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Commerce Bancshares, Inc. Reports Fourth Quarter Earnings Per Share of $.94

Commerce Bancshares, Inc. announced earnings of $.94 per share for the three months ended December 31, 2021, compared to $1.05 per common share in the same quarter last year and $.99 per share in the third quarter of 2021. Net income attributable to Commerce Bancshares, Inc. (net income) for the fourth quarter of 2021 amounted to $114.9 million, compared to $129.9 million in the fourth quarter of 2020 and $122.6 million in the prior quarter.

In announcing these results, John Kemper, Chief Executive Officer, said, “Commerce had a strong quarter to close out 2021, reflecting a growing economy and a resilient customer base. Trust fees were up 16.5% over the fourth quarter of 2020, driven by rising market values, excellent customer attraction and retention, and the ongoing investments we’ve made in our wealth business. Corporate and retail spending levels continued to increase, amounting to growth of 12% in bank card transaction fees over the same period last year.

The growth in our fee-based businesses continues to provide strong revenue diversification. Non-interest income comprised 42% of total revenue in the fourth quarter. Compared to the previous quarter, we experienced higher loan demand, a reflection of accelerating business activity in our markets. We continue to be confident in our strong liquidity, capital levels, and credit quality, and we continue to invest in our excellent relationships with customers, teammates, shareholders, and regulators.”

Fourth Quarter 2021 Financial Highlights:

  • Net interest income in the fourth quarter amounted to $207.7 million, a 3.0% decrease compared to the third quarter, partly due to a $5.3 million decrease in interest income from Paycheck Protection Program (PPP) loans. The net interest margin decreased 15 basis points from the prior quarter to 2.43%.
  • Non-interest income totaled $147.7 million in the fourth quarter, an increase of $10.2 million compared to the prior quarter.
  • Net investment securities losses of $9.7 million this quarter were driven mostly by net fair value losses of $6.5 million in the Company’s portfolio of private equity investments.
  • Non-interest expense totaled $203.6 for the quarter, a decrease of $8.0 million compared to the previous quarter.
  • Average loan balances totaled $15.1 billion, a decrease of $165.9 million, or 1.1%, from the prior quarter (average PPP loan balances declined $356.1 million). As of December 31, 2021, 93% of PPP loan balances have been forgiven.
  • Total average available for sale debt securities increased 5.3%, or $726.3 million, over the previous quarter to $14.5 billion, at fair value. Purchases of securities during the quarter totaled $1.4 billion with a weighted average yield of approximately 1.27%.
  • Compared to the previous quarter, average deposits grew $790.6 million, or 2.8%. The average rate paid on interest bearing deposits was 5 basis points this quarter.
  • The ratio of annualized net loan charge-offs to average loans was .11% in the current quarter compared to .10% in the prior quarter. Net charge-offs on loans remained low.
  • Non-accrual loans totaled $9.2 million compared to $10.4 million prior quarter. Non-accrual loans were .06% of total loans.
  • At December 31, 2021, the allowance for credit losses on loans decreased to $150.0 million. The allowance for credit losses on loans to total loans was .99% at December 31, 2021.
  • The Company purchased 696,367 shares of its common stock this quarter at an average price of $70.81.
  • Total assets at December 31, 2021 were $36.7 billion, an increase of $2.2 billion, or 6.4%, from the prior quarter.
  • For the quarter, the return on average assets was 1.28%, the return on average equity was 13.11% and the efficiency ratio was 57.3%.

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.

COMMERCE BANCSHARES, INC. and SUBSIDIARIES

FINANCIAL HIGHLIGHTS

 

 

For the Three Months Ended

For the Year Ended

(Unaudited)

(Dollars in thousands, except per share data)

 

Dec. 31,

2021

Sep. 30,

2021

Dec. 31,

2020

Dec. 31,

2021

Dec. 31,

2020

FINANCIAL SUMMARY

 

 

Net interest income

 

$207,657

 

$214,037

 

$209,763

 

$835,424

 

$829,847

 

Non-interest income

 

147,699

 

137,506

 

135,117

 

560,393

 

505,867

 

Total revenue

 

355,356

 

351,543

 

344,880

 

1,395,817

 

1,335,714

 

Investment securities gains (losses), net

 

(9,706

)

13,108

 

12,307

 

30,059

 

11,032

 

Provision for credit losses

 

(7,054

)

(7,385

)

(4,403

)

(66,326

)

137,190

 

Non-interest expense

 

203,582

 

211,620

 

196,310

 

805,901

 

768,378

 

Income before taxes

 

149,122

 

160,416

 

165,280

 

686,301

 

441,178

 

Income taxes

 

33,764

 

34,662

 

33,084

 

145,711

 

87,293

 

(Income) loss attributable to non-controlling interest

 

452

 

3,193

 

2,307

 

9,825

 

(172

)

Net income attributable to Commerce Bancshares, Inc.

