Business Wire | Jul 22, 2021 06:00AM EDT

Commerce Bancshares, Inc. Reports Second Quarter Earnings Per Share of $1.38

Jul. 22, 2021

KANSAS CITY, Mo.--(BUSINESS WIRE)--Jul. 22, 2021--Commerce Bancshares, Inc. announced earnings of $1.38 per share for the three months ended June 30, 2021, compared to $.32 per common share in the same quarter last year and $1.11 per share in the first quarter of 2021. Net income attributable to Commerce Bancshares, Inc. (net income) for the second quarter of 2021 amounted to $162.3 million, compared to $39.9 million in the second quarter of 2020 and $131.0 million in the prior quarter. For the quarter, the return on average assets was 1.93%, the return on average equity was 19.12% and the efficiency ratio was 56.9%.

For the six months ended June 30, 2021, earnings per common share totaled $2.49 compared to $.74 for the first six months of 2020. Net income attributable to Commerce Bancshares, Inc. amounted to $293.3 million for the six months ended June 30, 2021, compared to $91.7 million in the comparable period last year. For the year to date, the return on average assets was 1.78%, and the return on average common equity was 17.42%.

In making this announcement, John Kemper, Chief Executive Officer, said, "After more than a year of ups and downs brought on by the pandemic, the economy appears to be on increasingly firm footing. A strengthening economy further bolstered our credit metrics and led to a reduction in reserves for credit losses on loans and unfunded lending commitments, which resulted in substantially higher earnings this quarter. In addition, our portfolio of private equity investments continued to drive sizeable investment gains for the second consecutive quarter. Fee income was solid this quarter, including bank card fees, as corporate card income rebounded nicely and debit and credit card income exceeded their pre-pandemic levels. Trust fees continued to grow strongly this quarter, with trust assets under management now exceeding $40 billion. Non-interest expense increased compared to the same quarter last year, as salaries and benefits expense grew, deferred loan origination costs declined considerably, and marketing expense increased to support our strategic initiatives and to grow our customer base. Compared to the previous quarter, average deposits grew $1.2 billion, or 4.6%, while average loan balances declined $342.5 million, or 2.1% (average PPP loan balances declined $109.8 million). The pace of PPP loan forgiveness accelerated significantly in June 2021 and resulted in a reduction of $572.6 million in period end balances. Over two-thirds of our round one PPP loans have been forgiven as of June 30, 2021."

Mr. Kemper continued, "Credit performance was very strong in the second quarter. This quarter, net loan charge-offs totaled $699 thousand, compared to $10.0 million in the prior quarter and $8.4 million in the second quarter of 2020. The ratio of annualized net loan charge-offs to average loans was .02% in the current quarter, .25% in the prior quarter and .21% in the second quarter of last year. Net loan recoveries on commercial loans of $5.0 million were recorded this quarter, and net charge-offs on personal banking loans were significantly lower compared to the prior quarter. Non-performing assets decreased by half this quarter from $23.7 million to $11.4 million. At June 30, 2021, the allowance for credit losses on loans decreased to $172.4 million. Excluding Paycheck Protection Plan (PPP) loans, the allowance for credit losses on loans to total loans was 1.17% at June 30, 2021, down from a peak of 1.62% a year ago, but higher than .95% at the adoption of CECL on January 1, 2020."

Total assets at June 30, 2021 were $33.9 billion, total loans were $15.6 billion, and total deposits were $27.5 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 second quarter of 2020. The Company purchased 181,252 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 Six Months Ended

(Unaudited)

(Dollars in June 30, March 31, June 30, June 30, June 30,thousands, 2021 2021 2020 2021 2020except pershare data)

FINANCIAL SUMMARY

Net interest $207,982 $205,748 $203,057 $413,730 $404,122 income

Non-interest 139,143 136,045 117,515 275,188 241,178 income

Total revenue 347,125 341,793 320,572 688,918 645,300

Investmentsecurities 16,804 9,853 (4,129) 26,657 (17,430) gains (losses),net

Provision for (45,655) (6,232) 80,539 (51,887) 138,492 credit losses

Non-interest 198,126 192,573 187,512 390,699 381,210 expense

Income before 211,458 165,305 48,392 376,763 108,168 taxes

Income taxes 45,209 32,076 9,661 77,285 19,834

Non-controllinginterest 3,923 2,257 (1,132) 6,180 (3,386) (income)expense

Net incomeattributable to 162,326 130,972 39,863 293,298 91,720 CommerceBancshares, Inc.

Preferred stock - - 2,250 - 4,500 dividends

Net incomeavailable to $162,326 $130,972 $37,613 $293,298 $87,220 commonshareholders

Earnings per common share:

Net income - $1.38 $1.12 $.32 $2.50 $.74 basic

Net income - $1.38 $1.11 $.32 $2.49 $.74 diluted

Effective tax 21.78 % 19.67 % 19.51 % 20.85 % 17.78 %rate

Tax equivalentnet interest $211,060 $208,774 $206,253 $419,834 $410,655 income

Average totalinterest $32,556,658 $31,278,721 $28,193,312 $31,921,220 $26,442,163 earning assets^(1)

Diluted wtd.average shares 116,450,430 116,573,405 116,441,701 116,511,578 116,693,218 outstanding

RATIOS

Average loansto deposits ^ 57.78 % 61.79 % 69.22 % 59.73 % 70.78 %(2)

Return on total 1.93 1.63 .54 1.78 .66 average assets

Return onaverage common 19.12 15.69 4.77 17.42 5.61 equity ^(3)

Non-interestincome to total 40.08 39.80 36.66 39.94 37.37 revenue

Efficiency 56.90 56.37 58.10 56.64 58.64 ratio ^(4)

Net yield oninterest 2.60 2.71 2.94 2.65 3.12 earning assets

EQUITY SUMMARY

Cash dividendsper common $.263 $.263 $.257 $.525 $.514 share

Cash dividends $30,760 $30,799 $30,174 $61,559 $60,466 on common stock

Cash dividendson preferred $- $- $2,250 $- $4,500 stock

Book value percommon share ^ $29.89 $28.34 $27.44 (5)

Market valueper common $74.56 $76.61 $56.64 share ^(5)

High marketvalue per $81.19 $83.06 $66.45 common share

Low marketvalue per $70.69 $64.76 $45.77 common share

Common sharesoutstanding ^ 116,893,573 117,077,276 117,109,981 (5)

Tangible commonequity to 9.91 % 9.57 % 10.12 % tangible assets^(6)

Tier I leverage 9.36 % 9.38 % 9.88 % ratio

OTHER QTD INFORMATION

Number of bank/ 295 298 312 ATM locations

Full-timeequivalent 4,590 4,619 4,856 employees

(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.

(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.

The tangible common equity ratio is calculated as stockholders' equity reduced by preferred stock, goodwill and other intangible assets(6) (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% stockdividend distributed in December 2020.

