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Commerce Bancshares, Inc. Reports Third Quarter Earnings Per Share of $1.05

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KANSAS CITY, Mo., October 19, 2021--(BUSINESS WIRE)--Commerce Bancshares, Inc. announced earnings of $1.05 per share for the three months ended September 30, 2021, compared to $1.06 per common share in the same quarter last year and $1.38 per share in the second quarter of 2021. Net income attributable to Commerce Bancshares, Inc. (net income) for the third quarter of 2021 amounted to $122.6 million, compared to $132.4 million in the third quarter of 2020 and $162.3 million in the prior quarter. For the quarter, the return on average assets was 1.40%, the return on average equity was 13.74% and the efficiency ratio was 59.9%.

For the nine months ended September 30, 2021, earnings per common share totaled $3.54 compared to $1.80 for the first nine months of 2020. Net income attributable to Commerce Bancshares, Inc. amounted to $415.9 million for the nine months ended September 30, 2021, compared to $224.2 million in the comparable period last year. Year to date, the return on average assets was 1.65%, and the return on average equity was 16.14%.

In announcing these results, John Kemper, Chief Executive Officer, said, "We are pleased to report solid earnings again this quarter, reflecting continued robust contributions from our fee-based businesses. Trust fees grew 20.1% compared to the same quarter last year and 5.8% compared to the prior quarter. Bank card and deposit account fees continued to rebound strongly from last year’s lows. Although loan demand has been somewhat limited, we did experience increases in construction and consumer loans this quarter and our Company remains well-positioned to benefit from a strengthening economy. Our portfolio of private equity investments also performed well, driving net investment securities gains of $13.1 million. Non-interest expense increased compared to the same quarter last year, as higher incentive compensation reflected our improved financial performance in 2021 and certain business expenses that declined precipitously during the pandemic are rebounding from lows set one year ago. Additionally, other expense was elevated during the quarter, reflecting non-recurring litigation settlement expenses. Compared to the previous quarter, average deposits grew $344.0 million, or 1.2%, while average loan balances declined $731.5 million, or 4.6% (average PPP loan balances declined $689.2 million). As of September 30, 2021, 84% percent of our PPP loan balances have been forgiven."

Mr. Kemper continued, "Credit quality of the loan portfolio remains excellent. This quarter, net loan charge-offs totaled $3.7 million, compared to $699 thousand in the prior quarter and $7.6 million in the third quarter of 2020. The ratio of annualized net loan charge-offs to average loans was .10% in the current quarter, .02% in the prior quarter and .18% in the third quarter of last year. Net charge-offs on consumer card loans declined $2.2 million from the prior quarter, and net charge-offs on consumer loans remained low. Non-performing assets totaled $10.5 million and also remained at very low levels. At September 30, 2021, the allowance for credit losses on loans decreased to $162.8 million. Excluding Paycheck Protection Plan (PPP) loans, the allowance for credit losses on loans to total loans was 1.10% at September 30, 2021."

Total assets at September 30, 2021 were $34.5 billion, total loans were $15.1 billion, and total deposits were $28.1 billion. During the quarter, the Company paid a cash dividend of $.263 per share, representing a 2.1% increase over the rate paid in the third quarter of 2020. The Company purchased 575,457 shares of its common stock this quarter.

Commerce Bancshares, Inc. is a regional bank holding company offering a full line of banking services, including payment solutions, investment management and securities brokerage. Commerce Bank, a subsidiary of Commerce Bancshares, Inc., leverages more than 150 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)

September 30,
2021

June 30,
2021

September 30,
2020

September 30,
2021

September 30,
2020

FINANCIAL SUMMARY

Net interest income

$214,037

$207,982

$215,962

$627,767

$620,084

Non-interest income

137,506

139,143

129,572

412,694

370,750

Total revenue

351,543

347,125

345,534

1,040,461

990,834

Investment securities gains (losses), net

13,108

16,804

16,155

39,765

(1,275)

Provision for credit losses

(7,385)

(45,655)

3,101

(59,272)

141,593

Non-interest expense

211,620

198,126

190,858

602,319

572,068

Income before taxes

160,416

211,458

167,730

537,179

275,898

Income taxes

34,662

45,209

34,375

111,947

54,209

Non-controlling interest (income) expense

3,193

3,923

907

9,373

(2,479)

Net income attributable to Commerce Bancshares, Inc.

