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Commerce Bancshares, Inc. Reports Second Quarter Earnings Per Share of $1.07

Commerce Bancshares, Inc. announced earnings of $1.07 per share for the three months ended June 30, 2024, compared to $.97 per share in the same quarter last year and $.86 per share in the first quarter of 2024. Net income for the second quarter of 2024 amounted to $139.6 million, compared to $127.8 million in the second quarter of 2023 and $112.7 million in the prior quarter.

For the six months ended June 30, 2024, earnings per share totaled $1.93, compared to $1.88 for the first six months of 2023. Net income amounted to $252.2 million for the six months ended June 30, 2024, compared to $247.2 million in the comparable period last year. For the year to date, the return on average assets was 1.67%, and the return on average equity was 16.98%.

In announcing these results, John Kemper, President and Chief Executive Officer, said, “Our earnings remained strong this quarter, driven by an expanding net interest margin, solid fee income, and well-controlled expenses. Our net interest margin expanded 22 basis points this quarter, attributable to a repositioning of some of our available for sale securities, continued benefit from asset repricing and inflation income on treasury bonds. Interest-bearing deposit costs continue to flatten, increasing just two basis points this quarter. Trust fees and deposit account fees were up 10.6% and 11.9%, respectively, over the same period last year.

“We continue to maintain strong capital and liquidity levels. Credit quality across our entire loan portfolio remains excellent, with non-accrual loans at just 11 basis points of total loans.”

Kemper added, “We are pleased to announce that the Company contributed $5.0 million to the Commerce Bancshares Foundation during the second quarter. This donation underscores our commitment to supporting and empowering the growth and prosperity of our communities. Through our contribution to the Foundation, we look forward to maintaining a lasting positive impact on the organizations who do so much for the areas we serve.”

Second Quarter 2024 Financial Highlights:

  • Net interest income was $262.2 million, a $13.3 million increase over the prior quarter. The net yield on interest earning assets increased 22 basis points to 3.55%.
  • Non-interest income totaled $152.2 million, an increase of $4.6 million compared to the same quarter last year.
  • Trust fees grew $5.0 million, or 10.6%, compared to the same period last year, mostly due to higher private client fees.
  • Non-interest expense totaled $232.2 million, an increase of $4.6 million, or 2.0%, compared to the same quarter last year and included a $5.0 million donation to a related charitable foundation.
  • Average loan balances totaled $17.2 billion, an increase of .6% compared to the prior quarter.
  • Total average available for sale debt securities decreased $695.1 million from the prior quarter to $8.8 billion, at fair value. During the second quarter of 2024, the unrealized loss on available for sale debt securities decreased $173.4 million to $1.1 billion, at period end.
  • Investment securities gains included a $177.0 million gain on Visa Inc. stock and a $179.1 million loss on the repositioning of a portion of the Company’s available for sale debt securities portfolio.
  • Total average deposits decreased $164.5 million, or .7%, compared to the prior quarter. The average rate paid on interest bearing deposits in the current quarter was 1.99%.
  • The ratio of annualized net loan charge-offs to average loans was .23% compared to .21% in the prior quarter.
  • The allowance for credit losses on loans decreased $1.9 million during the second quarter to $158.6 million, and the ratio of the allowance for credit losses on loans to total loans was .92%, at June 30, 2024, compared to .93% at March 31, 2024.
  • Total assets at June 30, 2024 were $30.6 billion, an increase of $197.3 million, or .6%, compared to the prior quarter.
  • For the quarter, the return on average assets was 1.86%, the return on average equity was 18.52%, and the efficiency ratio was 55.9%.

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. Beyond the Midwest, Commerce also maintains commercial offices in Dallas, Houston, Cincinnati, Nashville, Des Moines, Indianapolis, and Grand Rapids and wealth offices in Dallas, Houston, and Naples. Commerce delivers high-touch service and sophisticated financial solutions at regional branches, commercial and wealth 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 Six Months Ended

(Unaudited)

(Dollars in thousands, except per share data)

 

Jun. 30,

2024

Mar. 31,

2024

Jun. 30,

2023

Jun. 30,

2024

Jun. 30,

2023

FINANCIAL SUMMARY

 

 

Net interest income

 

$262,249

 

$248,999

 

$249,538

 

$511,248

 

$501,161

 

Non-interest income

 

152,244

 

148,848

 

147,605

 

301,092

 

285,217

 

Total revenue

 

414,493

 

397,847

 

397,143

 

812,340

 

786,378

 

Investment securities gains (losses)

 

3,233

 

(259

)

3,392

 

2,974

 

3,086

 

Provision for credit losses

 

5,468

 

4,787

 

6,471

 

10,255

 

17,927

 

Non-interest expense

 

232,214

 

245,697

 

227,611

 

477,911

 

451,718

 

Income before taxes

 

180,044

 

147,104

 

166,453

 

327,148

 

319,819

 

Income taxes

 

38,602

 

31,652

 

35,990

 

70,254

 

68,803

 

Non-controlling interest expense

 

1,889

 

2,789

 

2,674

 

4,678

 

3,775

 

Net income attributable to Commerce Bancshares, Inc.

