EX-99.1 2 cbsh9302023ex991.htm EX-99.1 Document
Exhibit 99.1
Exhibit 99.1
commercebancshares914a01a05.jpg
CBSH
                   1000 Walnut Street / Suite 700 / Kansas City, Missouri 64106 / 816.234.2000
FOR IMMEDIATE RELEASE:
Wednesday, October 18, 2023

COMMERCE BANCSHARES, INC. REPORTS
THIRD QUARTER EARNINGS PER SHARE OF $.96

Commerce Bancshares, Inc. announced earnings of $.96 per share for the three months ended September 30, 2023, compared to $.97 per share in the same quarter last year and $1.02 per share in the second quarter of 2023. Net income for the third quarter of 2023 amounted to $120.6 million, compared to $122.8 million in the third quarter of 2022 and $127.8 million in the prior quarter.

For the nine months ended September 30, 2023, earnings per share totaled $2.93, compared to $2.81 for the first nine months of 2022. Net income amounted to $367.8 million for the nine months ended September 30, 2023, compared to $356.8 million in the comparable period last year. For the year to date, the return on average assets was 1.53%, and the return on average equity was 18.42%.

"Our strong quarterly performance in this high-rate environment demonstrates the resilience of our operating model and the adaptability of our bank," said John Kemper, President and Chief Executive Officer. "Our net interest margin declined only one basis point from the previous quarter, reflecting the impact of higher asset yields and the strength of our core deposits. Non-interest income comprised 36.5% of total revenue."

On the balance sheet, Kemper added, "As planned, we decreased the excess liquidity position that was built through short-term brokered deposit funding and FHLB advances during the second quarter.

"Our liquidity and capital levels remain robust, and credit performance remains excellent, with non-accrual loans at .05% of total loans, the same level as the third quarter of last year."

Third Quarter 2023 Financial Highlights:

•Net interest income was $248.5 million, a $991 thousand decrease from the prior quarter. The net yield on interest earning assets decreased 1 basis point to 3.11%.

•Non-interest income totaled $142.9 million, an increase of $4.4 million compared to the same quarter last year.

•Non-interest expense totaled $228.0 million, an increase of $15.1 million compared to the same quarter last year.

•Average loan balances totaled $17.0 billion, an increase of $299.3 million, or 1.8%, over the prior quarter.

1
Exhibit 99.1
•Total average available for sale debt securities decreased 6.9%, or $752.0 million, from the prior quarter to $10.2 billion, at fair value. During the third quarter of 2023, the unrealized loss on available for sale securities increased $177.4 million to $1.6 billion, at period end.

•Total average deposits increased $358.6 million, or 1.4%, compared to June 30, 2023. The average rate paid on interest bearing deposits in the current quarter was 1.76%.

•The ratio of annualized net loan charge-offs to average loans was .23% compared to .16% in the prior quarter.

•The allowance for credit losses on loans increased $3.6 million during the third quarter to $162.2 million, and at September 30, 2023, the ratio of the allowance for credit losses on loans to total loans was .95%, compared to .94% at June 30, 2023.

•Total assets at September 30, 2023 were $31.4 billion, a decrease of $1.5 billion, or 4.4%, from the prior quarter.

•For the quarter, the return on average assets was 1.49%, the return on average equity was 17.73%, and the efficiency ratio was 58.2%.

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 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. 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.
* * * * * * * * * * * * * * *
For additional information, contact
Matt Burkemper, Investor Relations
(314) 746-7485
www.commercebank.com
matthew.burkemper@commercebank.com


