Commerce Bancshares, Inc. Reports Fourth Quarter Earnings Per Share Of $1.04

KANSAS CITY, Mo.--()--Commerce Bancshares, Inc. announced earnings of $1.04 per share for the three months ended December 31, 2022, compared to $.90 per share in the same quarter last year and $.97 per share in the third quarter of 2022. Net income for the fourth quarter of 2022 amounted to $131.6 million, compared to $114.9 million in the fourth quarter of 2021 and $122.8 million in the prior quarter.

“The company delivered strong results in the fourth quarter,” said John Kemper, President and Chief Executive Officer. “Loan growth, margin expansion, and resilient fee-based income all contributed to record quarterly revenue. Taking stock of where we are and looking ahead into 2023, the strength of our deposit franchise and our long-term, conservative and disciplined approach to credit and capital management position us well in an uncertain environment.

“Our results would not be possible without our talented team members and their unwavering commitment to our purpose and culture. Our results are a reflection of the way our team works collaboratively, communicates, and strives toward the shared goal of helping our customers focus on what matters most.”

Fourth Quarter 2022 Financial Highlights:

  • Net interest income was $254.6 million, an $8.3 million increase over the prior quarter. The net yield on interest earning assets increased 17 basis points to 3.18%.
  • Non-interest income totaled $136.8 million, a decrease of $1.7 million compared to the prior quarter.
  • Non-interest expense totaled $216.7 million, an increase of $3.9 million compared to the prior quarter.
  • Average loan balances totaled $15.9 billion, an increase of $239.0 million, or 1.5%, over the prior quarter.
  • Total average available for sale debt securities decreased 7.9%, or $1.1 billion, from the prior quarter to $12.4 billion, at fair value. Purchases of securities during the quarter totaled $145.3 million, with a weighted average yield of approximately 5.05%.
  • Average deposits declined $1.1 billion, or 4.1%, from the prior quarter. The average rate paid on interest bearing deposits was .40%.
  • The ratio of annualized net loan charge-offs to average loans was .14% compared to .12% in the prior quarter.
  • Non-accrual loans totaled $8.3 million compared to $7.2 million in the prior quarter. Non-accrual loans were .05% of total loans.
  • The allowance for credit losses on loans increased $6.8 million during the fourth quarter to $150.1 million, and at December 31, 2022, the ratio of the allowance for credit losses on loans to total loans was .92%, compared to .90% at September 30, 2022.
  • The Company purchased 332,178 shares of its common stock this quarter at an average price of $70.15.
  • Total assets at December 31, 2022 were $31.9 billion, a decrease of $726.7 million, or 2.2%, from the prior quarter.
  • For the quarter, the return on average assets was 1.65%, the return on average equity was 21.88%, and the efficiency ratio was 55.3%.

Commerce Bancshares, Inc. is a regional bank holding company offering a full line of banking services through its subsidiaries, including payment solutions, investment management and securities brokerage. One of its subsidiaries, Commerce Bank, leverages almost 160 years of proven strength and experience to help individuals and businesses solve financial challenges. In addition to offering payment solutions across the U.S., Commerce Bank currently operates full-service banking facilities across the Midwest including the St. Louis and Kansas City metropolitan areas, Springfield, Central Missouri, Central Illinois, Wichita, Tulsa, Oklahoma City, and Denver. It also maintains commercial offices in Dallas, Houston, Cincinnati, Nashville, Des Moines, Indianapolis, and Grand Rapids. Commerce delivers high-touch service and sophisticated financial solutions at regional branches, commercial offices, ATMs, online, mobile and through a 24/7 customer service line.

This financial news release and the supplementary Earnings Highlights presentation are available on the Company’s website at https://investor.commercebank.com/news-info/financial-news-releases/default.aspx.

COMMERCE BANCSHARES, INC. and SUBSIDIARIES

FINANCIAL HIGHLIGHTS

 

 

 

For the Three Months Ended

For the Year Ended

(Unaudited)

(Dollars in thousands, except per share data)

 

Dec. 31,
2022

Sep. 30,
2022

Dec. 31,
2021

Dec. 31,
2022

Dec. 31,
2021

FINANCIAL SUMMARY

 

 

Net interest income

 

$254,641

 

$246,373

 

$207,657

 

$942,185

 

$835,424

 

Non-interest income

 

136,825

 

138,514

 

147,699

 

546,535

 

560,393

 

Total revenue

 

391,466

 

384,887

 

355,356

 

1,488,720

 

1,395,817

 

Investment securities gains (losses)

 

8,904

 

3,410

 

(9,706

)

20,506

 

30,059

 

Provision for credit losses

 

15,477

 

15,290

 

(7,054

)

28,071

 

(66,326

)

Non-interest expense

 

216,740

 

212,884

 

203,582

 

848,777

 

805,901

 

Income before taxes

 

168,153

 

160,123

 

149,122

 

632,378

 

686,301

 

Income taxes

 

34,499

 

33,936

 

33,764

 

132,358

 

145,711

 

Non-controlling interest expense

 

2,026

 

3,364

 

452

 

11,621

 

9,825

 

Net income attributable to Commerce Bancshares, Inc.