114,906

 

122,561

 

129,889

 

530,765

 

354,057

 

Preferred stock dividends

 

 

 

 

 

11,966

 

Net income available to common shareholders

$114,906

 

$122,561

 

$129,889

 

$530,765

 

$342,091

 

Earnings per common share:

 

 

 

 

 

 

Net income — basic

 

$0.94

 

$1.00

 

$1.05

 

$4.32

 

$2.77

 

Net income — diluted

 

$0.94

 

$0.99

 

$1.05

 

$4.31

 

$2.77

 

Effective tax rate

 

22.71

%

22.05

%

20.30

%

21.54

%

19.78

%

Tax equivalent net interest income

 

$210,424

 

$216,858

 

$213,017

 

$847,116

 

$842,790

 

Average total interest earning assets (1)

 

$ 34,318,520

 

$ 33,306,752

 

$ 30,297,922

 

$ 32,874,701

 

$ 28,143,048

 

Diluted wtd. average shares outstanding

 

121,221,482

 

121,881,091

 

122,333,233

 

121,940,992

 

122,413,216

 

 

 

 

 

 

 

 

RATIOS

 

 

 

 

 

 

Average loans to deposits (2)

 

52.36

%

54.44

%

64.05

%

56.46

%

67.73

%

Return on total average assets

 

1.28

 

1.40

 

1.63

 

1.55

 

1.20

 

Return on average common equity (3)

 

13.11

 

13.74

 

15.49

 

15.37

 

10.64

 

Non-interest income to total revenue

 

41.56

 

39.11

 

39.18

 

40.15

 

37.87

 

Efficiency ratio (4)

 

57.29

 

59.95

 

56.68

 

57.64

 

57.19

 

Net yield on interest earning assets

 

2.43

 

2.58

 

2.80

 

2.58

 

2.99

 

 

 

 

 

 

 

 

EQUITY SUMMARY

 

 

 

 

 

 

Cash dividends per common share

 

$.250

 

$.250

 

$.245

 

$1.00

 

$.980

 

Cash dividends on common stock

 

$30,489

 

$30,645

 

$30,178

 

$122,693

 

$120,818

 

Cash dividends on preferred stock

 

$—

 

$—

 

$—

 

$—

 

$11,966

 

Book value per common share (5)

 

$28.40

 

$28.58

 

$27.64

 

 

 

Market value per common share (5)

 

$68.74

 

$66.36

 

$62.57

 

 

 

High market value per common share

 

$71.50

 

$72.08

 

$64.85

 

 

 

Low market value per common share

 

$64.85

 

$61.81

 

$49.62

 

 

 

Common shares outstanding (5)

 

121,436,734

 

122,148,786

 

122,995,353

 

 

 

Tangible common equity to tangible assets (6)

 

9.01

%

9.71

%

9.92

%

 

 

Tier I leverage ratio

 

9.13

%

9.31

%

9.45

%

 

 

 

 

 

 

 

 

 

OTHER QTD INFORMATION

 

 

 

 

 

 

Number of bank/ATM locations

 

287

 

292

 

306

 

 

 

Full-time equivalent employees

 

4,567

 

4,582

 

4,766

 

 

 

(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 2021.

COMMERCE BANCSHARES, INC. and SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

(In thousands, except per share data)

 

For the Three Months Ended

For the Year Ended

 

Dec. 31,

2021

Sep. 30,

2021

Jun. 30,

2021

Mar. 31,

2021

Dec. 31,

2020

Dec. 31,

2021

Dec. 31,

2020

Interest income

 

$210,479

 

$216,981

 

$211,133

 

$209,697

 

$214,726

 

$848,290

 

$872,648

 

Interest expense

 

2,822

 

2,944

 

3,151

 

3,949

 

4,963

 

12,866

 

42,801

 

Net interest income

 

207,657

 

214,037

 

207,982

 

205,748

 

209,763

 

835,424

 

829,847

 

Provision for credit losses

 

(7,054

)

(7,385

)

(45,655

)

(6,232

)

(4,403

)

(66,326

)

137,190

 

Net interest income after credit losses

214,711

 

221,422

 

253,637

 

211,980

 

214,166

 

901,750

 

692,657

 

NON-INTEREST INCOME

 

 

 

 

 

 

 

 

Bank card transaction fees

 

44,773

 

42,815

 

42,608

 

37,695

 

39,979

 

167,891

 

151,797

 

Trust fees

 

48,893

 

48,950

 

46,257

 

44,127

 

41,961

 

188,227

 

160,637

 

Deposit account charges and other fees

25,493

 

25,161

 

23,988

 

22,575

 

24,164

 

97,217

 

93,227

 

Capital market fees

 

3,841

 

3,794

 

3,327

 

4,981

 

3,826

 

15,943

 

14,582

 

Consumer brokerage services

 

4,878

 

4,900

 

4,503

 

4,081

 

3,996

 

18,362

 

15,095

 

Loan fees and sales

 

5,248

 

6,842

 

7,446

 

10,184

 

9,031

 

29,720

 

26,684

 

Other

 

14,573

 

5,044

 

11,014

 

12,402

 

12,160

 

43,033

 

43,845

 

Total non-interest income

 

147,699

 

137,506

 

139,143

 

136,045

 

135,117

 

560,393

 

505,867

 

INVESTMENT SECURITIES GAINS (LOSSES), NET

(9,706

)

13,108

 

16,804

 

9,853

 

12,307

 

30,059

 

11,032

 

NON-INTEREST EXPENSE

 

 

 

 

 

 

 

 

Salaries and employee benefits

 

132,640

 

132,824

 

130,751

 

129,033

 

129,983

 

525,248

 

512,987

 

Net occupancy

 

12,308

 

