Business Wire | Oct 19, 2021 06:00AM EDT

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

Oct. 19, 2021

KANSAS CITY, Mo.--(BUSINESS WIRE)--Oct. 19, 2021--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 September 30, June 30, September 30, September 30, September 30,thousands, 2021 2021 2020 2021 2020except pershare data)

FINANCIAL SUMMARY

Net interest $214,037 $207,982 $215,962 $627,767 $620,084 income

Non-interest 137,506 139,143 129,572 412,694 370,750 income

Total revenue 351,543 347,125 345,534 1,040,461 990,834

Investmentsecurities 13,108 16,804 16,155 39,765 (1,275)gains (losses),net

Provision for (7,385) (45,655) 3,101 (59,272) 141,593 credit losses

Non-interest 211,620 198,126 190,858 602,319 572,068 expense

Income before 160,416 211,458 167,730 537,179 275,898 taxes

Income taxes 34,662 45,209 34,375 111,947 54,209

Non-controllinginterest 3,193 3,923 907 9,373 (2,479)(income)expense

Net incomeattributable to 122,561 162,326 132,448 415,859 224,168 CommerceBancshares, Inc.

Preferred stock - - 7,466 - 11,966 dividends

Net incomeavailable to $122,561 $162,326 $124,982 $415,859 $212,202 commonshareholders

Earnings per common share:

Net income - $1.05 $1.38 $1.06 $3.55 $1.80 basic

Net income - $1.05 $1.38 $1.06 $3.54 $1.80 diluted

Effective tax 22.05 % 21.78 % 20.61 % 21.21 % 19.47 %rate

Tax equivalentnet interest $216,858 $211,060 $219,118 $636,692 $629,773 income

Average totalinterest $ 33,306,752 $ 32,556,658 $ 29,352,970 $ 32,388,139 $ 27,419,514 earning assets^(1)

Diluted wtd.average shares 116,077,229 116,450,430 116,444,157 116,365,204 116,609,592 outstanding



RATIOS

Average loansto deposits ^ 54.44 % 57.78 % 66.23 % 57.91 % 69.12 %(2)

Return on total 1.40 1.93 1.71 1.65 1.04 average assets

Return onaverage common 13.74 19.12 15.21 16.14 8.93 equity ^(3)

Non-interestincome to total 39.11 40.08 37.50 39.66 37.42 revenue

Efficiency 59.95 56.90 55.00 57.76 57.37 ratio ^(4)

Net yield oninterest 2.58 2.60 2.97 2.63 3.07 earning assets



EQUITY SUMMARY

Cash dividendsper common $.263 $.263 $.257 $.788 $.771 share

Cash dividends $30,645 $30,760 $30,174 $92,204 $90,640 on common stock

Cash dividendson preferred $- $- $7,466 $- $11,966 stock

Book value percommon share ^ $30.01 $29.89 $28.23 (5)

Market valueper common $69.68 $74.56 $53.61 share ^(5)

High marketvalue per $75.68 $81.19 $59.13 common share

Low marketvalue per $64.90 $70.69 $50.50 common share

Common sharesoutstanding ^ 116,332,177 116,893,573 117,109,209 (5)

Tangible commonequity to 9.71 % 9.91 % 10.11 % tangible assets^(6)

Tier I leverage 9.31 % 9.36 % 9.39 % ratio



OTHER QTD INFORMATION

Number of bank/ 292 295 308 ATM locations

Full-timeequivalent 4,582 4,590 4,825 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. COMMERCE BANCSHARES, INC. and SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME

(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(6) 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% stockdividend distributed in December 2020. COMMERCE BANCSHARES, INC. and SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME

For the Three Months Ended For the Nine Months Ended

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

Interest $216,981 $211,133 $209,697 $214,726 $223,114 $637,811 $657,922 income

Interest 2,944 3,151 3,949 4,963 7,152 10,044 37,838 expense

Net interest 214,037 207,982 205,748 209,763 215,962 627,767 620,084 income

Provision for (7,385) (45,655) (6,232) (4,403) 3,101 (59,272) 141,593 credit losses

Net interestincome after 221,422 253,637 211,980 214,166 212,861 687,039 478,491 credit losses