$131,628

 

$122,823

 

$114,906

 

$488,399

 

$530,765

 

Earnings per common share:

 

 

 

 

 

 

Net income — basic

 

$1.05

 

$0.97

 

$0.90

 

$3.86

 

$4.12

 

Net income — diluted

 

$1.04

 

$0.97

 

$0.90

 

$3.85

 

$4.11

 

Effective tax rate

 

20.77

%

21.65

%

22.71

%

21.32

%

21.54

%

Fully-taxable equivalent net interest income

 

$256,675

 

$248,737

 

$210,424

 

$951,815

 

$847,116

 

Average total interest earning assets (1)

 

$31,991,224

 

$32,807,393

 

$34,318,520

 

$ 33,384,162

 

$32,874,701

 

Diluted wtd. average shares outstanding

 

124,589,323

 

125,116,585

 

127,282,556

 

125,560,387

 

128,038,042

 

 

 

 

 

 

 

 

RATIOS

 

 

 

 

 

 

Average loans to deposits (2)

 

59.73

%

56.40

%

52.36

%

55.41

%

56.46

%

Return on total average assets

 

1.65

 

1.48

 

1.28

 

1.45

 

1.55

 

Return on average equity (3)

 

21.88

 

17.84

 

13.11

 

17.31

 

15.37

 

Non-interest income to total revenue

 

34.95

 

35.99

 

41.56

 

36.71

 

40.15

 

Efficiency ratio (4)

 

55.26

 

55.19

 

57.29

 

56.90

 

57.64

 

Net yield on interest earning assets

 

3.18

 

3.01

 

2.43

 

2.85

 

2.58

 

 

 

 

 

 

 

 

EQUITY SUMMARY

 

 

 

 

 

 

Cash dividends per share

 

$.252

 

$.252

 

$.238

 

$1.010

 

$.952

 

Cash dividends on common stock

 

$31,648

 

$31,740

 

$30,489

 

$127,466

 

$122,693

 

Book value per share (5)

 

$19.85

 

$18.91

 

$27.05

 

 

 

Market value per share (5)

 

$68.07

 

$63.01

 

$65.47

 

 

 

High market value per share

 

$72.60

 

$70.45

 

$68.10

 

 

 

Low market value per share

 

$63.17

 

$61.14

 

$61.76

 

 

 

Common shares outstanding (5)

 

124,999,100

 

125,329,198

 

127,508,571

 

 

 

Tangible common equity to tangible assets (6)

 

7.32

%

6.80

%

9.01

%

 

 

Tier I leverage ratio

 

10.34

%

9.87

%

9.13

%

 

 

 

 

 

 

 

 

 

OTHER QTD INFORMATION

 

 

 

 

 

 

Number of bank/ATM locations

 

275

 

277

 

287

 

 

 

Full-time equivalent employees

 

4,594

 

4,595

 

4,567

 

 

 

(1)

Excludes allowance for credit losses on loans and unrealized gains/(losses) on available for sale debt securities.

(2)

Includes loans held for sale.

(3)

Annualized net income attributable to Commerce Bancshares, Inc. divided by average total equity.

(4)

The efficiency ratio is calculated as non-interest expense (excluding intangibles amortization) as a percent of total revenue.

(5)

As of period end.

(6)

The tangible common equity ratio is calculated as stockholders’ equity reduced by goodwill and other intangible assets (excluding mortgage servicing rights) divided by total assets reduced by goodwill and other intangible assets (excluding mortgage servicing rights).

All share and per share amounts have been restated to reflect the 5% stock dividend distributed in December 2022.

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,
2022

Sep. 30,
2022

Jun. 30,
2022

Mar. 31,
2022

Dec. 31,
2021

Dec. 31,
2022

Dec. 31,
2021

Interest income

 

$286,377

 

$262,666

 

$238,154

 

$211,782

 

$210,479

 

$998,979

 

$848,290

 

Interest expense

 

31,736

 

16,293

 

5,769

 

2,996

 

2,822

 

56,794

 

12,866

 

Net interest income

 

254,641

 

246,373

 

232,385

 

208,786

 

207,657

 

942,185

 

835,424

 

Provision for credit losses

 

15,477

 

15,290

 

7,162

 

(9,858

)

(7,054

)

28,071

 

(66,326

)

Net interest income after credit losses

239,164

 

231,083

 

225,223

 

218,644

 

214,711

 

914,114

 

901,750

 

NON-INTEREST INCOME

 

 

 

 

 

 

 

 

Trust fees

 

44,710

 

45,406

 

46,792

 

47,811

 

48,893

 

184,719

 

188,227

 

Bank card transaction fees

 

44,588

 

45,638

 

43,873

 

42,045

 

44,773

 

176,144

 

167,891

 

Deposit account charges and other fees

21,989

 

24,521

 

25,564

 

22,307

 

25,493

 

94,381

 

97,217

 

Consumer brokerage services

 

4,518

 

5,085

 

5,068

 

4,446

 

4,878

 

19,117

 

18,362

 

Capital market fees

 

3,386

 

3,393

 

3,327

 

4,125

 

3,841

 

14,231

 

15,943

 

Loan fees and sales

 

2,566

 

3,094

 

3,246

 

4,235

 

5,248

 

13,141

 

29,720

 

Other

 

15,068

 

11,377

 

11,557

 

6,800

 

14,573

 

44,802

 

43,033

 

Total non-interest income

 

136,825

 

138,514

 

139,427

 

131,769

 

147,699

 

546,535

 

560,393

 

