1000 Walnut Street / Suite 700 / Kansas City, Missouri 64106 / 816.234.2000
FOR IMMEDIATE RELEASE:
Thursday, January 18, 2024
COMMERCE BANCSHARES, INC. REPORTS
FOURTH QUARTER EARNINGS PER SHARE OF $.84
Commerce Bancshares, Inc. announced earnings of $.84 per share for the three months ended December 31, 2023, compared to $1.00 per share in the same quarter last year and $.92 per share in the third quarter of 2023. Net income for the fourth quarter of 2023 amounted to $109.2 million, compared to $131.6 million in the fourth quarter of 2022 and $120.6 million in the prior quarter.
“We are pleased with our fourth quarter results," said John Kemper, President and Chief Executive Officer. “These results reflect the strength of our core deposit base, the impact of higher earning asset yields, and the contribution from key non-interest income categories, notably trust, bank card and deposit fees. Net interest income was generally flat to the previous quarter, while the net interest margin expanded six basis points. Non-interest income comprised 36.8% of total revenue. Our results included a one-time FDIC special assessment of $16 million.
“On the balance sheet,” Kemper added, “the final tranches of FHLB advances and brokered deposits matured during the quarter as planned. More than offsetting these brokered deposit maturities, we saw deposit growth across our three business segments of $674 million, resulting in a period end net deposit increase of $273 million.
“We continue to maintain ample levels of liquidity and capital, which positions us well moving into 2024. Book value per share increased 14.4% during the quarter as interest rates declined. Credit quality of the loan portfolio remains strong with non-accrual loans at .04% of total loans, down one basis point from the previous quarter and prior year.”
Fourth Quarter 2023 Financial Highlights:
•Net interest income was $248.4 million, a $126 thousand decrease from the prior quarter. The net yield on interest earning assets increased 6 basis points to 3.17%.
•Non-interest income totaled $144.9 million, an increase of $8.1 million compared to the same quarter last year.
•Non-interest expense totaled $251.3 million, an increase of $34.5 million compared to the same quarter last year, mostly due to a $16.0 million accrual for a one-time FDIC insurance special assessment.
•Average loan balances totaled $17.1 billion, an increase of $89.8 million, or .5%, over the prior quarter.
1
Exhibit 99.1
•Total average available for sale debt securities decreased 6.2%, or $633.9 million, from the prior quarter to $9.6 billion, at fair value. During the fourth quarter of 2023, the unrealized loss on available for sale debt securities decreased $376.5 million to $1.2 billion, at period end.
•Total average deposits decreased $356.2 million, or 1.4%, compared to the prior quarter, which reflected a payoff of the last tranche of brokered deposits issued during 2023. The average rate paid on interest bearing deposits in the current quarter was 1.93%.
•The ratio of annualized net loan charge-offs to average loans was .19% compared to .23% in the prior quarter.
•The allowance for credit losses on loans increased $151 thousand during the fourth quarter to $162.4 million, and the ratio of the allowance for credit losses on loans to total loans was .94% at December 31, 2023, compared to .95% at September 30, 2023.
•Total assets at December 31, 2023 were $31.7 billion, an increase of $324.4 million, or 1.0%, over the prior quarter.
•For the quarter, the return on average assets was 1.38%, the return on average equity was 16.48%, and the efficiency ratio was 63.8%.
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 nearly 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.
* * * * * * * * * * * * * * *
For additional information, contact
Matt Burkemper, Investor Relations
(314) 746-7485
www.commercebank.com
matthew.burkemper@commercebank.com
2
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)
Dec. 31, 2023
Sep. 30, 2023
Dec. 31, 2022
Dec. 31, 2023
Dec. 31, 2022
FINANCIAL SUMMARY
Net interest income
$248,421
$248,547
$254,641
$998,129
$942,185
Non-interest income
144,879
142,949
136,825
573,045
546,535
Total revenue
393,300
391,496
391,466
1,571,174
1,488,720
Investment securities gains (losses)
7,601
4,298
8,904
14,985
20,506
Provision for credit losses
5,879
11,645
15,477
35,451
28,071
Non-interest expense
251,254
228,010
216,740
930,982
848,777
Income before taxes
143,768
156,139
168,153
619,726
632,378
Income taxes
32,307
33,439
34,499
134,549
132,358
Non-controlling interest expense
2,238
2,104
2,026
8,117
11,621
Net income attributable to Commerce Bancshares, Inc.