NON-INTEREST INCOME

Bank cardtransaction 42,815 42,608 37,695 39,979 37,873 123,118 111,818 fees

Trust fees 48,950 46,257 44,127 41,961 40,769 139,334 118,676

Deposit accountcharges and 25,161 23,988 22,575 24,164 23,107 71,724 69,063 other fees

Capital 3,794 3,327 4,981 3,826 3,194 12,102 10,756 market fees

Consumerbrokerage 4,900 4,503 4,081 3,996 4,011 13,484 11,099 services

Loan fees and 6,842 7,446 10,184 9,031 9,769 24,472 17,653 sales

Other 5,044 11,014 12,402 12,160 10,849 28,460 31,685

Totalnon-interest 137,506 139,143 136,045 135,117 129,572 412,694 370,750 income

INVESTMENTSECURITIES 13,108 16,804 9,853 12,307 16,155 39,765 (1,275)GAINS (LOSSES),NET

NON-INTEREST EXPENSE

Salaries andemployee 132,824 130,751 129,033 129,983 127,308 392,608 383,004 benefits

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 4,530 4,033 4,125 4,193 4,141 12,688 13,226 communication

Dataprocessing 25,598 24,954 25,463 24,323 23,610 76,015 71,002 and software

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

Totalnon-interest 211,620 198,126 192,573 196,310 190,858 602,319 572,068 expense

Income before 160,416 211,458 165,305 165,280 167,730 537,179 275,898 income taxes

Less income 34,662 45,209 32,076 33,084 34,375 111,947 54,209 taxes

Net income 125,754 166,249 133,229 132,196 133,355 425,232 221,689

Lessnon-controllinginterest 3,193 3,923 2,257 2,307 907 9,373 (2,479)expense(income)

Net incomeattributable toCommerce 122,561 162,326 130,972 129,889 132,448 415,859 224,168 Bancshares,Inc.

Lesspreferred - - - - 7,466 - 11,966 stockdividends

Net incomeavailable to $122,561 $162,326 $130,972 $129,889 $124,982 $415,859 $212,202 commonshareholders

Net income percommon share - $1.05 $1.38 $1.12 $1.11 $1.06 $3.55 $1.80 basic

Net income percommon share - $1.05 $1.38 $1.11 $1.11 $1.06 $3.54 $1.80 diluted



OTHER INFORMATION

Return ontotal average 1.40 % 1.93 % 1.63 % 1.63 % 1.71 % 1.65 % 1.04 %assets

Return onaverage common 13.74 19.12 15.69 15.49 15.21 16.14 8.93 equity ^(1)

Efficiency 59.95 56.90 56.37 56.68 55.00 57.76 57.37 ratio ^(2)

Effective tax 22.05 21.78 19.67 20.30 20.61 21.21 19.47 rate

Net yield oninterest 2.58 2.60 2.71 2.80 2.97 2.63 3.07 earning assets

Taxequivalent $216,858 $211,060 $208,774 $213,017 $219,118 $636,692 $629,773 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.

COMMERCE BANCSHARES, INC. and SUBSIDIARIES CONSOLIDATED BALANCE SHEETS - PERIOD END

(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) September 30, June 30, September 30, 2021 2021 2020(In thousands)

ASSETS

Loans

Business $ 5,277,850 $ 5,803,760 $ 6,683,413

Real estate - construction and 1,257,836 1,103,661 1,009,729 land

Real estate - business 2,937,852 3,017,560 2,993,192

Real estate - personal 2,769,292 2,793,213 2,753,867

Consumer 2,049,559 2,049,166 2,006,360

Revolving home equity 281,442 283,568 324,203

Consumer credit card 569,976 586,358 647,893

Overdrafts 4,583 2,978 2,270

Total loans 15,148,390 15,640,264 16,420,927

Allowance for credit losses on (162,775) (172,395) (236,360) loans

Net loans 14,985,615 15,467,869 16,184,567

Loans held for sale 16,043 23,697 39,483

Investment securities:

Available for sale debt 14,165,656 13,291,506 11,539,061 securities

Trading debt securities 40,114 29,002 25,805

Equity securities 9,174 8,678 4,203

Other securities 184,450 176,439 122,532

Total investment securities 14,399,394 13,505,625 11,691,601

Federal funds sold - 5,945 2,275

Securities purchased under 1,750,000 1,300,000 850,000 agreements to resell

Interest earning deposits with 1,888,545 2,161,644 1,171,697 banks

Cash and due from banks 344,460 358,122 357,616

Premises and equipment - net 377,476 371,989 377,853

Goodwill 138,921 138,921 138,921

Other intangible assets - net 14,458 14,148 7,183

Other assets 582,631 508,202 632,621

Total assets $ 34,497,543 $ 33,856,162 $ 31,453,817

LIABILITIES AND STOCKHOLDERS' EQUITY

Deposits:

Non-interest bearing $ 11,622,855 $ 11,085,286 $ 10,727,827

Savings, interest checking and 14,907,654 14,654,696 12,983,505 money market

Certificates of deposit of less 452,432 478,838 556,870 than $100,000

Certificates of deposit of 1,163,343 1,267,417 1,433,577 $100,000 and over

Total deposits 28,146,284 27,486,237 25,701,779

Federal funds purchased andsecurities sold under agreements 2,253,753 2,318,228 1,653,064 to repurchase

Other borrowings 4,006 2,194 782

Other liabilities 602,279 555,673 791,928

Total liabilities 31,006,322 30,362,332 28,147,553

Stockholders' equity:

Common stock 589,352 589,352 563,978

Capital surplus 2,427,544 2,424,157 2,140,410

Retained earnings 396,655 304,739 326,890

Treasury stock (92,047) (53,018) (69,050)

Accumulated other comprehensive 159,166 220,390 343,435 income

Total stockholders' equity 3,480,670 3,485,620 3,305,663

Non-controlling interest 10,551 8,210 601

Total equity 3,491,221 3,493,830 3,306,264

Total liabilities and equity $ 34,497,543 $ 33,856,162 $ 31,453,817

COMMERCE BANCSHARES, INC. and SUBSIDIARIES AVERAGE BALANCE SHEETS

(Unaudited) For the Three Months Ended

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

ASSETS:

Loans:

Business $ 5,437,498 $ 6,211,610 $ 6,532,921 $ 6,580,300 $ 6,709,200

Real estate -construction and 1,168,566 1,088,433 1,091,969 1,032,891 974,346 land

Real estate - 2,982,847 3,014,955 3,022,979 3,029,799 2,989,652 business

Real estate - 2,775,638 2,804,388 2,826,112 2,778,462 2,722,300 personal

Consumer 2,041,263 2,004,625 1,947,322 1,981,033 1,992,314

Revolving home 281,689 287,031 299,371 316,895 329,361 equity

Consumer credit card 566,406 575,725 608,747 638,161 646,185

Overdrafts 5,110 3,735 3,546 3,762 2,689

Total loans 15,259,017 15,990,502 16,332,967 16,361,303 16,366,047

Allowance for credit (172,112) (200,801) (220,512) (235,484) (240,286) losses on loans

Net loans 15,086,905 15,789,701 16,112,455 16,125,819 16,125,761

Loans held for sale 16,021 23,389 35,814 30,577 24,728

Investment securities:

U.S. government andfederal agency 727,566 719,849 725,367 774,640 770,361 obligations

Government-sponsoredenterprise 50,785 50,793 50,801 69,133 102,749 obligations

State and municipal 2,039,942 1,966,673 1,958,637 1,967,408 1,767,526 obligations

Mortgage-backed 7,115,419 6,685,407 6,998,521 6,646,345 6,259,926 securities

Asset-backed 3,028,076 2,653,928 2,085,491 1,819,467 1,520,988 securities

Other debt 608,642 605,772 570,115 533,646 514,166 securities

Unrealized gain on 230,058 197,124 283,511 329,477 368,154 debt securities

Total available for 13,800,488 12,879,546 12,672,443 12,140,116 11,303,870 sale debt securities

Trading debt 32,238 34,955 32,320 28,040 27,267 securities

Equity securities 8,756 4,914 4,321 4,221 4,193

Other securities 183,397 156,984 154,030 130,145 120,253

Total investment 14,024,879 13,076,399 12,863,114 12,302,522 11,455,583 securities

Federal funds sold 792 1,338 7 355 337

Securities purchasedunder agreements to 1,633,205 937,372 849,999 849,998 849,994 resell

Interest earning 2,602,896 2,724,782 1,480,331 1,082,644 1,024,435 deposits with banks

