Company Announcements

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

KANSAS CITY, Mo.--(BUSINESS WIRE)--Oct. 17, 2024-- Commerce Bancshares, Inc. announced earnings of $1.07 per share for the three months ended September 30, 2024, compared to $.92 per share in the same quarter last year and $1.07 per share in the second quarter of 2024. Net income for the third quarter of 2024 amounted to $138.0 million, compared to $120.6 million in the third quarter of 2023 and $139.6 million in the prior quarter.

For the nine months ended September 30, 2024, earnings per share totaled $3.00, compared to $2.80 for the first nine months of 2023. Net income amounted to $390.2 million for the nine months ended September 30, 2024, compared to $367.8 million in the comparable period last year. For the year to date, the return on average assets was 1.71%, and the return on average equity was 16.92%.

In announcing these results, John Kemper, President and Chief Executive Officer, said, “We are pleased with our third quarter results, which exemplify our diversified operating model and the growth mindset of our team. Our net interest margin, excluding the impact of inflation income on treasury bonds, expanded four basis points from the prior quarter. Interest bearing deposit costs continue to flatten, increasing just one basis point this quarter when compared to the previous quarter, while average deposits increased slightly. Trust fees were strong and experienced continued growth, up 11.1% over the same period last year. Total non-interest income was 37.7% of total revenue. During the quarter, we purchased $976.1 million in available for sale debt securities, indicative of lower loan demand and the relatively short duration of our investment securities portfolio.

“Credit quality remains excellent, and we continue to maintain strong levels of capital. Non-accrual loans were .11% of total loans, flat when compared to the previous quarter. Our tangible common equity to tangible assets ratio increased to 10.47% as interest rates declined, and book value per share increased 9.9% during the quarter.”

Third Quarter 2024 Financial Highlights:

  • Net interest income was $262.4 million, a $102 thousand increase over the prior quarter. The net yield on interest earning assets decreased five basis points to 3.50%.

  • Non-interest income totaled $159.0 million, an increase of $16.1 million over the same quarter last year.

  • Trust fees grew $5.5 million, or 11.1%, compared to the same period last year, mostly due to higher private client fees.

  • Non-interest expense totaled $237.6 million, an increase of $9.6 million, or 4.2%, compared to the same quarter last year.

  • Average loan balances totaled $17.0 billion, a decrease of .9% compared to the prior quarter.

  • Total average available for sale debt securities decreased $87.8 million from the prior quarter to $8.7 billion, at fair value. During the third quarter of 2024, the unrealized loss on available for sale debt securities decreased $287.4 million to $786.4 million, at period end.

  • Total average deposits increased $65.3 million, or .3%, compared to the prior quarter. The average rate paid on interest bearing deposits in the current quarter was 2.00%.

  • The ratio of annualized net loan charge-offs to average loans was .22% compared to .23% in the prior quarter.

  • The allowance for credit losses on loans increased $2.3 million during the third quarter of 2024 to $160.8 million, and the ratio of the allowance for credit losses on loans to total loans was .94%, at September 30, 2024, compared to .92% at June 30, 2024.

  • Total assets at September 30, 2024 were $31.5 billion, an increase of $924.2 million, or 3.0%, compared to the prior quarter.

  • For the quarter, the return on average assets was 1.80%, the return on average equity was 16.81%, and the efficiency ratio was 56.3%.

Commerce Bancshares, Inc. is a regional bank holding company offering a full line of banking services through its subsidiaries, including payment solutions, investment management and securities brokerage. One of its subsidiaries, Commerce Bank, leverages 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 Nine Months
Ended

(Unaudited)

(Dollars in thousands, except per share data)

 

Sep. 30,
2024

Jun. 30,
2024

Sep. 30,
2023

Sep. 30,
2024

Sep. 30,
2023

FINANCIAL SUMMARY

 

 

 

 

 

 

Net interest income

 

$262,351

 

$262,249

 

$248,547

 

$773,599

 

$749,708

 

Non-interest income

 

159,025

 

152,244

 

142,949

 

460,117

 

428,166

 

Total revenue

 

421,376

 

414,493

 

391,496

 

1,233,716

 

1,177,874

 

Investment securities gains (losses)

 

3,872

 

3,233

 

4,298

 

6,846

 

7,384

 

Provision for credit losses

 

9,140

 

5,468

 

11,645

 

19,395

 

29,572

 

Non-interest expense

 

237,600

 

232,214

 

228,010

 

715,511

 

679,728

 

Income before taxes

 

178,508

 

180,044

 

156,139

 

505,656

 

475,958

 

Income taxes

 

38,245

 

38,602

 

33,439

 

108,499

 

102,242

 

Non-controlling interest expense

 

2,256

 

1,889

 

2,104

 

6,934

 

5,879

 

Net income attributable to Commerce Bancshares, Inc.