$109,223
$120,596
$131,628
$477,060
$488,399
Earnings per common share:
Net income — basic
$0.84
$0.92
$1.00
$3.64
$3.68
Net income — diluted
$0.84
$0.92
$1.00
$3.64
$3.67
Effective tax rate
22.83
%
21.71
%
20.77
%
22.00
%
21.32
%
Fully-taxable equivalent net interest income
$250,547
$250,962
$256,675
$1,006,677
$951,815
Average total interest earning assets (1)
$31,340,958
$31,974,945
$31,991,224
$
31,823,935
$33,384,162
Diluted wtd. average shares outstanding
129,608,322
130,008,840
130,818,789
130,071,644
131,838,406
RATIOS
Average loans to deposits (2)
67.69
%
66.39
%
59.73
%
66.31
%
55.41
%
Return on total average assets
1.38
1.49
1.65
1.49
1.45
Return on average equity (3)
16.48
17.73
21.88
17.94
17.31
Non-interest income to total revenue
36.84
36.51
34.95
36.47
36.71
Efficiency ratio (4)
63.80
58.15
55.26
59.17
56.90
Net yield on interest earning assets
3.17
3.11
3.18
3.16
2.85
EQUITY SUMMARY
Cash dividends per share
$.257
$.257
$.240
$1.029
$.961
Cash dividends on common stock
$33,574
$33,657
$31,648
$134,734
$127,466
Book value per share (5)
$22.77
$19.90
$18.90
Market value per share (5)
$53.41
$45.70
$64.83
High market value per share
$56.75
$52.37
$69.14
Low market value per share
$40.91
$44.10
$60.16
Common shares outstanding (5)
130,176,048
130,586,153
131,249,055
Tangible common equity to tangible assets (6)
8.85
%
7.78
%
7.32
%
Tier I leverage ratio
11.25
%
10.87
%
10.34
%
OTHER QTD INFORMATION
Number of bank/ATM locations
257
266
275
Full-time equivalent employees
4,718
4,714
4,594
(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 a non-gaap ratio and 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 2023.
3
Exhibit 99.1
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, 2023
Sep. 30, 2023
Jun. 30, 2023
Mar. 31, 2023
Dec. 31, 2022
Dec. 31, 2023
Dec. 31, 2022
Interest income
$362,609
$361,162
$348,663
$308,857
$286,377
$1,381,291
$998,979
Interest expense
114,188
112,615
99,125
57,234
31,736
383,162
56,794
Net interest income
248,421
248,547
249,538
251,623
254,641
998,129
942,185
Provision for credit losses
5,879
11,645
6,471
11,456
15,477
35,451
28,071
Net interest income after credit losses
242,542
236,902
243,067
240,167
239,164
962,678
914,114
NON-INTEREST INCOME
Trust fees
49,154
49,207
47,265
45,328
44,710
190,954
184,719
Bank card transaction fees
47,878
46,899
49,725
46,654
44,588
191,156
176,144
Deposit account charges and other fees
23,517
23,090
22,633
21,752
21,989
90,992
94,381
Consumer brokerage services
3,641
3,820
4,677
5,085
4,518
17,223
19,117
Capital market fees
4,269
3,524
2,945
3,362
3,386
14,100
14,231
Loan fees and sales
2,875
2,966
2,735
2,589
2,566
11,165
13,141
Other
13,545
13,443
17,625
12,842
15,068
57,455
44,802
Total non-interest income
144,879
142,949
147,605
137,612
136,825
573,045
546,535
INVESTMENT SECURITIES GAINS (LOSSES), NET
7,601
4,298
3,392
(306)
8,904
14,985
20,506
NON-INTEREST EXPENSE
Salaries and employee benefits
147,456
146,805
145,429
144,373
138,458
584,063
554,047
Data processing and software
31,141
30,744
28,719
28,154
27,991
118,758
110,692
Net occupancy
13,927
13,948
12,995
12,759
11,774
53,629
49,117
Deposit insurance
20,304
4,029
4,187
4,643
3,153
33,163
10,583
Marketing
6,505
6,167
6,368
5,471
5,419
24,511
23,827
Equipment
5,137
4,697
4,864
4,850
5,021
19,548
19,359
Supplies and communication
5,242
4,963
4,625
4,590
4,446
19,420
18,101
Other
21,542
16,657
20,424
19,267
20,478
77,890
63,051
Total non-interest expense
251,254
228,010
227,611
224,107
216,740
930,982
848,777
Income before income taxes
143,768
156,139
166,453
153,366
168,153
619,726
632,378
Less income taxes
32,307
33,439
35,990
32,813
34,499
134,549
132,358
Net income
111,461
122,700
130,463
120,553
133,654
485,177
500,020
Less non-controlling interest expense (income)
2,238
2,104
2,674
1,101
2,026
8,117
11,621
Net income attributable to Commerce Bancshares, Inc.
