,890,687 | ||||||||
| Savings, interest checking and money market | 14,604,456 | 12,983,505 | 11,621,716 | |||||||||||
| Certificates of deposit of less than $100,000 | 529,802 | 556,870 | 626,157 | |||||||||||
| Certificates of deposit of $100,000 and over | 1,314,889 | 1,433,577 | 1,381,855 | |||||||||||
Total deposits | 26,946,745 | 25,701,779 | 20,520,415 | |||||||||||
Federal funds purchased and securities sold under agreements to repurchase | 2,098,383 | 1,653,064 | 1,850,772 | |||||||||||
| Other borrowings | 802 | 782 | 2,418 | |||||||||||
| Other liabilities | 477,072 | 791,928 | 553,712 | |||||||||||
Total liabilities | 29,523,002 | 28,147,553 | 22,927,317 | |||||||||||
| Stockholders’ equity: | ||||||||||||||
| Preferred stock | — | — | 144,784 | |||||||||||
| Common stock | 589,352 | 563,978 | 563,978 | |||||||||||
| Capital surplus | 2,436,288 | 2,140,410 | 2,151,464 | |||||||||||
| Retained earnings | 73,000 | 326,890 | 201,562 | |||||||||||
| Treasury stock | (32,970) | (69,050) | (37,548) | |||||||||||
| Accumulated other comprehensive income | 331,377 | 343,435 | 110,444 | |||||||||||
Total stockholders’ equity | 3,397,047 | 3,305,663 | 3,134,684 | |||||||||||
| Non-controlling interest | 2,925 | 601 | 3,788 | |||||||||||
Total equity | 3,399,972 | 3,306,264 | 3,138,472 | |||||||||||
Total liabilities and equity | $ | 32,922,974 | $ | 31,453,817 | $ | 26,065,789 | ||||||||
Exhibit 99.1
COMMERCE BANCSHARES, INC. and SUBSIDIARIES
AVERAGE BALANCE SHEETS
| (Unaudited) (In thousands) | For the Three Months Ended | ||||||||||||||||
| December 31, 2020 | September 30, 2020 | June 30, 2020 | March 31, 2020 | December 31, 2019 | |||||||||||||
| ASSETS: | |||||||||||||||||
| Loans: | |||||||||||||||||
| Business | $ | 6,580,300 | $ | 6,709,200 | $ | 6,760,827 | $ | 5,493,657 | $ | 5,362,020 | |||||||
| Real estate — construction and land | 1,032,891 | 974,346 | 895,648 | 924,086 | 901,367 | ||||||||||||
| Real estate — business | 3,029,799 | 2,989,652 | 2,962,076 | 2,853,632 | 2,820,189 | ||||||||||||
| Real estate — personal | 2,778,462 | 2,722,300 | 2,582,484 | 2,390,716 | 2,283,530 | ||||||||||||
| Consumer | 1,981,033 | 1,992,314 | 1,944,265 | 1,950,491 | 1,961,631 | ||||||||||||
| Revolving home equity | 316,895 | 329,361 | 343,210 | 350,256 | 347,527 | ||||||||||||
| Consumer credit card | 638,161 | 646,185 | 663,911 | 727,569 | 749,056 | ||||||||||||
| Overdrafts | 3,762 | 2,689 | 2,912 | 4,044 | 18,322 | ||||||||||||
Total loans | 16,361,303 | 16,366,047 | 16,155,333 | 14,694,451 | 14,443,642 | ||||||||||||
| Allowance for credit losses on loans | (235,484) | (240,286) | (171,616) | (139,482) | (159,776) | ||||||||||||
| Net loans | 16,125,819 | 16,125,761 | 15,983,717 | 14,554,969 | 14,283,866 | ||||||||||||
| Loans held for sale | 30,577 | 24,728 | 6,363 | 12,875 | 15,363 | ||||||||||||
| Investment securities: | |||||||||||||||||
U.S. government and federal agency obligations | 774,640 | 770,361 | 776,240 | 802,556 | 826,702 | ||||||||||||
Government-sponsored enterprise obligations | 69,133 | 102,749 | 114,518 | 134,296 | 184,973 | ||||||||||||
| State and municipal obligations | 1,967,408 | 1,767,526 | 1,285,427 | 1,222,595 | 1,207,584 | ||||||||||||
Mortgage-backed securities | 6,646,345 | 6,259,926 | 5,325,720 | 4,685,782 | 4,685,794 | ||||||||||||
| Asset-backed securities | 1,819,467 | 1,520,988 | 1,342,518 | 1,182,556 | 1,258,297 | ||||||||||||
Other debt securities | 533,646 | 514,166 | 406,665 | 321,733 | 331,167 | ||||||||||||
| Unrealized gain on debt securities | 329,477 | 368,154 | 281,457 | 191,275 | 149,591 | ||||||||||||
| Total available for sale debt securities | 12,140,116 | 11,303,870 | 9,532,545 | 8,540,793 | 8,644,108 | ||||||||||||
Trading debt securities | 28,040 | 27,267 | 31,981 | 34,055 | 32,518 | ||||||||||||
| Equity securities | 4,221 | 4,193 | 4,137 | 4,273 | 4,200 | ||||||||||||
| Other securities | 130,145 | 120,253 | 139,250 | 144,096 | 141,501 | ||||||||||||
| Total investment securities | 12,302,522 | 11,455,583 | 9,707,913 | 8,723,217 | 8,822,327 | ||||||||||||
Federal funds sold and short-term securities purchased under agreements to resell | 355 | 337 | 92 | 326 | 714 | ||||||||||||