Other assets 1,261,277 1,258,989 1,308,105 1,291,907 1,389,683

Total assets $ 34,625,975 $ 33,811,970 $ 32,649,825 $ 31,683,822 $ 30,870,521



LIABILITIES AND EQUITY:

Non-interest bearing $ 11,475,113 $ 11,109,198 $ 10,438,637 $ 10,275,735 $ 9,801,562 deposits

Savings 1,484,923 1,474,391 1,333,177 1,234,481 1,193,079

Interest checking 13,343,180 13,283,481 12,970,629 12,198,928 11,731,494 and money market

Certificates ofdeposit of less than 464,367 491,446 516,728 542,212 573,207 $100,000

Certificates ofdeposit of $100,000 1,289,665 1,354,685 1,230,075 1,339,301 1,447,968 and over

Total deposits 28,057,248 27,713,201 26,489,246 25,590,657 24,747,310

Borrowings:

Federal fundspurchased andsecurities sold 2,360,876 2,165,696 2,166,072 2,028,457 1,855,971 under agreements torepurchase

Other borrowings 347 978 831 1,013 1,225

Total borrowings 2,361,223 2,166,674 2,166,903 2,029,470 1,857,196

Other liabilities 667,786 527,401 608,212 727,569 899,890

Total liabilities 31,086,257 30,407,276 29,264,361 28,347,696 27,504,396

Equity 3,539,718 3,404,694 3,385,464 3,336,126 3,366,125

Total liabilities $ 34,625,975 $ 33,811,970 $ 32,649,825 $ 31,683,822 $ 30,870,521 and equity

COMMERCE BANCSHARES, INC. and SUBSIDIARIES AVERAGE RATES

For the Three Months Ended

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

ASSETS:

Loans:

Business^ (1) 3.43 % 3.15 % 3.09 % 3.01 % 2.95 %

Real estate - construction and 3.51 3.56 3.54 3.72 3.74 land

Real estate - business 3.46 3.49 3.52 3.51 3.53

Real estate - personal 3.27 3.31 3.40 3.44 3.56

Consumer 3.71 3.84 4.02 4.07 4.19

Revolving home equity 3.46 3.43 3.38 3.37 3.29

Consumer credit card 11.29 11.22 10.97 11.60 11.40

Overdrafts - - - - -

Total loans 3.74 3.65 3.66 3.69 3.69

Loans held for sale 4.63 4.20 3.44 3.54 4.25

Investment securities:

U.S. government and federal agency 5.74 5.52 2.54 2.63 3.71 obligations

Government-sponsored enterprise 2.30 2.33 2.36 2.23 2.17 obligations

State and municipal obligations^ 2.35 2.41 2.46 2.44 2.53 (1)

Mortgage-backed securities 1.53 1.11 1.39 1.37 1.95

Asset-backed securities 1.08 1.25 1.39 1.59 1.90

Other debt securities 2.04 2.06 2.15 2.19 2.35

Total available for sale debt 1.80 1.64 1.67 1.70 2.18 securities

Trading debt securities^ (1) 1.01 1.19 1.08 1.40 1.66

Equity securities ^(1) 23.92 43.10 49.56 50.71 47.15

Other securities ^(1) 7.46 11.90 5.26 10.03 6.74

Total investment securities 1.89 1.78 1.72 1.81 2.24

Federal funds sold .50 .60 - 1.12 -

Securities purchased under 2.19 4.46 5.31 5.24 5.26 agreements to resell

Interest earning deposits with .15 .11 .10 .10 .10 banks

Total interest earning assets 2.62 2.64 2.76 2.86 3.07



LIABILITIES AND EQUITY:

Interest bearing deposits:

Savings .08 .08 .08 .09 .09

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

Certificates of deposit of less .18 .27 .37 .51 .71 than $100,000

Certificates of deposit of .14 .20 .35 .47 .69 $100,000 and over

Total interest bearing deposits .06 .07 .09 .12 .18

Borrowings:

Federal funds purchased andsecurities sold under agreements .08 .06 .06 .06 .09 to repurchase

