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: matthew.burkemper@commercebank.com
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.