12,329

 

11,527

 

12,021

 

11,570

 

48,185

 

46,645

 

Equipment

 

4,691

 

4,440

 

4,605

 

4,353

 

4,526

 

18,089

 

18,839

 

Supplies and communication

 

4,430

 

4,530

 

4,033

 

4,125

 

4,193

 

17,118

 

17,419

 

Data processing and software

 

25,777

 

25,598

 

24,954

 

25,463

 

24,323

 

101,792

 

95,325

 

Marketing

 

5,395

 

5,623

 

5,680

 

5,158

 

5,028

 

21,856

 

19,734

 

Other

 

18,341

 

26,276

 

16,576

 

12,420

 

16,687

 

73,613

 

57,429

 

Total non-interest expense

 

203,582

 

211,620

 

198,126

 

192,573

 

196,310

 

805,901

 

768,378

 

Income before income taxes

 

149,122

 

160,416

 

211,458

 

165,305

 

165,280

 

686,301

 

441,178

 

Less income taxes

 

33,764

 

34,662

 

45,209

 

32,076

 

33,084

 

145,711

 

87,293

 

Net income

 

115,358

 

125,754

 

166,249

 

133,229

 

132,196

 

540,590

 

353,885

 

Less (income) loss attributable to non-controlling interest

452

 

3,193

 

3,923

 

2,257

 

2,307

 

9,825

 

(172

)

Net income attributable to Commerce Bancshares, Inc.

114,906

 

122,561

 

162,326

 

130,972

 

129,889

 

530,765

 

354,057

 

Less preferred stock dividends

 

 

 

 

 

 

 

11,966

 

Net income available to common shareholders

$114,906

 

$122,561

 

$162,326

 

$130,972

 

$129,889

 

$530,765

 

$342,091

 

Net income per common share — basic

$0.94

 

$1.00

 

$1.32

 

$1.06

 

$1.05

 

$4.32

 

$2.77

 

Net income per common share — diluted

$0.94

 

$0.99

 

$1.32

 

$1.06

 

$1.05

 

$4.31

 

$2.77

 

 

 

 

 

 

 

 

 

 

OTHER INFORMATION

 

 

 

 

 

 

 

 

Return on total average assets

 

1.28

%

1.40

%

1.93

%

1.63

%

1.63

%

1.55

%

1.20

%

Return on average common equity (1)

13.11

 

13.74

 

19.12

 

15.69

 

15.49

 

15.37

 

10.64

 

Efficiency ratio (2)

 

57.29

 

59.95

 

56.90

 

56.37

 

56.68

 

57.64

 

57.19

 

Effective tax rate

 

22.71

 

22.05

 

21.78

 

19.67

 

20.30

 

21.54

 

19.78

 

Net yield on interest earning assets

2.43

 

2.58

 

2.60

 

2.71

 

2.80

 

2.58

 

2.99

 

Tax equivalent net interest income

 

$210,424

 

$216,858

 

$211,060

 

$208,774

 

$213,017

 

$847,116

 

$842,790

 

(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.

COMMERCE BANCSHARES, INC. and SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS - PERIOD END

(Unaudited)

(In thousands)

 

Dec. 31,

2021

Sep. 30,

2021

Dec. 31,

2020

ASSETS

 

 

 

 

Loans

 

 

 

 

Business

 

$ 5,303,535

 

$ 5,277,850

 

$ 6,546,087

 

Real estate — construction and land

 

1,118,266

 

1,257,836

 

1,021,595

 

Real estate — business

 

3,058,837

 

2,937,852

 

3,026,117

 

Real estate — personal

 

2,805,401

 

2,769,292

 

2,820,030

 

Consumer

 

2,032,225

 

2,049,559

 

1,950,502

 

Revolving home equity

 

275,945

 

281,442

 

307,083

 

Consumer credit card

 

575,410

 

569,976

 

655,078

 

Overdrafts

 

6,740

 

4,583

 

3,149

 

Total loans

 

15,176,359

 

15,148,390

 

16,329,641

 

Allowance for credit losses on loans

 

(150,044

)

(162,775

)

(220,834

)

Net loans

 

15,026,315

 

14,985,615

 

16,108,807

 

Loans held for sale

 

8,615

 

16,043

 

45,089

 

Investment securities:

 

 

 

 

Available for sale debt securities

 

14,450,027

 

14,165,656

 

12,449,264

 

Trading debt securities

 

46,235

 

40,114

 

35,321

 

Equity securities

 

9,202

 

9,174

 

4,363

 

Other securities

 

194,047

 

184,450

 

156,745

 

Total investment securities

 

14,699,511

 

14,399,394

 

12,645,693

 

Federal funds sold

 

2,800

 

 

 

Securities purchased under agreements to resell

 

1,625,000

 

1,750,000

 

850,000

 

Interest earning deposits with banks

 

3,971,217

 

1,888,545

 

1,747,363

 

Cash and due from banks

 

305,539

 

344,460

 

437,563

 

Premises and equipment — net

 

388,738

 

377,476

 

371,083

 

Goodwill

 

138,921

 

138,921

 

138,921

 

Other intangible assets — net

 

15,570

 

14,458

 

11,207

 

Other assets

 

506,862

 

582,631

 

567,248

 

Total assets

 

$ 36,689,088

 

$ 34,497,543

 