$138,007

 

$139,553

 

$120,596

 

$390,223

 

$367,837

 

Earnings per common share:

 

 

 

 

 

 

Net income — basic

 

$1.07

 

$1.07

 

$0.92

 

$3.01

 

$2.80

 

Net income — diluted

 

$1.07

 

$1.07

 

$0.92

 

$3.00

 

$2.80

 

Effective tax rate

 

21.70

%

21.67

%

21.71

%

21.76

%

21.75

%

Fully-taxable equivalent net interest income

 

$264,638

 

$264,578

 

$250,962

 

$780,528

 

$756,130

 

Average total interest earning assets (1)

 

$30,051,845

 

$30,016,060

 

$31,974,945

 

$ 30,144,221

 

$31,986,696

 

Diluted wtd. average shares outstanding

 

127,995,072

 

128,610,693

 

130,008,840

 

128,595,025

 

130,227,782

 

RATIOS

 

 

 

 

 

 

Average loans to deposits (2)

 

69.93

%

70.73

%

66.39

%

70.17

%

65.85

%

Return on total average assets

 

1.80

 

1.86

 

1.49

 

1.71

 

1.53

 

Return on average equity(3)

 

16.81

 

18.52

 

17.73

 

16.92

 

18.42

 

Non-interest income to total revenue

 

37.74

 

36.73

 

36.51

 

37.30

 

36.35

 

Efficiency ratio (4)

 

56.31

 

55.95

 

58.15

 

57.92

 

57.62

 

Net yield on interest earning assets

 

3.50

 

3.55

 

3.11

 

3.46

 

3.16

 

EQUITY SUMMARY

 

 

 

 

 

 

Cash dividends per share

 

$.270

 

$.270

 

$.257

 

$.810

 

$.771

 

Cash dividends on common stock

 

$34,794

 

$34,960

 

$33,657

 

$104,894

 

$101,160

 

Book value per share (5)

 

$26.90

 

$24.48

 

$19.90

 

 

 

Market value per share (5)

 

$59.40

 

$55.78

 

$45.70

 

 

 

High market value per share

 

$65.86

 

$57.48

 

$52.37

 

 

 

Low market value per share

 

$54.88

 

$50.92

 

$44.10

 

 

 

Common shares outstanding (5)

 

128,378,890

 

129,004,231

 

130,586,153

 

 

 

Tangible common equity to tangible assets (6)

 

10.47

%

9.82

%

7.78

%

 

 

Tier I leverage ratio

 

12.31

%

12.13

%

10.87

%

 

 

OTHER QTD INFORMATION

 

 

 

 

 

 

Number of bank/ATM locations

 

244

 

247

 

266

 

 

 

Full-time equivalent employees

 

4,711

 

4,724

 

4,714

 

 

 

(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 Nine Months
Ended

 

Sep. 30,
2024

Jun. 30,
2024

Mar. 31,
2024

Dec. 31,
2023

Sep. 30,
2023

Sep. 30,
2024

Sep. 30,
2023

Interest income

 

$372,068

 

$369,363

 

$358,721

 

$362,609

 

$361,162

 

$1,100,152

 

$1,018,682

 

Interest expense

 

109,717

 

107,114

 

109,722

 

114,188

 

112,615

 

326,553

 

268,974

 

Net interest income

 

262,351

 

262,249

 

248,999

 

248,421

 

248,547

 

773,599

 

749,708

 

Provision for credit losses

 

9,140

 

5,468

 

4,787

 

5,879

 

11,645

 

19,395

 

29,572

 

Net interest income after credit losses

253,211

 

256,781

 

244,212

 

242,542

 

236,902

 

754,204

 

720,136

 

NON-INTEREST INCOME

 

 

 

 

 

 

 

 

Trust fees

 

54,689

 

52,291

 

51,105

 

49,154

 

49,207

 

158,085

 

141,800

 

Bank card transaction fees

 

47,570

 

47,477

 

46,930

 

47,878

 

46,899

 

141,977

 

143,278

 

Deposit account charges and other fees

25,380

 

25,325

 

24,151

 

23,517

 

23,090

 

74,856

 

67,475

 

Capital market fees

 

5,995

 

4,760

 

3,892

 

4,269

 

3,524

 

14,647

 

9,831

 

Consumer brokerage services

 

4,619

 

4,478

 

4,408

 

3,641

 

3,820

 

13,505

 

13,582

 

Loan fees and sales

 

3,444

 

3,431

 

3,141

 

2,875

 

2,966

 

10,016

 

8,290

 

Other

 

17,328

 

14,482

 

15,221

 

13,545

 

13,443

 

47,031

 

43,910

 

Total non-interest income

 

159,025

 

152,244

 

148,848

 

144,879

 

142,949

 

460,117

 

428,166

 

INVESTMENT SECURITIES GAINS (LOSSES), NET

3,872

 

3,233

 

(259

)

7,601

 

4,298

 

6,846

 

7,384

 

NON-INTEREST EXPENSE

 

 

 

 

 

 

 

 

Salaries and employee benefits

 

153,122

 

149,120

 

151,801

 

147,456

 

146,805

 

454,043

 

436,607

 

Data processing and software

 

32,194

 

31,529

 

31,153

 

31,141

 

30,744

 

94,876

 

87,617

 

Net occupancy

 

13,411

 

12,544

 

13,574

 

13,927

 

13,948

 

39,529

 

39,702

 

Professional and other services

 

8,830

 

8,617

 

8,648

 

9,219

 

8,293

 

26,095

 

26,979

 

Marketing

 

7,278

 

5,356

 

4,036

 

6,505

 

6,167

 

16,670

 