COMMERCE BANCSHARES, INC. and SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

For the Three Months Ended

For the Six Months Ended

(Unaudited)

(In thousands, except per share data)

June 30,2021

March 31, 2021

December 31, 2020

September 30, 2020

June 30, 2020

June 30,2021

June 30, 2020

Interest income

$211,133

$209,697

$214,726

$223,114

$213,323

$420,830

$434,808

Interest expense

3,151

3,949

4,963

7,152

10,266

7,100

30,686

Net interest income

207,982

205,748

209,763

215,962

203,057

413,730

404,122

Provision for credit losses

(45,655)

(6,232)

(4,403)

3,101

80,539

(51,887)

138,492

Net interest income after credit losses

253,637

211,980

214,166

212,861

122,518

465,617

265,630

NON-INTEREST INCOME

Bank card transaction fees

42,608

37,695

39,979

37,873

33,745

80,303

73,945

Trust fees

46,257

44,127

41,961

40,769

37,942

90,384

77,907

Deposit account charges and other fees

23,988

22,575

24,164

23,107

22,279

46,563

45,956

Capital market fees

3,327

4,981

3,826

3,194

3,772

8,308

7,562

Consumer brokerage services

4,503

4,081

3,996

4,011

3,011

8,584

7,088

Loan fees and sales

7,446

10,184

9,031

9,769

4,649

17,630

7,884

Other

11,014

12,402

12,160

10,849

12,117

23,416

20,836

Total non-interest income

139,143

136,045

135,117

129,572

117,515

275,188

241,178

INVESTMENT SECURITIES GAINS (LOSSES), NET

16,804

9,853

12,307

16,155

(4,129)

26,657

(17,430)

NON-INTEREST EXPENSE

Salaries and employee benefits

130,751

129,033

129,983

127,308

126,759

259,784

255,696

Net occupancy

11,527

12,021

11,570

12,058

11,269

23,548

23,017

Equipment

4,605

4,353

4,526

4,737

4,755

8,958

9,576

Supplies and communication

4,033

4,125

4,193

4,141

4,427

8,158

9,085

Data processing and software

24,954

25,463

24,323

23,610

23,837

50,417

47,392

Marketing

5,680

5,158

5,028

4,926

3,801

10,838

9,780

Other

16,576

12,420

16,687

14,078

12,664

28,996

26,664

Total non-interest expense

198,126

192,573

196,310

190,858

187,512

390,699

381,210

Income before income taxes

211,458

165,305

165,280

167,730

48,392

376,763

108,168

Less income taxes

45,209

32,076

33,084

34,375

9,661

77,285

19,834

Net income

166,249

133,229

132,196

133,355

38,731

299,478

88,334

Less non-controlling interest expense (income)

3,923

2,257

2,307

907

(1,132)

6,180

(3,386)

Net income attributable to Commerce Bancshares, Inc.

162,326

130,972

129,889

132,448

39,863

293,298

91,720

Less preferred stock dividends

-

-

-

7,466

2,250

-

4,500

Net income available to common shareholders

$162,326

$130,972

$129,889

$124,982

$37,613

$293,298

$87,220

Net income per common share - basic

$1.38

$1.12

$1.11

$1.06

$.32

$2.50

$.74

Net income per common share - diluted

$1.38

$1.11

$1.11

$1.06

$.32

$2.49

$.74

OTHER INFORMATION

Return on total average assets

1.93

%

1.63

%

1.63

%

1.71

%

.54

%

1.78

%

.66

%

Return on average common equity (1)

19.12

15.69

15.49

15.21

4.77

17.42

5.61

Efficiency ratio (2)

56.90

56.37

56.68

55.00

58.10

56.64

58.64

Effective tax rate

21.78

19.67

20.30

20.61

19.51

20.85

17.78

Net yield on interest earning assets

2.60

2.71

2.80

2.97

2.94

2.65

3.12

Tax equivalent net interest income

$211,060

$208,774

$213,017

$219,118

$206,253

$419,834

$410,655

COMMERCE BANCSHARES, INC. and SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

For the Three Months Ended For the Six Months Ended

(Unaudited) December September(In June 30, March 31, 31, 30, June 30, June 30, June 30,thousands, 2021 2021 2020 2020 2020 2021 2020except pershare data)

Interest $211,133 $209,697 $214,726 $223,114 $213,323 $420,830 $434,808 income

Interest 3,151 3,949 4,963 7,152 10,266 7,100 30,686 expense

Net interest 207,982 205,748 209,763 215,962 203,057 413,730 404,122 income

Provision for (45,655) (6,232) (4,403) 3,101 80,539 (51,887) 138,492 credit losses

Net interestincome after 253,637 211,980 214,166 212,861 122,518 465,617 265,630 credit losses

NON-INTEREST INCOME

Bank cardtransaction 42,608 37,695 39,979 37,873 33,745 80,303 73,945 fees

Trust fees 46,257 44,127 41,961 40,769 37,942 90,384 77,907

Deposit accountcharges and 23,988 22,575 24,164 23,107 22,279 46,563 45,956 other fees

Capital 3,327 4,981 3,826 3,194 3,772 8,308 7,562 market fees

Consumerbrokerage 4,503 4,081 3,996 4,011 3,011 8,584 7,088 services

Loan fees and 7,446 10,184 9,031 9,769 4,649 17,630 7,884 sales

Other 11,014 12,402 12,160 10,849 12,117 23,416 20,836

Totalnon-interest 139,143 136,045 135,117 129,572 117,515 275,188 241,178 income

INVESTMENTSECURITIES 16,804 9,853 12,307 16,155 (4,129) 26,657 (17,430) GAINS (LOSSES),NET

NON-INTEREST EXPENSE

Salaries andemployee 130,751 129,033 129,983 127,308 126,759 259,784 255,696 benefits

Net occupancy 11,527 12,021 11,570 12,058 11,269 23,548 23,017

Equipment 4,605 4,353 4,526 4,737 4,755 8,958 9,576

Supplies and 4,033 4,125 4,193 4,141 4,427 8,158 9,085 communication

Dataprocessing 24,954 25,463 24,323 23,610 23,837 50,417 47,392 and software

Marketing 5,680 5,158 5,028 4,926 3,801 10,838 9,780

Other 16,576 12,420 16,687 14,078 12,664 28,996 26,664

Totalnon-interest 198,126 192,573 196,310 190,858 187,512 390,699 381,210 expense

Income before 211,458 165,305 165,280 167,730 48,392 376,763 108,168 income taxes

Less income 45,209 32,076 33,084 34,375 9,661 77,285 19,834 taxes

Net income 166,249 133,229 132,196 133,355 38,731 299,478 88,334

Lessnon-controllinginterest 3,923 2,257 2,307 907 (1,132) 6,180 (3,386) expense(income)

Net incomeattributable toCommerce 162,326 130,972 129,889 132,448 39,863 293,298 91,720 Bancshares,Inc.