$ 32,922,974

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

Deposits:

 

 

 

 

Non-interest bearing

 

$ 11,772,374

 

$ 11,622,855

 

$ 10,497,598

 

Savings, interest checking and money market

 

16,598,085

 

14,907,654

 

14,604,456

 

Certificates of deposit of less than $100,000

 

435,960

 

452,432

 

529,802

 

Certificates of deposit of $100,000 and over

 

1,006,654

 

1,163,343

 

1,314,889

 

Total deposits

 

29,813,073

 

28,146,284

 

26,946,745

 

Federal funds purchased and securities sold under agreements to repurchase

 

3,022,967

 

2,253,753

 

2,098,383

 

Other borrowings

 

12,560

 

4,006

 

802

 

Other liabilities

 

392,164

 

602,279

 

477,072

 

Total liabilities

 

33,240,764

 

31,006,322

 

29,523,002

 

Stockholders’ equity:

 

 

 

 

Common stock

 

610,804

 

589,352

 

589,352

 

Capital surplus

 

2,689,894

 

2,427,544

 

2,436,288

 

Retained earnings

 

92,493

 

396,655

 

73,000

 

Treasury stock

 

(32,973

)

(92,047

)

(32,970

)

Accumulated other comprehensive income

 

77,080

 

159,166

 

331,377

 

Total stockholders’ equity

 

3,437,298

 

3,480,670

 

3,397,047

 

Non-controlling interest

 

11,026

 

10,551

 

2,925

 

Total equity

 

3,448,324

 

3,491,221

 

3,399,972

 

Total liabilities and equity

 

$ 36,689,088

 

$ 34,497,543

 

$ 32,922,974

 

COMMERCE BANCSHARES, INC. and SUBSIDIARIES

AVERAGE BALANCE SHEETS

(Unaudited)

(In thousands)

For the Three Months Ended

Dec. 31,

2021

Sep. 30,

2021

Jun. 30,

2021

Mar. 31,

2021

Dec. 31,

2020

ASSETS:

 

 

 

 

 

Loans:

 

 

 

 

 

Business

$ 5,191,844

 

$ 5,437,498

 

$ 6,211,610

 

$ 6,532,921

 

$ 6,580,300

 

Real estate — construction and land

1,228,237

 

1,168,566

 

1,088,433

 

1,091,969

 

1,032,891

 

Real estate — business

3,003,459

 

2,982,847

 

3,014,955

 

3,022,979

 

3,029,799

 

Real estate — personal

2,785,095

 

2,775,638

 

2,804,388

 

2,826,112

 

2,778,462

 

Consumer

2,043,690

 

2,041,263

 

2,004,625

 

1,947,322

 

1,981,033

 

Revolving home equity

276,464

 

281,689

 

287,031

 

299,371

 

316,895

 

Consumer credit card

559,429

 

566,406

 

575,725

 

608,747

 

638,161

 

Overdrafts

4,926

 

5,110

 

3,735

 

3,546

 

3,762

 

Total loans

15,093,144

 

15,259,017

 

15,990,502

 

16,332,967

 

16,361,303

 

Allowance for credit losses on loans

(162,428

)

(172,112

)

(200,801

)

(220,512

)

(235,484

)

Net loans

14,930,716

 

15,086,905

 

15,789,701

 

16,112,455

 

16,125,819

 

Loans held for sale

11,203

 

16,021

 

23,389

 

35,814

 

30,577

 

Investment securities:

 

 

 

 

 

U.S. government and federal agency obligations

1,009,025

 

727,566

 

719,849

 

725,367

 

774,640

 

Government-sponsored enterprise obligations

50,777

 

50,785

 

50,793

 

50,801

 

69,133

 

State and municipal obligations

2,095,517

 

2,039,942

 

1,966,673

 

1,958,637

 

1,967,408

 

Mortgage-backed securities

7,141,249

 

7,115,419

 

6,685,407

 

6,998,521

 

6,646,345

 

Asset-backed securities

3,514,541

 

3,028,076

 

2,653,928

 

2,085,491

 

1,819,467

 

Other debt securities

629,643

 

608,642

 

605,772

 

570,115

 

533,646

 

Unrealized gain on debt securities

86,020

 

230,058

 

197,124

 

283,511

 

329,477

 

Total available for sale debt securities

14,526,772

 

13,800,488

 

12,879,546

 

12,672,443

 

12,140,116

 

Trading debt securities

46,513

 

32,238

 

34,955

 

32,320

 

28,040

 

Equity securities

9,171

 

8,756

 

4,914

 

4,321

 

4,221

 

Other securities

190,346

 

183,397

 

156,984

 

154,030

 

130,145

 

Total investment securities

14,772,802

 

14,024,879

 

13,076,399

 

12,863,114

 

12,302,522

 

Federal funds sold

564

 

792

 

1,338

 

7

 

355

 

Securities purchased under agreements to resell

1,669,835

 

1,633,205

 

937,372

 

849,999

 

849,998

 

Interest earning deposits with banks

2,856,992

 

2,602,896

 

2,724,782

 

1,480,331

 

1,082,644

 

Other assets

1,288,323

 

1,261,277

 

1,258,989

 

1,308,105

 

1,291,907

 

Total assets

$ 35,530,435

 

$ 34,625,975

 