| Long-term securities purchased under agreements to resell | 849,998 | 849,994 | 850,000 | 850,000 | 849,986 | ||||||||||||
| Interest earning deposits with banks | 1,082,644 | 1,024,435 | 1,755,068 | 601,420 | 390,134 | ||||||||||||
| Other assets | 1,291,907 | 1,389,683 | 1,461,528 | 1,368,464 | 1,315,395 | ||||||||||||
| Total assets | $ | 31,683,822 | $ | 30,870,521 | $ | 29,764,681 | $ | 26,111,271 | $ | 25,677,785 | |||||||
| LIABILITIES AND EQUITY: | |||||||||||||||||
Non-interest bearing deposits | $ | 10,275,735 | $ | 9,801,562 | $ | 8,843,408 | $ | 6,615,108 | $ | 6,552,862 | |||||||
| Savings | 1,234,481 | 1,193,079 | 1,111,397 | 952,709 | 924,282 | ||||||||||||
| Interest checking and money market | 12,198,928 | 11,731,494 | 11,441,694 | 10,777,400 | 10,618,347 | ||||||||||||
Certificates of deposit of less than $100,000 | 542,212 | 573,207 | 605,136 | 622,840 | 626,944 | ||||||||||||
Certificates of deposit of $100,000 and over | 1,339,301 | 1,447,968 | 1,346,069 | 1,299,443 | 1,434,309 | ||||||||||||
| Total deposits | 25,590,657 | 24,747,310 | 23,347,704 | 20,267,500 | 20,156,744 | ||||||||||||
| Borrowings: | |||||||||||||||||
Federal funds purchased and securities sold under agreements to repurchase | 2,028,457 | 1,855,971 | 1,991,971 | 1,990,051 | 1,836,982 | ||||||||||||
| Other borrowings | 1,013 | 1,225 | 345,162 | 161,698 | 94,471 | ||||||||||||
| Total borrowings | 2,029,470 | 1,857,196 | 2,337,133 | 2,151,749 | 1,931,453 | ||||||||||||
| Other liabilities | 727,569 | 899,890 | 763,524 | 466,980 | 458,094 | ||||||||||||
| Total liabilities | 28,347,696 | 27,504,396 | 26,448,361 | 22,886,229 | 22,546,291 | ||||||||||||
| Equity | 3,336,126 | 3,366,125 | 3,316,320 | 3,225,042 | 3,131,494 | ||||||||||||
| Total liabilities and equity | $ | 31,683,822 | $ | 30,870,521 | $ | 29,764,681 | $ | 26,111,271 | $ | 25,677,785 | |||||||
Exhibit 99.1
COMMERCE BANCSHARES, INC. and SUBSIDIARIES
AVERAGE RATES
| (Unaudited) | For the Three Months Ended | |||||||||||||||||||
| December 31, 2020 | September 30, 2020 | June 30, 2020 | March 31, 2020 | December 31, 2019 | ||||||||||||||||
| ASSETS: | ||||||||||||||||||||
| Loans: | ||||||||||||||||||||
Business (1) | 3.01 | % | 2.95 | % | 2.91 | % | 3.50 | % | 3.59 | % | ||||||||||
| Real estate — construction and land | 3.72 | 3.74 | 3.95 | 4.78 | 5.05 | |||||||||||||||
| Real estate — business | 3.51 | 3.53 | 3.71 | 4.16 | 4.22 | |||||||||||||||
| Real estate — personal | 3.44 | 3.56 | 3.69 | 3.83 | 3.85 | |||||||||||||||
| Consumer | 4.07 | 4.19 | 4.48 | 4.78 | 4.76 | |||||||||||||||
| Revolving home equity | 3.37 | 3.29 | 3.50 | 4.61 | 4.76 | |||||||||||||||
| Consumer credit card | 11.60 | 11.40 | 11.76 | 12.26 | 12.11 | |||||||||||||||
| Overdrafts | — | — | — | — | — | |||||||||||||||
| Total loans | 3.69 | 3.69 | 3.80 | 4.39 | 4.47 | |||||||||||||||
| Loans held for sale | 3.54 | 4.25 | 8.03 | 6.15 | 5.32 | |||||||||||||||
| Investment securities: | ||||||||||||||||||||
U.S. government and federal agency obligations | 2.63 | 3.71 | .46 | 2.09 | 2.16 | |||||||||||||||
Government-sponsored enterprise obligations | 2.23 | 2.17 | 3.51 | 4.19 | 2.17 | |||||||||||||||
State and municipal obligations (1) | 2.44 | 2.53 | 2.97 | 3.11 | 3.05 | |||||||||||||||
Mortgage-backed securities | 1.37 | 1.95 | 2.17 | 2.37 | 2.72 | |||||||||||||||
| Asset-backed securities | 1.59 | 1.90 | 2.25 | 2.63 | 2.62 | |||||||||||||||
| Other debt securities | 2.19 | 2.35 | 2.49 | 2.94 | 2.82 | |||||||||||||||
| Total available for sale debt securities | 1.70 | 2.18 | 2.18 | 2.54 | 2.69 | |||||||||||||||
Trading debt securities (1) | 1.40 | 1.66 | 2.93 | 2.52 | 2.81 | |||||||||||||||
Equity securities (1) | 50.71 | 47.15 | 48.42 | 46.78 | 49.40 | |||||||||||||||
Other securities (1) | 10.03 | 6.74 | 4.36 | 5.31 | 6.58 | |||||||||||||||
| Total investment securities | 1.81 | 2.24 | 2.24 | 2.61 | 2.78 | |||||||||||||||
Federal funds sold and short-term securities purchased under agreements to resell | 1.12 | — | — | 2.47 | 2.22 | |||||||||||||||
Long-term securities purchased under agreements to resell | 5.24 | 5.26 | 5.08 | 3.53 | 2.26 | |||||||||||||||
| Interest earning deposits with banks | .10 | .10 | .10 | .86 | 1.61 | |||||||||||||||