2
Exhibit 99.1
COMMERCE BANCSHARES, INC. and SUBSIDIARIES
FINANCIAL HIGHLIGHTS

 For the Three Months EndedFor the Nine Months Ended
(Unaudited)
(Dollars in thousands, except per share data)		Sep. 30, 2023Jun. 30, 2023Sep. 30, 2022Sep. 30, 2023Sep. 30, 2022
FINANCIAL SUMMARY
Net interest income$248,547 $249,538 $246,373 $749,708 $687,544 
Non-interest income142,949 147,605 138,514 428,166 409,710 
Total revenue391,496 397,143 384,887 1,177,874 1,097,254 
Investment securities gains (losses)4,298 3,392 3,410 7,384 11,602 
Provision for credit losses11,645 6,471 15,290 29,572 12,594 
Non-interest expense228,010 227,611 212,884 679,728 632,037 
Income before taxes156,139 166,453 160,123 475,958 464,225 
Income taxes33,439 35,990 33,936 102,242 97,859 
Non-controlling interest expense 2,104 2,674 3,364 5,879 9,595 
Net income attributable to Commerce Bancshares, Inc.$120,596 $127,789 $122,823 $367,837 $356,771 
Earnings per common share:  
Net income — basic$0.96 $1.03 $0.97 $2.94 $2.81 
Net income — diluted$0.96 $1.02 $0.97 $2.93 $2.81 
Effective tax rate21.71 %21.97 %21.65 %21.75 %21.52 %
Fully-taxable equivalent net interest income$250,962 $251,757 $248,737 $756,130 $695,140 
Average total interest earning assets (1)
$31,974,945 $32,412,084 $32,807,393 $31,986,696 $33,853,577 
Diluted wtd. average shares outstanding123,817,943 124,007,300 125,116,585 124,026,459 125,887,632 
RATIOS  
Average loans to deposits (2)
66.39 %66.15 %56.40 %65.85 %54.05 %
Return on total average assets1.49 1.56 1.48 1.53 1.39 
Return on average equity (3)
17.73 18.81 17.84 18.42 16.08 
Non-interest income to total revenue36.51 37.17 35.99 36.35 37.34 
Efficiency ratio (4)
58.15 57.22 55.19 57.62 57.48 
Net yield on interest earning assets3.11 3.12 3.01 3.16 2.75 
EQUITY SUMMARY  
Cash dividends per share$.270 $.270 $.252 $.810 $.757 
Cash dividends on common stock$33,657 $33,744 $31,740 $101,160 $95,818 
Book value per share (5)
$20.90 $21.53 $18.91 
Market value per share (5)
$47.98 $48.70 $63.01 
High market value per share$54.99 $58.97 $70.45 
Low market value per share$46.30 $45.55 $61.14 
Common shares outstanding (5)
124,367,765 124,734,830 125,329,198 
Tangible common equity to tangible assets (6)
7.78 %7.70 %6.80 %
Tier I leverage ratio10.87 %10.46 %9.87 %
OTHER QTD INFORMATION 
Number of bank/ATM locations266 272 277 
Full-time equivalent employees4,714 4,680 4,595 
(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 2022.
3
Exhibit 99.1
COMMERCE BANCSHARES, INC. and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME

 (Unaudited)
(In thousands, except per share data)		For the Three Months EndedFor the Nine Months Ended
Sep. 30, 2023Jun. 30, 2023Mar. 31, 2023Dec. 31, 2022Sep. 30, 2022Sep. 30, 2023Sep. 30, 2022
Interest income$361,162 $348,663 $308,857 $286,377 $262,666 $1,018,682 $712,602 
Interest expense112,615 99,125 57,234 31,736 16,293 268,974 25,058 
Net interest income248,547 249,538 251,623 254,641 246,373 749,708 687,544 
Provision for credit losses11,645 6,471 11,456 15,477 15,290 29,572 12,594 
Net interest income after credit losses236,902 243,067 240,167 239,164 231,083 720,136 674,950 
NON-INTEREST INCOME   
Bank card transaction fees46,899 49,725 46,654 44,588 45,638 143,278 131,556 
Trust fees49,207 47,265 45,328 44,710 45,406 141,800 140,009 
Deposit account charges and other fees23,090 22,633 21,752 21,989 24,521 67,475 72,392 
Consumer brokerage services3,820 4,677 5,085 4,518 5,085 13,582 14,599 
Capital market fees2,410 2,539 3,362 3,386 3,393 8,311 10,845 
Loan fees and sales2,966 2,735 2,589 2,566 3,094 8,290 10,575 
Other14,557 18,031 12,842 15,068 11,377 45,430 29,734 
Total non-interest income142,949 147,605 137,612 136,825 138,514 428,166 409,710 
INVESTMENT SECURITIES GAINS (LOSSES), NET4,298 3,392 (306)8,904 3,410 7,384 11,602 
NON-INTEREST EXPENSE   
Salaries and employee benefits146,805 145,429 144,373 138,458 137,393 436,607 415,589 
Data processing and software30,744 28,719 28,154 27,991 28,050 87,617 82,701 
Net occupancy13,948 12,995 12,759 11,774 12,544 39,702 37,343 
Marketing6,167 6,368 5,471 5,419 6,228 18,006 18,408 
Equipment4,697 4,864 4,850 5,021 5,036 14,411 14,338 
Supplies and communication4,963 4,625 4,590 4,446 4,581 14,178 13,655 
Other20,686 24,611 23,910 23,631 19,052 69,207 50,003 
Total non-interest expense228,010 227,611 224,107 216,740 212,884 679,728 632,037 
Income before income taxes156,139 166,453 153,366 168,153 160,123 475,958 464,225 
Less income taxes33,439 35,990 32,813 34,499 33,936 102,242 97,859 
Net income122,700 130,463 120,553 133,654 126,187 373,716 366,366 
Less non-controlling interest expense (income)2,104 2,674 1,101 2,026 3,364 5,879 9,595 
Net income attributable to Commerce Bancshares, Inc.$120,596 $127,789 $119,452 $131,628 $122,823 $367,837 $356,771 
Net income per common share — basic$0.96 $1.03 $0.95 $1.05 $0.97 $2.94 $2.81 
Net income per common share — diluted$0.96 $1.02 $0.95 $1.04 $0.97 $2.93 $2.81 
OTHER INFORMATION
Return on total average assets1.49 %1.56 %1.54 %1.65 %1.48 %1.53 %1.39 %
Return on average equity (1)
17.73 18.81 18.75 21.88 17.84 18.42 16.08 
Efficiency ratio (2)
58.15 57.22 57.49 55.26 55.19 57.62 57.48 
Effective tax rate21.71 21.97 21.55 20.77 21.65 21.75 21.52 
Net yield on interest earning assets3.11 3.12 3.26 3.18 3.01 3.16 2.75 
Fully-taxable equivalent net interest income$250,962 $251,757 $253,411 $256,675 $248,737 $756,130 $695,140 
(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.
4
Exhibit 99.1
COMMERCE BANCSHARES, INC. and SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS - PERIOD END

