Commerce Bancshares, Inc. Reports Third Quarter Earnings Per Share Of $1.02

KANSAS CITY, Mo., October 18, 2022--(BUSINESS WIRE)--Commerce Bancshares, Inc. announced earnings of $1.02 per share for the three months ended September 30, 2022, compared to $.99 per share in the same quarter last year and $.96 per share in the second quarter of 2022. Net income for the third quarter of 2022 amounted to $122.8 million, compared to $122.6 million in the third quarter of 2021 and $115.8 million in the prior quarter.

For the nine months ended September 30, 2022, earnings per share totaled $2.95, compared to $3.37 for the first nine months of 2021. Net income amounted to $356.8 million for the nine months ended September 30, 2022, compared to $415.9 million in the comparable period last year. For the current year to date, the return on average assets was 1.39%, and the return on average equity was 16.08%.

"Our third quarter results reflect the strengths of our balance sheet and diverse operating model," said John Kemper. "Our variable rate earning assets and resilient core deposit base contributed to an expanding net interest margin and drove record quarterly net interest income. Additionally, our fee-based businesses contributed nearly 36% of total revenue."

"In an increasingly uncertain economic environment, the bank remains well-positioned. Credit quality metrics and regulatory capital levels remain robust, and we are in a strong liquidity position to accommodate future loan growth."

Third Quarter 2022 Financial Highlights:

• Net interest income was $246.4 million, a $14.0 million increase over the prior quarter. The net interest margin increased 22 basis points to 3.01%.

• Non-interest income totaled $138.5 million, a decrease of $913 thousand compared to the prior quarter.

• Non-interest expense totaled $212.9 million, a decrease of $621 thousand compared to the prior quarter.

• Average loan balances totaled $15.6 billion, an increase of $160.4 million, or 1.0%, over the prior quarter.

• Total average available for sale debt securities decreased 5.8%, or $826.7 million, from the prior quarter to $13.5 billion, at fair value. Purchases of securities during the quarter totaled $53.8 million, with a weighted average yield of approximately 4.52%.

• Average deposits declined $973.9 million, or 3.4% from the prior quarter. The average rate paid on interest bearing deposits was .21%.

• The ratio of annualized net loan charge-offs to average loans was .12% compared to .10% in the prior quarter.

• Non-accrual loans totaled $7.2 million compared to $7.9 million in the prior quarter. Non-accrual loans were .05% of total loans.

• The allowance for credit losses on loans increased $5.3 million during the third quarter to $143.4 million, and at September 30, 2022, the ratio of the allowance for credit losses on loans to total loans was .90% compared to .88% at June 30, 2022.

• The Company purchased 710,879 shares of its common stock this quarter at an average price of $70.50.

• Total assets at September 30, 2022 were $32.6 billion, a decrease of $832.8 million, or 2.5%, from the prior quarter.

• For the quarter, the return on average assets was 1.48%, the return on average equity was 17.84%, and the efficiency ratio was 55.2%.

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 more than 155 years of proven strength and experience to help individuals and businesses solve financial challenges. In addition to offering payment solutions across the U.S., Commerce Bank currently operates full-service banking facilities across the Midwest including the St. Louis and Kansas City metropolitan areas, Springfield, Central Missouri, Central Illinois, Wichita, Tulsa, Oklahoma City, and Denver. It also maintains commercial offices in Dallas, Houston, Cincinnati, Nashville, Des Moines, Indianapolis, and Grand Rapids. Commerce delivers high-touch service and sophisticated financial solutions at regional branches, commercial offices, ATMs, online, mobile and through a 24/7 customer service line.

This financial news release and the supplementary Earnings Highlights presentation are available on the Company’s website at https://investor.commercebank.com/news-info/financial-news-releases/default.aspx.