$139,553

 

$112,663

 

$127,789

 

$252,216

 

$247,241

 

Earnings per common share:

 

 

 

 

 

 

Net income — basic

 

$1.07

 

$0.87

 

$0.97

 

$1.94

 

$1.88

 

Net income — diluted

 

$1.07

 

$0.86

 

$0.97

 

$1.93

 

$1.88

 

Effective tax rate

 

21.67

%

21.93

%

21.97

%

21.79

%

21.77

%

Fully-taxable equivalent net interest income

 

$264,578

 

$251,312

 

$251,757

 

$515,890

 

$505,168

 

Average total interest earning assets (1)

 

$30,016,060

 

$30,365,774

 

$32,412,084

 

$30,190,917

 

$31,992,669

 

Diluted wtd. average shares outstanding

 

128,610,693

 

129,185,903

 

130,207,664

 

128,898,298

 

130,339,067

 

 

 

 

 

 

 

 

RATIOS

 

 

 

 

 

 

Average loans to deposits (2)

 

70.73

%

69.87

%

66.15

%

70.30

%

65.57

%

Return on total average assets

 

1.86

 

1.48

 

1.56

 

1.67

 

1.55

 

Return on average equity (3)

 

18.52

 

15.39

 

18.81

 

16.98

 

18.78

 

Non-interest income to total revenue

 

36.73

 

37.41

 

37.17

 

37.06

 

36.27

 

Efficiency ratio (4)

 

55.95

 

61.67

 

57.22

 

58.75

 

57.35

 

Net yield on interest earning assets

 

3.55

 

3.33

 

3.12

 

3.44

 

3.18

 

 

 

 

 

 

 

 

EQUITY SUMMARY

 

 

 

 

 

 

Cash dividends per share

 

$.270

 

$.270

 

$.257

 

$.540

 

$.514

 

Cash dividends on common stock

 

$34,960

 

$35,140

 

$33,744

 

$70,100

 

$67,503

 

Book value per share (5)

 

$24.48

 

$22.70

 

$20.50

 

 

 

Market value per share (5)

 

$55.78

 

$53.20

 

$46.38

 

 

 

High market value per share

 

$57.48

 

$55.64

 

$56.16

 

 

 

Low market value per share

 

$50.92

 

$49.44

 

$43.38

 

 

 

Common shares outstanding (5)

 

129,004,231

 

129,694,606

 

130,971,572

 

 

 

Tangible common equity to tangible assets (6)

 

9.82

%

9.24

%

7.70

%

 

 

Tier I leverage ratio

 

12.13

%

11.75

%

10.46

%

 

 

 

 

 

 

 

 

 

OTHER QTD INFORMATION

 

 

 

 

 

 

Number of bank/ATM locations

 

247

 

254

 

272

 

 

 

Full-time equivalent employees

 

4,724

 

4,721

 

4,680

 

 

 

(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.

 

COMMERCE BANCSHARES, INC. and SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

 

(Unaudited)

(In thousands, except per share data)

 

For the Three Months Ended

For the Six Months Ended

 

Jun. 30,

2024

Mar. 31,

2024

Dec. 31,

2023

Sep. 30,

2023

Jun. 30,

2023

Jun. 30,

2024

Jun. 30,

2023

Interest income

 

$369,363

 

$358,721

 

$362,609

 

$361,162

 

$348,663

 

$728,084

 

$657,520

 

Interest expense

 

107,114

 

109,722

 

114,188

 

112,615

 

99,125

 

216,836

 

156,359

 

Net interest income

 

262,249

 

248,999

 

248,421

 

248,547

 

249,538

 

511,248

 

501,161

 

Provision for credit losses

 

5,468

 

4,787

 

5,879

 

11,645

 

6,471

 

10,255

 

17,927

 

Net interest income after credit losses

256,781

 

244,212

 

242,542

 

236,902

 

243,067

 

500,993

 

483,234

 

NON-INTEREST INCOME

 

 

 

 

 

 

 

 

Trust fees

 

52,291

 

51,105

 

49,154

 

49,207

 

47,265

 

103,396

 

92,593

 

Bank card transaction fees

 

47,477

 

46,930

 

47,878

 

46,899

 

49,725

 

94,407

 

96,379

 

Deposit account charges and other fees

25,325

 

24,151

 

23,517

 

23,090

 

22,633

 

49,476

 

44,385

 

Consumer brokerage services

 

4,478

 

4,408

 

3,641

 

3,820

 

4,677

 

8,886

 

9,762

 

Capital market fees

 

4,760

 

3,892

 

4,269

 

3,524

 

2,945

 

8,652

 

6,307

 

Loan fees and sales

 

3,431

 

3,141

 

2,875

 

2,966

 

2,735

 

6,572

 

5,324

 

Other

 

14,482

 

15,221

 

13,545

 

13,443

 

17,625

 

29,703

 

30,467

 

Total non-interest income

 

152,244

 

148,848

 

144,879

 

142,949

 

147,605

 

301,092

 

285,217

 

INVESTMENT SECURITIES GAINS (LOSSES), NET

3,233

 

(259

)

7,601

 

4,298

 

3,392

 

2,974

 

3,086

 

NON-INTEREST EXPENSE

 

 

 

 

 

 

 

 

Salaries and employee benefits

 

149,120

 

151,801

 

147,456

 

146,805

 

145,429

 

300,921

 

289,802

 

Data processing and software

 

31,529

 

31,153

 

31,141

 

30,744

 

28,719

 

62,682

 

56,873

 

Net occupancy

 

12,544

 

13,574

 

13,927

 

13,948

 

12,995

 

26,118

 

25,754

 

Deposit insurance

 

2,354

 

8,017

 