Lesspreferred - - - 7,466 2,250 - 4,500 stockdividends

Net incomeavailable to $162,326 $130,972 $129,889 $124,982 $37,613 $293,298 $87,220 commonshareholders

Net income percommon share - $1.38 $1.12 $1.11 $1.06 $.32 $2.50 $.74 basic

Net income percommon share - $1.38 $1.11 $1.11 $1.06 $.32 $2.49 $.74 diluted



OTHER INFORMATION

Return ontotal average 1.93 % 1.63 % 1.63 % 1.71 % .54 % 1.78 % .66 %assets

Return onaverage common 19.12 15.69 15.49 15.21 4.77 17.42 5.61 equity ^(1)

Efficiency 56.90 56.37 56.68 55.00 58.10 56.64 58.64 ratio ^(2)

Effective tax 21.78 19.67 20.30 20.61 19.51 20.85 17.78 rate

Net yield oninterest 2.60 2.71 2.80 2.97 2.94 2.65 3.12 earning assets

Taxequivalent $211,060 $208,774 $213,017 $219,118 $206,253 $419,834 $410,655 net interestincome

(1)

Annualized net income available to common shareholders divided by average total equity less preferred stock.

(2)

The efficiency ratio is calculated as non-interest expense (excluding intangibles amortization) as a percent of revenue.

(1) Annualized net income available to common shareholders divided by average total equity less preferred stock.

(2) The efficiency ratio is calculated as non-interest expense (excluding intangibles amortization) as a percent of revenue.

COMMERCE BANCSHARES, INC. and SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS - PERIOD END

(Unaudited)

(In thousands)

June 30,2021

March 31, 2021

June 30, 2020

ASSETS

Loans

Business

$

5,803,760

$

6,624,209

$

6,858,217

Real estate - construction and land

1,103,661

1,073,036

932,022

Real estate - business

3,017,560

3,017,242

2,941,163

Real estate - personal

2,793,213

2,828,418

2,690,542

Consumer

2,049,166

1,966,833

1,966,707

Revolving home equity

283,568

285,261

334,627

Consumer credit card

586,358

593,833

666,597

Overdrafts

2,978

3,239

5,179

Total loans

15,640,264

16,392,071

16,395,054

Allowance for credit losses on loans

(172,395)

(200,527)

(240,744)

Net loans

15,467,869

16,191,544

16,154,310

Loans held for sale

23,697

38,076

12,785

Investment securities:

Available for sale debt securities

13,291,506

12,528,203

10,317,427

Trading debt securities

29,002

26,925

28,813

Equity securities

8,678

4,337

4,128

Other securities

176,439

155,913

117,761

Total investment securities

13,505,625

12,715,378

10,468,129

Federal funds sold and short-term securities purchased under agreements to resell

5,945

500

-

Long-term securities purchased under agreements to resell

1,300,000

850,000

850,000

Interest earning deposits with banks

2,161,644

2,017,128

1,404,968

Cash and due from banks

358,122

338,666

391,268

Premises and equipment - net

371,989

371,737

368,565

Goodwill

138,921

138,921

138,921

Other intangible assets - net

14,148

13,098

7,179

Other assets

508,202

594,738

699,996

Total assets

$

33,856,162

$

33,269,786

$

30,496,121

LIABILITIES AND STOCKHOLDERS' EQUITY

Deposits:

Non-interest bearing

$

11,085,286

$

11,076,556

$

9,700,261

Savings, interest checking and money market

14,654,696

14,572,378

12,792,993

Certificates of deposit of less than $100,000

478,838

504,472

590,635

Certificates of deposit of $100,000 and over

1,267,417

1,267,219

1,443,078

Total deposits

27,486,237

27,420,625

24,526,967

Federal funds purchased and securities sold under agreements to repurchase

2,318,228

1,938,110

1,740,438

Other borrowings

2,194

3,791

1,475

Other liabilities

555,673

589,875

869,072

Total liabilities

30,362,332

29,952,401

27,137,952

Stockholders' equity:

Preferred stock

-

-

144,784

Common stock

589,352

589,352

563,978

Capital surplus

2,424,157

2,420,393

2,136,874

Retained earnings

304,739

173,173

232,082

Treasury stock

(53,018)

(39,080)

(69,112)

Accumulated other comprehensive income

220,390

168,752

349,261

Total stockholders' equity

3,485,620

3,312,590

3,357,867

Non-controlling interest

8,210

4,795

302

Total equity

3,493,830

3,317,385

3,358,169

Total liabilities and equity

$

33,856,162

$

33,269,786

$

30,496,121

COMMERCE BANCSHARES, INC. and SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS - PERIOD END

(Unaudited) June 30, March 31, June 30, 2021 2021 2020(In thousands)

ASSETS

Loans

Business $ 5,803,760 $ 6,624,209 $ 6,858,217

Real estate - construction and 1,103,661 1,073,036 932,022 land

Real estate - business 3,017,560 3,017,242 2,941,163

Real estate - personal 2,793,213 2,828,418 2,690,542

Consumer 2,049,166 1,966,833 1,966,707

Revolving home equity 283,568 285,261 334,627

Consumer credit card 586,358 593,833 666,597

Overdrafts 2,978 3,239 5,179

Total loans 15,640,264 16,392,071 16,395,054

Allowance for credit losses on (172,395) (200,527) (240,744) loans

Net loans 15,467,869 16,191,544 16,154,310

Loans held for sale 23,697 38,076 12,785

Investment securities:

Available for sale debt 13,291,506 12,528,203 10,317,427 securities

Trading debt securities 29,002 26,925 28,813

Equity securities 8,678 4,337 4,128

Other securities 176,439 155,913 117,761

Total investment securities 13,505,625 12,715,378 10,468,129

Federal funds sold andshort-term securities purchased 5,945 500 - under agreements to resell

Long-term securities purchased 1,300,000 850,000 850,000 under agreements to resell

Interest earning deposits with 2,161,644 2,017,128 1,404,968 banks

Cash and due from banks 358,122 338,666 391,268

Premises and equipment - net 371,989 371,737 368,565

Goodwill 138,921 138,921 138,921

Other intangible assets - net 14,148 13,098 7,179

Other assets 508,202 594,738 699,996

Total assets $ 33,856,162 $ 33,269,786 $ 30,496,121

LIABILITIES AND STOCKHOLDERS' EQUITY

Deposits:

Non-interest bearing $ 11,085,286 $ 11,076,556 $ 9,700,261

Savings, interest checking and 14,654,696 14,572,378 12,792,993 money market

Certificates of deposit of less 478,838 504,472 590,635 than $100,000

Certificates of deposit of 1,267,417 1,267,219 1,443,078 $100,000 and over

Total deposits 27,486,237 27,420,625 24,526,967

Federal funds purchased andsecurities sold under agreements 2,318,228 1,938,110 1,740,438 to repurchase