INVESTMENT SECURITIES GAINS (LOSSES), NET

8,904

 

3,410

 

1,029

 

7,163

 

(9,706

)

20,506

 

30,059

 

NON-INTEREST EXPENSE

 

 

 

 

 

 

 

 

Salaries and employee benefits

 

138,458

 

137,393

 

142,243

 

135,953

 

132,640

 

554,047

 

525,248

 

Data processing and software

 

27,991

 

28,050

 

27,635

 

27,016

 

25,777

 

110,692

 

101,792

 

Net occupancy

 

11,774

 

12,544

 

12,503

 

12,296

 

12,308

 

49,117

 

48,185

 

Equipment

 

5,021

 

5,036

 

4,734

 

4,568

 

4,691

 

19,359

 

18,089

 

Supplies and communication

 

4,446

 

4,581

 

4,361

 

4,713

 

4,430

 

18,101

 

17,118

 

Marketing

 

5,419

 

6,228

 

5,836

 

6,344

 

5,395

 

23,827

 

21,856

 

Other

 

23,631

 

19,052

 

16,193

 

14,758

 

18,341

 

73,634

 

73,613

 

Total non-interest expense

 

216,740

 

212,884

 

213,505

 

205,648

 

203,582

 

848,777

 

805,901

 

Income before income taxes

 

168,153

 

160,123

 

152,174

 

151,928

 

149,122

 

632,378

 

686,301

 

Less income taxes

 

34,499

 

33,936

 

32,021

 

31,902

 

33,764

 

132,358

 

145,711

 

Net income

 

133,654

 

126,187

 

120,153

 

120,026

 

115,358

 

500,020

 

540,590

 

Less non-controlling interest expense

2,026

 

3,364

 

4,359

 

1,872

 

452

 

11,621

 

9,825

 

Net income attributable to Commerce Bancshares, Inc.

$131,628

 

$122,823

 

$115,794

 

$118,154

 

$114,906

 

$488,399

 

$530,765

 

Net income per common share — basic

$1.05

 

$0.97

 

$0.92

 

$0.92

 

$0.90

 

$3.86

 

$4.12

 

Net income per common share — diluted

$1.04

 

$0.97

 

$0.92

 

$0.92

 

$0.90

 

$3.85

 

$4.11

 

 

 

 

 

 

 

 

 

 

OTHER INFORMATION

 

 

 

 

 

 

 

Return on total average assets

 

1.65

%

1.48

%

1.36

%

1.33

%

1.28

%

1.45

%

1.55

%

Return on average equity (1)

21.88

 

17.84

 

16.29

 

14.41

 

13.11

 

17.31

 

15.37

 

Efficiency ratio (2)

 

55.26

 

55.19

 

57.29

 

60.29

 

57.29

 

56.90

 

57.64

 

Effective tax rate

 

20.77

 

21.65

 

21.66

 

21.26

 

22.71

 

21.32

 

21.54

 

Net yield on interest earning assets

3.18

 

3.01

 

2.79

 

2.45

 

2.43

 

2.85

 

2.58

 

Fully-taxable equivalent net interest income

 

$256,675

 

$248,737

 

$235,010

 

$211,393

 

$210,424

 

$951,815

 

$847,116

 

(1)

Annualized net income attributable to Commerce Bancshares, Inc. divided by average total equity.

(2)

The efficiency ratio is calculated as non-interest expense (excluding intangibles amortization) as a percent of total revenue.

 

COMMERCE BANCSHARES, INC. and SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS - PERIOD END

 

(Unaudited)

(In thousands)

 

Dec. 31,
2022

Sep. 30,
2022

Dec. 31,
2021

ASSETS

 

 

 

 

Loans

 

 

 

 

Business

 

$ 5,661,725

 

$ 5,528,895

 

$ 5,303,535

 

Real estate — construction and land

 

1,361,095

 

1,206,955

 

1,118,266

 

Real estate — business

 

3,406,981

 

3,331,627

 

3,058,837

 

Real estate — personal

 

2,918,078

 

2,862,519

 

2,805,401

 

Consumer

 

2,059,088

 

2,116,371

 

2,032,225

 

Revolving home equity

 

297,207

 

286,026

 

275,945

 

Consumer credit card

 

584,000

 

563,349

 

575,410

 

Overdrafts

 

14,957

 

3,216

 

6,740

 

Total loans

 

16,303,131

 

15,898,958

 

15,176,359

 

Allowance for credit losses on loans

 

(150,136

)

(143,377

)

(150,044

)

Net loans

 

16,152,995

 

15,755,581

 

15,026,315

 

Loans held for sale

 

4,964

 

8,062

 

8,615

 

Investment securities:

 

 

 

 

Available for sale debt securities

 

12,238,316

 

12,632,510

 

14,450,027

 

Trading debt securities

 

43,523

 

39,222

 

46,235

 

Equity securities

 

12,304

 

8,954

 

9,202

 

Other securities

 

225,034

 

222,742

 

194,047

 

Total investment securities

 

12,519,177

 

12,903,428

 

14,699,511

 

Federal funds sold

 

49,505

 

14,020

 

2,800

 

Securities purchased under agreements to resell

 

825,000

 

1,275,000

 

1,625,000

 

Interest earning deposits with banks

 

389,140

 

642,943

 

3,971,217

 

Cash and due from banks

 

452,496

 

344,178

 