$109,223
$120,596
$127,789
$119,452
$131,628
$477,060
$488,399
Net income per common share — basic
$0.84
$0.92
$0.97
$0.91
$1.00
$3.64
$3.68
Net income per common share — diluted
$0.84
$0.92
$0.97
$0.91
$1.00
$3.64
$3.67
OTHER INFORMATION
Return on total average assets
1.38
%
1.49
%
1.56
%
1.54
%
1.65
%
1.49
%
1.45
%
Return on average equity (1)
16.48
17.73
18.81
18.75
21.88
17.94
17.31
Efficiency ratio (2)
63.80
58.15
57.22
57.49
55.26
59.17
56.90
Effective tax rate
22.83
21.71
21.97
21.55
20.77
22.00
21.32
Net yield on interest earning assets
3.17
3.11
3.12
3.26
3.18
3.16
2.85
Fully-taxable equivalent net interest income
$250,547
$250,962
$251,757
$253,411
$256,675
$1,006,677
$951,815
(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.
The statement above reflects the reclassification of non-interest income of $406 thousand and $1.1 million from other non-interest income to capital market fees for the second and third quarters of 2023.
4
Exhibit 99.1
COMMERCE BANCSHARES, INC. and SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS - PERIOD END
(Unaudited) (In thousands)
Dec. 31, 2023
Sep. 30, 2023
Dec. 31, 2022
ASSETS
Loans
Business
$
6,019,036
$
5,908,330
$
5,661,725
Real estate — construction and land
1,446,764
1,539,566
1,361,095
Real estate — business
3,719,306
3,647,168
3,406,981
Real estate — personal
3,026,041
3,024,639
2,918,078
Consumer
2,077,723
2,125,804
2,059,088
Revolving home equity
319,894
305,237
297,207
Consumer credit card
589,913
574,829
584,000
Overdrafts
6,802
3,753
14,957
Total loans
17,205,479
17,129,326
16,303,131
Allowance for credit losses on loans
(162,395)
(162,244)
(150,136)
Net loans
17,043,084
16,967,082
16,152,995
Loans held for sale
4,177
5,120
4,964
Investment securities:
Available for sale debt securities
9,684,760
9,860,828
12,238,316
Trading debt securities
28,830
35,564
43,523
Equity securities
12,701
12,212
12,304
Other securities
222,473
230,792
225,034
Total investment securities
9,948,764
10,139,396
12,519,177
Federal funds sold
5,025
2,735
49,505
Securities purchased under agreements to resell
450,000
450,000
825,000
Interest earning deposits with banks
2,239,010
1,847,641
389,140
Cash and due from banks
443,147
358,010
452,496
Premises and equipment — net
469,059
460,830
418,909
Goodwill
146,539
146,539
138,921
Other intangible assets — net
14,179
14,432
15,234
Other assets
938,077
984,907
909,590
Total assets
$
31,701,061
$
31,376,692
$
31,875,931
LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits:
Non-interest bearing
$
7,975,935
$
7,961,402
$
10,066,356
Savings, interest checking and money market
14,512,273
14,154,275
15,126,981
Certificates of deposit of less than $100,000
930,432
1,210,169
387,336
Certificates of deposit of $100,000 and over
1,945,258
1,764,611
606,767
Total deposits
25,363,898
25,090,457
26,187,440
Federal funds purchased and securities sold under agreements to repurchase
2,908,815
2,745,181
2,841,734
Other borrowings
1,404
503,589
9,672
Other liabilities
462,714
438,199
355,508
Total liabilities
28,736,831
28,777,426
29,394,354
Stockholders’ equity:
Common stock
655,322
629,319
629,319
Capital surplus
3,162,622
2,924,211
2,932,959
Retained earnings
53,183
298,297
31,620
Treasury stock
(35,599)
(76,888)
(41,743)
Accumulated other comprehensive income (loss)
(891,412)
(1,193,534)
(1,086,864)
Total stockholders’ equity
2,944,116
2,581,405
2,465,291
Non-controlling interest
20,114
17,861
16,286
Total equity
2,964,230
2,599,266
2,481,577
Total liabilities and equity
$
31,701,061
$
31,376,692
$
31,875,931
5
Exhibit 99.1
COMMERCE BANCSHARES, INC. and SUBSIDIARIES
AVERAGE BALANCE SHEETS
(Unaudited) (In thousands)
For the Three Months Ended
Dec. 31, 2023
Sep. 30, 2023
Jun. 30, 2023
Mar. 31, 2023
Dec. 31, 2022
ASSETS:
Loans:
Business
$
5,861,229
$
5,849,227
$
5,757,388
$
5,656,104
$
5,478,241
Real estate — construction and land
1,523,682
1,508,850
1,450,196
1,410,835