(Unaudited)
(In thousands)		Sep. 30, 2023Jun. 30, 2023Sep. 30, 2022
ASSETS   
Loans
     Business $5,908,330 $5,906,493 $5,528,895 
     Real estate — construction and land1,539,566 1,451,783 1,206,955 
     Real estate — business3,647,168 3,621,222 3,331,627 
     Real estate — personal3,024,639 2,980,599 2,862,519 
     Consumer2,125,804 2,110,605 2,116,371 
     Revolving home equity305,237 303,845 286,026 
     Consumer credit card574,829 574,755 563,349 
     Overdrafts3,753 7,237 3,216 
Total loans17,129,326 16,956,539 15,898,958 
Allowance for credit losses on loans(162,244)(158,685)(143,377)
Net loans16,967,082 16,797,854 15,755,581 
Loans held for sale5,120 6,776 8,062 
Investment securities:
Available for sale debt securities9,860,828 10,414,625 12,632,510 
Trading debt securities35,564 29,412 39,222 
Equity securities12,212 12,266 8,954 
Other securities230,792 258,045 222,742 
Total investment securities10,139,396 10,714,348 12,903,428 
Federal funds sold2,735 2,750 14,020 
Securities purchased under agreements to resell450,000 825,000 1,275,000 
Interest earning deposits with banks1,847,641 2,568,695 642,943 
Cash and due from banks358,010 366,699 344,178 
Premises and equipment — net460,830 451,568 407,833 
Goodwill146,539 146,371 138,921 
Other intangible assets — net14,432 14,666 15,599 
Other assets984,907 936,535 1,097,031 
Total assets$31,376,692 $32,831,262 $32,602,596 
LIABILITIES AND STOCKHOLDERS’ EQUITY   
Deposits:   
Non-interest bearing$7,961,402 $8,198,849 $10,468,591 
Savings, interest checking and money market14,154,275 14,418,974 16,014,487 
Certificates of deposit of less than $100,0001,210,169 1,543,424 391,145 
Certificates of deposit of $100,000 and over1,764,611 1,708,197 597,093 
Total deposits25,090,457 25,869,444 27,471,316 
Federal funds purchased and securities sold under agreements to repurchase2,745,181 2,878,021 2,314,590 
Other borrowings503,589 1,005,613 1,831 
Other liabilities438,199 392,956 443,752 
Total liabilities28,777,426 30,146,034 30,231,489 
Stockholders’ equity:   
Common stock629,319 629,319 610,804 
Capital surplus2,924,211 2,921,365 2,683,631 
Retained earnings298,297 211,358 353,446 
Treasury stock(76,888)(58,389)(176,943)
Accumulated other comprehensive income (loss)(1,193,534)(1,036,295)(1,119,344)
Total stockholders’ equity2,581,405 2,667,358 2,351,594 
Non-controlling interest17,861 17,870 19,513 
Total equity2,599,266 2,685,228 2,371,107 
Total liabilities and equity$31,376,692 $32,831,262 $32,602,596 