305,539

 

Premises and equipment — net

 

418,909

 

407,833

 

388,738

 

Goodwill

 

138,921

 

138,921

 

138,921

 

Other intangible assets — net

 

15,234

 

15,599

 

15,570

 

Other assets

 

909,590

 

1,097,031

 

506,862

 

Total assets

 

$ 31,875,931

 

$ 32,602,596

 

$ 36,689,088

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

Deposits:

 

 

 

 

Non-interest bearing

 

$ 10,066,356

 

$ 10,468,591

 

$ 11,772,374

 

Savings, interest checking and money market

 

15,126,981

 

16,014,487

 

16,598,085

 

Certificates of deposit of less than $100,000

 

387,336

 

391,145

 

435,960

 

Certificates of deposit of $100,000 and over

 

606,767

 

597,093

 

1,006,654

 

Total deposits

 

26,187,440

 

27,471,316

 

29,813,073

 

Federal funds purchased and securities sold under agreements to repurchase

 

2,841,734

 

2,314,590

 

3,022,967

 

Other borrowings

 

9,672

 

1,831

 

12,560

 

Other liabilities

 

355,508

 

443,752

 

392,164

 

Total liabilities

 

29,394,354

 

30,231,489

 

33,240,764

 

Stockholders’ equity:

 

 

 

 

Common stock

 

629,319

 

610,804

 

610,804

 

Capital surplus

 

2,932,959

 

2,683,631

 

2,689,894

 

Retained earnings

 

31,620

 

353,446

 

92,493

 

Treasury stock

 

(41,743

)

(176,943

)

(32,973

)

Accumulated other comprehensive income

 

(1,086,864

)

(1,119,344

)

77,080

 

Total stockholders’ equity

 

2,465,291

 

2,351,594

 

3,437,298

 

Non-controlling interest

 

16,286

 

19,513

 

11,026

 

Total equity

 

2,481,577

 

2,371,107

 

3,448,324

 

Total liabilities and equity

 

$ 31,875,931

 

$ 32,602,596

 

$ 36,689,088

 

 

COMMERCE BANCSHARES, INC. and SUBSIDIARIES

AVERAGE BALANCE SHEETS

 

(Unaudited)

(In thousands)

For the Three Months Ended

Dec. 31,
2022

Sep. 30,
2022

Jun. 30,
2022

Mar. 31,
2022

Dec. 31,
2021

ASSETS:

 

 

 

 

 

Loans:

 

 

 

 

 

Business

$ 5,478,241

 

$ 5,317,696

 

$ 5,385,181

 

$ 5,324,172

 

$ 5,191,844

 

Real estate — construction and land

1,268,900

 

1,288,721

 

1,225,267

 

1,134,902

 

1,228,237

 

Real estate — business

3,300,697

 

3,258,128

 

3,163,508

 

3,095,068

 

3,003,459

 

Real estate — personal

2,886,686

 

2,844,376

 

2,825,578

 

2,808,980

 

2,785,095

 

Consumer

2,089,912

 

2,101,622

 

2,070,560

 

2,040,200

 

2,043,690

 

Revolving home equity

293,681

 

280,923

 

272,280

 

273,859

 

276,464

 

Consumer credit card

559,463

 

550,058

 

537,681

 

540,844

 

559,429

 

Overdrafts

7,428

 

4,438

 

5,524

 

5,178

 

4,926

 

Total loans

15,885,008

 

15,645,962

 

15,485,579

 

15,223,203

 

15,093,144

 

Allowance for credit losses on loans

(143,285

)

(137,833

)

(134,670

)

(149,685

)

(162,428

)

Net loans

15,741,723

 

15,508,129

 

15,350,909

 

15,073,518

 

14,930,716

 

Loans held for sale

6,567

 

7,170

 

7,933

 

9,383

 

11,203

 

Investment securities:

 

 

 

 

 

U.S. government and federal agency obligations

1,055,602

 

1,113,442

 

1,119,305

 

1,103,749

 

1,009,025

 

Government-sponsored enterprise obligations

55,732

 

55,753

 

55,762

 

51,770

 

50,777

 

State and municipal obligations

1,990,643

 

2,052,908

 

2,126,380

 

2,077,600

 

2,095,517

 

Mortgage-backed securities

6,605,936

 

6,847,912

 

7,158,252

 

7,316,609

 

7,141,249

 

Asset-backed securities

3,714,092

 

3,870,953

 

4,038,113

 

3,933,061

 

3,514,541

 

Other debt securities

560,951

 

587,026

 

643,463

 

636,247

 

629,643

 

Unrealized gain (loss) on debt securities

(1,582,061

)

(1,064,534

)

(851,110

)

(174,297

)

86,020

 

Total available for sale debt securities

12,400,895

 

13,463,460

 

14,290,165

 

14,944,739

 

14,526,772

 

Trading debt securities

44,626

 

35,621

 

43,904

 

40,686

 

46,513

 

Equity securities

10,534

 

8,838

 

9,094

 

9,498

 

9,171

 

Other securities

219,354

 

208,708

 

195,090

 

192,311

 

190,346

 

Total investment securities

12,675,409

 

13,716,627

 

14,538,253

 

15,187,234

 

14,772,802

 

Federal funds sold

27,683

 

13,486

 

4,269

 

1,053

 

564

 

Securities purchased under agreements to resell

1,174,457

 