Other borrowings 2,194 3,791 1,475

Other liabilities 555,673 589,875 869,072

Total liabilities 30,362,332 29,952,401 27,137,952

Stockholders' equity:

Preferred stock - - 144,784

Common stock 589,352 589,352 563,978

Capital surplus 2,424,157 2,420,393 2,136,874

Retained earnings 304,739 173,173 232,082

Treasury stock (53,018) (39,080) (69,112)

Accumulated other comprehensive 220,390 168,752 349,261 income

Total stockholders' equity 3,485,620 3,312,590 3,357,867

Non-controlling interest 8,210 4,795 302

Total equity 3,493,830 3,317,385 3,358,169

Total liabilities and equity $ 33,856,162 $ 33,269,786 $ 30,496,121

COMMERCE BANCSHARES, INC. and SUBSIDIARIES

AVERAGE BALANCE SHEETS

(Unaudited)

(In thousands)

For the Three Months Ended

June 30, 2021

March 31, 2021

December 31, 2020

September 30, 2020

June 30, 2020

ASSETS:

Loans:

Business

$

6,211,610

$

6,532,921

$

6,580,300

$

6,709,200

$

6,760,827

Real estate - construction and land

1,088,433

1,091,969

1,032,891

974,346

895,648

Real estate - business

3,014,955

3,022,979

3,029,799

2,989,652

2,962,076

Real estate - personal

2,804,388

2,826,112

2,778,462

2,722,300

2,582,484

Consumer

2,004,625

1,947,322

1,981,033

1,992,314

1,944,265

Revolving home equity

287,031

299,371

316,895

329,361

343,210

Consumer credit card

575,725

608,747

638,161

646,185

663,911

Overdrafts

3,735

3,546

3,762

2,689

2,912

Total loans

15,990,502

16,332,967

16,361,303

16,366,047

16,155,333

Allowance for credit losses on loans

(200,801)

(220,512)

(235,484)

(240,286)

(171,616)

Net loans

15,789,701

16,112,455

16,125,819

16,125,761

15,983,717

Loans held for sale

23,389

35,814

30,577

24,728

6,363

Investment securities:

U.S. government and federal agency obligations

719,849

725,367

774,640

770,361

776,240

Government-sponsored enterprise obligations

50,793

50,801

69,133

102,749

114,518

State and municipal obligations

1,966,673

1,958,637

1,967,408

1,767,526

1,285,427

Mortgage-backed securities

6,685,407

6,998,521

6,646,345

6,259,926

5,325,720

Asset-backed securities

2,653,928

2,085,491

1,819,467

1,520,988

1,342,518

Other debt securities

605,772

570,115

533,646

514,166

406,665

Unrealized gain on debt securities

197,124

283,511

329,477

368,154

281,457

Total available for sale debt securities

12,879,546

12,672,443

12,140,116

11,303,870

9,532,545

Trading debt securities

34,955

32,320

28,040

27,267

31,981

Equity securities

4,914

4,321

4,221

4,193

4,137

Other securities

156,984

154,030

130,145

120,253

139,250

Total investment securities

13,076,399

12,863,114

12,302,522

11,455,583

9,707,913

Federal funds sold and short-term securities purchased under agreements to resell

1,338

7

355

337

92

Long-term securities purchased under agreements to resell

937,372

849,999

849,998

849,994

850,000

Interest earning deposits with banks

2,724,782

1,480,331

1,082,644

1,024,435

1,755,068

Other assets

1,258,989

1,308,105

1,291,907

1,389,683

1,461,528

Total assets

$

33,811,970

$

32,649,825

$

31,683,822

$

30,870,521

$

29,764,681

LIABILITIES AND EQUITY:

Non-interest bearing deposits

$

11,109,198

$

10,438,637

$

10,275,735

$

9,801,562

$

8,843,408

Savings

1,474,391

1,333,177

1,234,481

1,193,079

1,111,397

Interest checking and money market

13,283,481

12,970,629

12,198,928

11,731,494

11,441,694

Certificates of deposit of less than $100,000

491,446

516,728

542,212

573,207

605,136

Certificates of deposit of $100,000 and over

1,354,685

1,230,075

1,339,301

1,447,968

1,346,069

Total deposits

27,713,201

26,489,246

25,590,657

24,747,310

23,347,704

Borrowings:

Federal funds purchased and securities sold under agreements to repurchase

2,165,696

2,166,072

2,028,457

1,855,971

1,991,971

Other borrowings

978

831

1,013

1,225

345,162

Total borrowings

2,166,674

2,166,903

2,029,470

1,857,196

2,337,133

Other liabilities

527,401

608,212

727,569

899,890

763,524

Total liabilities

30,407,276

29,264,361

28,347,696

27,504,396

26,448,361

Equity

3,404,694

3,385,464

3,336,126

3,366,125

3,316,320

Total liabilities and equity

$

33,811,970

$

32,649,825

$

31,683,822

$

30,870,521

$

29,764,681

COMMERCE BANCSHARES, INC. and SUBSIDIARIES

AVERAGE BALANCE SHEETS

(Unaudited) For the Three Months Ended

(In thousands) June 30, March 31, December 31, September 30, June 30, 2021 2021 2020 2020 2020

ASSETS:

Loans:

Business $ 6,211,610 $ 6,532,921 $ 6,580,300 $ 6,709,200 $ 6,760,827

Real estate -construction and 1,088,433 1,091,969 1,032,891 974,346 895,648 land

Real estate - 3,014,955 3,022,979 3,029,799 2,989,652 2,962,076 business

Real estate - 2,804,388 2,826,112 2,778,462 2,722,300 2,582,484 personal

Consumer 2,004,625 1,947,322 1,981,033 1,992,314 1,944,265

Revolving home 287,031 299,371 316,895 329,361 343,210 equity

Consumer credit card 575,725 608,747 638,161 646,185 663,911

Overdrafts 3,735 3,546 3,762 2,689 2,912

Total loans^ 15,990,502 16,332,967 16,361,303 16,366,047 16,155,333

Allowance for credit (200,801) (220,512) (235,484) (240,286) (171,616) losses on loans

Net loans 15,789,701 16,112,455 16,125,819 16,125,761 15,983,717

Loans held for sale 23,389 35,814 30,577 24,728 6,363

Investment securities:

U.S. government andfederal agency 719,849 725,367 774,640 770,361 776,240 obligations

Government-sponsoredenterprise 50,793 50,801 69,133 102,749 114,518 obligations

State and municipal 1,966,673 1,958,637 1,967,408 1,767,526 1,285,427 obligations