Other borrowings 1.14 .82 .98 - -

Total borrowings .08 .06 .06 .06 .09

Total interest bearing liabilities .06 % .07 % .09 % .11 % .17 %



Net yield on interest earning 2.58 % 2.60 % 2.71 % 2.80 % 2.97 %assets

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

COMMERCE BANCSHARES, INC. and SUBSIDIARIES CREDIT QUALITY

(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 Nine Months Ended

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

ALLOWANCE FORCREDIT LOSSES ON LOANS

Balance atbeginning of $172,395 $200,527 $220,834 $236,360 $240,744 $220,834 $160,682 period

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

Provision forcredit losses (5,961) (27,433) (10,355) (7,510) 3,200 (43,749) 123,559 on loans

Netcharge-offs (recoveries):

Commercial portfolio:

Business 65 (4,909) (4) 581 208 (4,848) 3,084

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

Real estate - (5 ) (85) 20 (7) (13) (70) (40)business

60 (4,994) 17 572 194 (4,917) 3,043

Personalbanking portfolio:

Consumer 2,908 5,155 8,981 5,975 7,263 17,044 20,004 credit card

Consumer 496 378 763 1,160 211 1,637 3,284

Overdraft 243 148 153 335 200 544 942

Real estate - (26) (16) 15 (18) (198) (27) (273)personal

Revolving home (22) 28 23 (8) (86) 29 (158)equity

3,599 5,693 9,935 7,444 7,390 19,227 23,799

Total net loan 3,659 699 9,952 8,016 7,584 14,310 26,842 charge-offs

Balance at end $162,775 $172,395 $200,527 $220,834 $236,360 $162,775 $236,360 of period

LIABILITY FORUNFUNDED $22,784 $24,208 $42,430 $38,307 $35,200 LENDINGCOMMITMENTS



NET CHARGE-OFF RATIOS ^(1)

Commercial portfolio:

Business - % (.32%) - % .04 % .01 % (.11%) .07 %

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

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

- (.19) - .02 .01 (.06) .04

Personalbanking portfolio:

Consumer 2.04 3.59 5.98 3.72 4.47 3.91 3.93 credit card

Consumer .10 .08 .16 .23 .04 .11 .22

Overdraft 18.87 15.89 17.50 35.43 29.59 17.59 39.16

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

Revolving home (.03) .04 .03 (.01) (.10) .01 (.06)equity

.25 .40 .71 .52 .52 .45 .57

Total .10 % .02 % .25 % .19 % .18 % .12 % .23 %



CREDIT QUALITY RATIOS

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

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

Allowance forcredit losseson loans to 1.07 1.10 1.22 1.35 1.44 total loans^(2)



NON-PERFORMING ASSETS

Non-accrual loans:

Business $8,293 $8,839 $20,215 $22,524 $37,295

Real estate -construction - - - - 1 and land

Real estate - 577 655 1,572 2,230 1,063 business

Real estate - 1,551 1,672 1,719 1,786 1,911 personal

Total 10,421 11,166 23,506 26,540 40,270

Foreclosed 115 229 208 93 57 real estate

Totalnon-performing $10,536 $11,395 $23,714 $26,633 $40,327 assets

Loans past due90 days and $10,496 $12,338 $21,512 $22,190 $14,436 still accruinginterest

(1)

Net charge-offs are annualized and calculated 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 1.10% and 1.17% as of September 30, 2021 and June 30, 2021, respectively. COMMERCE BANCSHARES, INC. Management Discussion of Third Quarter Results September 30, 2021

For the quarter ended September 30, 2021, net income attributable to Commerce Bancshares, Inc. (net income) amounted to $122.6 million, compared to $162.3 million in the previous quarter and $132.4 million in the same quarter last year. The decrease in net income compared to the previous quarter was primarily the result of an increase in the provision for credit losses, higher non-interest expense, and lower investment securities gains, partly offset by higher net interest income and lower income tax expense. Compared to the prior quarter, the provision for credit losses increased due to a smaller decrease in the estimate of the allowance for credit losses on loans and unfunded lending commitments and higher net loan charge-offs. The net yield on interest earning assets declined two basis points to 2.58%. Average loans declined $731.5 million compared to the previous quarter, while average available for sale debt securities grew $920.9 million, and average deposits increased $344.0 million. For the quarter, the return on average assets was 1.40%, the return on average common equity was 13.74%, and the efficiency ratio was 59.9%.