18,006

 

Equipment

 

5,286

 

5,091

 

5,010

 

5,137

 

4,697

 

15,387

 

14,411

 

Supplies and communication

 

4,963

 

4,636

 

4,744

 

5,242

 

4,963

 

14,343

 

14,178

 

Deposit Insurance

 

2,930

 

2,354

 

8,017

 

20,304

 

4,029

 

13,301

 

12,859

 

Other

 

9,586

 

12,967

 

18,714

 

12,323

 

8,364

 

41,267

 

29,369

 

Total non-interest expense

 

237,600

 

232,214

 

245,697

 

251,254

 

228,010

 

715,511

 

679,728

 

Income before income taxes

 

178,508

 

180,044

 

147,104

 

143,768

 

156,139

 

505,656

 

475,958

 

Less income taxes

 

38,245

 

38,602

 

31,652

 

32,307

 

33,439

 

108,499

 

102,242

 

Net income

 

140,263

 

141,442

 

115,452

 

111,461

 

122,700

 

397,157

 

373,716

 

Less non-controlling interest expense (income)

2,256

 

1,889

 

2,789

 

2,238

 

2,104

 

6,934

 

5,879

 

Net income attributable to Commerce Bancshares, Inc.

$138,007

 

$139,553

 

$112,663

 

$109,223

 

$120,596

 

$390,223

 

$367,837

 

Net income per common share — basic

$1.07

 

$1.07

 

$0.87

 

$0.84

 

$0.92

 

$3.01

 

$2.80

 

Net income per common share — diluted

$1.07

 

$1.07

 

$0.86

 

$0.84

 

$0.92

 

$3.00

 

$2.80

 

 

 

 

 

 

 

 

 

 

OTHER INFORMATION

 

 

 

 

 

 

 

Return on total average assets

 

1.80

%

1.86

%

1.48

%

1.38

%

1.49

%

1.71

%

1.53

%

Return on average equity (1)

16.81

 

18.52

 

15.39

 

16.48

 

17.73

 

16.92

 

18.42

 

Efficiency ratio (2)

 

56.31

 

55.95

 

61.67

 

63.80

 

58.15

 

57.92

 

57.62

 

Effective tax rate

 

21.70

 

21.67

 

21.93

 

22.83

 

21.71

 

21.76

 

21.75

 

Net yield on interest earning assets

3.50

 

3.55

 

3.33

 

3.17

 

3.11

 

3.46

 

3.16

 

Fully-taxable equivalent net interest income

 

$264,638

 

$264,578

 

$251,312

 

$250,547

 

$250,962

 

$780,528

 

$756,130

 

(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 $1.1 million and $1.5 million from other non-interest income to capital market fees for the third quarter of 2023 and the first nine months of 2023, respectively.

COMMERCE BANCSHARES, INC. and SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS - PERIOD END

 

(Unaudited)

(In thousands)

 

Sep. 30,
2024

Jun. 30,
2024

Sep. 30,
2023

ASSETS

 

 

 

 

Loans

 

 

 

 

Business

 

$ 6,048,328

 

$ 6,090,724

 

$ 5,908,330

 

Real estate — construction and land

 

1,381,607

 

1,396,515

 

1,539,566

 

Real estate — business

 

3,586,999

 

3,572,539

 

3,647,168

 

Real estate — personal

 

3,043,391

 

3,055,182

 

3,024,639

 

Consumer

 

2,108,281

 

2,145,609

 

2,125,804

 

Revolving home equity

 

342,376

 

331,381

 

305,237

 

Consumer credit card

 

574,746

 

566,925

 

574,829

 

Overdrafts

 

4,272

 

4,190

 

3,753

 

Total loans

 

17,090,000

 

17,163,065

 

17,129,326

 

Allowance for credit losses on loans

 

(160,839

)

(158,557

)

(162,244

)

Net loans

 

16,929,161

 

17,004,508

 

16,967,082

 

Loans held for sale

 

1,707

 

2,930

 

5,120

 

Investment securities:

 

 

 

 

Available for sale debt securities

 

9,167,681

 

8,534,271

 

9,860,828

 

Trading debt securities

 

42,645

 

45,499

 

35,564

 

Equity securities

 

57,115

 

113,584

 

12,212

 

Other securities

 

216,543

 

223,798

 

230,792

 

Total investment securities

 

9,483,984

 

8,917,152

 

10,139,396

 

Federal funds sold

 

10

 

 

2,735

 

Securities purchased under agreements to resell

 

475,000

 

475,000

 

450,000

 

Interest earning deposits with banks

 

2,642,048

 

2,215,057

 

1,847,641

 

Cash and due from banks

 

507,941

 

329,692

 

358,010

 

Premises and equipment — net

 

469,986

 

467,256

 

460,830

 

Goodwill

 

146,539

 

146,539

 

146,539

 

Other intangible assets — net

 

13,722

 

13,801

 

14,432

 

Other assets

 

823,494

 

997,423

 

984,907

 

Total assets

 

$ 31,493,592

 

$ 30,569,358

 

$ 31,376,692

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

Deposits:

 

 

 

 

Non-interest bearing

 

$ 7,396,153

 

$ 7,492,751

 

$ 7,961,402

 

Savings, interest checking and money market

 