20,304

 

4,029

 

4,187

 

10,371

 

8,830

 

Equipment

 

5,091

 

5,010

 

5,137

 

4,697

 

4,864

 

10,101

 

9,714

 

Marketing

 

5,356

 

4,036

 

6,505

 

6,167

 

6,368

 

9,392

 

11,839

 

Supplies and communication

 

4,636

 

4,744

 

5,242

 

4,963

 

4,625

 

9,380

 

9,215

 

Other

 

21,584

 

27,362

 

21,542

 

16,657

 

20,424

 

48,946

 

39,691

 

Total non-interest expense

 

232,214

 

245,697

 

251,254

 

228,010

 

227,611

 

477,911

 

451,718

 

Income before income taxes

 

180,044

 

147,104

 

143,768

 

156,139

 

166,453

 

327,148

 

319,819

 

Less income taxes

 

38,602

 

31,652

 

32,307

 

33,439

 

35,990

 

70,254

 

68,803

 

Net income

 

141,442

 

115,452

 

111,461

 

122,700

 

130,463

 

256,894

 

251,016

 

Less non-controlling interest expense (income)

1,889

 

2,789

 

2,238

 

2,104

 

2,674

 

4,678

 

3,775

 

Net income attributable to Commerce Bancshares, Inc.

$139,553

 

$112,663

 

$109,223

 

$120,596

 

$127,789

 

$252,216

 

$247,241

 

Net income per common share — basic

$1.07

 

$0.87

 

$0.84

 

$0.92

 

$0.97

 

$1.94

 

$1.88

 

Net income per common share — diluted

$1.07

 

$0.86

 

$0.84

 

$0.92

 

$0.97

 

$1.93

 

$1.88

 

 

 

 

 

 

 

 

 

 

OTHER INFORMATION

 

 

 

 

 

 

 

Return on total average assets

 

1.86

%

1.48

%

1.38

%

1.49

%

1.56

%

1.67

%

1.55

%

Return on average equity (1)

18.52

 

15.39

 

16.48

 

17.73

 

18.81

 

16.98

 

18.78

 

Efficiency ratio (2)

 

55.95

 

61.67

 

63.80

 

58.15

 

57.22

 

58.75

 

57.35

 

Effective tax rate

 

21.67

 

21.93

 

22.83

 

21.71

 

21.97

 

21.79

 

21.77

 

Net yield on interest earning assets

3.55

 

3.33

 

3.17

 

3.11

 

3.12

 

3.44

 

3.18

 

Fully-taxable equivalent net interest income

 

$264,578

 

$251,312

 

$250,547

 

$250,962

 

$251,757

 

$515,890

 

$505,168

 

(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 income statement above reflects the reclassification of non-interest income of $406 thousand, $1.1 million, and $406 thousand from other non-interest income to capital market fees for the second and third quarters of 2023 and the first six months of 2023, respectively.

 

COMMERCE BANCSHARES, INC. and SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS - PERIOD END

 

(Unaudited)

(In thousands)

 

Jun. 30,

2024

Mar. 31,

2024

Jun. 30,

2023

ASSETS

 

 

 

 

Loans

 

 

 

 

Business

 

$6,090,724

 

$5,994,974

 

$5,906,493

 

Real estate — construction and land

 

1,396,515

 

1,497,647

 

1,451,783

 

Real estate — business

 

3,572,539

 

3,711,602

 

3,621,222

 

Real estate — personal

 

3,055,182

 

3,039,885

 

2,980,599

 

Consumer

 

2,145,609

 

2,119,308

 

2,110,605

 

Revolving home equity

 

331,381

 

322,523

 

303,845

 

Consumer credit card

 

566,925

 

564,388

 

574,755

 

Overdrafts

 

4,190

 

48,513

 

7,237

 

Total loans

 

17,163,065

 

17,298,840

 

16,956,539

 

Allowance for credit losses on loans

 

(158,557

)

(160,465

)

(158,685

)

Net loans

 

17,004,508

 

17,138,375

 

16,797,854

 

Loans held for sale

 

2,930

 

2,328

 

6,776

 

Investment securities:

 

 

 

 

Available for sale debt securities

 

8,534,271

 

9,141,695

 

10,414,625

 

Trading debt securities

 

45,499

 

56,716

 

29,412

 

Equity securities

 

113,584

 

12,852

 

12,266

 

Other securities

 

223,798

 

229,146

 

258,045

 

Total investment securities

 

8,917,152

 

9,440,409

 

10,714,348

 

Federal funds sold

 

 

 

2,750

 

Securities purchased under agreements to resell

 

475,000

 

225,000

 

825,000

 

Interest earning deposits with banks

 

2,215,057

 

1,609,614

 

2,568,695

 

Cash and due from banks

 

329,692

 

291,040

 

366,699

 

Premises and equipment — net

 

467,256

 

467,377

 

451,568

 

Goodwill

 

146,539

 

146,539

 

146,371

 

Other intangible assets — net

 

13,801

 

13,918

 

14,666

 

Other assets

 

997,423

 

1,037,508

 

936,535

 

Total assets

 

$30,569,358

 

$30,372,108

 

$32,831,262

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

Deposits:

 

 

 

 

Non-interest bearing

 

$7,492,751

 

$7,513,464

 

$8,198,849

 

Savings, interest checking and money market

 

14,367,710

 

14,463,211

 

14,418,974

 

Certificates of deposit of less than $100,000

 