1,379,341

 

1,703,569

 

1,733,887

 

1,669,835

 

Interest earning deposits with banks

640,039

 

980,273

 

1,248,942

 

2,608,029

 

2,856,992

 

Other assets

1,339,554

 

1,256,498

 

1,238,493

 

1,304,400

 

1,288,323

 

Total assets

$ 31,605,432

 

$ 32,861,524

 

$ 34,092,368

 

$ 35,917,504

 

$ 35,530,435

 

 

 

 

 

 

 

LIABILITIES AND EQUITY:

 

 

 

 

 

Non-interest bearing deposits

$ 10,360,834

 

$ 10,758,353

 

$ 11,209,680

 

$ 11,544,701

 

$ 11,919,268

 

Savings

1,567,113

 

1,595,857

 

1,609,694

 

1,563,093

 

1,507,199

 

Interest checking and money market

13,693,974

 

14,423,713

 

14,847,306

 

14,949,727

 

13,873,985

 

Certificates of deposit of less than $100,000

388,304

 

397,071

 

411,655

 

429,852

 

441,920

 

Certificates of deposit of $100,000 and over

596,703

 

578,158

 

648,728

 

862,232

 

1,105,480

 

Total deposits

26,606,928

 

27,753,152

 

28,727,063

 

29,349,605

 

28,847,852

 

Borrowings:

 

 

 

 

 

Federal funds purchased

143,630

 

51,929

 

113,128

 

23,356

 

20,848

 

Securities sold under agreements to repurchase

2,260,263

 

2,199,866

 

2,258,184

 

2,712,468

 

2,620,348

 

Other borrowings

179,552

 

2,010

 

2,029

 

768

 

1,078

 

Total borrowings

2,583,445

 

2,253,805

 

2,373,341

 

2,736,592

 

2,642,274

 

Other liabilities

28,745

 

123,691

 

139,986

 

505,644

 

562,102

 

Total liabilities

29,219,118

 

30,130,648

 

31,240,390

 

32,591,841

 

32,052,228

 

Equity

2,386,314

 

2,730,876

 

2,851,978

 

3,325,663

 

3,478,207

 

Total liabilities and equity

$ 31,605,432

 

$ 32,861,524

 

$ 34,092,368

 

$ 35,917,504

 

$ 35,530,435

 

 

COMMERCE BANCSHARES, INC. and SUBSIDIARIES

AVERAGE RATES

 

(Unaudited)

For the Three Months Ended

Dec. 31,
2022

Sep. 30,
2022

Jun. 30,
2022

Mar. 31,
2022

Dec. 31,
2021

ASSETS:

 

 

 

 

 

Loans:

 

 

 

 

 

Business (1)

4.68

%

3.94

%

3.16

%

2.93

%

3.16

%

Real estate — construction and land

6.80

 

5.27

 

4.09

 

3.76

 

3.61

 

Real estate — business

5.15

 

4.40

 

3.70

 

3.38

 

3.41

 

Real estate — personal

3.45

 

3.36

 

3.27

 

3.28

 

3.21

 

Consumer

4.77

 

4.17

 

3.62

 

3.59

 

3.65

 

Revolving home equity

5.89

 

4.82

 

3.69

 

3.48

 

3.47

 

Consumer credit card

12.64

 

12.05

 

11.32

 

11.35

 

11.06

 

Overdrafts

 

 

 

 

 

Total loans

5.03

 

4.37

 

3.72

 

3.54

 

3.62

 

Loans held for sale

10.09

 

8.80

 

8.14

 

6.48

 

5.10

 

Investment securities:

 

 

 

 

 

U.S. government and federal agency obligations

2.01

 

4.51

 

4.93

 

3.42

 

3.11

 

Government-sponsored enterprise obligations

2.36

 

2.36

 

2.39

 

2.33

 

2.30

 

State and municipal obligations (1)

2.29

 

2.27

 

2.30

 

2.29

 

2.26

 

Mortgage-backed securities

1.88

 

1.93

 

1.99

 

1.98

 

1.40

 

Asset-backed securities

1.96

 

1.62

 

1.35

 

1.13

 

1.03

 

Other debt securities

1.89

 

1.93

 

1.97

 

2.00

 

2.07

 

Total available for sale debt securities

1.97

 

2.09

 

2.08

 

1.91

 

1.59

 

Trading debt securities (1)

3.81

 

2.74

 

2.46

 

1.84

 

1.54

 

Equity securities (1)

28.44

 

27.11

 

26.90

 

26.00

 

27.64

 

Other securities (1)

6.67

 

7.09

 

22.38

 

5.91

 

18.39

 

Total investment securities

2.07

 

2.18

 

2.36

 

1.97

 

1.82

 

Federal funds sold

4.27

 

2.77

 

1.79

 

.39

 

.70

 

Securities purchased under agreements to resell

2.36

 

1.72

 

1.03

 

1.24

 

1.62

 

Interest earning deposits with banks

3.69

 

2.25

 

.78

 

.18

 

.15

 

Total interest earning assets

3.59

 

3.21

 

2.86

 

2.49

 

2.47

 

 

 

 

 

 

 

LIABILITIES AND EQUITY:

 

 

 

 

 

Interest bearing deposits:

 

 

 

 

 

Savings

.06

 

.04

 

.04

 

.05

 

.08

 

Interest checking and money market

.38

 