| Total interest earning assets | 2.86 | 3.07 | 3.09 | 3.66 | 3.75 | |||||||||||||||
| LIABILITIES AND EQUITY: | ||||||||||||||||||||
| Interest bearing deposits: | ||||||||||||||||||||
| Savings | .09 | .09 | .09 | .11 | .11 | |||||||||||||||
| Interest checking and money market | .07 | .10 | .13 | .30 | .35 | |||||||||||||||
Certificates of deposit of less than $100,000 | .51 | .71 | .93 | 1.15 | 1.16 | |||||||||||||||
Certificates of deposit of $100,000 and over | .47 | .69 | 1.08 | 1.62 | 1.79 | |||||||||||||||
| Total interest bearing deposits | .12 | .18 | .25 | .45 | .52 | |||||||||||||||
| Borrowings: | ||||||||||||||||||||
Federal funds purchased and securities sold under agreements to repurchase | .06 | .09 | .12 | .96 | 1.20 | |||||||||||||||
| Other borrowings | — | — | .82 | .82 | 2.05 | |||||||||||||||
| Total borrowings | .06 | .09 | .22 | .95 | 1.25 | |||||||||||||||
| Total interest bearing liabilities | .11 | % | .17 | % | .25 | % | .52 | % | .61 | % | ||||||||||
| Net yield on interest earning assets | 2.80 | % | 2.97 | % | 2.94 | % | 3.33 | % | 3.36 | % | ||||||||||
(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 Year Ended | |||||||||||||||||||||||||
| (Unaudited) (In thousands, except per share data) | December 31, 2020 | September 30, 2020 | June 30, 2020 | March 31, 2020 | December 31, 2019 | December 31, 2020 | December 31, 2019 | |||||||||||||||||||
| ALLOWANCE FOR CREDIT LOSSES ON LOANS | ||||||||||||||||||||||||||
| Balance at beginning of period | $ | 236,360 | $ | 240,744 | $ | 171,653 | $ | 160,682 | $ | 160,682 | $ | 160,682 | $ | 159,932 | ||||||||||||
| Adoption of ASU 2016-13 | — | — | — | (21,039) | — | (21,039) | — | |||||||||||||||||||
| Provision for credit losses on loans | (7,510) | 3,200 | 77,491 | 42,868 | 15,206 | 116,049 | 50,438 | |||||||||||||||||||
| Net charge-offs (recoveries): | ||||||||||||||||||||||||||
| Commercial portfolio: | ||||||||||||||||||||||||||
Business | 581 | 208 | 3,249 | (373) | 3,036 | 3,665 | 4,102 | |||||||||||||||||||
Real estate — construction and land | (2) | (1) | — | — | — | (3) | (117) | |||||||||||||||||||
Real estate — business | (7) | (13) | (6) | (21) | 35 | (47) | (60) | |||||||||||||||||||
| 572 | 194 | 3,243 | (394) | 3,071 | 3,615 | 3,925 | ||||||||||||||||||||
| Personal banking portfolio: | ||||||||||||||||||||||||||
Consumer credit card | 5,975 | 7,263 | 3,584 | 9,157 | 8,829 | 25,979 | 35,421 | |||||||||||||||||||
Consumer | 1,160 | 211 | 1,362 | 1,711 | 2,838 | 4,444 | 8,554 | |||||||||||||||||||
Overdraft | 335 | 200 | 316 | 426 | 507 | 1,277 | 1,523 | |||||||||||||||||||
Real estate — personal | (18) | (198) | (71) | (4) | 6 | (291) | 56 | |||||||||||||||||||
Revolving home equity | (8) | (86) | (34) | (38) | (45) | (166) | 209 | |||||||||||||||||||
| 7,444 | 7,390 | 5,157 | 11,252 | 12,135 | 31,243 | 45,763 | ||||||||||||||||||||
| Total net loan charge-offs | 8,016 | 7,584 | 8,400 | 10,858 | 15,206 | 34,858 | 49,688 | |||||||||||||||||||
| Balance at end of period | $ | 220,834 | $ | 236,360 | $ | 240,744 | $ | 171,653 | $ | 160,682 | $ | 220,834 | $ | 160,682 | ||||||||||||
| LIABILITY FOR UNFUNDED LENDING COMMITMENTS | $ | 38,307 | $ | 35,200 | $ | 35,299 | $ | 32,250 | $ | 1,075 | ||||||||||||||||
NET CHARGE-OFF RATIOS (1) | ||||||||||||||||||||||||||
| Commercial portfolio: | ||||||||||||||||||||||||||
| Business | .04 | % | .01 | % | .19 | % | (.03 | %) | .22 | % | .06 | % | .08 | % | ||||||||||||
| Real estate — construction and land | — | — | — | — | — | — | (.01) | |||||||||||||||||||
| Real estate — business | — | — | — | — | — | — | — | |||||||||||||||||||
| .02 | .01 | .12 | (.02) | .13 | .04 | .04 | ||||||||||||||||||||
| Personal banking portfolio: | ||||||||||||||||||||||||||
| Consumer credit card | 3.72 | 4.47 | 2.17 | 5.06 | 4.68 | 3.88 | 4.63 | |||||||||||||||||||
| Consumer | .23 | .04 | .28 | .35 | .57 | .23 | .44 | |||||||||||||||||||
| Overdraft | 35.43 | 29.59 | 43.65 | 42.37 | 10.98 | 38.11 | 16.55 | |||||||||||||||||||
| Real estate — personal | — | (.03) | (.01) | — | — | (.01) | — | |||||||||||||||||||
| Revolving home equity | (.01) | (.10) | (.04) | (.04) | (.05) | (.05) | .06 | |||||||||||||||||||