1,010,251

 

997,979

 

1,543,424

 

Certificates of deposit of $100,000 and over

 

1,408,548

 

1,465,541

 

1,708,197

 

Total deposits

 

24,279,260

 

24,440,195

 

25,869,444

 

Federal funds purchased and securities sold under agreements to repurchase

 

2,551,399

 

2,505,576

 

2,878,021

 

Other borrowings

 

3,984

 

2,359

 

1,005,613

 

Other liabilities

 

576,380

 

460,089

 

392,956

 

Total liabilities

 

27,411,023

 

27,408,219

 

30,146,034

 

Stockholders’ equity:

 

 

 

 

Common stock

 

655,322

 

655,322

 

629,319

 

Capital surplus

 

3,153,107

 

3,148,649

 

2,921,365

 

Retained earnings

 

235,299

 

130,706

 

211,358

 

Treasury stock

 

(98,176

)

(59,674

)

(58,389

)

Accumulated other comprehensive income (loss)

 

(807,817

)

(931,027

)

(1,036,295

)

Total stockholders’ equity

 

3,137,735

 

2,943,976

 

2,667,358

 

Non-controlling interest

 

20,600

 

19,913

 

17,870

 

Total equity

 

3,158,335

 

2,963,889

 

2,685,228

 

Total liabilities and equity

 

$30,569,358

 

$30,372,108

 

$32,831,262

 

 

COMMERCE BANCSHARES, INC. and SUBSIDIARIES

AVERAGE BALANCE SHEETS

 

(Unaudited)

(In thousands)

For the Three Months Ended

Jun. 30,

2024

Mar. 31,

2024

Dec. 31,

2023

Sep. 30,

2023

Jun. 30,

2023

ASSETS:

 

 

 

 

 

Loans:

 

 

 

 

 

Business

$5,980,364

 

$5,873,525

 

$5,861,229

 

$5,849,227

 

$5,757,388

 

Real estate — construction and land

1,471,504

 

1,472,554

 

1,523,682

 

1,508,850

 

1,450,196

 

Real estate — business

3,666,057

 

3,727,643

 

3,644,589

 

3,642,010

 

3,540,851

 

Real estate — personal

3,044,943

 

3,031,193

 

3,027,664

 

2,992,500

 

2,960,962

 

Consumer

2,127,650

 

2,082,490

 

2,117,268

 

2,102,281

 

2,098,523

 

Revolving home equity

326,204

 

322,074

 

310,282

 

304,055

 

300,623

 

Consumer credit card

552,896

 

562,892

 

568,112

 

564,039

 

555,875

 

Overdrafts

4,856

 

7,696

 

5,258

 

5,341

 

4,630

 

Total loans

17,174,474

 

17,080,067

 

17,058,084

 

16,968,303

 

16,669,048

 

Allowance for credit losses on loans

(159,791

)

(161,891

)

(161,932

)

(158,335

)

(159,068

)

Net loans

17,014,683

 

16,918,176

 

16,896,152

 

16,809,968

 

16,509,980

 

Loans held for sale

2,455

 

2,149

 

5,392

 

5,714

 

5,957

 

Investment securities:

 

 

 

 

 

U.S. government and federal agency obligations

1,201,954

 

851,656

 

889,390

 

986,284

 

1,035,651

 

Government-sponsored enterprise obligations

55,634

 

55,652

 

55,661

 

55,676

 

55,751

 

State and municipal obligations

1,069,934

 

1,330,808

 

1,363,649

 

1,391,541

 

1,532,519

 

Mortgage-backed securities

5,553,656

 

5,902,328

 

6,022,502

 

6,161,348

 

6,316,224

 

Asset-backed securities

1,785,598

 

2,085,050

 

2,325,089

 

2,553,562

 

2,827,911

 

Other debt securities

364,828

 

503,204

 

510,721

 

514,787

 

519,988

 

Unrealized gain (loss) on debt securities

(1,272,127

)

(1,274,125

)

(1,595,845

)

(1,458,141

)

(1,331,002

)

Total available for sale debt securities

8,759,477

 

9,454,573

 

9,571,167

 

10,205,057

 

10,957,042

 

Trading debt securities

46,565

 

40,483

 

37,234

 

35,044

 

46,493

 

Equity securities

127,584

 

12,768

 

12,249

 

12,230

 

12,335

 

Other securities

228,403

 

221,695

 

222,378

 

237,518

 

273,587

 

Total investment securities

9,162,029

 

9,729,519

 

9,843,028

 

10,489,849

 

11,289,457

 

Federal funds sold

1,612

 

599

 

1,194

 

2,722

 

7,484

 

Securities purchased under agreements to resell

303,586

 

340,934

 

450,000

 

712,472

 

824,974

 

Interest earning deposits with banks

2,099,777

 

1,938,381

 

2,387,415

 

2,337,744

 

2,284,162

 

Other assets

1,651,808

 

1,715,716

 

1,797,849

 

1,750,222

 

1,941,340

 

Total assets

$30,235,950

 

$30,645,474

 

$31,381,030

 

$32,108,691

 

$32,863,354

 

 

 

 

 

 

 

LIABILITIES AND EQUITY:

 

 

 

 

 

Non-interest bearing deposits

$7,297,955

 

$7,328,603

 

$7,748,654

 

$7,939,190

 

$8,224,475

 

Savings

1,328,989

 

1,333,983

 

1,357,733

 

1,436,149

 