5
Exhibit 99.1
COMMERCE BANCSHARES, INC. and SUBSIDIARIES
AVERAGE BALANCE SHEETS

(Unaudited)
(In thousands)		For the Three Months Ended
Sep. 30, 2023Jun. 30, 2023Mar. 31, 2023Dec. 31, 2022Sep. 30, 2022
ASSETS:
Loans:
Business$5,849,227 $5,757,388 $5,656,104 $5,478,241 $5,317,696 
Real estate — construction and land1,508,850 1,450,196 1,410,835 1,268,900 1,288,721 
Real estate — business3,642,010 3,540,851 3,478,382 3,300,697 3,258,128 
Real estate — personal2,992,500 2,960,962 2,933,750 2,886,686 2,844,376 
Consumer2,102,281 2,098,523 2,067,385 2,089,912 2,101,622 
Revolving home equity304,055 300,623 296,748 293,681 280,923 
Consumer credit card564,039 555,875 556,223 559,463 550,058 
Overdrafts5,341 4,630 4,449 7,428 4,438 
Total loans
16,968,303 16,669,048 16,403,876 15,885,008 15,645,962 
Allowance for credit losses on loans(158,335)(159,068)(150,117)(143,285)(137,833)
Net loans16,809,968 16,509,980 16,253,759 15,741,723 15,508,129 
Loans held for sale5,714 5,957 5,708 6,567 7,170 
Investment securities:
U.S. government and federal agency obligations986,284 1,035,651 1,099,067 1,055,602 1,113,442 
Government-sponsored enterprise obligations55,676 55,751 87,086 55,732 55,753 
State and municipal obligations1,391,541 1,532,519 1,793,756 1,990,643 2,052,908 
Mortgage-backed securities6,161,348 6,316,224 6,454,408 6,605,936 6,847,912 
Asset-backed securities2,553,562 2,827,911 3,233,757 3,714,092 3,870,953 
Other debt securities
514,787 519,988 528,941 560,951 587,026 
Unrealized gain (loss) on debt securities(1,458,141)(1,331,002)(1,387,196)(1,582,061)(1,064,534)
Total available for sale debt securities10,205,057 10,957,042 11,809,819 12,400,895 13,463,460 
Trading debt securities
35,044 46,493 45,757 44,626 35,621 
Equity securities12,230 12,335 12,458 10,534 8,838 
Other securities 237,518 273,587 229,867 219,354 208,708 
Total investment securities10,489,849 11,289,457 12,097,901 12,675,409 13,716,627 
Federal funds sold2,722 7,484 38,978 27,683 13,486 
Securities purchased under agreements to resell712,472 824,974 825,000 1,174,457 1,379,341 
Interest earning deposits with banks2,337,744 2,284,162 809,935 640,039 980,273 
Other assets1,750,222 1,941,340 1,376,551 1,339,554 1,256,498 
Total assets$32,108,691 $32,863,354 $31,407,832 $31,605,432 $32,861,524 
LIABILITIES AND EQUITY:
Non-interest bearing deposits$7,939,190 $8,224,475 $9,114,512 $10,360,834 $10,758,353 
Savings1,436,149 1,516,887 1,550,215 1,567,113 1,595,857 
Interest checking and money market13,048,199 12,918,399 13,265,485 13,693,974 14,423,713 
Certificates of deposit of less than $100,0001,423,965 1,075,110 415,367 388,304 397,071 
Certificates of deposit of $100,000 and over1,718,126 1,472,208 903,393 596,703 578,158 
Total deposits25,565,629 25,207,079 25,248,972 26,606,928 27,753,152 
Borrowings:
Federal funds purchased508,851 507,165 493,721 143,630 51,929 
Securities sold under agreements to repurchase2,283,020 2,206,612 2,418,726 2,260,263 2,199,866 
Other borrowings685,222 1,617,952 551,267 179,552 2,010 
Total borrowings3,477,093 4,331,729 3,463,714 2,583,445 2,253,805 
Other liabilities367,741 598,915 112,052 28,745 123,691 
Total liabilities29,410,463 30,137,723 28,824,738 29,219,118 30,130,648 
Equity2,698,228 2,725,631 2,583,094 2,386,314 2,730,876 
Total liabilities and equity$32,108,691 $32,863,354 $31,407,832 $31,605,432 $32,861,524 