1,268,900
Real estate — business
3,644,589
3,642,010
3,540,851
3,478,382
3,300,697
Real estate — personal
3,027,664
2,992,500
2,960,962
2,933,750
2,886,686
Consumer
2,117,268
2,102,281
2,098,523
2,067,385
2,089,912
Revolving home equity
310,282
304,055
300,623
296,748
293,681
Consumer credit card
568,112
564,039
555,875
556,223
559,463
Overdrafts
5,258
5,341
4,630
4,449
7,428
Total loans
17,058,084
16,968,303
16,669,048
16,403,876
15,885,008
Allowance for credit losses on loans
(161,932)
(158,335)
(159,068)
(150,117)
(143,285)
Net loans
16,896,152
16,809,968
16,509,980
16,253,759
15,741,723
Loans held for sale
5,392
5,714
5,957
5,708
6,567
Investment securities:
U.S. government and federal agency obligations
889,390
986,284
1,035,651
1,099,067
1,055,602
Government-sponsored enterprise obligations
55,661
55,676
55,751
87,086
55,732
State and municipal obligations
1,363,649
1,391,541
1,532,519
1,793,756
1,990,643
Mortgage-backed securities
6,022,502
6,161,348
6,316,224
6,454,408
6,605,936
Asset-backed securities
2,325,089
2,553,562
2,827,911
3,233,757
3,714,092
Other debt securities
510,721
514,787
519,988
528,941
560,951
Unrealized gain (loss) on debt securities
(1,595,845)
(1,458,141)
(1,331,002)
(1,387,196)
(1,582,061)
Total available for sale debt securities
9,571,167
10,205,057
10,957,042
11,809,819
12,400,895
Trading debt securities
37,234
35,044
46,493
45,757
44,626
Equity securities
12,249
12,230
12,335
12,458
10,534
Other securities
222,378
237,518
273,587
229,867
219,354
Total investment securities
9,843,028
10,489,849
11,289,457
12,097,901
12,675,409
Federal funds sold
1,194
2,722
7,484
38,978
27,683
Securities purchased under agreements to resell
450,000
712,472
824,974
825,000
1,174,457
Interest earning deposits with banks
2,387,415
2,337,744
2,284,162
809,935
640,039
Other assets
1,797,849
1,750,222
1,941,340
1,376,551
1,339,554
Total assets
$
31,381,030
$
32,108,691
$
32,863,354
$
31,407,832
$
31,605,432
LIABILITIES AND EQUITY:
Non-interest bearing deposits
$
7,748,654
$
7,939,190
$
8,224,475
$
9,114,512
$
10,360,834
Savings
1,357,733
1,436,149
1,516,887
1,550,215
1,567,113
Interest checking and money market
13,166,783
13,048,199
12,918,399
13,265,485
13,693,974
Certificates of deposit of less than $100,000
1,097,224
1,423,965
1,075,110
415,367
388,304
Certificates of deposit of $100,000 and over
1,839,057
1,718,126
1,472,208
903,393
596,703
Total deposits
25,209,451
25,565,629
25,207,079
25,248,972
26,606,928
Borrowings:
Federal funds purchased
473,534
508,851
507,165
493,721
143,630
Securities sold under agreements to repurchase
2,467,118
2,283,020
2,206,612
2,418,726
2,260,263
Other borrowings
179,587
685,222
1,617,952
551,267
179,552
Total borrowings
3,120,239
3,477,093
4,331,729
3,463,714
2,583,445
Other liabilities
421,402
367,741
598,915
112,052
28,745
Total liabilities
28,751,092
29,410,463
30,137,723
28,824,738
29,219,118
Equity
2,629,938
2,698,228
2,725,631
2,583,094
2,386,314
Total liabilities and equity
$
31,381,030
$
32,108,691
$
32,863,354
$
31,407,832
$
31,605,432
6
Exhibit 99.1
COMMERCE BANCSHARES, INC. and SUBSIDIARIES
AVERAGE RATES
(Unaudited)
For the Three Months Ended
Dec. 31, 2023
Sep. 30, 2023
Jun. 30, 2023
Mar. 31, 2023
Dec. 31, 2022
ASSETS:
Loans:
Business (1)
5.91
%
5.77
%
5.58
%
5.31
%
4.68
%
Real estate — construction and land
8.34
8.17
7.92
7.33
6.80
Real estate — business
6.18
6.13
5.96
5.65
5.15
Real estate — personal
3.85
3.73
3.68
3.61
3.45
Consumer
6.21
5.97
5.63
5.31
4.77
Revolving home equity
7.70
7.76
7.55
7.03
5.89
Consumer credit card
13.83
13.77
13.77
13.68
12.64
Overdrafts
—
—
—
—
—
Total loans
6.15
6.02
5.84
5.56
5.03
Loans held for sale
9.93
10.55
10.17
10.30
10.09
Investment securities:
U.S. government and federal agency obligations
2.32
2.31
3.42
1.90
2.01
Government-sponsored enterprise obligations
2.36
2.36
2.38
3.21
2.36
State and municipal obligations (1)
1.94
1.95
2.04
2.26
2.29