1,516,887

 

Interest checking and money market

13,162,118

 

13,215,270

 

13,166,783

 

13,048,199

 

12,918,399

 

Certificates of deposit of less than $100,000

1,003,798

 

976,804

 

1,097,224

 

1,423,965

 

1,075,110

 

Certificates of deposit of $100,000 and over

1,492,592

 

1,595,310

 

1,839,057

 

1,718,126

 

1,472,208

 

Total deposits

24,285,452

 

24,449,970

 

25,209,451

 

25,565,629

 

25,207,079

 

Borrowings:

 

 

 

 

 

Federal funds purchased

265,042

 

328,216

 

473,534

 

508,851

 

507,165

 

Securities sold under agreements to repurchase

2,254,849

 

2,511,959

 

2,467,118

 

2,283,020

 

2,206,612

 

Other borrowings

838

 

76

 

179,587

 

685,222

 

1,617,952

 

Total borrowings

2,520,729

 

2,840,251

 

3,120,239

 

3,477,093

 

4,331,729

 

Other liabilities

399,080

 

410,310

 

421,402

 

367,741

 

598,915

 

Total liabilities

27,205,261

 

27,700,531

 

28,751,092

 

29,410,463

 

30,137,723

 

Equity

3,030,689

 

2,944,943

 

2,629,938

 

2,698,228

 

2,725,631

 

Total liabilities and equity

$30,235,950

 

$30,645,474

 

$31,381,030

 

$32,108,691

 

$32,863,354

 

 

COMMERCE BANCSHARES, INC. and SUBSIDIARIES

AVERAGE RATES

 

(Unaudited)

For the Three Months Ended

Jun. 30,

2024

Mar. 31,

2024

Dec. 31,

2023

Sep. 30,

2023

Jun. 30,

2023

ASSETS:

 

 

 

 

 

Loans:

 

 

 

 

 

Business (1)

6.11

%

6.07

%

5.91

%

5.77

%

5.58

%

Real estate — construction and land

8.36

 

8.40

 

8.34

 

8.17

 

7.92

 

Real estate — business

6.26

 

6.26

 

6.18

 

6.13

 

5.96

 

Real estate — personal

4.04

 

3.95

 

3.85

 

3.73

 

3.68

 

Consumer

6.56

 

6.40

 

6.21

 

5.97

 

5.63

 

Revolving home equity

7.68

 

7.70

 

7.70

 

7.76

 

7.55

 

Consumer credit card

13.96

 

14.11

 

13.83

 

13.77

 

13.77

 

Overdrafts

 

 

 

 

 

Total loans

6.30

 

6.27

 

6.15

 

6.02

 

5.84

 

Loans held for sale

7.54

 

7.49

 

9.93

 

10.55

 

10.17

 

Investment securities:

 

 

 

 

 

U.S. government and federal agency obligations

5.04

 

2.08

 

2.32

 

2.31

 

3.42

 

Government-sponsored enterprise obligations

2.39

 

2.39

 

2.36

 

2.36

 

2.38

 

State and municipal obligations (1)

2.00

 

1.97

 

1.94

 

1.95

 

2.04

 

Mortgage-backed securities

2.09

 

2.19

 

2.05

 

2.06

 

2.09

 

Asset-backed securities

2.50

 

2.39

 

2.30

 

2.20

 

2.08

 

Other debt securities

2.01

 

1.93

 

1.85

 

1.75

 

1.86

 

Total available for sale debt securities

2.50

 

2.18

 

2.10

 

2.08

 

2.19

 

Trading debt securities (1)

4.95

 

5.30

 

5.05

 

5.11

 

4.53

 

Equity securities (1)

2.82

 

25.64

 

27.47

 

23.06

 

23.25

 

Other securities (1)

13.20

 

13.04

 

8.60

 

13.13

 

9.40

 

Total investment securities

2.75

 

2.44

 

2.27

 

2.33

 

2.37

 

Federal funds sold

6.74

 

6.71

 

6.65

 

6.56

 

5.63

 

Securities purchased under agreements to resell

3.21

 

1.93

 

1.64

 

2.08

 

1.99

 

Interest earning deposits with banks

5.48

 

5.48

 

5.47

 

5.39

 

5.14

 

Total interest earning assets

4.98

 

4.78

 

4.62

 

4.51

 

4.34

 

 

 

 

 

 

 

LIABILITIES AND EQUITY:

 

 

 

 

 

Interest bearing deposits:

 

 

 

 

 

Savings

.06

 

.06

 

.05

 

.05

 

.05

 

Interest checking and money market

1.73

 

1.69

 

1.57

 

1.33

 

.93

 

Certificates of deposit of less than $100,000

4.22

 

4.20

 

4.21

 

4.32

 

3.78

 

Certificates of deposit of $100,000 and over

4.55

 

4.56

 

4.55

 

4.37

 

3.93

 

Total interest bearing deposits

1.99

 

1.97

 

1.93

 

1.76

 

1.29

 

Borrowings:

 

 

 

 

 

Federal funds purchased

5.42

 

5.42

 

5.40

 

5.33

 

5.06

 

Securities sold under agreements to repurchase

3.44

 

3.43

 

3.25

 

3.20

 

3.09

 

Other borrowings

3.84

 

 

5.45

 

5.30

 

5.24

 

Total borrowings

3.65

 

3.66

 

3.71

 

3.93

 

4.13

 