6
Exhibit 99.1
COMMERCE BANCSHARES, INC. and SUBSIDIARIES
AVERAGE RATES

(Unaudited)For the Three Months Ended
Sep. 30, 2023Jun. 30, 2023Mar. 31, 2023Dec. 31, 2022Sep. 30, 2022
ASSETS: 
Loans: 
Business (1)
5.77 %5.58 %5.31 %4.68 %3.94 %
Real estate — construction and land8.17 7.92 7.33 6.80 5.27 
Real estate — business6.13 5.96 5.65 5.15 4.40 
Real estate — personal3.73 3.68 3.61 3.45 3.36 
Consumer5.97 5.63 5.31 4.77 4.17 
Revolving home equity7.76 7.55 7.03 5.89 4.82 
Consumer credit card13.77 13.77 13.68 12.64 12.05 
Overdrafts— — — — — 
Total loans6.02 5.84 5.56 5.03 4.37 
Loans held for sale10.55 10.17 10.30 10.09 8.80 
Investment securities: 
U.S. government and federal agency obligations2.31 3.42 1.90 2.01 4.51 
Government-sponsored enterprise obligations2.36 2.38 3.21 2.36 2.36 
State and municipal obligations (1)
1.95 2.04 2.26 2.29 2.27 
Mortgage-backed securities2.06 2.09 2.06 1.88 1.93 
Asset-backed securities2.20 2.08 2.01 1.96 1.62 
Other debt securities1.75 1.86 1.93 1.89 1.93 
Total available for sale debt securities2.08 2.19 2.07 1.97 2.09 
Trading debt securities (1)
5.11 4.53 4.59 3.81 2.74 
Equity securities (1)
23.06 23.25 23.24 28.44 27.11 
Other securities (1)
13.13 9.40 7.11 6.67 7.09 
Total investment securities2.33 2.37 2.18 2.07 2.18 
Federal funds sold6.56 5.63 5.09 4.27 2.77 
Securities purchased under agreements to resell2.08 1.99 1.94 2.36 1.72 
Interest earning deposits with banks5.39 5.14 4.67 3.69 2.25 
Total interest earning assets4.51 4.34 4.00 3.59 3.21 
LIABILITIES AND EQUITY: 
Interest bearing deposits: 
Savings.05 .05 .05 .06 .04 
Interest checking and money market1.33 .93 .61 .38 .20 
Certificates of deposit of less than $100,0004.32 3.78 1.39 .73 .41 
Certificates of deposit of $100,000 and over4.37 3.93 2.98 1.42 .60 
Total interest bearing deposits1.76 1.29 .71 .40 .21 
Borrowings: 
Federal funds purchased5.33 5.06 4.59 3.56 2.41 
Securities sold under agreements to repurchase3.20 3.09 2.93 2.29 1.37 
Other borrowings5.30 5.24 4.94 4.02 1.78 
Total borrowings3.93 4.13 3.49 2.48 1.39 
Total interest bearing liabilities2.12 %1.87 %1.20 %.69 %.34 %
Net yield on interest earning assets3.11 %3.12 %3.26 %3.18 %3.01 %
(1) Stated on a fully taxable-equivalent basis using a federal income tax rate of 21%.