Mortgage-backed securities
2.05
2.06
2.09
2.06
1.88
Asset-backed securities
2.30
2.20
2.08
2.01
1.96
Other debt securities
1.85
1.75
1.86
1.93
1.89
Total available for sale debt securities
2.10
2.08
2.19
2.07
1.97
Trading debt securities (1)
5.05
5.11
4.53
4.59
3.81
Equity securities (1)
27.47
23.06
23.25
23.24
28.44
Other securities (1)
8.60
13.13
9.40
7.11
6.67
Total investment securities
2.27
2.33
2.37
2.18
2.07
Federal funds sold
6.65
6.56
5.63
5.09
4.27
Securities purchased under agreements to resell
1.64
2.08
1.99
1.94
2.36
Interest earning deposits with banks
5.47
5.39
5.14
4.67
3.69
Total interest earning assets
4.62
4.51
4.34
4.00
3.59
LIABILITIES AND EQUITY:
Interest bearing deposits:
Savings
.05
.05
.05
.05
.06
Interest checking and money market
1.57
1.33
.93
.61
.38
Certificates of deposit of less than $100,000
4.21
4.32
3.78
1.39
.73
Certificates of deposit of $100,000 and over
4.55
4.37
3.93
2.98
1.42
Total interest bearing deposits
1.93
1.76
1.29
.71
.40
Borrowings:
Federal funds purchased
5.40
5.33
5.06
4.59
3.56
Securities sold under agreements to repurchase
3.25
3.20
3.09
2.93
2.29
Other borrowings
5.45
5.30
5.24
4.94
4.02
Total borrowings
3.71
3.93
4.13
3.49
2.48
Total interest bearing liabilities
2.20
%
2.12
%
1.87
%
1.20
%
.69
%
Net yield on interest earning assets
3.17
%
3.11
%
3.12
%
3.26
%
3.18
%
(1) Stated on a fully taxable-equivalent basis using a federal income tax rate of 21%.
7
Exhibit 99.1
COMMERCE BANCSHARES, INC. and SUBSIDIARIES
CREDIT QUALITY
For the Three Months Ended
For the Year Ended
(Unaudited) (In thousands, except ratios)
Dec. 31, 2023
Sep. 30, 2023
Jun. 30, 2023
Mar. 31, 2023
Dec. 31, 2022
Dec. 31, 2023
Dec. 31, 2022
ALLOWANCE FOR CREDIT LOSSES ON LOANS
Balance at beginning of period
$162,244
$158,685
$159,317
$150,136
$143,377
$150,136
$150,044
Provision for credit losses on loans
8,170
13,343
5,864
15,948
12,404
43,325
19,155
Net charge-offs (recoveries):
Commercial portfolio:
Business
96
2,613
165
230
496
3,104
1,053
Real estate — construction and land
—
—
(115)
—
—
(115)
—
Real estate — business
128
(15)
(5)
(4)
(4)
104
(20)
224
2,598
45
226
492
3,093
1,033
Personal banking portfolio:
Consumer credit card
5,325
4,716
4,687
4,325
3,467
19,053
12,658
Consumer
1,903
1,797
1,273
1,275
1,522
6,248
3,790
Overdraft
588
683
517
978
230
2,766
1,716
Real estate — personal
(11)
(9)
(6)
(11)
(40)
(37)
(74)
Revolving home equity
(10)
(1)
(20)
(26)
(26)
(57)
(60)
7,795
7,186
6,451
6,541
5,153
27,973
18,030
Total net loan charge-offs
8,019
9,784
6,496
6,767
5,645
31,066
19,063
Balance at end of period
$162,395
$162,244
$158,685
$159,317
$150,136
$162,395
$150,136
LIABILITY FOR UNFUNDED LENDING COMMITMENTS
$25,246
$27,537
$29,235
$28,628
$33,120
NET CHARGE-OFF RATIOS (1)
Commercial portfolio:
Business
.01
%
.18
%
.01
%
.02
%
.04
%
.05
%
.02
%
Real estate — construction and land
—
—
(.03)
—
—
(.01)
—
Real estate — business
.01
—
—
—
—
—
—
.01
.09
—
.01
.02
.03
.01
Personal banking portfolio:
Consumer credit card
3.72
3.32
3.38
3.15
2.46
3.40
2.31
Consumer
.36
.34
.24
.25
.29
.30
.18
Overdraft
44.37
50.73
44.79
89.15
12.28
56.19
30.40
Real estate — personal
—
—
—
—
(.01)
—
—
Revolving home equity
(.01)
—
(.03)
(.04)
(.04)
(.02)
(.02)
.51
.48
.44
.45
.35
.47
.31
Total
.19
%
.23
%
.16
%
.17
%
.14
%
.19
%
.12
%
CREDIT QUALITY RATIOS
Non-accrual loans to total loans
.04
%
.05
%
.04
%
.05
%
.05
%
Allowance for credit losses on loans to total loans
.94
.95
.94
.96
.92
NON-ACCRUAL AND PAST DUE LOANS
Non-accrual loans:
Business
$3,622
$6,602
$4,732
$6,361
$6,751
Real estate — business
60
76
153
171
189
Real estate — personal
1,653
1,531
1,276
1,269
1,366
Revolving home equity
1,977
—
—
—
—
Total
7,312
8,209
6,161
7,801
8,306
Loans past due 90 days and still accruing interest
$21,864
$18,580
$15,351
$14,800
$15,830
(1) Net charge-offs are annualized and calculated as a percentage of average loans (excluding loans held for sale).