Mortgage-backed 6,685,407 6,998,521 6,646,345 6,259,926 5,325,720 securities

Asset-backed 2,653,928 2,085,491 1,819,467 1,520,988 1,342,518 securities

Other debt 605,772 570,115 533,646 514,166 406,665 securities^

Unrealized gain on 197,124 283,511 329,477 368,154 281,457 debt securities

Total available for 12,879,546 12,672,443 12,140,116 11,303,870 9,532,545 sale debt securities

Trading debt 34,955 32,320 28,040 27,267 31,981 securities^

Equity securities 4,914 4,321 4,221 4,193 4,137

Other securities 156,984 154,030 130,145 120,253 139,250

Total investment 13,076,399 12,863,114 12,302,522 11,455,583 9,707,913 securities

Federal funds soldand short-termsecurities purchased 1,338 7 355 337 92 under agreements toresell

Long-term securitiespurchased under 937,372 849,999 849,998 849,994 850,000 agreements to resell

Interest earning 2,724,782 1,480,331 1,082,644 1,024,435 1,755,068 deposits with banks

Other assets 1,258,989 1,308,105 1,291,907 1,389,683 1,461,528

Total assets $ 33,811,970 $ 32,649,825 $ 31,683,822 $ 30,870,521 $ 29,764,681



LIABILITIES AND EQUITY:

Non-interest bearing $ 11,109,198 $ 10,438,637 $ 10,275,735 $ 9,801,562 $ 8,843,408 deposits

Savings 1,474,391 1,333,177 1,234,481 1,193,079 1,111,397

Interest checking 13,283,481 12,970,629 12,198,928 11,731,494 11,441,694 and money market

Certificates ofdeposit of less than 491,446 516,728 542,212 573,207 605,136 $100,000

Certificates ofdeposit of $100,000 1,354,685 1,230,075 1,339,301 1,447,968 1,346,069 and over

Total deposits 27,713,201 26,489,246 25,590,657 24,747,310 23,347,704

Borrowings:

Federal fundspurchased andsecurities sold 2,165,696 2,166,072 2,028,457 1,855,971 1,991,971 under agreements torepurchase

Other borrowings 978 831 1,013 1,225 345,162

Total borrowings 2,166,674 2,166,903 2,029,470 1,857,196 2,337,133

Other liabilities 527,401 608,212 727,569 899,890 763,524

Total liabilities 30,407,276 29,264,361 28,347,696 27,504,396 26,448,361

Equity 3,404,694 3,385,464 3,336,126 3,366,125 3,316,320

Total liabilities $ 33,811,970 $ 32,649,825 $ 31,683,822 $ 30,870,521 $ 29,764,681 and equity

COMMERCE BANCSHARES, INC. and SUBSIDIARIES

AVERAGE RATES

(Unaudited)

For the Three Months Ended

June 30, 2021

March 31, 2021

December 31, 2020

September 30, 2020

June 30, 2020

ASSETS:

Loans:

Business(1)

3.15

%

3.09

%

3.01

%

2.95

%

2.91

%

Real estate - construction and land

3.56

3.54

3.72

3.74

3.95

Real estate - business

3.49

3.52

3.51

3.53

3.71

Real estate - personal

3.31

3.40

3.44

3.56

3.69

Consumer

3.84

4.02

4.07

4.19

4.48

Revolving home equity

3.43

3.38

3.37

3.29

3.50

Consumer credit card

11.22

10.97

11.60

11.40

11.76

Overdrafts

-

-

-

-

-

Total loans

3.65

3.66

3.69

3.69

3.80

Loans held for sale

4.20

3.44

3.54

4.25

8.03

Investment securities:

U.S. government and federal agency obligations

5.52

2.54

2.63

3.71

.46

Government-sponsored enterprise obligations

2.33

2.36

2.23

2.17

3.51

State and municipal obligations(1)

2.41

2.46

2.44

2.53

2.97

Mortgage-backed securities

1.11

1.39

1.37

1.95

2.17

Asset-backed securities

1.25

1.39

1.59

1.90

2.25

Other debt securities

2.06

2.15

2.19

2.35

2.49

Total available for sale debt securities

1.64

1.67

1.70

2.18

2.18

Trading debt securities(1)

1.19

1.08

1.40

1.66

2.93

Equity securities (1)

43.10

49.56

50.71

47.15

48.42

Other securities (1)

11.90

5.26

10.03

6.74

4.36

Total investment securities

1.78

1.72

1.81

2.24

2.24

Federal funds sold and short-term securities purchased under agreements to resell

.60

-

1.12

-

-

Long-term securities purchased under agreements to resell

4.46

5.31

5.24

5.26

5.08

Interest earning deposits with banks

.11

.10

.10

.10

.10

Total interest earning assets

2.64

2.76

2.86

3.07

3.09

LIABILITIES AND EQUITY:

Interest bearing deposits:

Savings

.08

.08

.09

.09

.09

Interest checking and money market

.05

.06

.07

.10

.13

Certificates of deposit of less than $100,000

.27

.37

.51

.71

.93

Certificates of deposit of $100,000 and over

.20

.35

.47

.69

1.08

Total interest bearing deposits

.07

.09

.12

.18

.25

Borrowings:

Federal funds purchased and securities sold under agreements to repurchase

.06

.06

.06

.09

.12

Other borrowings

.82

.98

-

-

.82

Total borrowings

.06

.06

.06

.09

.22

Total interest bearing liabilities

.07

%

.09

%

.11

%

.17

%

.25

%

Net yield on interest earning assets

2.60

%

2.71

%

2.80

%

2.97

%

2.94

%

COMMERCE BANCSHARES, INC. and SUBSIDIARIES

AVERAGE RATES

For the Three Months Ended

(Unaudited) June March December September June 30, 31, 31, 30, 30, 2021 2021 2020 2020 2020

ASSETS:

Loans:

Business^ (1) 3.15 % 3.09 % 3.01 % 2.95 % 2.91 %

Real estate - construction and 3.56 3.54 3.72 3.74 3.95 land

Real estate - business 3.49 3.52 3.51 3.53 3.71

Real estate - personal 3.31 3.40 3.44 3.56 3.69

Consumer 3.84 4.02 4.07 4.19 4.48

Revolving home equity 3.43 3.38 3.37 3.29 3.50

Consumer credit card 11.22 10.97 11.60 11.40 11.76

Overdrafts - - - - -

Total loans 3.65 3.66 3.69 3.69 3.80

Loans held for sale 4.20 3.44 3.54 4.25 8.03

Investment securities:

U.S. government and federal agency 5.52 2.54 2.63 3.71 .46 obligations

Government-sponsored enterprise 2.33 2.36 2.23 2.17 3.51 obligations

State and municipal obligations^ 2.41 2.46 2.44 2.53 2.97 (1)