| .52 | .52 | .37 | .83 | .90 | .56 | .87 | ||||||||||||||||||||
| Total | .19 | % | .18 | % | .21 | % | .30 | % | .42 | % | .22 | % | .35 | % | ||||||||||||
| CREDIT QUALITY RATIOS | ||||||||||||||||||||||||||
| Non-performing assets to total loans | .16 | % | .25 | % | .14 | % | .07 | % | .07 | % | ||||||||||||||||
| Non-performing assets to total assets | .08 | .13 | .08 | .04 | .04 | |||||||||||||||||||||
Allowance for credit losses on loans to total loans(2) | 1.35 | 1.44 | 1.47 | 1.14 | 1.09 | |||||||||||||||||||||
| NON-PERFORMING ASSETS | ||||||||||||||||||||||||||
| Non-accrual loans: | ||||||||||||||||||||||||||
| Business | $ | 22,524 | $ | 37,295 | $ | 19,034 | $ | 7,356 | $ | 7,489 | ||||||||||||||||
| Real estate — construction and land | — | 1 | 1 | 2 | 2 | |||||||||||||||||||||
| Real estate — business | 2,230 | 1,063 | 1,921 | 1,532 | 1,030 | |||||||||||||||||||||
| Real estate — personal | 1,786 | 1,911 | 1,679 | 1,743 | 1,699 | |||||||||||||||||||||
| Total | 26,540 | 40,270 | 22,635 | 10,633 | 10,220 | |||||||||||||||||||||
| Foreclosed real estate | 93 | 57 | 422 | 422 | 365 | |||||||||||||||||||||
| Total non-performing assets | $ | 26,633 | $ | 40,327 | $ | 23,057 | $ | 11,055 | $ | 10,585 | ||||||||||||||||
| Loans past due 90 days and still accruing interest | $ | 22,190 | $ | 14,436 | $ | 24,583 | $ | 16,520 | $ | 19,859 | ||||||||||||||||
(1) 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 1.48% and 1.59% as of December 31, 2020 and September 30, 2020, respectively.
Exhibit 99.1
COMMERCE BANCSHARES, INC.
Management Discussion of Fourth Quarter Results
December 31, 2020
For the quarter ended December 31, 2020, net income attributable to Commerce Bancshares, Inc. (net income) amounted to $129.9 million, compared to $132.4 million in the previous quarter and $106.9 million in the same quarter last year. The decrease in net income over the previous quarter was primarily the result of lower net interest income and net securities gains and higher non-interest expense, partly offset by a decrease in the provision for credit losses and higher non-interest income. The provision for credit losses decreased this quarter, compared to the prior quarter, due to a decrease in the estimate of the allowance for credit losses. Net interest income decreased $6.2 million this quarter mostly due to lower interest earned on the available for sale debt securities portfolio, including a $3.5 million adjustment to premium amortization on mortgage-backed securities for prepayment speed changes and a $2.1 million decrease in inflation income on our Treasury inflation-protected securities (TIPs). Excluding the premium amortization adjustment and TIPs inflation income, the net yield on interest earnings assets declined eight basis points. Average loans were flat compared to the previous quarter, while average available for sale debt securities grew $836.2 million, and average deposits increased $843.3 million. For the quarter, the return on average assets was 1.63%, the return on average common equity was 15.49%, and the efficiency ratio was 56.7%.
Balance Sheet Review
During the 4th quarter of 2020, average loans totaled $16.4 billion, and decreased $4.7 million from the prior quarter, and grew $1.9 billion, or 13.3%, over the same quarter last year. Period end loans declined $91.3 million compared to the prior quarter and grew $1.6 billion compared to December 31, 2019. Compared to the previous quarter, average balances of construction and land, personal real estate, and business real estate loans grew $58.5 million, $56.2 million, and $40.1 million, respectively. This growth was mostly offset by a decline in business loans of $128.9 million. The period end balance of Paycheck Protection Program (PPP) loans (included in business loans) declined $147.4 million during the 4th quarter and totaled $1.4 billion at December 31, 2020. Growth in personal real estate loan balances was due to continued strong demand for residential mortgage loans in this low interest rate environment. During the current quarter, the Company sold certain fixed rate personal real estate loans totaling $136.0 million, compared to $98.9 million in the prior quarter.