8
Exhibit 99.1
COMMERCE BANCSHARES, INC.
Management Discussion of Fourth Quarter Results
December 31, 2023
For the quarter ended December 31, 2023, net income amounted to $109.2 million, compared to $120.6 million in the previous quarter and $131.6 million in the same quarter last year. The decrease in net income compared to the previous quarter was primarily the result of higher non-interest expense, partly offset by lower provision for credit losses and higher net gains on investment securities. The net yield on interest earning assets increased six basis points from the previous quarter to 3.17%. Average loans grew $89.8 million compared to the previous quarter, while average deposits, borrowings and available for sale debt securities, at fair value, declined $356.2 million, $356.9 million, and $633.9 million, respectively. For the quarter, the return on average assets was 1.38%, the return on average equity was 16.48%, and the efficiency ratio was 63.8%.
Balance Sheet Review
During the 4th quarter of 2023, average loans totaled $17.1 billion, an increase of $89.8 million over the prior quarter, and $1.2 billion, or 7.4%, over the same quarter last year. Compared to the previous quarter, average balances of personal real estate, consumer, construction, and business loans grew $35.2 million, $15.0 million, $14.8 million, and $12.0 million, respectively. During the current quarter, the Company sold certain fixed rate personal real estate loans totaling $8.7 million, compared to $9.2 million in the prior quarter.
Total average available for sale debt securities decreased $633.9 million compared to the previous quarter to $9.6 billion, at fair value. The decrease in investment securities was mainly the result of lower average balances of asset-backed, mortgage-backed, and U.S. government and federal agency obligation securities. During the 4th quarter of 2023, the unrealized loss on available for sale securities decreased $376.5 million to $1.2 billion, at period end, and maturities and pay downs were $598.7 million. At December 31, 2023, the duration of the available for sale investment portfolio was 4.1 years. The Company does not have any investment securities classified as held-to-maturity.
Total average deposits decreased $356.2 million this quarter compared to the previous quarter. The decrease in deposits mostly resulted from lower certificates of deposit, demand deposits, and savings average deposits of $205.8 million, $190.5 million, and $78.4 million, respectively, partly offset by higher interest checking and money market average deposits of $118.6 million. Compared to the previous quarter, total average commercial and wealth deposits increased $93.4 million and $23.0 million, respectively, while consumer deposits declined $5.9 million. During the 4th quarter, the Company paid off its final tranche of brokered deposits, which decreased average certificate of deposit balances by $471.3 million compared to the prior quarter. The average loans to deposits ratio was 67.7% in the current quarter and 66.4% in the prior quarter. The
Company’s average borrowings, which included customer repurchase agreements of $2.5 billion, decreased $356.9 million to $3.1 billion in the 4th quarter of 2023, mostly due to a decline of $505.4 million in Federal Home Loan Bank (FHLB) borrowings.
Net Interest Income
Net interest income in the 4th quarter of 2023 amounted to $248.4 million, a decrease of $126 thousand compared to the previous quarter. On a fully taxable-equivalent (FTE) basis, net interest income for the current quarter decreased $415 thousand from the previous quarter to $250.5 million. The decrease in net interest income was mostly due to higher interest expense on deposits and lower interest income on investment securities, partly offset by higher interest earned on loans and lower interest expense on borrowings. The net yield (FTE) on earning assets increased to 3.17%, from 3.11% in the prior quarter.
Compared to the previous quarter, interest income on loans (FTE) increased $6.8 million, due to higher average rates earned in most loan categories, coupled with higher average balances in almost all loan categories. The average yield (FTE) on the loan portfolio increased 13 basis points to 6.15% this quarter.