Mortgage-backed securities 1.11 1.39 1.37 1.95 2.17

Asset-backed securities 1.25 1.39 1.59 1.90 2.25

Other debt securities 2.06 2.15 2.19 2.35 2.49

Total available for sale debt 1.64 1.67 1.70 2.18 2.18 securities

Trading debt securities^ (1) 1.19 1.08 1.40 1.66 2.93

Equity securities ^(1) 43.10 49.56 50.71 47.15 48.42

Other securities ^(1) 11.90 5.26 10.03 6.74 4.36

Total investment securities 1.78 1.72 1.81 2.24 2.24

Federal funds sold and short-termsecurities purchased under .60 - 1.12 - - agreements to resell

Long-term securities purchased 4.46 5.31 5.24 5.26 5.08 under agreements to resell

Interest earning deposits with .11 .10 .10 .10 .10 banks

Total interest earning assets 2.64 2.76 2.86 3.07 3.09



LIABILITIES AND EQUITY:

Interest bearing deposits:

Savings .08 .08 .09 .09 .09

Interest checking and money market .05 .06 .07 .10 .13

Certificates of deposit of less .27 .37 .51 .71 .93 than $100,000

Certificates of deposit of .20 .35 .47 .69 1.08 $100,000 and over

Total interest bearing deposits .07 .09 .12 .18 .25

Borrowings:

Federal funds purchased andsecurities sold under agreements .06 .06 .06 .09 .12 to repurchase

Other borrowings .82 .98 - - .82

Total borrowings .06 .06 .06 .09 .22

Total interest bearing liabilities .07 % .09 % .11 % .17 % .25 %



Net yield on interest earning 2.60 % 2.71 % 2.80 % 2.97 % 2.94 % assets

(1)

Stated on a tax equivalent basis using a federal income tax rate of 21%.

(1) Stated on a tax 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 per share data)

June 30, 2021

March 31, 2021

December 31, 2020

September 30, 2020

June 30, 2020

June 30, 2021

June 30, 2020

ALLOWANCE FOR CREDIT LOSSES ON LOANS

Balance at beginning of period

$

200,527

$

220,834

$

236,360

$

240,744

$

171,653

$

220,834

$

160,682

Adoption of ASU 2016-13

-

-

-

-

-

-

(21,039)

Provision for credit losses on loans

(27,433)

(10,355)

(7,510)

3,200

77,491

(37,788)

120,359

Net charge-offs (recoveries):

Commercial portfolio:

Business

(4,909)

(4)

581

208

3,249

(4,913)

2,876

Real estate - construction and land

-

1

(2)

(1)

-

1

-

Real estate - business

(85)

20

(7)

(13)

(6)

(65)

(27)

(4,994)

17

572

194

3,243

(4,977)

2,849

Personal banking portfolio:

Consumer credit card

5,155

8,981

5,975

7,263

3,584

14,136

12,741

Consumer

378

763

1,160

211

1,362

1,141

3,073

Overdraft

148

153

335

200

316

301

742

Real estate - personal

(16)

15

(18)

(198)

(71)

(1)

(75)

Revolving home equity

28

23

(8)

(86)

(34)

51

(72)

5,693

9,935

7,444

7,390

5,157

15,628

16,409

Total net loan charge-offs

699

9,952

8,016

7,584

8,400

10,651

19,258

Balance at end of period

$

172,395

$

200,527

$

220,834

$

236,360

$

240,744

$

172,395

$

240,744

LIABILITY FOR UNFUNDED LENDING COMMITMENTS

$

24,208

$

42,430

$

38,307

$

35,200

$

35,299

NET CHARGE-OFF RATIOS (1)

Commercial portfolio:

Business

(.32

%)

-

%

.04

%

.01

%

.19

%

(.16

%)

.09

%

Real estate - construction and land

-

-

-

-

-

-

-

Real estate - business

(.01)

-

-

-

-

-

-

(.19)

-

.02

.01

.12

(.10)

.06

Personal banking portfolio:

Consumer credit card

3.59

5.98

3.72

4.47

2.17

4.81

3.68

Consumer

.08

.16

.23

.04

.28

.12

.32

Overdraft

15.89

17.50

35.43

29.59

43.65

16.67

42.90

Real estate - personal

-

-

-

(.03)

(.01)

-

(.01)

Revolving home equity

.04

.03

(.01)

(.10)

(.04)

.04

(.04)

.40

.71

.52

.52

.37

.55

.60

Total

.02

%

.25

%

.19

%

.18

%

.21

%

.13

%

.25

%

CREDIT QUALITY RATIOS

Non-performing assets to total loans

.07

%

.14

%

.16

%

.25

%

.14

%

Non-performing assets to total assets

.03

.07

.08

.13

.08

Allowance for credit losses on loans to total loans(2)

1.10

1.22

1.35

1.44

1.47

NON-PERFORMING ASSETS

Non-accrual loans:

Business

$

8,839

$

20,215

$

22,524

$

37,295

$

19,034

Real estate - construction and land

-

-

-

1

1

Real estate - business

655

1,572

2,230

1,063

1,921

Real estate - personal

1,672

1,719

1,786

1,911

1,679

Total

11,166

23,506

26,540

40,270

22,635

Foreclosed real estate

229

208

93

57

422

Total non-performing assets

$

11,395

$

23,714

$

26,633

$

40,327

$

23,057

Loans past due 90 days and still accruing interest

$

12,338

$

21,512

$

22,190

$

14,436

$

24,583

COMMERCE BANCSHARES, INC. and SUBSIDIARIES

CREDIT QUALITY

For the Three Months Ended For the Six Months Ended

(Unaudited) June 30, March 31, December September June 30, June 30, June 30,(In thousands, 2021 2021 31, 30, 2020 2021 2020except per 2020 2020share data)

ALLOWANCE FORCREDIT LOSSES ON LOANS

Balance atbeginning of $ 200,527 $ 220,834 $ 236,360 $ 240,744 $ 171,653 $ 220,834 $ 160,682 period

Adoption of - - - - - - (21,039) ASU 2016-13

Provision forcredit losses (27,433) (10,355) (7,510) 3,200 77,491 (37,788) 120,359 on loans

Netcharge-offs (recoveries):

Commercial portfolio:

Business (4,909) (4) 581 208 3,249 (4,913) 2,876

Real estate -construction - 1 (2) (1) - 1 - and land

Real estate - (85) 20 (7) (13) (6) (65) (27) business

(4,994) 17 572 194 3,243 (4,977) 2,849

Personalbanking portfolio:

Consumer 5,155 8,981 5,975 7,263 3,584 14,136 12,741 credit card

Consumer 378 763 1,160 211 1,362 1,141 3,073

Overdraft 148 153 335 200 316 301 742

Real estate - (16) 15 (18) (198) (71) (1) (75) personal

Revolving home 28 23 (8) (86) (34) 51 (72) equity

5,693 9,935 7,444 7,390 5,157 15,628 16,409

Total net loan 699 9,952 8,016 7,584 8,400 10,651 19,258 charge-offs

Balance at end $ 172,395 $ 200,527 $ 220,834 $ 236,360 $ 240,744 $ 172,395 $ 240,744 of period