.20

 

.06

 

.04

 

.04

 

Certificates of deposit of less than $100,000

.73

 

.41

 

.20

 

.13

 

.14

 

Certificates of deposit of $100,000 and over

1.42

 

.60

 

.29

 

.20

 

.14

 

Total interest bearing deposits

.40

 

.21

 

.07

 

.05

 

.05

 

Borrowings:

 

 

 

 

 

Federal funds purchased

3.56

 

2.41

 

.79

 

.12

 

.11

 

Securities sold under agreements to repurchase

2.29

 

1.37

 

.48

 

.10

 

.08

 

Other borrowings

4.02

 

1.78

 

2.37

 

.53

 

 

Total borrowings

2.48

 

1.39

 

.50

 

.10

 

.08

 

Total interest bearing liabilities

.69

%

.34

%

.12

%

.06

%

.06

%

 

 

 

 

 

 

Net yield on interest earning assets

3.18

%

3.01

%

2.79

%

2.45

%

2.43

%

(1)

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

 

COMMERCE BANCSHARES, INC. and SUBSIDIARIES

CREDIT QUALITY

 

 

 

For the Three Months Ended

For the Year Ended

(Unaudited)

(In thousands, except ratios)

 

Dec. 31,
2022

Sep. 30,
2022

Jun. 30,
2022

Mar. 31,
2022

Dec. 31,
2021

Dec. 31,
2022

Dec. 31,
2021

ALLOWANCE FOR CREDIT LOSSES ON LOANS

 

 

 

 

 

 

 

 

Balance at beginning of period

 

$143,377

 

$138,039

 

$134,710

 

$150,044

 

$162,775

 

$150,044

 

$220,834

 

Provision for credit losses on loans

 

12,404

 

10,150

 

7,287

 

(10,686

)

(8,474

)

19,155

 

(52,223

)

Net charge-offs (recoveries):

 

 

 

 

 

 

 

 

Commercial portfolio:

 

 

 

 

 

 

 

 

Business

 

496

 

461

 

19

 

77

 

90

 

1,053

 

(4,758

)

Real estate — construction and land

 

 

 

 

 

 

 

1

 

Real estate — business

 

(4

)

(8

)

(1

)

(7

)

6

 

(20

)

(64

)

 

 

492

 

453

 

18

 

70

 

96

 

1,033

 

(4,821

)

Personal banking portfolio:

 

 

 

 

 

 

 

 

Consumer credit card

 

3,467

 

2,882

 

2,937

 

3,372

 

2,964

 

12,658

 

20,008

 

Consumer

 

1,522

 

827

 

633

 

808

 

919

 

3,790

 

2,556

 

Overdraft

 

230

 

703

 

425

 

358

 

375

 

1,716

 

919

 

Real estate — personal

 

(40

)

(15

)

(41

)

22

 

(71

)

(74

)

(98

)

Revolving home equity

 

(26

)

(38

)

(14

)

18

 

(26

)

(60

)

3

 

 

 

5,153

 

4,359

 

3,940

 

4,578

 

4,161

 

18,030

 

23,388

 

Total net loan charge-offs

 

5,645

 

4,812

 

3,958

 

4,648

 

4,257

 

19,063

 

18,567

 

Balance at end of period

 

$150,136

 

$143,377

 

$138,039

 

$134,710

 

$150,044

 

$150,136

 

$150,044

 

LIABILITY FOR UNFUNDED LENDING COMMITMENTS

 

$33,120

 

$30,047

 

$24,907

 

$25,032

 

$24,204

 

 

 

 

 

 

 

 

 

 

 

 

NET CHARGE-OFF RATIOS (1)

 

 

 

 

 

 

 

 

Commercial portfolio:

 

 

 

 

 

 

 

 

Business

 

.04

%

.03

%

%

.01

%

.01

%

.02

%

(.08

%)

Real estate — construction and land

 

 

 

 

 

 

 

 

Real estate — business

 

 

 

 

 

 

 

 

 

 

.02

 

.02

 

 

 

 

.01

 

(.05

)

Personal banking portfolio:

 

 

 

 

 

 

 

 

Consumer credit card

 

2.46

 

2.08

 

2.19

 

2.53

 

2.10

 

2.31

 

3.47

 

Consumer

 

.29

 

.16

 

.12

 

.16

 

.18

 

.18

 

.13

 

Overdraft

 

12.28

 

62.85

 

30.86

 

28.04

 

30.20

 

30.40

 

21.20

 

Real estate — personal

 

(.01

)

 

(.01

)

 

(.01

)

 

 

Revolving home equity

 

(.04

)

(.05

)

(.02

)

.03

 

(.04

)

(.02

)

 

 

 

.35

 

.30

 

.28

 

.33

 

.29

 

.31

 

.41

 

Total

 

.14

%

.12

%

.10

%

.12

%

.11

%

.12

%

.12

%

 

 

 

 

 

 

 

 

 

CREDIT QUALITY RATIOS

 

 

 

 

 

 

 

 

Non-accrual loans to total loans

 

.05

%

.05

%

.05

%

.05

%

.06

%

 

 

Allowance for credit losses on loans to total loans

 

.92

 

.90

 

.88

 

.87

 

.99

 

 

 

 

 

 

 

 

 

 

 

 

NON-ACCRUAL AND PAST DUE LOANS

 