7
Exhibit 99.1
COMMERCE BANCSHARES, INC. and SUBSIDIARIES
CREDIT QUALITY

 For the Three Months EndedFor the Nine Months Ended
(Unaudited)
(In thousands, except ratios)		Sep. 30, 2023Jun. 30, 2023Mar. 31, 2023Dec. 31, 2022Sep. 30, 2022Sep. 30, 2023Sep. 30, 2022
ALLOWANCE FOR CREDIT LOSSES ON LOANS
Balance at beginning of period$158,685 $159,317 $150,136 $143,377 $138,039 $150,136 $150,044 
     Provision for credit losses on loans13,343 5,864 15,948 12,404 10,150 35,155 6,751 
     Net charge-offs (recoveries):
        Commercial portfolio:
     Business2,613 165 230 496 461 3,008 557 
     Real estate — construction and land — (115)— — — (115)— 
     Real estate — business(15)(5)(4)(4)(8)(24)(16)
2,598 45 226 492 453 2,869 541 
        Personal banking portfolio:
     Consumer credit card4,716 4,687 4,325 3,467 2,882 13,728 9,191 
     Consumer1,797 1,273 1,275 1,522 827 4,345 2,268 
     Overdraft683 517 978 230 703 2,178 1,486 
     Real estate — personal(9)(6)(11)(40)(15)(26)(34)
     Revolving home equity(1)(20)(26)(26)(38)(47)(34)
7,186 6,451 6,541 5,153 4,359 20,178 12,877 
     Total net loan charge-offs 9,784 6,496 6,767 5,645 4,812 23,047 13,418 
Balance at end of period$162,244 $158,685 $159,317 $150,136 $143,377 $162,244 $143,377 
LIABILITY FOR UNFUNDED LENDING COMMITMENTS$27,537 $29,235 $28,628 $33,120 $30,047 
NET CHARGE-OFF RATIOS (1)
Commercial portfolio:
     Business.18 %.01 %.02 %.04 %.03 %.07 %.01 %
     Real estate — construction and land— (.03)— — — (.01)— 
     Real estate — business— — — — — — — 
.09 — .01 .02 .02 .04 .01 
Personal banking portfolio:
     Consumer credit card3.32 3.38 3.15 2.46 2.08 3.28 2.26 
     Consumer.34 .24 .25 .29 .16 .28 .15 
     Overdraft50.73 44.79 89.15 12.28 62.85 60.54 39.39 
     Real estate — personal— — — (.01)— — — 
     Revolving home equity— (.03)(.04)(.04)(.05)(.02)(.02)
.48 .44 .45 .35 .30 .46 .30 
Total.23 %.16 %.17 %.14 %.12 %.18 %.12 %
CREDIT QUALITY RATIOS
Non-accrual loans to total loans.05 %.04 %.05 %.05 %.05 %
Allowance for credit losses on loans to total loans.95 .94 .96 .92 .90 
NON-ACCRUAL AND PAST DUE LOANS
  Non-accrual loans:
     Business$6,602 $4,732 $6,361 $6,751 $5,645 
     Real estate — construction and land— — — — — 
     Real estate — business76 153 171 189 149 
     Real estate — personal1,531 1,276 1,269 1,366 1,390 
   Total 8,209 6,161 7,801 8,306 7,184 
Loans past due 90 days and still accruing interest$18,580 $15,351 $14,800 $15,830 $12,538 
(1) Net charge-offs are annualized and calculated as a percentage of average loans (excluding loans held for sale).
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Exhibit 99.1                                        
COMMERCE BANCSHARES, INC.
Management Discussion of Third Quarter Results
September 30, 2023
For the quarter ended September 30, 2023, net income amounted to $120.6 million, compared to $127.8 million in the previous quarter and $122.8 million in the same quarter last year. The decrease in net income compared to the previous quarter was primarily the result of lower non-interest income coupled with a higher provision for credit losses. The net yield on interest earning assets declined 1 basis point from the previous quarter to 3.11%. Average loans and deposits grew $299.3 million and $358.6 million, respectively, compared to the previous quarter, while average borrowings and available for sale debt securities, at fair value, declined $854.6 million and $752.0 million, respectively. For the quarter, the return on average assets was 1.49%, the return on average equity was 17.73%, and the efficiency ratio was 58.2%.

Balance Sheet Review
During the 3rd quarter of 2023, average loans totaled $17.0 billion, an increase of $299.3 million over the prior quarter, and $1.3 billion, or 8.5%, over the same quarter last year. Compared to the previous quarter, average balances of business real estate, business, construction, and personal real estate loans grew $101.2 million, $91.8 million, $58.7 million, and $31.5 million, respectively. During the current quarter, the Company sold certain fixed rate personal real estate loans totaling $9.2 million, compared to $8.9 million in the prior quarter.

Total average available for sale debt securities decreased $752.0 million compared to the previous quarter to $10.2 billion, at fair value. The decrease in investment securities was mainly the result of lower balances of asset-backed, mortgage-backed, and state and municipal securities. During the 3rd quarter of 2023, the unrealized loss on available for sale securities increased $177.4 million to $1.6 billion, at period end, and maturities and pay downs were $369.5 million. At September 30, 2023, the duration of the available for sale investment portfolio was 3.9 years. The Company does not have any investment securities classified as held-to-maturity.

Total average deposits increased $358.6 million this quarter compared to the previous quarter. The increase in deposits mostly resulted from higher certificates of deposit and interest checking and money market deposits of $594.8 million and $129.8 million, respectively, partly offset by lower demand deposits of $285.3 million. Compared to the previous quarter, total average commercial deposits increased $452.3 million, while consumer deposits and wealth deposits declined $185.3 million and $66.1 million, respectively. The average loans to deposits ratio was 66.4% in the current quarter and 66.2% in the prior quarter. The Company’s average borrowings, which included customer repurchase agreements of $2.3 billion, decreased $854.6 million to $3.5 billion in the 3rd quarter of 2023, mostly due to a decline of $931.7 million in Federal Home Loan Bank (FHLB) borrowings.
Net Interest Income
Net interest income in the 3rd quarter of 2023 amounted to $248.5 million, a decrease of $991 thousand compared to the previous quarter. On a fully taxable-equivalent (FTE) basis, net interest income for the current quarter decreased $795 thousand from the previous quarter to $251.0 million. The decrease in net interest income was mostly due to higher interest expense on deposits and lower interest income on investment securities, partly offset by higher interest earned on loans and lower interest expense on borrowings. The net yield (FTE) on earning assets decreased to 3.11%, from 3.12% in the prior quarter.