15,216,557

 

14,367,710

 

14,154,275

 

Certificates of deposit of less than $100,000

 

1,113,962

 

1,010,251

 

1,210,169

 

Certificates of deposit of $100,000 and over

 

1,511,120

 

1,408,548

 

1,764,611

 

Total deposits

 

25,237,792

 

24,279,260

 

25,090,457

 

Federal funds purchased and securities sold under agreements to repurchase

 

2,182,229

 

2,551,399

 

2,745,181

 

Other borrowings

 

10,201

 

3,984

 

503,589

 

Other liabilities

 

609,831

 

576,380

 

438,199

 

Total liabilities

 

28,040,053

 

27,411,023

 

28,777,426

 

Stockholders’ equity:

 

 

 

 

Common stock

 

655,322

 

655,322

 

629,319

 

Capital surplus

 

3,154,300

 

3,153,107

 

2,924,211

 

Retained earnings

 

338,512

 

235,299

 

298,297

 

Treasury stock

 

(139,149

)

(98,176

)

(76,888

)

Accumulated other comprehensive income (loss)

 

(576,904

)

(807,817

)

(1,193,534

)

Total stockholders’ equity

 

3,432,081

 

3,137,735

 

2,581,405

 

Non-controlling interest

 

21,458

 

20,600

 

17,861

 

Total equity

 

3,453,539

 

3,158,335

 

2,599,266

 

Total liabilities and equity

 

$ 31,493,592

 

$ 30,569,358

 

$ 31,376,692

 

COMMERCE BANCSHARES, INC. and SUBSIDIARIES

AVERAGE BALANCE SHEETS

 

(Unaudited)

(In thousands)

For the Three Months Ended

Sep. 30,
2024

Jun. 30,
2024

Mar. 31,
2024

Dec. 31,
2023

Sep. 30,
2023

ASSETS:

 

 

 

 

 

Loans:

 

 

 

 

 

Business

$ 5,966,797

 

$ 5,980,364

 

$ 5,873,525

 

$ 5,861,229

 

$ 5,849,227

 

Real estate — construction and land

1,400,563

 

1,471,504

 

1,472,554

 

1,523,682

 

1,508,850

 

Real estate — business

3,580,772

 

3,666,057

 

3,727,643

 

3,644,589

 

3,642,010

 

Real estate — personal

3,047,563

 

3,044,943

 

3,031,193

 

3,027,664

 

2,992,500

 

Consumer

2,129,483

 

2,127,650

 

2,082,490

 

2,117,268

 

2,102,281

 

Revolving home equity

335,817

 

326,204

 

322,074

 

310,282

 

304,055

 

Consumer credit card

559,410

 

552,896

 

562,892

 

568,112

 

564,039

 

Overdrafts

5,460

 

4,856

 

7,696

 

5,258

 

5,341

 

Total loans

17,025,865

 

17,174,474

 

17,080,067

 

17,058,084

 

16,968,303

 

Allowance for credit losses on loans

(158,003

)

(159,791

)

(161,891

)

(161,932

)

(158,335

)

Net loans

16,867,862

 

17,014,683

 

16,918,176

 

16,896,152

 

16,809,968

 

Loans held for sale

2,448

 

2,455

 

2,149

 

5,392

 

5,714

 

Investment securities:

 

 

 

 

 

U.S. government and federal agency obligations

1,888,985

 

1,201,954

 

851,656

 

889,390

 

986,284

 

Government-sponsored enterprise obligations

55,583

 

55,634

 

55,652

 

55,661

 

55,676

 

State and municipal obligations

856,620

 

1,069,934

 

1,330,808

 

1,363,649

 

1,391,541

 

Mortgage-backed securities

5,082,091

 

5,553,656

 

5,902,328

 

6,022,502

 

6,161,348

 

Asset-backed securities

1,525,593

 

1,785,598

 

2,085,050

 

2,325,089

 

2,553,562

 

Other debt securities

224,528

 

364,828

 

503,204

 

510,721

 

514,787

 

Unrealized gain (loss) on debt securities

(961,695

)

(1,272,127

)

(1,274,125

)

(1,595,845

)

(1,458,141

)

Total available for sale debt securities

8,671,705

 

8,759,477

 

9,454,573

 

9,571,167

 

10,205,057

 

Trading debt securities

47,440

 

46,565

 

40,483

 

37,234

 

35,044

 

Equity securities

85,118

 

127,584

 

12,768

 

12,249

 

12,230

 

Other securities

217,377

 

228,403

 

221,695

 

222,378

 

237,518

 

Total investment securities

9,021,640

 

9,162,029

 

9,729,519

 

9,843,028

 

10,489,849

 

Federal funds sold

12

 

1,612

 

599

 

1,194

 

2,722

 

Securities purchased under agreements to resell

474,997

 

303,586

 

340,934

 

450,000

 

712,472

 

Interest earning deposits with banks

2,565,188

 

2,099,777

 

1,938,381

 

2,387,415

 

2,337,744

 

Other assets

1,648,321

 

1,651,808

 

1,715,716

 

1,797,849

 

1,750,222

 

Total assets

$ 30,580,468

 

$ 30,235,950

 

$ 30,645,474

 

$ 31,381,030

 