Total average available for sale debt securities increased $836.2 million over the previous quarter to $12.1 billion, at fair value. The increase in investment securities was mainly the result of growth in mortgage-backed, asset-backed, and state and municipal securities. During the quarter, purchases of securities totaled $1.8 billion with a weighted average yield of approximately 1.27%. Sales, maturities and pay downs were $851.6 million. At December 31, 2020, the duration of the investment portfolio was 3.3 years, and maturities and pay downs of approximately $2.0 billion are expected to occur during the next 12 months.
Total average deposits increased $843.3 million this quarter compared to the previous quarter. The increase in deposits resulted from growth in demand ($474.2 million), interest checking and money market ($467.4 million), and savings deposits ($41.4 million), partly offset by a decline in certificates of deposit ($139.7 million). Compared to the previous quarter, total average commercial, consumer and wealth deposits (including private banking) grew $505.6 million, $138.4 million and $240.3 million, respectively. The average loans to deposits
ratio was 64.1% in the current quarter and 66.2% in the prior quarter. The Company’s average borrowings, which includes customer repurchase agreements, were $2.0 billion in the 4th quarter of 2020 and $1.9 billion in the prior quarter.
Net Interest Income
Net interest income in the 4th quarter of 2020 amounted to $209.8 million, a decrease of $6.2 million compared to the previous quarter. On a tax equivalent basis, net interest income for the current quarter decreased $6.1 million from the previous quarter to $213.0 million. The decrease in net interest income was mainly due to lower income earned on investment securities, partially offset by lower interest expense on interest bearing deposits. The Company recorded a $3.5 million adjustment to premium amortization on mortgage-backed securities for prepayment speed changes, which lowered interest income this quarter. The net yield on earning assets (tax equivalent) decreased to 2.80%, compared to 2.97% in the prior quarter.
Compared to the previous quarter, interest income on loans (tax equivalent) decreased $248 thousand, mostly as a result of lower yields on loans, mainly personal real estate and consumer loans, coupled with a decline in business loan average balances. Growth in average construction and land and personal real estate loan balances and higher yields on business loans resulted in higher net interest income and partially offset the impact of lower yields. The average tax-equivalent yield on the loan portfolio was 3.69% in both the current and previous quarters.
Interest income on investment securities (tax equivalent) decreased $8.0 million from the previous quarter, due to lower rates partly offset by higher average balances. Interest income on mortgage-backed securities declined in part due to the aforementioned premium amortization adjustment, while interest income earned on U.S. government and federal agency securities decreased, as TIPs inflation income declined $2.1 million this quarter. The yield on total investment securities was 1.81% in the current quarter, compared to 2.24% in the previous quarter.
The average rate paid on deposits totaled 12 basis points in the 4th quarter of 2020, compared to 18 basis points in the prior quarter. Interest expense on deposits decreased $2.1 million this quarter compared to the previous quarter mainly due to lower rates paid on money market and certificate of deposit accounts. The overall rate paid on interest bearing liabilities was .11% in the current quarter, compared to .17% in the prior quarter.
Non-Interest Income
In the 4th quarter of 2020, total non-interest income amounted to $135.1 million, a decrease of $8.3 million, or 5.8%, compared to the same period last year and increased $5.5 million, or 4.3%, compared to the prior quarter. The decrease in non-interest income from the same period last year was mainly due to the sale of our corporate trust business in 2019, which resulted in a one-time gain of $11.5 million. This decrease was partly offset by growth in loan fees and sales, trust fees and capital market fees. Excluding the one-time gain from the sale of our corporate trust business, non-interest income this quarter grew $3.1 million or 2.4% compared to the same period last year.
Total net bank card fees in the current quarter decreased $1.1 million, or 2.7%, from the same period last year, and increased $2.1 million, or 5.6%, compared to the prior quarter. Net corporate card fees decreased $774 thousand, or 3.5%, from the same quarter of last year mainly due to lower transaction volume, partly offset by lower rewards expense. Net debit card fees
COMMERCE BANCSHARES, INC. Exhibit 99.1
Management Discussion of Fourth Quarter Results
December 31, 2020
decreased $639 thousand, or 6.1%, mainly due to lower interchange income and higher network expense. Net merchant income increased $181 thousand, or 3.6%, while net credit card fees increased $133 thousand, or 3.8%. Total net bank card fees this quarter were comprised of fees on corporate card ($21.3 million), debit card ($9.8 million), merchant ($5.2 million) and credit card ($3.6 million) transactions.
In the current quarter, trust fees increased $1.6 million, or 3.9%, over the same period last year, resulting mostly from higher private client fee income. Compared to the same period last year, deposit account fees decreased $810 thousand, or 3.2%, mainly due to lower overdraft and return item fees, partly offset by an increase in corporate cash management fees. Additionally, capital market fees grew $1.3 million, or 50.9%, while loan fees and sales, mostly mortgage banking revenue, grew $5.6 million, or 160.6%, over amounts recorded in the same quarter last year. Other non-interest income decreased from the same period last year due to the corporate trust sale gain mentioned previously and declines in cash sweep fees and swap fees of $2.0 million and $1.8 million, respectively. For the 4th quarter of 2020, non-interest income comprised 39.2% of the Company’s total revenue.