Balance Sheet Review

During the 3rd quarter of 2021, average loans totaled $15.3 billion, a decrease of $731.5 million from the prior quarter, and declined $1.1 billion, or 6.8%, from the same quarter last year. Period end loans decreased $491.9 million compared to the prior quarter. Compared to the previous quarter, average balances of business, business real estate and personal real estate loans declined $774.1 million (includes a decline of $689.2 million in Paycheck Protection Program (PPP) loan balances), $32.1 million and $28.7 million, respectively. This decline was partially offset by growth in construction and consumer loans of $80.1 million and $36.6 million, respectively. The period end balance of PPP loans decreased $546.4 million during the 3rd quarter of 2021 and totaled $307.9 million at September 30, 2021. As of September 30, 2021, 97% of round 1 and 35% of round 2 PPP loan balances have been forgiven. During the current quarter, the Company sold certain fixed rate personal real estate loans totaling $119.3 million, compared to $164.6 million in the prior quarter.

Total average available for sale debt securities increased $920.9 million over the previous quarter to $13.8 billion, at fair value. The increase in investment securities was mainly the result of growth in mortgage-backed and asset-backed securities. During the current quarter, purchases of securities totaled $1.8 billion with a weighted average yield of approximately 1.20%. Maturities and pay downs were $817.2 million, and there were no sales during the quarter. At September 30, 2021, the duration of the investment portfolio was 3.5 years, and maturities and pay downs of approximately $2.8 billion are expected to occur during the next 12 months.

Total average deposits increased $344.0 million this quarter compared to the previous quarter. The increase in deposits mostly resulted from growth in demand deposits of $365.9 million. Additionally, interest checking and money market deposits grew $59.7 million, while certificate of deposit balances declined $92.1 million. Compared to the previous quarter, total average commercial deposits grew $360.1 million. The average loans to deposits ratio was 54.4% in the current quarter and 57.8% in the prior quarter. The Company's average borrowings, which include customer repurchase agreements, were $2.4 billion in the 3rd quarter of 2021 and $2.2 billion in the prior quarter.

Net Interest Income

Net interest income in the 3rd quarter of 2021 amounted to $214.0 million, an increase of $6.1 million compared to the previous quarter. On a tax equivalent basis, net interest income for the current quarter increased $5.8 million over the previous quarter to $216.9 million. The increase in net interest income was mainly due to higher income earned on investment securities, partly offset by lower interest earned on loans and securities purchased under agreements to resell. The net yield on earning assets (tax equivalent) decreased to 2.58%, compared to 2.60% in the prior quarter.

Compared to the previous quarter, interest income on loans (tax equivalent) decreased $1.7 million. This decrease was mostly a result of lower average business loan balances, partially offset by higher yields on business loans and higher average construction loan balances. The increase in the yield on business loans was driven primarily by an increase in the yield on PPP loans, which grew to 7.73% this quarter. Excluding PPP loans, the yield on business loans was 2.92% in the 3rd quarter of 2021 compared to 3.00% in the prior quarter. The average tax-equivalent yield on the loan portfolio increased nine basis points to 3.74% this quarter.

Interest income on investment securities (tax equivalent) increased $8.6 million over the previous quarter, due to both higher rates earned and average balances. Interest income earned on U.S. government and federal agency securities increased modestly, as inflation income from Treasury inflation-protected securities inflation income increased $591 thousand this quarter to $7.4 million. At September 30, 2021, the Company recorded a $5.0 million adjustment to premium amortization, which increased interest income this quarter to reflect moderately slower forward prepayment speed estimates on mortgage-backed securities. The yield on total investment securities was 1.89% in the current quarter, compared to 1.78% in the previous quarter.

The average rate paid on interest bearing deposits totaled .06% in the 3rd quarter of 2021, compared .07% in the prior quarter. Interest expense on deposits decreased $359 thousand this quarter compared to the previous quarter mainly due to lower rates paid on certificate of deposit accounts. The overall rate paid on interest bearing liabilities was .06% in the current quarter, compared to .07% in the prior quarter.

Non-Interest Income

In the 3rd quarter of 2021, total non-interest income amounted to $137.5 million, an increase of $7.9 million, or 6.1%, compared to the same period last year and decreased $1.6 million compared to the prior quarter. The increase in non-interest income over the same period last year was mainly due to growth in trust fees, bank card fees, and deposit account fees, partially offset by lower loan fees and sales.