Total interest bearing liabilities

2.21

%

2.21

%

2.20

%

2.12

%

1.87

%

 

 

 

 

 

 

Net yield on interest earning assets

3.55

%

3.33

%

3.17

%

3.11

%

3.12

%

(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 Six Months Ended

(Unaudited)

(In thousands, except ratios)

 

Jun. 30,

2024

Mar. 31,

2024

Dec. 31,

2023

Sep. 30,

2023

Jun. 30,

2023

Jun. 30,

2024

Jun. 30,

2023

ALLOWANCE FOR CREDIT LOSSES ON LOANS

 

 

 

 

 

 

 

 

Balance at beginning of period

 

$160,465

 

$162,395

 

$162,244

 

$158,685

 

$159,317

 

$162,395

 

$150,136

 

Provision for credit losses on loans

 

7,849

 

6,947

 

8,170

 

13,343

 

5,864

 

14,796

 

21,812

 

Net charge-offs (recoveries):

 

 

 

 

 

 

 

 

Commercial portfolio:

 

 

 

 

 

 

 

 

Business

 

622

 

23

 

96

 

2,613

 

165

 

645

 

395

 

Real estate — construction and land

 

 

 

 

 

(115

)

 

(115

)

Real estate — business

 

(8

)

(141

)

128

 

(15

)

(5

)

(149

)

(9

)

 

 

614

 

(118

)

224

 

2,598

 

45

 

496

 

271

 

Personal banking portfolio:

 

 

 

 

 

 

 

 

Consumer credit card

 

6,746

 

6,435

 

5,325

 

4,716

 

4,687

 

13,181

 

9,012

 

Consumer

 

1,804

 

1,983

 

1,903

 

1,797

 

1,273

 

3,787

 

2,548

 

Overdraft

 

521

 

557

 

588

 

683

 

517

 

1,078

 

1,495

 

Real estate — personal

 

79

 

24

 

(11

)

(9

)

(6

)

103

 

(17

)

Revolving home equity

 

(7

)

(4

)

(10

)

(1

)

(20

)

(11

)

(46

)

 

 

9,143

 

8,995

 

7,795

 

7,186

 

6,451

 

18,138

 

12,992

 

Total net loan charge-offs

 

9,757

 

8,877

 

8,019

 

9,784

 

6,496

 

18,634

 

13,263

 

Balance at end of period

 

$158,557

 

$160,465

 

$162,395

 

$162,244

 

$158,685

 

$158,557

 

$158,685

 

LIABILITY FOR UNFUNDED LENDING COMMITMENTS

 

$20,705

 

$23,086

 

$25,246

 

$27,537

 

$29,235

 

 

 

 

 

 

 

 

 

 

 

 

NET CHARGE-OFF RATIOS (1)

 

 

 

 

 

 

 

 

Commercial portfolio:

 

 

 

 

 

 

 

 

Business

 

.04

%

%

.01

%

.18

%

.01

%

.02

%

.01

%

Real estate — construction and land

 

 

 

 

 

(.03

)

 

(.02

)

Real estate — business

 

 

(.02

)

.01

 

 

 

(.01

)

 

 

 

.02

 

 

.01

 

.09

 

 

.01

 

.01

 

Personal banking portfolio:

 

 

 

 

 

 

 

 

Consumer credit card

 

4.91

 

4.60

 

3.72

 

3.32

 

3.38

 

4.75

 

3.27

 

Consumer

 

.34

 

.38

 

.36

 

.34

 

.24

 

.36

 

.25

 

Overdraft

 

43.15

 

29.11

 

44.37

 

50.73

 

44.79

 

34.54

 

66.40

 

Real estate — personal

 

.01

 

 

 

 

 

.01

 

 

Revolving home equity

 

(.01

)

 

(.01

)

 

(.03

)

(.01

)

(.03

)

 

 

.61

 

.60

 

.51

 

.48

 

.44

 

.60

 

.44

 

Total

 

.23

%

.21

%

.19

%

.23

%

.16

%

.22

%

.16

%

 

 

 

 

 

 

 

 

 

CREDIT QUALITY RATIOS

 

 

 

 

 

 

 

 

Non-accrual loans to total loans

 

.11

%

.03

%

.04

%

.05

%

.04

%

 

 

Allowance for credit losses on loans to total loans

 

.92

 

.93

 

.94

 

.95

 

.94

 

 

 

 

 

 

 

 

 

 

 

 

NON-ACCRUAL AND PAST DUE LOANS

 

 

 

 

 

 

 

 

Non-accrual loans:

 

 

 

 

 

 

 

 

Business

 

$504

 

$1,038

 

$3,622

 

$6,602

 

$4,732

 

 

 

Real estate — business

 

15,050

 

1,246

 

60

 

76

 

153

 

 

 

Real estate — personal

 

1,772

 

1,523

 

1,653

 

1,531

 

1,276

 

 

 

Revolving home equity

 

1,977

 

1,977

 

1,977

 

 

 

 

 

Total

 

19,303

 

5,784

 

7,312

 

8,209

 

6,161

 

 

 

Loans past due 90 days and still accruing interest

$18,566

 

$20,281

 

$21,864

 

$18,580

 

$15,351

 

 

 

(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 Second Quarter Results

June 30, 2024

For the quarter ended June 30, 2024, net income amounted to $139.6 million, compared to $112.7 million in the previous quarter and $127.8 million in the same quarter last year. The increase in net income compared to the previous quarter was primarily the result of higher net interest income and lower non-interest expense. The net yield on interest earning assets increased 22 basis points over the previous quarter to 3.55%. Average loans increased $94.4 million over the previous quarter, while average deposits, borrowings and available for sale debt securities, at fair value, declined $164.5 million, $319.5 million, and $695.1 million, respectively. For the quarter, the return on average assets was 1.86%, the return on average equity was 18.52%, and the efficiency ratio was 55.9%.