LIABILITY FORUNFUNDED $ 24,208 $ 42,430 $ 38,307 $ 35,200 $ 35,299 LENDINGCOMMITMENTS



NET CHARGE-OFF RATIOS ^(1)

Commercial portfolio:

Business (.32 %) - % .04 % .01 % .19 % (.16 %) .09 %

Real estate -construction - - - - - - - and land

Real estate - (.01) - - - - - - business

(.19) - .02 .01 .12 (.10) .06

Personalbanking portfolio:

Consumer 3.59 5.98 3.72 4.47 2.17 4.81 3.68 credit card

Consumer .08 .16 .23 .04 .28 .12 .32

Overdraft 15.89 17.50 35.43 29.59 43.65 16.67 42.90

Real estate - - - - (.03) (.01) - (.01) personal

Revolving home .04 .03 (.01) (.10) (.04) .04 (.04) equity

.40 .71 .52 .52 .37 .55 .60

Total .02 % .25 % .19 % .18 % .21 % .13 % .25 %



CREDIT QUALITY RATIOS

Non-performingassets to .07 % .14 % .16 % .25 % .14 % total loans

Non-performingassets to .03 .07 .08 .13 .08 total assets

Allowance forcredit losseson loans to 1.10 1.22 1.35 1.44 1.47 total loans^(2)



NON-PERFORMING ASSETS

Non-accrual loans:

Business $ 8,839 $ 20,215 $ 22,524 $ 37,295 $ 19,034

Real estate -construction - - - 1 1 and land

Real estate - 655 1,572 2,230 1,063 1,921 business

Real estate - 1,672 1,719 1,786 1,911 1,679 personal

Total 11,166 23,506 26,540 40,270 22,635

Foreclosed 229 208 93 57 422 real estate

Totalnon-performing $ 11,395 $ 23,714 $ 26,633 $ 40,327 $ 23,057 assets

Loans past due90 days and $ 12,338 $ 21,512 $ 22,190 $ 14,436 $ 24,583 still accruinginterest

(1)

As a percentage of average loans (excluding loans held for sale).

(2)

Excluding PPP loans, the allowance for credit losses on loans to total loans was 1.17% and 1.34% as of June 30, 2021 and March 31, 2021, respectively.

COMMERCE BANCSHARES, INC. Management Discussion of Second Quarter Results June 30, 2021

For the quarter ended June 30, 2021, net income attributable to Commerce Bancshares, Inc. (net income) amounted to $162.3 million, compared to $131.0 million in the previous quarter and $39.9 million in the same quarter last year. The increase in net income over the previous quarter was primarily the result of a significant decrease in the provision for credit losses and higher net gains on investments, partly offset by higher non-interest expense and higher income tax expense. Compared to the prior quarter, the provision for credit losses declined due to a decrease in the estimate of the allowance for credit losses on loans and unfunded lending commitments and lower net loan charge-offs. While net interest income increased slightly this quarter, the net yield on interest earnings assets declined 11 basis points to 2.60%. Average loans declined $342.5 million compared to the previous quarter, while average available for sale debt securities grew $207.1 million, and average deposits increased $1.2 billion. For the quarter, the return on average assets was 1.93%, the return on average common equity was 19.12%, and the efficiency ratio was 56.9%.

Balance Sheet Review

During the 2nd quarter of 2021, average loans totaled $16.0 billion, or a decrease of $342.5 million over the prior quarter, and declined $164.8 million, or 1.0%, from the same quarter last year. Period end loans decreased $751.8 million compared to the prior quarter. Compared to the previous quarter, average balances of business, personal real estate, and consumer card loans declined $321.3 million (includes a decline of $109.8 million in Paycheck Protection Program loan balances), $21.7 million, and $33.0 million, respectively. This decline was partially offset by growth in consumer loans of $57.3 million. The period end balance of Paycheck Protection Program (PPP) loans decreased $572.6 million during the 2nd quarter of 2021 and totaled $854.3 million at June 30, 2021. The decrease in actual PPP loan balances during the 2nd quarter of 2021 reflected a decline of $639.5 million in round one loan balances, partly offset by a $67.0 million increase in loan balances from round two. Total loan originations from PPP round two were $402.1 million. During the current quarter, the Company sold certain fixed rate personal real estate loans totaling $164.6 million, compared to $177.8 million in the prior quarter.

Total average available for sale debt securities increased $207.1 million over the previous quarter to $12.9 billion, at fair value. The increase in investment securities was mainly the result of growth in asset-backed securities, partly offset by lower mortgage-backed securities. During the current quarter, purchases of securities totaled $1.5 billion with a weighted average yield of approximately 1.17%. Maturities and pay downs were $808.1 million, and there were no sales during the quarter. At June 30, 2021, the duration of the investment portfolio was 3.4 years, and maturities and pay downs of approximately $2.6 billion are expected to occur during the next 12 months.

Total average deposits increased $1.2 billion this quarter compared to the previous quarter. The increase in deposits mostly resulted from growth in demand deposits of $670.6 million. Interest checking and money market deposits, savings deposits, and certificates of deposit also grew $312.9 million, $141.2 million, $99.3 million over the prior quarter, respectively. Compared to the previous quarter, total average consumer and commercial deposits grew $653.4 million and $621.2 million, respectively. The average loans to deposits ratio was 57.8% in the current quarter and 61.8% in the prior quarter. The Company's average borrowings, which include customer repurchase agreements, were $2.2 billion in both the 1st and 2nd quarters of 2021.

Net Interest Income

Net interest income in the 2nd quarter of 2021 amounted to $208.0 million, an increase of $2.2 million compared to the previous quarter. On a tax equivalent basis, net interest income for the current quarter increased $2.3 million over the previous quarter to $211.1 million. The increase in net interest income was mainly due to higher income earned on investment securities, partly offset by lower interest on loans and long-term securities purchased under agreements to resell. The net yield on earning assets (tax equivalent) decreased to 2.60%, compared to 2.71% in the prior quarter, mostly as a result of larger average balances on deposit at the Federal Reserve.

Compared to the previous quarter, interest income on loans (tax equivalent) decreased $1.8 million, mostly as a result of lower average balances of business and consumer credit card loans. The impact of these decreases was partially offset by higher yields on business and consumer credit card loans. The increase in the yield on business loans was driven primarily by an increase in the yield on PPP loans, which grew to 3.77% this quarter. Excluding PPP loans, the yield on business loans was 3.00% in the 2nd quarter of 2021. The average tax-equivalent yield on the loan portfolio declined one basis point to 3.65% this quarter.