Compared to the previous quarter, interest income on loans (FTE) increased $15.0 million, due to higher average rates earned in most loan categories, coupled with higher average balances in all loan categories. The average yield (FTE) on the loan portfolio increased 18 basis points to 6.02% this quarter.

Interest income on investment securities (FTE) decreased $4.4 million compared to the prior quarter, mostly due to lower average balances. Interest income earned on U.S. government and federal agency securities decreased due to lower rates earned, which included the impact of $2.5 million in lower inflation income from Treasury inflation-protected securities this quarter. Partly offsetting this decrease was a $2.3 million dividend from a private equity investment this quarter. Additionally, at September 30, 2023, the Company recorded a $1.3 million adjustment to premium amortization, which increased interest income to reflect slower forward prepayment speed estimates on mortgage-backed securities. The average yield (FTE) on total investment securities was 2.33% in the current quarter, compared to 2.37% in the previous quarter.

Compared to the previous quarter, interest income on deposits with banks increased $2.5 million, due to higher average rates earned and average balances. The average yield on deposits with banks was 5.39% in the current quarter, compared to 5.14% in the prior quarter.

Interest expense increased $13.5 million, mostly due to higher average balances and rates paid on deposits, partly offset by lower average borrowings. The average rate paid on interest bearing deposits totaled 1.76% in the current quarter compared to 1.29% in the prior quarter. Interest expense on deposits increased $23.6 million this quarter compared to the previous quarter. Interest expense on borrowings decreased $10.1 million, mostly due to a decline in average FHLB borrowings of $931.7 million. The overall rate paid on interest bearing liabilities was 2.12% in the current quarter compared to 1.87% in the prior quarter.

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Exhibit 99.1
COMMERCE BANCSHARES, INC.                                
Management Discussion of Third Quarter Results
September 30, 2023
Non-Interest Income
In the 3rd quarter of 2023, total non-interest income amounted to $142.9 million, an increase of $4.4 million compared to the same period last year and a decrease of $4.7 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 and bank card fees, partly offset by lower deposit fees, brokerage fees, and capital market fees. The decrease in non-interest income compared to the prior quarter was mainly due to lower bank card fees, letter of credit fees, and swap fees, partly offset by higher trust fees and tax credit fees. Additionally, a decrease of $1.5 million in fair value adjustments was recorded on the Company’s deferred compensation plan assets, which are held in a trust and recorded as both and asset and liability, affecting both other income and other expense.

Total net bank card fees in the current quarter increased $1.3 million, or 2.8%, compared to the same period last year, and decreased $2.8 million compared to the prior quarter. Net corporate card fees increased $220 thousand, or .8%, over the same quarter of last year mainly due to lower network expense and rewards expense, mostly offset by lower interchange fee income. Net debit card fees increased $581 thousand, or 5.5%, and net merchant fees increased $627 thousand, or 12.0%, due to higher interchange fees, while net credit card fees decreased $167 thousand, or 4.6%. Total net bank card fees this quarter were comprised of fees on corporate card ($26.5 million), debit card ($11.1 million), merchant ($5.9 million) and credit card ($3.4 million) transactions.

In the current quarter, trust fees increased $3.8 million, or 8.4%, over the same period last year, mostly resulting from higher private client trust fees. Compared to the same period last year, deposit account fees decreased $1.4 million, or 5.8%, due to lower overdraft and return item fees of $3.0 million, partly offset by higher corporate cash management fees of $1.6 million.

Other non-interest income increased over the same period last year primarily due to higher bond underwriting fees of $942 thousand and gains on the sale of real estate in the current quarter of $1.3 million. For the 3rd quarter of 2023, non-interest income comprised 36.5% of the Company’s total revenue.

Investment Securities Gains and Losses
The Company recorded net securities gains of $4.3 million in the current quarter, compared to gains of $3.4 million in both the prior quarter and the 3rd quarter of 2022. Net securities gains in the current quarter primarily resulted from net fair value gains of $5.6 million and an $847 thousand loss on the sale of an investment in the Company’s private equity portfolio.
Non-Interest Expense
Non-interest expense for the current quarter amounted to $228.0 million, compared to $212.9 million in the same period last year and $227.6 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, FDIC insurance expense, and occupancy expense. The increase in non-interest expense compared to the prior quarter was mainly due to higher salaries expense, data processing and software expense, and miscellaneous losses, partly offset by lower deconversion expense and the $1.5 million decrease in the deferred compensation adjustment previously mentioned.