Interest income on investment securities (FTE) decreased $4.9 million compared to the prior quarter, mostly due to lower average balances of available for sale securities and a $2.3 million dividend from a private equity investment in the prior quarter that did not repeat in the current quarter. Interest income earned on U.S. government and federal agency securities decreased due to lower average balances, which included the impact of $473 thousand in lower inflation income from Treasury inflation-protected securities this quarter. Additionally, the Company recorded a $629 thousand adjustment to premium amortization at December 31, 2023, which increased interest income to reflect slower forward prepayment speed estimates on mortgage-backed securities, but was lower than the $1.3 million adjustment that increased interest income in the prior quarter. The average yield (FTE) on total investment securities was 2.27% in the current quarter, compared to 2.33% in the previous quarter.
Compared to the previous quarter, interest income on deposits with banks increased $1.2 million, due to higher average rates earned and higher average balances. The average yield on deposits with banks was 5.47% in the current quarter, compared to 5.39% in the prior quarter.
Interest expense increased $1.6 million, mostly due to higher rates paid on deposits, partly offset by lower average balances of borrowings and deposits. The average rate paid on interest bearing deposits totaled 1.93% in the current quarter compared to 1.76%
9
Exhibit 99.1
COMMERCE BANCSHARES, INC.
Management Discussion of Fourth Quarter Results
December 31, 2023
in the prior quarter. Interest expense on deposits increased $6.9 million this quarter compared to the previous quarter. Interest expense on borrowings decreased $5.3 million, mostly due to a decline in average FHLB borrowings of $505.4 million. The overall rate paid on interest bearing liabilities was 2.20% in the current quarter compared to 2.12% in the prior quarter.
Non-Interest Income
In the 4th quarter of 2023, total non-interest income amounted to $144.9 million, an increase of $8.1 million compared to the same period last year and an increase of $1.9 million compared to the prior quarter. The increase in non-interest income compared to the same period last year was mainly due to higher trust fees, bank card fees, deposit account fees, and capital market fees, partly offset by lower consumer brokerage fees and lower gains on sales of real estate. The increase in non-interest income compared to the prior quarter was mainly due to higher bank card fees, capital market fees, deposit account fees, and sweep fees, partly offset by lower tax credit sales income, and lower gains on sales of real estate. Additionally, an increase of $2.3 million in fair value adjustments was recorded on the Company’s deferred compensation plan, 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 increased $3.3 million, or 7.4%, compared to the same period last year, and increased $979 thousand compared to the prior quarter. Net corporate card fees increased $2.3 million, or 9.3%, over the same quarter of last year mainly due to lower rewards and network expense. Net debit card fees increased $790 thousand, or 7.6%, mostly due to lower network expense. Net merchant fees increased $159 thousand, or 2.9%, due to higher interchange fees, while net credit card fees increased $3 thousand. Total net bank card fees this quarter were comprised of fees on corporate card ($27.6 million), debit card ($11.2 million), merchant ($5.6 million) and credit card ($3.5 million) transactions.
In the current quarter, trust fees increased $4.4 million, or 9.9%, over the same period last year, mostly resulting from higher private client trust fees. Compared to the same period last year, deposit account fees increased $1.5 million, or 6.9%, mostly due to higher corporate cash management fees. Capital market fees increased $883 thousand, or 26.1%, over the same period last year due to higher underwriting fees, while consumer brokerage fees decreased $877 thousand, or 19.4%.
Other non-interest income decreased compared to the same period last year primarily due to lower tax credit sales income of $1.0 million and lower gains on sales of real estate and other assets of $1.2 million. These decreases were partly offset by higher fair
value adjustments on the Company’s deferred compensation plan this quarter. For the 4th quarter of 2023, non-interest income comprised 36.8% of the Company’s total revenue.
Investment Securities Gains and Losses
The Company recorded net securities gains of $7.6 million in the current quarter, compared to gains of $4.3 million in the prior quarter and $8.9 million in the 4th quarter of 2022. Net securities gains in the current quarter primarily resulted from net fair value gains of $7.1 million on the Company’s portfolio of private equity investments.
Non-Interest Expense
Non-interest expense for the current quarter amounted to $251.3 million, compared to $216.7 million in the same period last year and $228.0 million in the prior quarter. The increase in non-interest expense compared to the same period last year was mainly due to higher FDIC insurance expense, salaries and employee benefits expense, data processing and software expense, and occupancy expense. The increase in non-interest expense compared to the prior quarter was mainly due to higher FDIC insurance expense.