Total net bank card fees in the current quarter increased $4.9 million, or 13.0%, over the same period last year, and increased $207 thousand compared to the prior quarter. Net corporate card fees increased $3.1 million, or 15.3%, 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 $681 thousand, or 7.0%, mainly due to higher interchange fees. Net merchant income increased $651 thousand, or 14.3%, and net credit card fees increased $504 thousand, or 15.0%. Total net bank card fees this quarter were comprised of fees on corporate card ($23.3 million), debit card ($10.4 million), merchant ($5.2 million) and credit card ($3.9 million) transactions.

In the current quarter, trust fees increased $8.2 million, or 20.1%, 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 $2.1 million, or 8.9%, mainly due to higher overdraft and return item fees and corporate cash management fees. Loan fees and sales, mostly mortgage banking revenue, declined $2.9 million, or 30.0%, over amounts recorded in the same quarter last year. Consumer brokerage fees increased $889 thousand, or 22.2%, 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 cash sweep commissions and tax credit sales fees of $1.6 million and $1.1 million, respectively. Additionally, a $2.0 million loss was recorded this quarter on an equity method investment. For the 3rd quarter of 2021, non-interest income comprised 39.1% of the Company's total revenue.

Investment Securities Gains and Losses

The Company recorded investment net gains of $13.1 million in the current quarter, compared to net gains of $16.8 million in the prior quarter and net gains of $16.2 million in the 3rd quarter of 2020. Net gains on investments in the current quarter primarily resulted from unrealized fair value gains of $13.0 million in the Company's private equity investment portfolio.

Non-Interest Expense

Non-interest expense for the current quarter amounted to $211.6 million, compared to $190.9 million in the same period last year and $198.1 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 litigation settlement expense, higher salaries and benefits expense and data processing and software expense.

Compared to the 3rd quarter of last year, salaries and employee benefits expense increased $5.5 million, mostly due to higher incentive compensation. Full-time equivalent employees totaled 4,582 and 4,825 at September 30, 2021 and 2020, respectively.

Data processing and software expense increased $2.0 million due to higher bank card processing fees and increased costs for service providers. Other non-interest expense increased mainly due to $8.2 million in litigation settlement costs. Additionally, legal and professional fees and travel and entertainment expense increased $1.3 million and $1.1 million, respectively.

Income Taxes

The effective tax rate for the Company was 22.0% in the current quarter, 21.8% in the previous quarter, and 20.6% in the 3rd quarter of 2020.

Credit Quality

Net loan charge-offs in the 3rd quarter of 2021 amounted to $3.7 million, compared to $699 thousand in the prior quarter and $7.6 million in the same period last year. The ratio of annualized net loan charge-offs to total average loans was .10% in the current quarter, .02% in the previous quarter, and .18% in the 3rd quarter of last year. Net loan charge-offs on personal banking loans decreased $2.1 million to $3.6 million.

In the 3rd quarter of 2021, annualized net loan charge-offs on average consumer credit card loans were 2.04%, compared to 3.59% in the previous quarter, and 4.47% in the same quarter last year. Consumer loan net charge-offs were .10% of average consumer loans in the current quarter, .08% in the prior quarter and .04% in the same quarter last year.

During the 3rd quarter of 2021, the economy continued to recover from the pandemic and the economic forecast utilized in the allowance for credit loss model continued to improve. This improvement, coupled with other model inputs, resulted in a decrease in the allowance for credit losses as of September 30, 2021. At September 30, 2021, the allowance for credit losses on loans totaled $162.8 million, or 1.07% of total loans and 1.10% of total loans excluding PPP loans. Additionally, the liability for unfunded lending commitments at September 30, 2021 was $22.8 million, a decrease of $1.4 million from the liability at June 30, 2021.

At September 30, 2021, total non-performing assets amounted to $10.5 million, a decrease of $859 thousand from the previous quarter. Non-performing assets are comprised of non-accrual loans and foreclosed real estate ($10.4 million and $115 thousand, respectively). At September 30, 2021, the balance of non-accrual loans, which represented .07% of loans outstanding, included business loans of $8.3 million, personal real estate loans of $1.6 million, and business real estate loans of $577 thousand. Loans more than 90 days past due and still accruing interest totaled $10.5 million at September 30, 2021.

Other

During the 3rd 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 575,457 shares of treasury stock during the current quarter at an average price of $69.80.

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