Investment Securities Gains and Losses
The Company recorded net securities gains of $12.3 million in the current quarter, compared to gains of $16.2 million in the prior quarter and losses of $248 thousand in the 4th quarter of 2019. Net securities gains in the current quarter primarily resulted from unrealized gains of $8.0 million in the Company’s private equity investment portfolio and gains of $4.1 million on the sales of mortgage-backed securities.
Non-Interest Expense
Non-interest expense for the current quarter amounted to $196.3 million, compared to $195.2 million in the same period last year and $190.9 million in the prior quarter. The increase in non-interest expense compared to the same period last year was mainly due to higher salaries and employee benefits and marketing expense, partially offset by lower other non-interest expense.
Compared to the 4th quarter of last year, salaries and employee benefits expense increased $3.1 million, or 2.4%, driven mainly by growth in incentive compensation expense, partially offset by lower benefits costs. Full-time equivalent employees totaled 4,766 and 4,858 at December 31, 2020 and 2019, respectively.
For the current quarter compared to the same quarter of last year, marketing expense increased $1.1 million. Net occupancy costs declined $648 thousand due to lower building maintenance and real estate taxes. Supplies and communication expense decreased $658 thousand due to lower supplies, postage and bank card issuance expense. Other non-interest expense decreased mainly due to a $2.3 million decrease in travel and entertainment expense.
Income Taxes
The effective tax rate for the Company was 20.3% in the current quarter, 20.6% in the previous quarter, and 20.9% in the 4th quarter of 2020.
Credit Quality
Net loan charge-offs in the 4th quarter of 2020 amounted to $8.0 million, compared to $7.6 million in the prior quarter and $15.2 million in the same period last year. The ratio of annualized net loan charge-offs to total average loans was .19% in the current quarter, .18% in the previous quarter, and .42% in the 4th quarter of last year. Compared to the prior quarter, net loan charge-offs on commercial loans increased $378 thousand to $572 thousand, while net loan charge-offs on personal banking loans increased $54 thousand to $7.4 million.
In the 4th quarter of 2020, annualized net loan charge-offs on average consumer credit card loans were 3.72%, compared to 4.47% in the previous quarter, and 4.68% in the same quarter last year. Consumer loan net charge-offs were .23% of average consumer loans in the current quarter, .04% in the prior quarter and .57% in the same quarter last year.
This quarter, the provision for credit losses on loans decreased $10.7 million and was $15.5 million lower than net loan charge-offs. Actual fourth quarter economic data and the economic forecast used to estimate the allowance for credit losses in December showed improving economic conditions compared to the forecast utilized in September, which resulted in a decrease in the allowance for credit losses as of December 31, 2020, and also reduced the provision for credit losses this quarter, compared to the prior quarter. At December 31, 2020, the allowance for credit losses on loans totaled $220.8 million, or 1.35% of total loans and 1.48% of total loans excluding PPP loans. Additionally, the liability for unfunded lending commitments at December 31, 2020 was $38.3 million, an increase of $3.1 million over the liability at September 30, 2020.
At December 31, 2020, total non-performing assets amounted to $26.6 million, a decrease of $13.7 million from the previous quarter. Non-performing assets are comprised of non-accrual loans and foreclosed real estate ($26.5 million and $93 thousand, respectively). At December 31, 2020, the balance of non-accrual loans, which represented .16% of loans outstanding, included business loans of $22.5 million, business real estate loans of $2.2 million, and personal real estate loans of $1.8 million. Loans more than 90 days past due and still accruing interest totaled $22.2 million at December 31, 2020.
Other
During the 4th quarter of 2020, the Company distributed a 5% stock dividend on its common stock and paid a cash dividend of $.257 per common share (as restated for the stock dividend), representing an 8.9% increase over the same period last year.
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 4th Quarter 2020
CAUTIONARY STATEMENT 2 A number of statements we will be making in our presentation and in the accompanying slides are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, such as statements of the Corporation’s plans, goals, objectives, expectations, projections, estimates and intentions. These forward- looking statements involve significant risks and uncertainties and are subject to change based on various factors (some of which are beyond the Corporation’s control). Factors that could cause the Corporation’s actual results to differ materially from such forward- looking statements made herein or by management of the Corporation are set forth in the Corporation’s 2019 Annual Report on Form 10-K, 3RD Quarter 2020 Report on Form 10-Q and the Corporation’s Current Reports on Form 8-K.