 

 

 

 

 

 

 

Non-accrual loans:

 

 

 

 

 

 

 

 

Business

 

$6,751

 

$5,645

 

$6,314

 

$6,756

 

$7,312

 

 

 

Real estate — construction and land

 

 

 

 

 

 

 

 

Real estate — business

 

189

 

149

 

167

 

190

 

214

 

 

 

Real estate — personal

 

1,366

 

1,390

 

1,436

 

1,389

 

1,631

 

 

 

Total

 

8,306

 

7,184

 

7,917

 

8,335

 

9,157

 

 

 

Loans past due 90 days and still accruing interest

$15,830

 

$12,538

 

$11,909

 

$10,670

 

$11,726

 

 

 

(1)

Net charge-offs are annualized and calculated as a percentage of average loans (excluding loans held for sale).

 

COMMERCE BANCSHARES, INC.
Management Discussion of Fourth Quarter Results
December 31, 2022

For the quarter ended December 31, 2022, net income amounted to $131.6 million, compared to $122.8 million in the previous quarter and $114.9 million in the same quarter last year. The increase in net income compared to the previous quarter was primarily the result of increases in net interest income and investment securities gains, partly offset by lower non-interest income and higher non-interest expense. The net yield on interest earning assets grew 17 basis points to 3.18%. Average loans grew $239.0 million compared to the previous quarter, while average available for sale debt securities and average deposits each declined $1.1 billion. For the quarter, the return on average assets was 1.65%, the return on average equity was 21.88%, and the efficiency ratio was 55.3%.

Balance Sheet Review

During the 4th quarter of 2022, average loans totaled $15.9 billion, an increase of $239.0 million over the prior quarter, and $791.9 million, or 5.3%, over the same quarter last year. Compared to the previous quarter, average balances of business, business real estate, and personal real estate loans grew $160.5 million, $42.6 million, and $42.3 million, respectively. Period end loans increased $404.2 million compared to the prior quarter. During the current quarter, the Company sold certain fixed rate personal real estate loans totaling $2.4 million, compared to $16.7 million in the prior quarter.

Total average available for sale debt securities decreased $1.1 billion compared to the previous quarter to $12.4 billion, at fair value. The decrease in investment securities was mainly the result of lower balances of mortgage-backed and other asset-backed securities. During the current quarter, purchases of securities totaled $145.3 million with a weighted average yield of approximately 5.05%. Maturities and pay downs were $573.2 million. At December 31, 2022, the duration of the investment portfolio was 3.7 years, and maturities and pay downs of approximately $2.4 billion are expected to occur during the next 12 months.

Total average deposits decreased $1.1 billion this quarter compared to the previous quarter. The decrease in deposits mostly resulted from lower demand deposits and interest checking and money market deposits of $397.5 million and $729.7 million, respectively. Compared to the previous quarter, total average commercial, consumer, and wealth deposits declined $554.3 million, $426.7 million, and $162.0 million, respectively. The average loans to deposits ratio was 59.7% in the current quarter and 56.4% in the prior quarter. The Company’s average borrowings, which include customer repurchase agreements, were $2.6 billion in the 4th quarter of 2022 and $2.3 billion in the prior quarter.

Net Interest Income

Net interest income in the 4th quarter of 2022 amounted to $254.6 million, an increase of $8.3 million compared to the previous quarter. On a fully taxable-equivalent (FTE) basis, net interest income for the current quarter increased $7.9 million over the previous quarter to $256.7 million. The increase in net interest income was due to higher interest earned on loans, partly offset by lower interest earned on investment securities and higher interest expense. The net yield (FTE) on earning assets increased to 3.18%, compared to 3.01% in the prior quarter.

Compared to the previous quarter, interest income on loans (FTE) increased $29.2 million, mostly due to higher average rates on business, business real estate, construction, and consumer loans. The average yield (FTE) on the loan portfolio increased 66 basis points to 5.03% this quarter.

Interest income on investment securities (FTE) decreased $7.0 million compared to the prior quarter, due to lower rates earned, coupled with lower average balances. Interest income earned on U.S. government and federal agency securities decreased due to lower rates earned, which included the impact of $6.9 million in lower inflation income from Treasury inflation-protected securities this quarter. At December 31, 2022, the Company recorded a $1.1 million adjustment to premium amortization, which decreased interest income to reflect faster forward prepayment speed estimates on mortgage-backed securities. The average yield (FTE) on total investment securities was 2.07% in the current quarter, compared to 2.18% in the previous quarter.

The average rate paid on interest bearing deposits totaled .40% in the current quarter compared to .21% in the prior quarter. Interest expense on deposits increased $7.5 million this quarter compared to the previous quarter, while interest expense on securities sold under agreements to repurchase increased $5.5 million, due to a 92 basis point increase in the average rate paid. The overall rate paid on interest bearing liabilities was .69% in the current quarter compared to .34% in the prior quarter.

Non-Interest Income

In the 4th quarter of 2022, total non-interest income amounted to $136.8 million, a decrease of $10.9 million compared to the same period last year and decreased $1.7 million compared to the prior quarter. The decrease in non-interest income compared to the same period last year was mainly due to lower trust fees, deposit account fees, and loan fees and sales, partly offset by higher sweep fees. The decrease in non-interest income compared to the prior quarter was mainly due to lower deposit account fees and bank card fees. These decreases were partly offset by a $2.5 million increase in fair value adjustments on the Company’s deferred compensation plan assets, which are held in a trust and recorded as both an asset and liability, affecting both other income and other expense.