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, 2022		Jun. 30, 2022		Sep. 30, 2021		Sep. 30, 2022		Sep. 30, 2021
FINANCIAL SUMMARY
Net interest income		$246,373		$232,385		$214,037		$687,544		$627,767
Non-interest income		138,514		139,427		137,506		409,710		412,694
Total revenue		384,887		371,812		351,543		1,097,254		1,040,461
Investment securities gains		3,410		1,029		13,108		11,602		39,765
Provision for credit losses		15,290		7,162		(7,385	)	12,594		(59,272	)
Non-interest expense		212,884		213,505		211,620		632,037		602,319
Income before taxes		160,123		152,174		160,416		464,225		537,179
Income taxes		33,936		32,021		34,662		97,859		111,947
Non-controlling interest expense		3,364		4,359		3,193		9,595		9,373
Net income attributable to Commerce Bancshares, Inc.		$122,823		$115,794		$122,561		$356,771		$415,859
Earnings per common share:
Net income — basic		$1.03		$0.96		$1.00		$2.96		$3.38
Net income — diluted		$1.02		$0.96		$0.99		$2.95		$3.37
Effective tax rate		21.65	%	21.66	%	22.05	%	21.52	%	21.21	%
Fully-taxable equivalent net interest income		$248,737		$235,010		$216,858		$695,140		$636,692
Average total interest earning assets (1)		$32,807,393		$33,839,655		$33,306,752		$33,853,577		$32,388,139
Diluted wtd. average shares outstanding		119,158,652		119,920,218		121,881,091		119,892,983		122,183,464
RATIOS
Average loans to deposits (2)		56.40	%	53.93	%	54.44	%	54.05	%	57.91	%
Return on total average assets		1.48		1.36		1.40		1.39		1.65
Return on average equity (3)		17.84		16.29		13.74		16.08		16.14
Non-interest income to total revenue		35.99		37.50		39.11		37.34		39.66
Efficiency ratio (4)		55.19		57.29		59.95		57.48		57.76
Net yield on interest earning assets		3.01		2.79		2.58		2.75		2.63
EQUITY SUMMARY
Cash dividends per share		$.265		$.265		$.250		$.795		$.750
Cash dividends on common stock		$31,740		$31,935		$30,645		$95,818		$92,204
Book value per share (5)		$19.86		$22.29		$28.58
Market value per share (5)		$66.16		$65.65		$66.36
High market value per share		$73.97		$74.32		$72.08
Low market value per share		$64.20		$62.80		$61.81
Common shares outstanding (5)		119,361,141		120,032,698		122,148,786
Tangible common equity to tangible assets (6)		6.80	%	7.56	%	9.71	%
Tier I leverage ratio		9.87	%	9.45	%	9.31	%
OTHER QTD INFORMATION
Number of bank/ATM locations		277		279		292
Full-time equivalent employees		4,595		4,579		4,582

(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 revenue.
(5)		As of period end.
(6)		The tangible common equity ratio 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 2021.

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, 2022		Jun. 30, 2022		Mar. 31, 2022		Dec. 31, 2021		Sep. 30, 2021		Sep. 30, 2022		Sep. 30, 2021
Interest income		$262,666		$238,154		$211,782		$210,479		$216,981		$712,602		$637,811
Interest expense		16,293		5,769		2,996		2,822		2,944		25,058		10,044
Net interest income		246,373		232,385		208,786		207,657		214,037		687,544		627,767
Provision for credit losses		15,290		7,162		(9,858	)	(7,054	)	(7,385	)	12,594		(59,272	)
Net interest income after credit losses		231,083		225,223		218,644		214,711		221,422		674,950		687,039
NON-INTEREST INCOME
Trust fees		45,406		46,792		47,811		48,893		48,950		140,009		139,334
Bank card transaction fees		45,638		43,873		42,045		44,773		42,815		131,556		123,118
Deposit account charges and other fees		24,521		25,564		22,307		25,493		25,161		72,392		71,724
Consumer brokerage services		5,085		5,068		4,446		4,878		4,900		14,599		13,484
Capital market fees		3,393		3,327		4,125		3,841		3,794		10,845		12,102
Loan fees and sales		3,094		3,246		4,235		5,248		6,842		10,575		24,472
Other		11,377		11,557		6,800		14,573		5,044		29,734		28,460
Total non-interest income		138,514		139,427		131,769		147,699		137,506		409,710		412,694
INVESTMENT SECURITIES GAINS (LOSSES), NET		3,410		1,029		7,163		(9,706	)	13,108		11,602		39,765
NON-INTEREST EXPENSE
Salaries and employee benefits		137,393		142,243		135,953		132,640		132,824		415,589		392,608
Data processing and software		28,050		27,635		27,016		25,777		25,598		82,701		76,015
Net occupancy		12,544		12,503		12,296		12,308		12,329		37,343		35,877
Equipment		5,036		4,734		4,568		4,691		4,440		14,338		13,398
Supplies and communication		4,581		4,361		4,713		4,430		4,530		13,655		12,688
Marketing		6,228		5,836		6,344		5,395		5,623		18,408		16,461
Other		19,052		16,193		14,758		18,341		26,276		50,003		55,272
Total non-interest expense		212,884		213,505		205,648		203,582		211,620		632,037		602,319
Income before income taxes		160,123		152,174		151,928		149,122		160,416		464,225		537,179
Less income taxes		33,936		32,021		31,902		33,764		34,662		97,859