$1.11 EPS 3 • Allowance for credit losses on loans to total loans decreased to 1.35% – Decreased to 1.48% excluding Paycheck Protection Program (“PPP”) loans. • Net charge-offs to total loans of .19% and Non-performing assets to total loans of .16%. • Loans on deferral of .6% of total loans. • Non-interest income to total revenue of 39.2%. • Non-interest income up 4.3% over Q3. • QTD average loans flat to Q3 at $16.4B. • QTD average deposits increased by $843MM in Q4 compared to Q3. • Tangible common equity to tangible assets of 9.92%. • Net interest margin decreased 17 bps from Q3 to 2.80% (8 bps excluding adjustments4). • Wealth management client assets increased in Q4 by 11.9% to $61.2MM. Highlights Well-positioned in a challenging environment 4Q2020 EARNINGS HIGHLIGHTS $148.6 million PPNR1 $15.5 million decrease Allowance for Credit Losses on Loans $129.9 million Income Available to Common 15.49% ROACE $1.2 billion Deposit Growth3 1 See the non-GAAP reconciliation on page 13; 2 Compared to 3Q2020; 3 Compared to 3Q2020, based on period-end balances; 4 Adjustments include a -$3.5 million adjustment to premium amortization on mortgage-backed securities for prepayment speed changes and a -$2.1 million decrease in inflation income on our Treasury inflation-protected securities. 1.63% ROAA
Average Balances Change vs. $ in millions 4Q20 3Q20 4Q19 Highlights Commercial1 $10,643.0 $(30.2) $1,559.4 • Linked quarter reflects lower business loans offset by higher construction and business real estate • YoY reflects PPP Consumer 5,718.3 25.5 358.2 • Linked quarter reflects higher personal real estate partially offset by lower auto, credit card, home equity Total Loans $16,361.3 $(4.7) $1,917.6 Investment Securities $12,302.5 $846.9 $3,480.2 • Reflects net purchase activity Interest Earning Deposits with Banks $1,082.6 $58.2 $692.5 • Reflects liquidity from deposit growth Deposits $25,590.7 $843.3 $5,433.9 • 3.4% quarterly growth, 27% annual growth Equity $3,336.1 $(30.0) $204.6 • Linked quarter reflects Q3 redemption of preferred stock Book Value per Common Share2 $29.03 $0.80 $3.60 • 2.8% quarterly growth, 14.2% annual growth BALANCE SHEET HIGHLIGHTS 4 1 PPP average balances were $1,476.2 million and $1,505.7 million as of December 31, 2020 and September 30, 2020, respectively 2 For the quarters ended December 31, 2020
$13.6 $14.9 $15.3 $6.6 $9.8 $10.3 3Q204Q19 4Q20 $20.2 $24.7 $25.6 +27% $9.1 $10.6 $10.6 $5.4 $5.7 $5.7 3Q204Q19 4Q20 $14.5 $16.3 $16.3 +13% 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 4.47% 3.69% 3.69% 0.52% 0.18% 0.12%
Change vs. $ in millions 4Q20 3Q20 4Q19 Highlights Net Interest Income $209.8 $(6.2) $7.1 • Linked quarter (LQ) decline due to lower earning asset yields partially offset by lower deposit costs and larger balance sheet. Non-Interest Income $135.1 $5.5 $(8.3) • LQ increase in bank card, trust fees and mortgage loan sales. • Excluding the one-time gain of the corporate trust business sale in Q419, non-interest income grew $3.1MM, or 2.4%. Non-Interest Expense $196.3 $5.5 $1.1 • Increase of 2.9% over LQ, .6% over prior year. • LQ increase due to higher incentive compensation. Pre-Tax, Pre-Provision Net Revenue1 $148.6 $(6.1) $(2.4) Investment Securities Gains (Losses), Net $12.3 $(3.8) $12.6 • Q4 fair value gains on private equity portfolio and MBS sale gains. Provision for Credit Losses $(4.4) $(7.5) $(19.6) • Declines primarily driven by improvement in economic forecast Net-Income Available to Common Shareholders $129.9 $4.9 $25.3 4Q20 3Q20 4Q19 Net Income per Common Share – Diluted $1.11 $1.06 $.88 Efficiency Ratio 56.68% 55.00% 56.29% • Continued expense discipline Net Yield on Interest Earning Assets 2.80% 2.97% 3.36% • Lower earning asset yields partially offset by lower deposit costs. INCOME STATEMENT HIGHLIGHTS 61 See the non-GAAP reconciliation on page 13
7 PRE-TAX, PRE-PROVISION NET REVENUE (PPNR) $143 $151 $203 $195 4Q2019 $346 $130 $155 $216 $191 3Q2020 $346 $135 $149 $210 $196 4Q2020 $345 Non-Interest Income (+) Net Interest Income (+) Non-Interest Expense (-) Pre-Tax, Pre-Provision Net Revenue (=) 4Q2020 Comparison vs. 4Q2019 -1.6% vs. 3Q2020 -3.9% See the non-GAAP reconciliation on page 13
Average Loan to Deposit Ratio3 SOUND CAPITAL AND LIQUIDITY POSITION 8 Total Risk-Based Capital Ratio1 1S&P Global Market Intelligence, Information as of September 30, 2020 2Period-end balances, as of December 31, 2020 3Includes loans held for sale, for the quarter ended December 31, 2020 15.8% 15.3% 15.1% 15.0% 14.7% 14.6% 14.3% 14.2% 14.2% 14.2% 14.1% 13.8% 13.8% 13.7% 13.5% 12.9% 12.9% 12.8% 12.4% 12.2% UBSI SFNC UMPQ OZK FULT CFR PB CBSH VLY FCNC.A PNFP BXS UMBF BOKF ASB WBS HWC ONB WTFC FNB Peer Median: 14.1% Core Deposits $25.1 Billion2 Large, stable deposit base and low loan to deposit ratio Loan to Deposit Ratio Total Deposits 64% Average Loan to Deposit Ratio190%Peer Average Commerce 93%7% Core Deposits - Non-Interest Bearing - Interest Checking - Savings and Money Market Certificates of Deposit