Total net bank card fees in the current quarter decreased $185 thousand, or .4%, compared to the same period last year, and decreased $1.1 million compared to the prior quarter. Net corporate card fees increased $269 thousand, or 1.1%, over the same quarter of last year mainly due to higher interchange fee income, partly offset by higher rewards expense. Net debit card fees decreased $361 thousand, or 3.4%, and net credit card fees decreased $226 thousand, or 6.0%, while net merchant fees increased $133 thousand, or 2.5%. Total net bank card fees this quarter were comprised of fees on corporate card ($25.2 million), debit card ($10.4 million), merchant ($5.5 million) and credit card ($3.5 million) transactions.

In the current quarter, trust fees decreased $4.2 million, or 8.6%, from the same period last year, resulting from lower private client and institutional trust fees. Compared to the same period last year, deposit account fees decreased $3.5 million, or 13.7%, mainly due to lower overdraft and return item fees of $4.1 million. In September 2022, enhancements were made to consumer checking accounts that eliminated return item fees and lowered overdraft fees. Loan fees and sales declined $2.7 million, or 51.1%, compared to amounts recorded in the same quarter last year, mostly due to lower mortgage banking revenue.

Other non-interest income increased over the same period last year primarily due to higher sweep fees of $3.0 million, partly offset by lower gains on asset sales of $2.3 million. A $1.0 million gain on the sale of real estate was recorded this quarter, but it was lower than the $3.7 million gain on the sale of real estate recorded in the 4th quarter of 2021. For the 4th quarter of 2022, non-interest income comprised 35.0% of the Company’s total revenue.

Investment Securities Gains and Losses

The Company recorded net securities gains of $8.9 million in the current quarter, compared to gains of $3.4 million in the prior quarter and losses of $9.7 million in the 4th quarter of 2021. In the current quarter, the Company's private equity investment portfolio had net fair value gains and a gain on the sale of an investment of $6.7 million and $1.6 million, respectively.

Non-Interest Expense

Non-interest expense for the current quarter amounted to $216.7 million, compared to $203.6 million in the same period last year and $212.9 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 expense, data processing and software expense, miscellaneous losses, and travel and entertainment expense. The increase in non-interest expense compared to the prior quarter was mainly due to higher salaries and employee benefits expense, legal and professional fees expense, and the deferred compensation adjustment mentioned above, partly offset by lower marketing and occupancy expense.

Compared to the 4th quarter of last year, salaries and employee benefits expense increased $5.8 million, mostly due to higher full-time salaries expense, of $4.1 million, or 4.7%, and higher employee benefits expense of $1.3 million. Full-time equivalent employees totaled 4,594 and 4,567 at December 31, 2022 and 2021, respectively.

Compared to the same period last year, data processing and software expense increased $2.2 million due to higher software expense, bank card processing fees and increased costs for service providers. Other non-interest expense increased $5.3 million, mostly due to increases in miscellaneous losses, travel and entertainment, insurance, and professional fees expense of $1.6 million, $1.2 million, $742 thousand, and $507 thousand, respectively.

Income Taxes

The effective tax rate for the Company was 20.8% in the current quarter, 21.6% in the previous quarter, and 22.7% in the 4th quarter of 2021.

Credit Quality

Net loan charge-offs in the 4th quarter of 2022 amounted to $5.6 million, compared to $4.8 million in the prior quarter and $4.3 million in the same period last year. The ratio of annualized net loan charge-offs to total average loans was .14% in the current quarter, .12% in the previous quarter, and .11% in the 4th quarter of last year. Net loan charge-offs on personal banking loans increased $794 thousand to $5.2 million, mainly due to higher consumer and consumer credit card loan net charge-offs.

In the 4th quarter of 2022, annualized net loan charge-offs on average consumer credit card loans were 2.46%, compared to 2.08% in the previous quarter, and 2.10% in the same quarter last year. Consumer loan net charge-offs were .29% of average consumer loans in the current quarter, .16% in the prior quarter, and .18% in the same quarter last year.

At December 31, 2022, the allowance for credit losses on loans totaled $150.1 million, or .92% of total loans, and increased $6.8 million compared to the prior quarter. Additionally, the liability for unfunded lending commitments at December 31, 2022 was $33.1 million, an increase of $3.1 million compared to the liability at September 30, 2022.

At December 31, 2022, total non-accrual loans amounted to $8.3 million, an increase of $1.1 million over the previous quarter. At December 31, 2022, the balance of non-accrual loans, which represented .05% of loans outstanding, included business loans of $6.8 million, personal real estate loans of $1.4 million, and business real estate loans of $189 thousand. Loans more than 90 days past due and still accruing interest totaled $15.8 million at December 31, 2022.

Other

During the 4th quarter of 2022, 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 6.0% increase over the same period last year. The Company purchased 332,178 shares of treasury stock during the current quarter at an average price of $70.15.

Forward Looking Information

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

Contacts

Matt Burkemper, Investor Relations
(314) 746-7485
www.commercebank.com
matthew.burkemper@commercebank.com

Contacts

Matt Burkemper, Investor Relations
(314) 746-7485
www.commercebank.com
matthew.burkemper@commercebank.com