122,561

162,326

132,448

415,859

224,168

Preferred stock dividends

7,466

11,966

Net income available to common shareholders

$122,561

$162,326

$124,982

$415,859

$212,202

Earnings per common share:

Net income — basic

$1.05

$1.38

$1.06

$3.55

$1.80

Net income — diluted

$1.05

$1.38

$1.06

$3.54

$1.80

Effective tax rate

22.05

%

21.78

%

20.61

%

21.21

%

19.47

%

Tax equivalent net interest income

$216,858

$211,060

$219,118

$636,692

$629,773

Average total interest earning assets (1)

$

33,306,752

$

32,556,658

$

29,352,970

$

32,388,139

$

27,419,514

Diluted wtd. average shares outstanding

116,077,229

116,450,430

116,444,157

116,365,204

116,609,592

RATIOS

Average loans to deposits (2)

54.44

%

57.78

%

66.23

%

57.91

%

69.12

%

Return on total average assets

1.40

1.93

1.71

1.65

1.04

Return on average common equity (3)

13.74

19.12

15.21

16.14

8.93

Non-interest income to total revenue

39.11

40.08

37.50

39.66

37.42

Efficiency ratio (4)

59.95

56.90

55.00

57.76

57.37

Net yield on interest earning assets

2.58

2.60

2.97

2.63

3.07

EQUITY SUMMARY

Cash dividends per common share

$.263

$.263

$.257

$.788

$.771

Cash dividends on common stock

$30,645

$30,760

$30,174

$92,204

$90,640

Cash dividends on preferred stock

$—

$—

$7,466

$—

$11,966

Book value per common share (5)

$30.01

$29.89

$28.23

Market value per common share (5)

$69.68

$74.56

$53.61

High market value per common share

$75.68

$81.19

$59.13

Low market value per common share

$64.90

$70.69

$50.50

Common shares outstanding (5)

116,332,177

116,893,573

117,109,209

Tangible common equity to tangible assets (6)

9.71

%

9.91

%

10.11

%

Tier I leverage ratio

9.31

%

9.36

%

9.39

%

OTHER QTD INFORMATION

Number of bank/ATM locations

292

295

308

Full-time equivalent employees

4,582

4,590

4,825

(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 available to common shareholders divided by average total equity less preferred stock.

(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 preferred stock, 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 2020.

COMMERCE BANCSHARES, INC. and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME

For the Three Months Ended

For the Nine Months Ended

(Unaudited)

(In thousands, except per share data)

September 30,
2021

June 30,
2021

March 31,
2021

December 31,
2020

September 30,
2020

September 30,
2021

September 30,
2020

Interest income

$216,981

$211,133

$209,697

$214,726

$223,114

$637,811

$657,922

Interest expense

2,944

3,151

3,949

4,963

7,152

10,044

37,838

Net interest income

214,037

207,982

205,748

209,763

215,962

627,767

620,084

Provision for credit losses

(7,385)

(45,655)

(6,232)

(4,403)

3,101

(59,272)

141,593

Net interest income after credit losses

221,422

253,637

211,980

214,166

212,861

687,039

478,491

NON-INTEREST INCOME

Bank card transaction fees

42,815

42,608

37,695

39,979

37,873

123,118

111,818

Trust fees

48,950

46,257

44,127

41,961

40,769

139,334

118,676

Deposit account charges and other fees

25,161

23,988

22,575

24,164

23,107

71,724

69,063

Capital market fees

3,794

3,327

4,981

3,826

3,194

12,102

10,756

Consumer brokerage services

4,900

4,503

4,081

3,996

4,011

13,484

11,099

Loan fees and sales

6,842

7,446

10,184

9,031

9,769

24,472

17,653

Other

5,044

11,014

12,402

12,160

10,849

28,460

31,685

Total non-interest income

137,506

139,143

136,045

135,117

129,572

412,694

370,750

INVESTMENT SECURITIES GAINS (LOSSES), NET

13,108

16,804

9,853

12,307

16,155

39,765

(1,275)

NON-INTEREST EXPENSE

Salaries and employee benefits

132,824

130,751

129,033

129,983

127,308

392,608

383,004

Net occupancy

12,329

11,527

12,021

11,570

12,058

35,877

35,075

Equipment

4,440

4,605

4,353

4,526

4,737

13,398

14,313

Supplies and communication

4,530

4,033

4,125

4,193

4,141

12,688

13,226

Data processing and software

25,598

24,954

25,463

24,323

23,610

76,015

71,002

Marketing

5,623

5,680

5,158

5,028

4,926

16,461

14,706

Other

26,276

16,576

12,420

16,687

14,078

55,272

40,742

Total non-interest expense

211,620

198,126

192,573

196,310

190,858

...

572,068

Income before income taxes

160,416

211,458

165,305

165,280

167,730

537,179

275,898

Less income taxes

34,662

...

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