$15.2 $7.6 $8.0$8.3 $10.4 4Q19 3Q20 4Q20 MAINTAINING STRONG CREDIT QUALITY 9 Net Loan Charge-Offs (NCOs) $ in millions NCOs- CBSH NCOs - Peer Average NCO/Average Loans1 - CBSH $160.7 $236.4 $220.8 $143.0 $301.8 4Q203Q204Q19 Allowance for Credit Losses on Loans (ACL) $ in millions ACL - CBSH ACL - Peer Average ACL / Total Loans - CBSH $10.2 $40.3 $26.5 $121.1 $150.7 3Q204Q19 4Q20 Non-Performing Loans (NPLs) $ in millions NPLs - CBSH NPLs - Peer Average 15.7x 5.9x 8.3x 1.5x 2.7x 4Q19 3Q20 4Q20 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, BOKF, BXS CFR, FCNC.A, FNB, FULT, HWC, ONB, OZK, PB, PNFP, SFNC, UBSI, UMBF, UMPQ, VLY, WBS, WTFC 1As a percentage of average loans (excluding loans held for sale) NPLs / Total Loans - CBSH NCO/Average Loans1 – Peer Average .07% NPLs / Total Loans – Peer Average .25% .16% .65% .71% ACL / Total Loans – Peer Average 1.09% 1.44% 1.35% .73% 1.42% .42% .18% .19%.18% .18%
IMPACT OF CECL: ALLOCATION OF ALLOWANCE 10 Methodology and Variables • CECL model utilizes 3rd party baseline forecast • Key variables include: GDP, disposable income, unemployment rate, various interest rates, CPI inflation rate, HPI, CREPI and market volatility CECL allowances reflect the economic and market outlook due to COVID-19 * Note: The Liability for unfunded lending commitments is included in Other liabilities on the consolidated balance sheets. December 31, 2019 Incurred Model September 30, 2020 CECL Model December 31, 2020 CECL Model $ in millions Allowance for Loan Losses % of Outstanding Loans Allowance for Credit Losses (ACL) % of Outstanding Loans Allowance for Credit Losses (ACL) % of Outstanding Loans Business $ 44.3 .80% $ 78.7 1.18% $ 63.7 .97% Bus R/E 25.9 .91% 31.3 1.05% 30.1 .99% Construction 21.6 2.40% 18.4 1.83% 27.7 2.72% Commercial total $ 91.8 .99% $ 128.4 1.20% $ 121.5 1.15% Consumer 15.9 .81% 18.2 .90% 15.2 .78% Consumer CC 48.0 6.27% 79.2 12.23% 74.0 11.30% Personal R/E 3.1 .13% 8.7 .32% 8.3 .29% Revolving H/E .6 .18% 1.8 .55% 1.5 .48% Overdrafts 1.2 19.51% .1 2.56% .3 8.29% Consumer total $ 68.9 1.27% $ 108.0 1.88% $ 99.3 1.73% Allowance for credit losses on loans $ 160.7 1.09% $ 236.4 1.44% $ 220.8 1.35% Liability for unfunded lending commitments 1.1 35.2 38.3 Total allowance for credit losses $ 161.8 $ 271.6 $ 259.1
PROVIDING RELIEF TO OUR CUSTOMERS Active deferral exposure reduced as pandemic continues 11 Payment Relief Requests 1Deferrals are defined as modifications, payment deferrals, forbearance agreements, or change in terms, % of Portfolio calculated on Total Loans (excluding PPP loans); 2 No direct consumer credit exposure Active deferrals1 as of September 30, 2020 Active deferrals1 as of December 31, 2020 Loan Type Number of Requests % of Portfolio (by $ amount) Total Amount of Requests Number of Requests % of Portfolio (by $ amount) Total Amount of Requests Commercial 11 .5% $48MM 8 .6% $57MM Mortgage 111 1.0% $25MM 86 .7% $18MM Consumer Card 73 .1% $0.5MM 93 .1% $0.6MM Installment 553 .8% $11MM 500 .6% $8MM Med/HSF2 76 .1% $0.2MM 109 .1% $0.3MM TOTAL 824 .6% $85MM 796 .6% $84MM
LOAN PORTFOLIO: LIMITED EXPOSURE TO PANDEMIC-SENSITIVE INDUSTRIES 12 While we expect nearly every industry to be impacted to some degree by Coronavirus-related disruptions, we have identified eight industries that will be most impacted. Highest Impacted Industries $ in millions 9/30 $ in millions 12/31 % of Loan Portfolio 12/31 Hospitals $758 $729 4.9% Multifamily / Student Housing 608 550 3.7% CRE Retail 389 387 2.6% Senior Living 310 311 2.1% Hotels 291 303 2.0% Energy 150 173 1.1% Retail Stores 141 111 .7% Restaurants 67 67 .4% Total $2,714 $2,631 17.5% 18% 82% Highest Impacted Industries All Other Loans Industry breakdowns represent outstanding balances, excluding PPP loans, as of December 31, 2020, segmented by NAICS codes Loan Portfolio Outstandings
NON-GAAP RECONCILIATIONS 13 For The Three Months Ended (DOLLARS IN THOUSANDS) Dec. 31, 2020 Sept. 30, 2020 Dec. 31, 2019 A Net Interest Income $ 209,763 $ 215,962 $ 202,659 B Non-Interest Income $ 135,117 $ 129,572 $ 143,461 C Non-Interest Expense $ 196,310 $ 190,858 $ 195,174 Pre-Provision Net Revenue (A+B-C) $ 148,570 $ 154,676 $ 150,946 Pre-tax, Pre-provision Net Revenue