Interest income on investment securities (tax equivalent) increased $3.7 million over the previous quarter, due to higher rates earned and higher average balances. Interest income earned on U.S. government and federal agency securities increased, as inflation income from Treasury inflation-protected securities inflation income increased $5.3 million this quarter to $6.8 million. At June 30, 2021, the Company recorded a $1.9 million adjustment to premium amortization, which decreased interest income this quarter to reflect an acceleration in forward prepayment speed estimates on mortgage-backed securities due to falling interest rates during the quarter. The yield on total investment securities was 1.78% in the current quarter, compared to 1.72% in the previous quarter.

The average rate paid on interest bearing deposits totaled .07% in the 2nd quarter of 2021, compared .09% in the prior quarter. Interest expense on deposits decreased $806 thousand this quarter compared to the previous quarter mainly due to lower rates paid on money market and certificate of deposit accounts, partly offset by higher average interest bearing deposit balances. The overall rate paid on interest bearing liabilities was .07% in the current quarter, compared to .09% in the prior quarter.

Non-Interest Income

In the 2nd quarter of 2021, total non-interest income amounted to $139.1 million, an increase of $21.6 million, or 18.4%, compared to the same period last year and increased $3.1 million compared to the prior quarter. The increase in non-interest income over the same period last year was mainly due to growth in bank card fees, trust fees, and loan fees and sales, partially offset by lower cash sweep fees.

Total net bank card fees in the current quarter increased $8.9 million, or 26.3%, over the same period last year, and increased $4.9 million, or 13.0%, compared to the prior quarter. Net corporate card fees increased $5.3 million, or 29.8%, over the same quarter of last year mainly due to higher interchange fee income, partly offset by higher rewards expense. Net debit card fees increased $1.7 million, or 19.1%, mainly due to higher interchange fees. Net merchant income increased $669 thousand, or 15.8%, and net credit card fees increased $1.2 million, or 41.4%. Total net bank card fees this quarter were comprised of fees on corporate card ($23.1 million), debit card ($10.5 million), merchant ($4.9 million) and credit card ($4.1 million) transactions.

In the current quarter, trust fees increased $8.3 million, or 21.9%, over the same period last year, resulting mostly from higher private client fee income. Compared to the same period last year, deposit account fees increased $1.7 million, or 7.7%, mainly due to higher overdraft and return item fees, coupled with an increase in corporate cash management fees. Additionally, loan fees and sales, mostly mortgage banking revenue, grew $2.8 million, or 60.2%, over amounts recorded in the same quarter last year. Consumer brokerage fees increased $1.5 million, or 49.6%, compared to the same quarter last year, mainly due to growth in annuity and advisory fees.

Other non-interest income decreased from the same period last year mainly due to lower sweep fees of $2.8 million, partly offset by higher check sales and wire fees. For the 2nd quarter of 2021, non-interest income comprised 40.1% of the Company's total revenue.

Investment Securities Gains and Losses

The Company recorded investment net gains of $16.8 million in the current quarter, compared to net gains of $9.9 million in the prior quarter and net losses of $4.1 million in the 2nd quarter of 2020. Net gains on investments in the current quarter primarily resulted from unrealized fair value gains of $16.7 million in the Company's private equity investment portfolio.

Non-Interest Expense

Non-interest expense for the current quarter amounted to $198.1 million, compared to $187.5 million in the same period last year and $192.6 million in the prior quarter. The increase in non-interest expense compared to the same period last year and the prior quarter was mainly due to lower deferred loan origination costs, higher salaries and benefits expense and higher marketing expense.

Compared to the 2nd quarter of last year, salaries and employee benefits expense increased $4.0 million, mostly due to higher medical expense of $3.5 million and higher incentive compensation of $4.0 million. These increases were partly offset by declines in full and part-time salaries, overtime pay, payroll taxes and other benefits expense. Full-time equivalent employees totaled 4,590 and 4,856 at June 30, 2021 and 2020, respectively.

Marketing and data processing and software expense increased $1.9 million and $1.1 million, respectively. Other non-interest expense increased mainly due to a $4.0 million decrease in deferred loan origination costs. Additionally, insurance expense and travel and entertainment expense increased $514 thousand and $476 thousand, respectively. These increases were partially offset by a $1.0 million reduction in impairment expense on mortgage servicing rights.

Income Taxes

The effective tax rate for the Company was 21.8% in the current quarter, 19.7% in the previous quarter, and 19.5% in the 2nd quarter of 2020. The increase in the effective tax rate in the current quarter compared to the prior quarter and the same quarter last year is mostly due to the mix of taxable and non-taxable income and expenses.

Credit Quality

Net loan charge-offs in the 2nd quarter of 2021 amounted to $699 thousand, compared to $10.0 million in the prior quarter and $8.4 million in the same period last year. The ratio of annualized net loan charge-offs to total average loans was .02% in the current quarter, .25% in the previous quarter, and .21% in the 2nd quarter of last year. Net loan recoveries on commercial loans totaled $5.0 million mostly due to recoveries on two business loans in the current quarter. Net loan charge-offs on personal banking loans decreased $4.2 million to $5.7 million.

In the 2nd quarter of 2021, annualized net loan charge-offs on average consumer credit card loans were 3.59%, compared to 5.98% in the previous quarter, and 2.17% in the same quarter last year. Consumer loan net charge-offs were .08% of average consumer loans in the current quarter, .16% in the prior quarter and .28% in the same quarter last year.

Actual economic data for the 2nd quarter of 2021 and the economic forecast used to estimate the allowance for credit losses in June 2021 showed improving economic conditions compared to the forecast utilized in March 2021. This improvement resulted in a significant decrease in the allowance for credit losses as of June 30, 2021 and reduced the provision for credit losses this quarter compared to the prior quarter. At June 30, 2021, the allowance for credit losses on loans totaled $172.4 million, or 1.10% of total loans and 1.17% of total loans excluding PPP loans. Additionally, the liability for unfunded lending commitments at June 30, 2021 was $24.2 million, a decrease of $18.2 million from the liability at March 31, 2021.

At June 30, 2021, total non-performing assets amounted to $11.4 million, a decrease of $12.3 million from the previous quarter. Non-performing assets are comprised of non-accrual loans and foreclosed real estate ($11.2 million and $229 thousand, respectively). At June 30, 2021, the balance of non-accrual loans, which represented .07% of loans outstanding, included business loans of $8.8 million, personal real estate loans of $1.7 million, and business real estate loans of $655 thousand. Loans more than 90 days past due and still accruing interest totaled $12.3 million at June 30, 2021.

Other

During the 2nd quarter of 2021, the Company paid a cash dividend of $.263 per common share, representing a 2.1% increase over the same period last year. The Company purchased 181,252 shares of treasury stock during the current quarter at an average price of $77.05.

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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CONTACT: For additional information, contact Matthew Burkemper, Investor Relations at 8000 Forsyth, Mailstop: CBIR-1 Clayton, MO 63105 or by telephone at (314) 746-7485 Web Site: http://www.commercebank.com Email: matthew.burkemper@commercebank.com