$ 33,811,970

 

$ 32,649,825

 

$ 31,683,822

 

 

 

 

 

 

 

LIABILITIES AND EQUITY:

 

 

 

 

 

Non-interest bearing deposits

$ 11,919,268

 

$ 11,475,113

 

$ 11,109,198

 

$ 10,438,637

 

$ 10,275,735

 

Savings

1,507,199

 

1,484,923

 

1,474,391

 

1,333,177

 

1,234,481

 

Interest checking and money market

13,873,985

 

13,343,180

 

13,283,481

 

12,970,629

 

12,198,928

 

Certificates of deposit of less than $100,000

441,920

 

464,367

 

491,446

 

516,728

 

542,212

 

Certificates of deposit of $100,000 and over

1,105,480

 

1,289,665

 

1,354,685

 

1,230,075

 

1,339,301

 

Total deposits

28,847,852

 

28,057,248

 

27,713,201

 

26,489,246

 

25,590,657

 

Borrowings:

 

 

 

 

 

Federal funds purchased

20,848

 

13,606

 

23,291

 

37,034

 

48,412

 

Securities sold under agreements to repurchase

2,620,348

 

2,347,270

 

2,142,405

 

2,129,038

 

1,980,045

 

Other borrowings

1,078

 

347

 

978

 

831

 

1,013

 

Total borrowings

2,642,274

 

2,361,223

 

2,166,674

 

2,166,903

 

2,029,470

 

Other liabilities

562,102

 

667,786

 

527,401

 

608,212

 

727,569

 

Total liabilities

32,052,228

 

31,086,257

 

30,407,276

 

29,264,361

 

28,347,696

 

Equity

3,478,207

 

3,539,718

 

3,404,694

 

3,385,464

 

3,336,126

 

Total liabilities and equity

$ 35,530,435

 

$ 34,625,975

 

$ 33,811,970

 

$ 32,649,825

 

$ 31,683,822

 

COMMERCE BANCSHARES, INC. and SUBSIDIARIES

AVERAGE RATES

(Unaudited)

For the Three Months Ended

Dec. 31,

2021

Sep. 30,

2021

Jun. 30,

2021

Mar. 31,

2021

Dec. 31,

2020

ASSETS:

 

 

 

 

 

Loans:

 

 

 

 

 

Business (1)

3.16

%

3.43

%

3.15

%

3.09

%

3.01

%

Real estate — construction and land

3.61

 

3.51

 

3.56

 

3.54

 

3.72

 

Real estate — business

3.41

 

3.46

 

3.49

 

3.52

 

3.51

 

Real estate — personal

3.21

 

3.27

 

3.31

 

3.40

 

3.44

 

Consumer

3.65

 

3.71

 

3.84

 

4.02

 

4.07

 

Revolving home equity

3.47

 

3.46

 

3.43

 

3.38

 

3.37

 

Consumer credit card

11.06

 

11.29

 

11.22

 

10.97

 

11.60

 

Overdrafts

 

 

 

 

 

Total loans

3.62

 

3.74

 

3.65

 

3.66

 

3.69

 

Loans held for sale

5.10

 

4.63

 

4.20

 

3.44

 

3.54

 

Investment securities:

 

 

 

 

 

U.S. government and federal agency obligations

3.11

 

5.74

 

5.52

 

2.54

 

2.63

 

Government-sponsored enterprise obligations

2.30

 

2.30

 

2.33

 

2.36

 

2.23

 

State and municipal obligations (1)

2.26

 

2.35

 

2.41

 

2.46

 

2.44

 

Mortgage-backed securities

1.40

 

1.53

 

1.11

 

1.39

 

1.37

 

Asset-backed securities

1.03

 

1.08

 

1.25

 

1.39

 

1.59

 

Other debt securities

2.07

 

2.04

 

2.06

 

2.15

 

2.19

 

Total available for sale debt securities

1.59

 

1.80

 

1.64

 

1.67

 

1.70

 

Trading debt securities (1)

1.54

 

1.01

 

1.19

 

1.08

 

1.40

 

Equity securities (1)

27.64

 

23.92

 

43.10

 

49.56

 

50.71

 

Other securities (1)

18.39

 

7.46

 

11.90

 

5.26

 

10.03

 

Total investment securities

1.82

 

1.89

 

1.78

 

1.72

 

1.81

 

Federal funds sold

.70

 

.50

 

.60

 

 

1.12

 

Securities purchased under agreements to resell

1.62

 

2.19

 

4.46

 

5.31

 

5.24

 

Interest earning deposits with banks

.15

 

.15

 

.11

 

.10

 

.10

 

Total interest earning assets

2.47

 

2.62

 

2.64

 

2.76

 

2.86

 

 

 

 

 

 

 

LIABILITIES AND EQUITY:

 

 

 

 

 

Interest bearing deposits:

 

 

 

 

 

Savings

.08

 

.08

 

.08

 

.08

 

.09

 

Interest checking and money market

.04

 

.05

 

.05

 

.06

 

.07

 

Certificates of deposit of less than $100,000

.14

 

.18

 

.27

 

.37

 

.51

 

Certificates of deposit of $100,000 and over

.14

 

.14

 

.20

 

.35

 

.47

 

Total interest bearing deposits

.05

 

.06

 

.07

 

.09

 

.12

 

Borrowings:

 

 

 

 

 

Federal funds purchased

.11

 

.10

 

.05

 

.05

 

.07

 

Securities sold under agreements to repurchase

.08

 

.08

 

.06

 

.06

 

.06

 

Other borrowings

 

1.14

 

.82

 

.98

 

 

Total borrowings

.08

 

.08

 

.06

 

.06

 

.06

 

Total interest bearing liabilities

.06

%

.06

%

.07

%

.09

%

.11

%

 

 

 

 

 

 

Net yield on interest earning assets

2.43

%

2.58

%

2.60

%

2.71

%

2.80

%

(1)

Stated on a tax equivalent basis using a federal income tax rate of 21%.

