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.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240717377865/en/
Matt Burkemper, Investor Relations (314) 746-7485
www.commercebank.com matthew.burkemper@commercebank.com
Commerce Bancshares (NASDAQ:CBSH)
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