Compared to the 4th quarter of last year, salaries and employee benefits expense increased $9.0 million, or 6.5%, mostly due to higher full-time salaries expense of $7.3 million and higher employee benefits expense of $2.0 million. Full-time equivalent employees totaled 4,718 and 4,594 at December 31, 2023 and 2022, respectively.
Compared to the same period last year, data processing and software expense increased $3.1 million due to higher bank card fees expense and increased costs for service providers. Occupancy expense increased $2.2 million mostly due to higher real estate taxes and depreciation expense, partly offset by higher rent income. FDIC insurance expense increased $17.2 million, mostly due to a $16.0 million accrual in the current quarter of a one-time special assessment by the FDIC to replenish the Deposit Insurance Fund.
Income Taxes
The effective tax rate for the Company was 22.8% in the current quarter, 21.7% in the previous quarter, and 20.8% in the 4th quarter of 2022. The increase in the effective tax rate compared to the prior quarter was mostly due to higher state and local income taxes. The increase in the effective tax rate compared to the same quarter last year was mostly due to higher state income taxes and lower tax-exempt income.
Credit Quality
Net loan charge-offs in the 4th quarter of 2023 amounted to $8.0 million, compared to $9.8 million in the prior quarter and $5.6 million in the same period last year. The ratio of annualized net loan charge-offs to total average loans was .19% in the current
10
Exhibit 99.1
COMMERCE BANCSHARES, INC.
Management Discussion of Fourth Quarter Results
December 31, 2023
quarter, .23% in the previous quarter, and .14% in the 4th quarter of last year. Compared to the prior quarter, net loan charge-offs on commercial loans decreased $2.4 million to $224 thousand, while net loan charge-offs on personal banking loans increased $609 thousand to $7.8 million, mainly due to $609 thousand of higher consumer credit card loan net charge-offs.
In the 4th quarter of 2023, annualized net loan charge-offs on average consumer credit card loans were 3.72%, compared to 3.32% in the previous quarter, and 2.46% in the same quarter last year. Consumer loan net charge-offs were .36% of average consumer loans in the current quarter, .34% in the prior quarter, and .29% in the same quarter last year.
At December 31, 2023, the allowance for credit losses on loans totaled $162.4 million, or .94% of total loans, and increased $151 thousand compared to the prior quarter. Additionally, the liability for unfunded lending commitments at December 31, 2023 was $25.2 million, a decrease of $2.3 million compared to the liability at September 30, 2023.
At December 31, 2023, total non-accrual loans amounted to $7.3 million, a decrease of $897 thousand compared to the previous quarter. At December 31, 2023, the balance of non-accrual loans, which represented .04% of loans outstanding, included business loans of $3.6 million, revolving home equity loans of $2.0 million, personal real estate loans of $1.7 million, and business real estate loans of $60 thousand. Loans more than 90 days past due and still accruing interest totaled $21.9 million at December 31, 2023.
Liquidity
During the 4th quarter of 2023, the Company increased its interest earning deposit at the Federal Reserve Bank (FRB) by $391.4 million to $2.2 billion. The change in the balance at the FRB was mostly the result of $598.7 million of maturities and paydowns in the available for sale debt securities portfolio, a $408.7 million increase in securities sold under agreements to repurchase, and a $273.4 million increase in total deposits, which includes a $401.0 million decrease in brokered certificates of deposit, partly offset by a $500.0 million decrease in FHLB advances and a $245.1 million decrease in federal funds purchased.
The Company regularly pledges loans and securities to the FRB and at December 31, 2023 and September 30, 2023, the Company’s pledging resulted in a total borrowing capacity of $4.9 billion and $5.0 billion, respectively. The Company did not have any borrowings from the FRB’s Discount Window or the Bank Term Funding Program during the current quarter. The Company also pledges loans and securities and borrows from the FHLB. At December 31, 2023, the Company did not have any outstanding
borrowings and had $1.9 billion of available borrowing capacity from the FHLB. Additionally, the Company pledges portions of its investment securities portfolio to secure public fund deposits, trust funds, and securities sold under agreements to repurchase.
The Company has an available for sale debt securities portfolio with a fair market value of $9.7 billion at December 31, 2023. Approximately $1.8 billion is expected to mature or pay down over the next 12 months. At December 31, 2023, the Company had pledged $7.5 billion of the securities portfolio. The Company also has a portfolio of $450.0 million in securities purchased under agreements to resell, of which $325.0 million are expected to mature over the next 12 months.
Other
During the 4th quarter of 2023, the Company distributed a 5% stock dividend on its common stock and paid a cash dividend of $.26 per common share (as restated for the stock dividend), representing a 7.1% increase over the same period last year. The Company purchased 412,921 shares of treasury stock during the current quarter at an average price of $48.84.
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.