$ 32,108,691

 

 

 

 

 

 

 

LIABILITIES AND EQUITY:

 

 

 

 

 

Non-interest bearing deposits

$ 7,284,834

 

$ 7,297,955

 

$ 7,328,603

 

$ 7,748,654

 

$ 7,939,190

 

Savings

1,303,675

 

1,328,989

 

1,333,983

 

1,357,733

 

1,436,149

 

Interest checking and money market

13,242,398

 

13,162,118

 

13,215,270

 

13,166,783

 

13,048,199

 

Certificates of deposit of less than $100,000

1,055,683

 

1,003,798

 

976,804

 

1,097,224

 

1,423,965

 

Certificates of deposit of $100,000 and over

1,464,143

 

1,492,592

 

1,595,310

 

1,839,057

 

1,718,126

 

Total deposits

24,350,733

 

24,285,452

 

24,449,970

 

25,209,451

 

25,565,629

 

Borrowings:

 

 

 

 

 

Federal funds purchased

206,644

 

265,042

 

328,216

 

473,534

 

508,851

 

Securities sold under agreements to repurchase

2,351,870

 

2,254,849

 

2,511,959

 

2,467,118

 

2,283,020

 

Other borrowings

496

 

838

 

76

 

179,587

 

685,222

 

Total borrowings

2,559,010

 

2,520,729

 

2,840,251

 

3,120,239

 

3,477,093

 

Other liabilities

405,490

 

399,080

 

410,310

 

421,402

 

367,741

 

Total liabilities

27,315,233

 

27,205,261

 

27,700,531

 

28,751,092

 

29,410,463

 

Equity

3,265,235

 

3,030,689

 

2,944,943

 

2,629,938

 

2,698,228

 

Total liabilities and equity

$ 30,580,468

 

$ 30,235,950

 

$ 30,645,474

 

$ 31,381,030

 

$ 32,108,691

 

COMMERCE BANCSHARES, INC. and SUBSIDIARIES

AVERAGE RATES

 

(Unaudited)

For the Three Months Ended

Sep. 30,
2024

Jun. 30,
2024

Mar. 31,
2024

Dec. 31,
2023

Sep. 30,
2023

ASSETS:

 

 

 

 

 

Loans:

 

 

 

 

 

Business(1)

6.17

%

6.11

%

6.07

%

5.91

%

5.77

%

Real estate — construction and land

8.44

 

8.36

 

8.40

 

8.34

 

8.17

 

Real estate — business

6.28

 

6.26

 

6.26

 

6.18

 

6.13

 

Real estate — personal

4.10

 

4.04

 

3.95

 

3.85

 

3.73

 

Consumer

6.64

 

6.56

 

6.40

 

6.21

 

5.97

 

Revolving home equity

7.69

 

7.68

 

7.70

 

7.70

 

7.76

 

Consumer credit card

14.01

 

13.96

 

14.11

 

13.83

 

13.77

 

Overdrafts

 

 

 

 

 

Total loans

6.35

 

6.30

 

6.27

 

6.15

 

6.02

 

Loans held for sale

6.34

 

7.54

 

7.49

 

9.93

 

10.55

 

Investment securities:

 

 

 

 

 

U.S. government and federal agency obligations

3.68

 

5.04

 

2.08

 

2.32

 

2.31

 

Government-sponsored enterprise obligations

2.37

 

2.39

 

2.39

 

2.36

 

2.36

 

State and municipal obligations(1)

2.00

 

2.00

 

1.97

 

1.94

 

1.95

 

Mortgage-backed securities

1.95

 

2.09

 

2.19

 

2.05

 

2.06

 

Asset-backed securities

2.66

 

2.50

 

2.39

 

2.30

 

2.20

 

Other debt securities

2.07

 

2.01

 

1.93

 

1.85

 

1.75

 

Total available for sale debt securities

2.41

 

2.50

 

2.18

 

2.10

 

2.08

 

Trading debt securities(1)

4.52

 

4.95

 

5.30

 

5.05

 

5.11

 

Equity securities (1)

4.44

 

2.82

 

25.64

 

27.47

 

23.06

 

Other securities (1)

6.09

 

13.20

 

13.04

 

8.60

 

13.13

 

Total investment securities

2.52

 

2.75

 

2.44

 

2.27

 

2.33

 

Federal funds sold

 

6.74

 

6.71

 

6.65

 

6.56

 

Securities purchased under agreements to resell

3.53

 

3.21

 

1.93

 

1.64

 

2.08

 

Interest earning deposits with banks

5.43

 

5.48

 

5.48

 

5.47

 

5.39

 

Total interest earning assets

4.96

 

4.98

 

4.78

 

4.62

 

4.51

 

 

 

 

 

 

 

LIABILITIES AND EQUITY:

 

 

 

 

 

Interest bearing deposits:

 

 

 

 

 

Savings

.07

 

.06

 

.06

 

.05

 

.05

 

Interest checking and money market

1.74

 

1.73

 

1.69

 

1.57

 

1.33

 

Certificates of deposit of less than $100,000

4.17

 

4.22

 

4.20

 

4.21

 

4.32

 

Certificates of deposit of $100,000 and over

4.51

 

4.55

 

4.56

 

4.55

 