COMMERCE BANCSHARES, INC. and SUBSIDIARIES

CREDIT QUALITY

 

 

For the Three Months Ended

For the Year Ended

(Unaudited)

(In thousands, except per share data)

 

Dec. 31,

2021

Sep. 30,

2021

Jun. 30,

2021

Mar. 31,

2021

Dec. 31,

2020

Dec. 31,

2021

Dec. 31,

2020

ALLOWANCE FOR CREDIT LOSSES ON LOANS

 

 

 

 

 

 

 

 

Balance at beginning of period

 

$162,775

 

$172,395

 

$200,527

 

$220,834

 

$236,360

 

$220,834

 

$160,682

 

Adoption of ASU 2016-13

 

 

 

 

 

 

 

(21,039

)

Provision for credit losses on loans

 

(8,474

)

(5,961

)

(27,433

)

(10,355

)

(7,510

)

(52,223

)

116,049

 

Net charge-offs (recoveries):

 

 

 

 

 

 

 

 

Commercial portfolio:

 

 

 

 

 

 

 

 

Business

 

90

 

65

 

(4,909

)

(4

)

581

 

(4,758

)

3,665

 

Real estate — construction and land

 

 

 

 

1

 

(2

)

1

 

(3

)

Real estate — business

 

6

 

(5

)

(85

)

20

 

(7

)

(64

)

(47

)

 

 

96

 

60

 

(4,994

)

17

 

572

 

(4,821

)

3,615

 

Personal banking portfolio:

 

 

 

 

 

 

 

 

Consumer credit card

 

2,964

 

2,908

 

5,155

 

8,981

 

5,975

 

20,008

 

25,979

 

Consumer

 

919

 

496

 

378

 

763

 

1,160

 

2,556

 

4,444

 

Overdraft

 

375

 

243

 

148

 

153

 

335

 

919

 

1,277

 

Real estate — personal

 

(71

)

(26

)

(16

)

15

 

(18

)

(98

)

(291

)

Revolving home equity

 

(26

)

(22

)

28

 

23

 

(8

)

3

 

(166

)

 

 

4,161

 

3,599

 

5,693

 

9,935

 

7,444

 

23,388

 

31,243

 

Total net loan charge-offs

 

4,257

 

3,659

 

699

 

9,952

 

8,016

 

18,567

 

34,858

 

Balance at end of period

 

$150,044

 

$162,775

 

$172,395

 

$200,527

 

$220,834

 

$150,044

 

$220,834

 

LIABILITY FOR UNFUNDED LENDING COMMITMENTS

 

$24,204

 

$22,784

 

$24,208

 

$42,430

 

$38,307

 

 

 

 

 

 

 

 

 

 

 

 

NET CHARGE-OFF RATIOS (1)

 

 

 

 

 

 

 

 

Commercial portfolio:

 

 

 

 

 

 

 

 

Business

 

.01

%

%

(.32

%)

%

.04

%

(.08

%)

.06

%

Real estate — construction and land

 

 

 

 

 

 

 

 

Real estate — business

 

 

 

(.01

)

 

 

 

 

 

 

 

 

(.19

)

 

.02

 

(.05

)

.04

 

Personal banking portfolio:

 

 

 

 

 

 

 

 

Consumer credit card

 

2.10

 

2.04

 

3.59

 

5.98

 

3.72

 

3.47

 

3.88

 

Consumer

 

.18

 

.10

 

.08

 

.16

 

.23

 

.13

 

.23

 

Overdraft

 

30.20

 

18.87

 

15.89

 

17.50

 

35.43

 

21.20

 

38.11

 

Real estate — personal

 

(.01

)

 

 

 

 

 

(.01

)

Revolving home equity

 

(.04

)

(.03

)

.04

 

.03

 

(.01

)

 

(.05

)

 

 

.29

 

.25

 

.40

 

.71

 

.52

 

.41

 

.56

 

Total

 

.11

%

.10

%

.02

%

.25

%

.19

%

.12

%

.22

%

 

 

 

 

 

 

 

 

 

CREDIT QUALITY RATIOS

 

 

 

 

 

 

 

 

Non-accrual loans to total loans

 

.06

%

.07

%

.07

%

.14

%

.16

%

 

 

Allowance for credit losses on loans to total loans(2)

 

.99

 

1.07

 

1.10

 

1.22

 

1.35

 

 

 

 

 

 

 

 

 

 

 

 

NON-ACCRUAL AND PAST DUE LOANS

 

 

 

 

 

 

 

 

Non-accrual loans:

 

 

 

 

 

 

 

 

Business

 

$7,312

 

$8,293

 

$8,839

 

$20,215

 

$22,524

 

 

 

Real estate — construction and land

 

 

 

 

 

 

 

 

Real estate — business

 

214

 

577

 

655

 

1,572

 

2,230

 

 

 

Real estate — personal

 

1,631

 

1,551

 

1,672

 

1,719

 

1,786

 

 

 

Total

 

9,157

 

10,421

 

11,166

 

23,506

 

26,540

 

 

 

Loans past due 90 days and still accruing interest

$11,726

 

$10,496

 

$12,338

 

$21,512

 

$22,190

 

 

 

(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 1.00% and 1.10% as of December 31, 2021 and September 30, 2021, respectively.