Balance Sheet Review

During the 2nd quarter of 2024, average loans totaled $17.2 billion, an increase of $94.4 million over the prior quarter, and increased $505.4 million, or 3.0%, over the same quarter last year. Compared to the previous quarter, average balances of business and consumer loans grew $106.8 million and $45.2 million, respectively, while business real estate loans declined $61.6 million. During the current quarter, the Company sold certain fixed rate personal real estate loans totaling $18.2 million, compared to $7.4 million in the prior quarter.

Total average available for sale debt securities decreased $695.1 million compared to the previous quarter to $8.8 billion, at fair value. The decrease in debt securities was mainly the result of lower average balances of mortgage-backed, asset-backed, state and municipal, and other debt securities, partly offset by higher average balances of U.S. government and federal agency obligations. Most of the changes in the debt securities balances resulted from the completion of a plan to reposition a portion of the portfolio, which was announced in May 2024. During the 2nd quarter of 2024, the unrealized loss on available for sale debt securities decreased $173.4 million to $1.1 billion, at period end. Also, during the 2nd quarter of 2024, purchases of securities totaled $928.8 million with a weighted average yield of approximately 4.60%, and sales, maturities and pay downs were $1.7 billion. At June 30, 2024, the duration of the available for sale investment portfolio was 4.0 years, and maturities and pay downs of approximately $1.6 billion are expected to occur during the next 12 months. The Company does not have any investment securities classified as held-to-maturity.

Total average deposits decreased $164.5 million this quarter compared to the previous quarter. The decrease in deposits mostly resulted from a decline of $102.7 million in average balances of certificates of deposit greater than $100,000. Compared to the previous quarter, total average commercial deposits declined $317.0 million, while average consumer deposits increased $136.3 million. The average loans to deposits ratio was 70.7% in the current quarter and 69.9% in the prior quarter. The Company’s average borrowings, which included average customer repurchase agreements of $2.3 billion, decreased $319.5 million to $2.5 billion in the 2nd quarter of 2024.

Net Interest Income

Net interest income in the 2nd quarter of 2024 amounted to $262.2 million, an increase of $13.3 million over the previous quarter. On a fully taxable-equivalent (FTE) basis, net interest income for the current quarter increased $13.3 million over the previous quarter to $264.6 million. The increase in net interest income was mostly due to higher interest income on investment securities, loans, and deposits with banks, coupled with lower interest expense on borrowings. The net yield (FTE) on earning assets increased to 3.55%, from 3.33% in the prior quarter.

Compared to the previous quarter, interest income on loans (FTE) increased $2.9 million, due to higher average rates earned on business, consumer, and personal real estate loans. Interest income on loans also increased due to higher average balances of business and consumer loans, partly offset by lower average balances of business real estate loans. The average yield (FTE) on the loan portfolio increased three basis points to 6.30% this quarter.

Interest income on investment securities (FTE) increased $4.7 million over the prior quarter, mostly due to higher rates earned on available for sale debt securities, partly offset by lower average balances of available for sale debt securities. Interest income earned on U.S. government and federal agency securities increased due to higher average balances and rates, which included the impact of $5.9 million in higher inflation income from Treasury inflation-protected securities compared to previous quarter. Additionally, the Company recorded a $740 thousand adjustment to premium amortization at June 30, 2024, which increased interest income to reflect slower forward prepayment speed estimates on mortgage-backed securities but was lower than the $2.0 million adjustment that increased interest income in the prior quarter. The average yield (FTE) on total investment securities was 2.75% in the current quarter, compared to 2.44% in the previous quarter.

Compared to the previous quarter, interest income on deposits with banks increased $2.2 million, due to $161.4 million of higher average balances.

Interest expense decreased $2.6 million, mainly due to lower average borrowing balances, partly offset by higher interest expense on deposits. Interest expense on borrowings decreased $3.0 million due to lower average balances of customer repurchase agreements and federal funds purchased. Interest expense on deposits increased $377 thousand as higher rates paid on deposits were mostly offset by lower average balances. The average rate paid on interest bearing deposits totaled 1.99% in the current quarter compared to 1.97% in the prior quarter. The overall rate paid on interest bearing liabilities was 2.21% in the current and prior quarter.

Non-Interest Income

In the 2nd quarter of 2024, total non-interest income amounted to $152.2 million, an increase of $4.6 million, or 3.1%, over the same period last year and an increase of $3.4 million over the prior quarter. The increase in non-interest income compared to the same period last year was mainly due to higher trust fees, capital market fees, and deposit account fees, partly offset by lower bank card fees and letter of credit fees. The increase in non-interest income compared to the prior quarter was mainly due to higher deposit account fees, trust fees, capital market fees and swap fees, partly offset by lower tax credit sales income. Additionally, a decrease of $1.1 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 decreased $2.2 million, or 4.5%, compared to the same period last year, and increased $547 thousand compared to the prior quarter. Net corporate card fees decreased $3.0 million, or 10.3%, compared to the same quarter of last year mainly due to lower interchange fees and higher rewards expense. Net merchant fees increased $506 thousand, or 9.4%, due to higher interchange fees, partly offset by higher network expense. Net debit card fees increased $43 thousand, or .4%, while net credit card fees increased $221 thousand, or 5.8%. Total net bank card fees this quarter were comprised of fees on corporate card ($26.2 million), debit card ($11.4 million), merchant ($5.9 million) and credit card ($4.0 million) transactions.