4.37

 

Total interest bearing deposits

2.00

 

1.99

 

1.97

 

1.93

 

1.76

 

Borrowings:

 

 

 

 

 

Federal funds purchased

5.38

 

5.42

 

5.42

 

5.40

 

5.33

 

Securities sold under agreements to repurchase

3.56

 

3.44

 

3.43

 

3.25

 

3.20

 

Other borrowings

4.81

 

3.84

 

 

5.45

 

5.30

 

Total borrowings

3.71

 

3.65

 

3.66

 

3.71

 

3.93

 

Total interest bearing liabilities

2.22

%

2.21

%

2.21

%

2.20

%

2.12

%

 

 

 

 

 

 

Net yield on interest earning assets

3.50

%

3.55

%

3.33

%

3.17

%

3.11

%

(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 Nine Months
Ended

(Unaudited)

(In thousands, except ratios)

 

Sep. 30,
2024

Jun. 30,
2024

Mar. 31,
2024

Dec. 31,
2023

Sep. 30,
2023

Sep. 30,
2024

Sep. 30,
2023

ALLOWANCE FOR CREDIT LOSSES ON LOANS

 

 

 

 

 

 

 

 

Balance at beginning of period

 

$158,557

 

$160,465

 

$162,395

 

$162,244

 

$158,685

 

$162,395

 

$150,136

 

Provision for credit losses on loans

 

11,861

 

7,849

 

6,947

 

8,170

 

13,343

 

26,657

 

35,155

 

Net charge-offs (recoveries):

 

 

 

 

 

 

 

 

Commercial portfolio:

 

 

 

 

 

 

 

 

Business

 

114

 

622

 

23

 

96

 

2,613

 

759

 

3,008

 

Real estate — construction and land

 

 

 

 

 

 

 

(115

)

Real estate — business

 

(7

)

(8

)

(141

)

128

 

(15

)

(156

)

(24

)

 

 

107

 

614

 

(118

)

224

 

2,598

 

603

 

2,869

 

Personal banking portfolio:

 

 

 

 

 

 

 

 

Consumer credit card

 

6,273

 

6,746

 

6,435

 

5,325

 

4,716

 

19,454

 

13,728

 

Consumer

 

2,759

 

1,804

 

1,983

 

1,903

 

1,797

 

6,546

 

4,345

 

Overdraft

 

464

 

521

 

557

 

588

 

683

 

1,542

 

2,178

 

Real estate — personal

 

128

 

79

 

24

 

(11

)

(9

)

231

 

(26

)

Revolving home equity

 

(152

)

(7

)

(4

)

(10

)

(1

)

(163

)

(47

)

 

 

9,472

 

9,143

 

8,995

 

7,795

 

7,186

 

27,610

 

20,178

 

Total net loan charge-offs

 

9,579

 

9,757

 

8,877

 

8,019

 

9,784

 

28,213

 

23,047

 

Balance at end of period

 

$160,839

 

$158,557

 

$160,465

 

$162,395

 

$162,244

 

$160,839

 

$162,244

 

LIABILITY FOR UNFUNDED LENDING COMMITMENTS

 

$17,984

 

$20,705

 

$23,086

 

$25,246

 

$27,537

 

 

 

NET CHARGE-OFF RATIOS (1)

 

 

 

 

 

 

 

 

Commercial portfolio:

 

 

 

 

 

 

 

 

Business

 

.01

%

.04

%

%

.01

%

.18

%

.02

%

.07

%

Real estate — construction and land

 

 

 

 

 

 

 

(.01

)

Real estate — business

 

 

 

(.02

)

.01

 

 

(.01

)

 

 

 

 

.02

 

 

.01

 

.09

 

.01

 

.04

 

Personal banking portfolio:

 

 

 

 

 

 

 

 

Consumer credit card

 

4.46

 

4.91

 

4.60

 

3.72

 

3.32

 

4.65

 

3.28

 

Consumer

 

.52

 

.34

 

.38

 

.36

 

.34

 

.41

 

.28

 

Overdraft

 

33.81

 

43.15

 

29.11

 

44.37

 

50.73

 

34.32

 

60.54

 

Real estate — personal

 

.02

 

.01

 

 

 

 

.01

 

 

Revolving home equity

 

(.18

)

(.01

)

 

(.01

)

 

(.07

)

(.02

)

 

 

.62

 

.61

 

.60

 

.51

 

.48

 

.61

 

.46

 

Total

 

.22

%

.23

%

.21

%

.19

%

.23

%

.22

%

.18

%

CREDIT QUALITY RATIOS

 

 

 

 

 

 

 

 

Non-accrual loans to total loans

 

.11

%

.11

%

.03

%

.04

%

.05

%

 

 

Allowance for credit losses on loans to total loans

 

.94

 

.92

 

.93

 

.94

 

.95

 

 

 

NON-ACCRUAL AND PAST DUE LOANS

 

 

 

 

 

 

 

 

Non-accrual loans:

 

 

 

 

 

 

 

 

Business

 

$354

 

$504

 

$1,038

 

$3,622

 

$6,602

 

 

 

Real estate — business

 

14,944

 

15,050

 

1,246

 

60

 

76

 

 

 

Real estate — personal

 

1,144

 

1,772

 