COMMERCE BANCSHARES, INC.

Management Discussion of Fourth Quarter Results

December 31, 2021

For the quarter ended December 31, 2021, net income attributable to Commerce Bancshares, Inc. (net income) amounted to $114.9 million, compared to $122.6 million in the previous quarter and $129.9 million in the same quarter last year. The decrease in net income compared to the previous quarter was primarily the result of net investment securities losses recorded this quarter compared to net gains recorded in the prior quarter and lower net interest income, partly offset by higher non-interest income and lower non-interest expense. The net yield on interest earning assets declined 15 basis points to 2.43%. Average loans declined $165.9 million compared to the previous quarter, while average available for sale debt securities grew $726.3 million, and average deposits increased $790.6 million. For the quarter, the return on average assets was 1.28%, the return on average equity was 13.11%, and the efficiency ratio was 57.3%.

Balance Sheet Review

During the 4th quarter of 2021, average loans totaled $15.1 billion, a decrease of $165.9 million from the prior quarter, and declined $1.3 billion, or 7.8%, from the same quarter last year. Compared to the previous quarter, average balances of business loans declined $245.7 million (includes a decline of $356.1 million in Paycheck Protection Program (PPP) loan balances). This decline was partially offset by growth in construction and business real estate loans of $59.7 million and $20.6 million, respectively. While period end loans only increased $28.0 million compared to the prior quarter, PPP loan balances decreased $178.8 million this quarter and totaled $129.2 million at December 31, 2021. Excluding PPP loans, period end business loans increased $204.5 million. As of December 31, 2021, 99% of round 1 and 73% of round 2 PPP loan balances have been forgiven. During the current quarter, the Company sold certain fixed rate personal real estate loans totaling $85.3 million, compared to $119.3 million in the prior quarter.

Total average available for sale debt securities increased $726.3 million over the previous quarter to $14.5 billion, at fair value. The increase in investment securities was mainly the result of growth in asset-backed and U.S. government securities. During the current quarter, purchases of securities totaled $1.4 billion with a weighted average yield of approximately 1.27%. Sales, maturities and pay downs were $956.5 million. At December 31, 2021, the duration of the investment portfolio was 3.2 years, and maturities and pay downs of approximately $3.0 billion are expected to occur during the next 12 months.

Total average deposits increased $790.6 million this quarter compared to the previous quarter. The increase in deposits mostly resulted from growth in interest checking and money market deposits and demand deposits of $530.8 million and $444.2 million, respectively. Certificate of deposit balances declined $206.6 million. Compared to the previous quarter, total average commercial and consumer deposits grew $612.1 million and $203.8 million, respectively. The average loans to deposits ratio was 52.4% in the current quarter and 54.4% in the prior quarter. The Company’s average borrowings, which include customer repurchase agreements, were $2.6 billion in the 4th quarter of 2021 and $2.4 billion in the prior quarter.

Net Interest Income

Net interest income in the 4th quarter of 2021 amounted to $207.7 million, a decrease of $6.4 million compared to the previous quarter. On a tax equivalent basis, net interest income for the current quarter decreased $6.4 million compared to the previous quarter to $210.4 million. The decrease in net interest income was mainly due to lower income earned on loans and securities purchased under agreements to resell, partially offset by higher income earned on investment securities. The net yield on earning assets (tax equivalent) decreased to 2.43%, compared to 2.58% in the prior quarter.

Compared to the previous quarter, interest income on loans (tax equivalent) decreased $6.1 million, mostly due to $5.3 million of lower income recognized from PPP loans this quarter. Interest on construction loans grew due to higher yields and average loan balances, but was offset by lower consumer card yields and average loan balances. The yield on PPP loans increased from 7.73% to 10.80% this quarter. Excluding PPP loans, the yield on business loans was 2.83% in the 4th quarter of 2021 compared to 2.92% in the prior quarter. The average tax-equivalent yield on the loan portfolio decreased 12 basis points to 3.62% this quarter.

Interest income on investment securities (tax equivalent) increased $1.7 million compared to the prior quarter, due to higher average balances, partly offset by lower rates earned. Interest income earned on U.S. government and federal agency securities decreased, as lower average rates earned, including the impact of $2.9 million of lower inflation income from Treasury inflation-protected securities, more than offset higher average balances. This decrease was partly offset by $5.5 million in dividends received from private equity portfolio investments this quarter. At December 31, 2021, the Company recorded a $2.6 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 1.82% in the current quarter, compared to 1.89% in the previous quarter.