In the current quarter, trust fees increased $5.0 million, or 10.6%, over the same period last year, mostly resulting from higher private client fees. Compared to the same period last year, deposit account fees increased $2.7 million, or 11.9%, mostly due to higher corporate cash management fees, while capital market fees increased $1.8 million, or 61.6%, mostly due to higher underwriting fees.

Other non-interest income decreased compared to the same period last year primarily due to lower letter of credit fees and swap fees of $2.3 million and $919 thousand, respectively. For the 2nd quarter of 2024, non-interest income comprised 36.7% of the Company’s total revenue.

Investment Securities Gains and Losses

The Company recorded net securities gains of $3.2 million in the current quarter, compared to losses of $259 thousand in the prior quarter and gains of $3.4 million in the 2nd quarter of 2023. Net securities gains in the current quarter resulted primarily from gains of $177.0 million recognized on Visa common stock. During the second quarter of 2024, the Company sold 436 thousand shares of Visa Class A common stock (converted from 109 thousand shares of Visa Class C common stock) at an average price of $274.91. As of June 30, 2024, the Company has sold approximately two thirds of the Visa Class C shares it received from the Visa exchange offer. In addition, net gains of $4.1 million were recorded on the Company’s portfolio of private equity investments. These net gains were mostly offset by losses of $179.1 million realized on sales of available for sale debt securities resulting from the completion of the Company’s plan to reposition a portion of its available for sale debt securities portfolio.

Non-Interest Expense

Non-interest expense for the current quarter amounted to $232.2 million, compared to $227.6 million in the same period last year and $245.7 million in the prior quarter. The increase in non-interest expense compared to the same period last year was mainly due to higher salaries expense, data processing and software expense, and other expense, partly offset by lower marketing and deposit insurance expense. The decrease in non-interest expense compared to the prior quarter was mainly due to lower deposit insurance expense, employee benefits expense, and litigation settlement expense recorded in the prior quarter that did not reoccur in the current quarter. These decreases were partly offset by higher salaries expense and a donation to a related charitable foundation.

Compared to the 2nd quarter of last year, salaries and employee benefits expense increased $3.7 million, or 2.5%, mostly due to higher full-time salaries expense of $3.8 million, and other salaries expense of $1.0 million, partly offset by lower medical expense of $1.5 million. Full-time equivalent employees totaled 4,724 and 4,680 at June 30, 2024 and 2023, respectively.

Compared to the same period last year, data processing and software expense increased $2.8 million due to increased costs for service providers. This increase was partly offset by a decrease in deposit insurance expense of $1.8 million, mostly due to a $1.2 million accrual adjustment to the FDIC’s special assessment and lower marketing expense of $1.0 million. Other expense included a $5.0 million donation to a related charitable foundation in the current quarter, partly offset by deconversion expense of $2.1 million recorded in the same period last year.

Income Taxes

The effective tax rate for the Company was 21.7% in the current quarter, 21.9% in the previous quarter, and 22.0% in the 2nd quarter of 2023.

Credit Quality

Net loan charge-offs in the 2nd quarter of 2024 amounted to $9.8 million, compared to $8.9 million in the prior quarter and $6.5 million in the same period last year. The ratio of annualized net loan charge-offs to total average loans was .23% in the current quarter, .21% in the previous quarter, and .16% in the 2nd quarter of last year. Compared to the prior quarter, net loan charge-offs on business and consumer credit card loans increased $599 thousand and $311 thousand, respectively.

In the 2nd quarter of 2024, annualized net loan charge-offs on average consumer credit card loans were 4.91%, compared to 4.60% in the previous quarter and 3.38% in the same quarter last year. Consumer loan net charge-offs were .34% of average consumer loans in the current quarter, .38% in the prior quarter, and .24% in the same quarter last year.

At June 30, 2024, the allowance for credit losses on loans totaled $158.6 million, or .92% of total loans, and decreased $1.9 million compared to the prior quarter. Additionally, the liability for unfunded lending commitments at June 30, 2024 was $20.7 million, a decrease of $2.4 million compared to the liability at March 31, 2024.

At June 30, 2024, total non-accrual loans amounted to $19.3 million, an increase of $13.5 million over the previous quarter. The increase in non-accrual loans was mostly due to a senior living business real estate loan that was moved to non-accrual status during the second quarter of 2024. At June 30, 2024, the balance of non-accrual loans, which represented .11% of loans outstanding, included business loans of $504 thousand, revolving home equity loans of $2.0 million, personal real estate loans of $1.8 million, and business real estate loans of $15.1 million. Loans more than 90 days past due and still accruing interest totaled $18.6 million at June 30, 2024.

Other

During the 2nd quarter of 2024, the Company paid a cash dividend of $.27 per common share, representing a 5.1% increase over the same period last year. The Company purchased 685,685 shares of treasury stock during the current quarter at an average price of $55.21.

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. Additional information about risks and uncertainties is included in the "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" sections within the Company's Annual Report on Form 10-K.

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