Compared to the 3rd quarter of last year, salaries and employee benefits expense increased $9.4 million, mostly due to higher full-time salaries expense of $6.4 million, or 6.9%, and higher medical expense of $2.0 million. Full-time equivalent employees totaled 4,714 and 4,595 at September 30, 2023 and 2022, respectively.

Compared to the same period last year, data processing and software expense increased $2.7 million due to higher bank card fees expense and increased costs for service providers. Occupancy expense increased $1.4 million mostly due to higher depreciation and real estate taxes, partly offset by higher external rent income. Other non-interest expense increased $1.6 million, mostly due to growth in FDIC insurance and lower deferred loan origination costs of $1.3 million and $982 thousand, respectively.

Income Taxes
The effective tax rate for the Company was 21.7% in the current quarter, 22.0% in the previous quarter, and 21.7% in the 3rd quarter of 2022.

Credit Quality
Net loan charge-offs in the 3rd quarter of 2023 amounted to $9.8 million, compared to $6.5 million in the prior quarter and $4.8 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, .16% in the previous quarter, and .12% in the 3rd quarter of last year. Compared to the prior quarter, net loan charge-offs on commercial loans increased $2.6 million to $2.6 million, while net loan charge-offs on personal banking loans increased $735 thousand to $7.2 million, mainly due to higher consumer loan net charge-offs.

In the 3rd quarter of 2023, annualized net loan charge-offs on average consumer credit card loans were 3.32%, compared to 3.38% in the previous quarter, and 2.08% in the same quarter last year. Consumer loan net charge-offs were .34% of average consumer loans in the current quarter, .24% in the prior quarter, and .16% in the same quarter last year.
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Exhibit 99.1
COMMERCE BANCSHARES, INC.                                
Management Discussion of Third Quarter Results
September 30, 2023
At September 30, 2023, the allowance for credit losses on loans totaled $162.2 million, or .95% of total loans, and increased $3.6 million compared to the prior quarter. Additionally, the liability for unfunded lending commitments at September 30, 2023 was $27.5 million, a decrease of $1.7 million compared to the liability at June 30, 2023.

At September 30, 2023, total non-accrual loans amounted to $8.2 million, an increase of $2.0 compared to the previous quarter. At September 30, 2023, the balance of non-accrual loans, which represented .05% of loans outstanding, included business loans of $6.6 million, personal real estate loans of $1.5 million, and business real estate loans of $76 thousand. Loans more than 90 days past due and still accruing interest totaled $18.6 million at September 30, 2023.

Liquidity
During the 3rd quarter of 2023, the Company reduced its deposit balance at the Federal Reserve Bank (FRB) by $721.1 million to $1.8 billion. The change in the balance at the FRB was mostly the result of a $779.0 million decrease in total deposits, including a $502.6 million decrease in brokered certificates of deposit, a $500.0 million decrease in FHLB advances, and a $172.8 million increase in loan balances, partly offset by $369.5 million of maturities and paydowns in the available for sale debt securities portfolio, and $375.0 million of maturities in securities purchased under agreements to resell.

The Company regularly pledges loans and securities to the FRB and at both September 30, 2023 and June 30, 2023, the Company’s pledging resulted in a total borrowing capacity of $5.0 billion. The Company did not have any borrowings from the FRB’s Discount Window or the Bank Term Funding Program during the current quarter. The Company also pledges loans and securities and borrows from the FHLB. During the 3rd quarter of 2023, the Company reduced its outstanding borrowings from the FHLB by $500.0 million to $500.0 million and had $1.6 billion of available borrowing capacity at September 30, 2023. Additionally, the Company pledges portions of its investment securities portfolio to secure public fund deposits, trust funds, and securities sold under agreements to repurchase.

The Company has an available for sale debt securities portfolio with a fair market value of $9.9 billion at September 30, 2023. Approximately $2.1 billion is expected to mature or pay down over the next 12 months. At September 30, 2023, the Company had pledged $6.9 billion of the securities portfolio. The Company also has a portfolio of $450.0 million in securities purchased under agreements to resell, of which $325.0 million are expected to mature over the next 12 months.

Other
During the 3rd quarter of 2023, the Company paid a cash dividend of $.27 per common share, representing a 7.1% increase over the same period last year. The Company purchased 388,304 shares of treasury stock during the current quarter at an average price of $50.96.

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.
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