The average rate paid on interest bearing deposits totaled .05% in the 4th quarter of 2021, compared .06% in the prior quarter. Interest expense on deposits decreased $172 thousand this quarter compared to the previous quarter mainly due to lower rates paid on money market accounts and certificate of deposit accounts. The overall rate paid on interest bearing liabilities was .06% in both the current and prior quarters.

Non-Interest Income

In the 4th quarter of 2021, total non-interest income amounted to $147.7 million, an increase of $12.6 million, or 9.3%, compared to the same period last year and increased $10.2 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 and bank card fees, partially offset by lower loan fees and sales.

Total net bank card fees in the current quarter increased $4.8 million, or 12.0%, over the same period last year, and increased $2.0 million compared to the prior quarter. Net corporate card fees increased $3.6 million, or 17.0%, 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 $955 thousand, or 9.8%, mainly due to higher interchange fees. Net merchant income increased $104 thousand, or 2.0%, and net credit card fees increased $111 thousand, or 3.0%. Total net bank card fees this quarter were comprised of fees on corporate card ($25.0 million), debit card ($10.7 million), merchant ($5.3 million) and credit card ($3.8 million) transactions.

In the current quarter, trust fees increased $6.9 million, or 16.5%, 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 $1.3 million, or 5.5%, mainly due to higher overdraft and return item fees and corporate cash management fees. Loan fees and sales, mostly mortgage banking revenue, declined $3.8 million, or 41.9%, compared to amounts recorded in the same quarter last year. Consumer brokerage fees increased $882 thousand, or 22.1%, compared to the same quarter last year.

Other non-interest income increased over the same period last year mainly due to a $3.7 million gain on the sale of land recorded this quarter, $818 thousand of higher tax credit sales fees, and $774 thousand of higher swap fees, partially offset by lower cash sweep commissions of $710 thousand. For the 4th quarter of 2021, non-interest income comprised 41.6% of the Company’s total revenue.

Investment Securities Gains and Losses

The Company recorded investment net losses of $9.7 million in the current quarter, compared to net gains of $13.1 million in the prior quarter and net gains of $12.3 million in the 4th quarter of 2020. Net losses on investments in the current quarter primarily resulted from net fair value losses of $6.5 million in the Company’s private equity investment portfolio, in part due to $5.5 million in dividends paid by portfolio companies mentioned above, which reduced the fair value of the investments.

Non-Interest Expense

Non-interest expense for the current quarter amounted to $203.6 million, compared to $196.3 million in the same period last year and $211.6 million in the prior quarter. The increase in non-interest expense compared to the same period last year was mainly due to higher salaries expense, data processing and software expense, and travel and entertainment expense. The decrease in non-interest expense compared to the prior quarter was mainly due to litigation settlement expense in the prior quarter that did not reoccur.

Compared to the 4th quarter of last year, salaries and employee benefits expense increased $2.7 million, mostly due to higher full-time salaries expense. Incentive compensation was also higher, while employee benefits expense was flat. Full-time equivalent employees totaled 4,567 and 4,766 at December 31, 2021 and 2020, respectively.

Compared to the same period last year, data processing and software expense increased $1.5 million due to higher bank card processing fees and increased costs for service providers this quarter. Additionally, other non-interest expense increased $1.7 million, mainly due to an increase of $1.3 million in travel and entertainment expense.

Income Taxes

The effective tax rate for the Company was 22.7% in the current quarter, 22.0% in the previous quarter, and 20.3% in the 4th quarter of 2020.

Credit Quality

Net loan charge-offs in the 4th quarter of 2021 amounted to $4.3 million, compared to $3.7 million in the prior quarter and $8.0 million in the same period last year. The ratio of annualized net loan charge-offs to total average loans was .11% in the current quarter, .10% in the previous quarter, and .19% in the 4th quarter of last year. Net loan charge-offs on personal banking loans increased $562 thousand to $4.2 million.

In the 4th quarter of 2021, annualized net loan charge-offs on average consumer credit card loans were 2.10%, compared to 2.04% in the previous quarter, and 3.72% in the same quarter last year. Consumer loan net charge-offs were .18% of average consumer loans in the current quarter, .10% in the prior quarter and .23% in the same quarter last year.

During the 4th quarter of 2021, the economy continued to recover from the pandemic and the economic forecast utilized in the allowance for credit loss model also continued to improve. This improvement, coupled with other model inputs, resulted in a decrease in the allowance for credit losses as of December 31, 2021. At December 31, 2021, the allowance for credit losses on loans totaled $150.0 million, or .99% of total loans and 1.00% of total loans excluding PPP loans. Additionally, the liability for unfunded lending commitments at December 31, 2021 was $24.2 million, an increase of $1.4 million over the liability at September 30, 2021.

At December 31, 2021, total non-accrual loans amounted to $9.2 million, a decrease of $1.3 million from the previous quarter. At December 31, 2021, the balance of non-accrual loans, which represented .06% of loans outstanding, included business loans of $7.3 million, personal real estate loans of $1.6 million, and business real estate loans of $214 thousand. Loans more than 90 days past due and still accruing interest totaled $11.7 million at December 31, 2021.

Other

During the 4th quarter of 2021, the Company distributed a 5% stock dividend on its common stock and paid a cash dividend of $.25 per common share (as restated for the stock dividend), representing a 2.1% increase over the same period last year. The Company purchased 696,367 shares of treasury stock during the current quarter at an average price of $70.81.

Forward Looking Information

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

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