1,523

 

1,653

 

1,531

 

 

 

Revolving home equity

 

1,977

 

1,977

 

1,977

 

1,977

 

 

 

 

Total

 

18,419

 

19,303

 

5,784

 

7,312

 

8,209

 

 

 

Loans past due 90 days and still accruing interest

$21,986

 

$18,566

 

$20,281

 

$21,864

 

$18,580

 

 

 

(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 Third Quarter Results
September 30, 2024

For the quarter ended September 30, 2024, net income amounted to $138.0 million, compared to $139.6 million in the previous quarter and $120.6 million in the same quarter last year. The decrease in net income compared to the previous quarter was primarily the result of increases in the provision for credit losses and non-interest expense, partly offset by higher non-interest income. The net yield on interest earning assets decreased five basis points compared to the previous quarter to 3.50%. Average deposits increased $65.3 million over the prior quarter, while average loans and available for sale debt securities, at fair value, declined $148.6 million and $87.8 million, respectively. For the quarter, the return on average assets was 1.80%, the return on average equity was 16.81%, and the efficiency ratio was 56.3%.

Balance Sheet Review

During the 3rd quarter of 2024, average loans totaled $17.0 billion, a decrease of $148.6 million compared to the prior quarter, and an increase of $57.6 million, or .3%, over the same quarter last year. Compared to the previous quarter, average balances of business real estate and construction loans declined $85.3 million and $70.9 million, respectively. During the current quarter, the Company sold certain fixed rate personal real estate loans totaling $22.6 million, compared to $18.2 million in the prior quarter.

Total average available for sale debt securities decreased $87.8 million compared to the previous quarter to $8.7 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 obligations, and other debt securities, partly offset by higher average balances of U.S. government and federal agency obligations. During the 3rd quarter of 2024, the unrealized loss on available for sale debt securities decreased $287.4 million to $786.4 million, at period end. Also, during the 3rd quarter of 2024, purchases of available for sale debt securities totaled $976.1 million with a weighted average yield of approximately 3.87%, and sales, maturities and pay downs of available for sale debt securities were $630.3 million. At September 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.

Total average deposits increased $65.3 million this quarter compared to the previous quarter. The increase in deposits mostly resulted from growth of $80.3 million in interest checking and money market average balances. Compared to the previous quarter, total average commercial deposits grew $250.3 million, while average consumer and trust deposits declined $117.6 million and $82.2 million, respectively. The average loans to deposits ratio was 69.9% in the current quarter and 70.7% in the prior quarter. The Company’s average borrowings, which included average customer repurchase agreements of $2.4 billion, increased $38.3 million to $2.6 billion in the 3rd quarter of 2024.

Net Interest Income

Net interest income in the 3rd quarter of 2024 amounted to $262.4 million, an increase of $102 thousand over the previous quarter. On a fully taxable-equivalent (FTE) basis, net interest income for the current quarter increased $60 thousand over the previous quarter to $264.6 million. The increase in net interest income was mostly due to higher interest income on loans and deposits with banks, partly offset by lower interest income on investment securities and higher interest expense on deposits and borrowings. The net yield (FTE) on earning assets decreased to 3.50%, from 3.55% in the prior quarter.

Compared to the previous quarter, interest income on loans (FTE) increased $2.7 million, due to higher average rates earned on all loan categories, partly offset by lower balances on construction and business real estate loans. The average yield (FTE) on the loan portfolio increased five basis points to 6.35% this quarter.

Interest income on investment securities (FTE) decreased $8.1 million compared to the prior quarter, mostly due to lower rates earned on U.S. government and federal agency, mortgage-backed and other securities. Interest income earned on U.S. government and federal agency securities increased due to higher average balances, partly offset by lower rates, which included the impact of $5.5 million in lower inflation income from Treasury inflation-protected securities compared to previous quarter. Additionally, the Company recorded a $286 thousand adjustment to premium amortization at September 30, 2024, which decreased interest income to reflect slightly faster forward prepayment speed estimates on mortgage-backed securities. This decrease was lower than the $740 thousand adjustment increasing interest income in the prior quarter. The average yield (FTE) on total investment securities was 2.52% in the current quarter, compared to 2.75% in the previous quarter.

Compared to the previous quarter, interest income on deposits with banks increased $6.4 million, due to higher average balances of $465.4 million. Interest earned on securities purchased under agreements to resell increased $1.8 million due to higher average balances and rates.

Interest expense increased $2.6 million compared to the previous quarter, mainly due to higher average borrowing rates and average interest bearing deposit balances. Interest expense on borrowings increased $994 thousand due to higher average rates and balances of customer repurchase agreements, partly offset by lower average balances of federal funds purchased. Interest expense on deposits increased $1.6 million mostly due to higher average balances. The average rate paid on interest bearing deposits totaled 2.00% in the current quarter compared to 1.99% in the prior quarter. The overall rate paid on interest bearing liabilities was 2.22% in the current quarter and 2.21% in the prior quarter.

Non-Interest Income

In the 3rd quarter of 2024, total non-interest income amounted to $159.0 million, an increase of $16.1 million, or 11.2%, over the same period last year and an increase of $6.8 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, capital market fees, deposit account fees, and gains on the sales of real estate, partly offset by lower tax credit sales income. Additionally, an increase of $1.8 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. The increase in non-interest income compared to the prior quarter was mainly due to higher trust fees, capital market fees, and gains on the sales of real estate.

Total net bank card fees in the current quarter increased $671 thousand, or 1.4%, compared to the same period last year, and increased $93 thousand compared to the prior quarter. Net corporate card fees increased $234 thousand, or .9%, compared to the same quarter of last year mainly due to lower rewards expense. Net merchant fees decreased $378 thousand, or 6.5%, mainly due to higher network expense. Net debit card fees increased $288 thousand, or 2.6%, while net credit card fees increased $527 thousand, or 15.4%, mostly due to higher interchange fees and lower rewards expense. Total net bank card fees this quarter were comprised of fees on corporate card ($26.8 million), debit card ($11.4 million), merchant ($5.5 million) and credit card ($4.0 million) transactions.

In the current quarter, trust fees increased $5.5 million, or 11.1%, over the same period last year, mostly resulting from higher private client fees. Compared to the same period last year, deposit account fees increased $2.3 million, or 9.9%, mostly due to higher corporate cash management fees, while capital market fees increased $2.5 million, or 70.1%, mostly due to higher trading securities income.

Other non-interest income increased compared to the same period last year primarily due to higher gains on the sales of real estate of $3.4 million and the deferred compensation adjustment previously mentioned, partly offset by lower tax credit sales income of $1.4 million. For the 3rd quarter of 2024, non-interest income comprised 37.7% of the Company’s total revenue.

Investment Securities Gains and Losses

The Company recorded net securities gains of $3.9 million in the current quarter, compared to gains of $3.2 million in the prior quarter and gains of $4.3 million in the 3rd quarter of 2023. Net securities gains in the current quarter resulted from net gains of $9.5 million on the Company’s portfolio of private equity investments, driven by $7.4 million of fair value adjustments. These net gains were partly offset by losses of $5.4 million on sales of available for sale debt securities and a loss of $417 thousand resulting from the Company’s sale of 217,872 shares of Visa Class A common stock (converted from 54,468 shares of Visa Class C common stock). As of September 30, 2024, the Company has sold all of the Visa Class C shares it received from the Visa exchange offer.

Non-Interest Expense

Non-interest expense for the current quarter amounted to $237.6 million, compared to $228.0 million in the same period last year and $232.2 million in the prior quarter. The increase in non-interest expense compared to the same period last year was mainly due to higher salaries and employee benefits expense, data processing and software expense, and marketing expense, partly offset by lower deposit insurance expense. The increase in non-interest expense compared to the prior quarter was mainly due to higher salaries and employee benefits expense and marketing expense, partly offset by a donation to a related charitable foundation recorded in the prior quarter that did not reoccur in the current quarter.

Compared to the 3rd quarter of last year, salaries and employee benefits expense increased $6.3 million, or 4.3%, mostly due to higher full-time salaries expense of $3.5 million, and incentive compensation of $2.2 million. Full-time equivalent employees totaled 4,711 and 4,714 at September 30, 2024 and 2023, respectively.

Compared to the same period last year, data processing and software expense increased $1.5 million due to increased costs for service providers, and marketing expense increased $1.1 million. These increases were partly offset by a decrease in deposit insurance expense of $1.1 million, which was partially the result of a $525 thousand accrual adjustment to the FDIC’s special assessment.

Income Taxes

The effective tax rate for the Company was 21.7% in the current quarter, unchanged from both the previous quarter, and the 3rd quarter of 2023.

Credit Quality

Net loan charge-offs in the 3rd quarter of 2024 amounted to $9.6 million, compared to $9.8 million in both the prior quarter and the same period last year. The ratio of annualized net loan charge-offs to total average loans was .22% in the current quarter, and .23% in both the previous quarter and the same quarter of last year. Compared to the prior quarter, net loan charge-offs on business and consumer credit card loans decreased $508 thousand and $473 thousand, respectively, while consumer loan net charge-offs increased $955 thousand.

In the 3rd quarter of 2024, annualized net loan charge-offs on average consumer credit card loans were 4.46%, compared to 4.91% in the previous quarter and 3.32% in the same quarter last year. Consumer loan net charge-offs were .52% of average consumer loans in the current quarter, and .34% in both the prior quarter and the same quarter last year.

At September 30, 2024, the allowance for credit losses on loans totaled $160.8 million, or .94% of total loans, and increased $2.3 million compared to the prior quarter. Additionally, the liability for unfunded lending commitments at September 30, 2024 was $18.0 million, a decrease of $2.7 million compared to the liability at June 30, 2024.

At September 30, 2024, total non-accrual loans amounted to $18.4 million, a decrease of $884 thousand compared to the previous quarter. At September 30, 2024, the balance of non-accrual loans, which represented .11% of loans outstanding, included business loans of $354 thousand, revolving home equity loans of $2.0 million, personal real estate loans of $1.1 million, and business real estate loans of $14.9 million. Loans more than 90 days past due and still accruing interest totaled $22.0 million at September 30, 2024.

Other

During the 3rd 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 699,919 shares of treasury stock during the current quarter at an average price of $62.39.

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.

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

Source: Commerce Bancshares, Inc.