What changed in COMMERCE BANCSHARES INC /MO/'s 10-K — 2022 vs 2023
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Paragraph-level year-over-year comparison of COMMERCE BANCSHARES INC /MO/'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.
+435 added−459 removedSource: 10-K (2024-02-22) vs 10-K (2023-02-22)
Top changes in COMMERCE BANCSHARES INC /MO/'s 2023 10-K
435 paragraphs added · 459 removed · 360 edited across 6 sections
- Item 7. Management's Discussion & Analysis+326 / −352 · 278 edited
- Item 1A. Risk Factors+55 / −48 · 33 edited
- Item 1. Business+30 / −34 · 27 edited
- Item 4. Mine Safety Disclosures+15 / −15 · 15 edited
- Item 5. Market for Registrant's Common Equity+7 / −9 · 6 edited
Item 1. Business
Business — how the company describes what it does
27 edited+3 added−7 removed71 unchanged
Item 1. Business
Business — how the company describes what it does
27 edited+3 added−7 removed71 unchanged
2022 filing
2023 filing
Biggest changeThese amendments include the Money Laundering Control Act of 1986 which made money laundering a criminal act, as well as the Money Laundering Suppression Act of 1994 which required regulators to develop enhanced examination procedures and increased examiner training to improve the identification of money laundering schemes in financial institutions.
Biggest changeThese amendments include the Money Laundering Control Act of 1986 which made money laundering a criminal act, as well as the Money Laundering Suppression Act of 1994 which required regulators to develop enhanced examination procedures and increased examiner training to improve the identification of money laundering schemes in financial institutions. 5 Table of Contents The USA PATRIOT Act, established in 2001, substantially broadened the scope of U.S. anti-money laundering laws and regulations by imposing significant new compliance and due diligence obligations, creating new crimes and penalties and expanding the extra-territorial jurisdiction of the U.S.
The Company also has offices in Dallas, Houston, Cincinnati, Nashville, Des Moines, Indianapolis, and Grand Rapids that support customers in its commercial and/or wealth segments and operates a commercial payments business with sales representatives covering the continental United States of America (“U.S.”).
The Company also has offices in Dallas, Houston, Cincinnati, Nashville, Des Moines, Indianapolis, Grand Rapids, and Naples that support customers in its commercial and/or wealth segments and operates a commercial payments business with sales representatives covering the continental United States of America (“U.S.”).
The Company also uses regional advisory boards, comprised of local business leaders, professionals and other community representatives, who assist the Company in responding to local banking needs. In addition to this local market, community-based focus, the Company offers sophisticated financial products usually only available at much larger financial institutions.
The Company also uses regional advisory boards, comprised of local business leaders, professionals and other community representatives, who assist the Company in responding to local banking needs. In addition to this local market, community-based focus, the Company offers sophisticated financial products usually only available at larger financial institutions.
On May 24, 2018, the Economic Growth, Regulatory Relief, and Consumer Protection Act was enacted, which eliminated the required stress testing under the Dodd-Frank Act for banks with consolidated assets of less than $250 billion. The Company continues to perform periodic stress-testing based on its own internal criteria.
On May 24, 2018, the Economic Growth, Regulatory Relief, and Consumer Protection Act was enacted, which eliminated the required stress testing under the Dodd-Frank Act for banks with consolidated assets of less than $250 billion. While not required to perform stress testing, the Company continues to perform periodic stress-testing based on its own internal criteria.
The Commercial segment provides a full array of corporate lending, merchant and commercial bank card products, payment solutions, leasing, and international services, as well as business and government deposit, investment, and cash management services. The Consumer segment includes the retail branch network, consumer installment lending, personal mortgage banking, and consumer debit and credit bank card activities.
The Commercial segment provides a full array of corporate lending, merchant and commercial bank card products, payment solutions, leasing, and international services, as well as business and government deposit, investment, institutional brokerage, and cash management services. The Consumer segment includes the retail branch network, consumer installment lending, personal mortgage banking, and consumer debit and credit bank card activities.
The Company's principal markets, which are served by 148 branch facilities, are located throughout Missouri, Kansas, and central Illinois, as well as Tulsa and Oklahoma City, Oklahoma and Denver, Colorado. Its two largest markets are St. Louis and Kansas City, which serve as central hubs for the Company.
The Company's principal markets, which are served by 141 branch facilities, are located throughout Missouri, Kansas, and central Illinois, as well as Tulsa and Oklahoma City, Oklahoma and Denver, Colorado. Its two largest markets are St. Louis and Kansas City, which serve as central hubs for the Company.
This guidance covers all employees that have the ability to materially affect the risk profile of an organization, either individually or as part of a group, based on key principles that (i) incentives do not 7 Table of Conte nts encourage risk-taking beyond the organization's ability to identify and manage risk, (ii) compensation arrangements are compatible with effective internal controls and risk management, and (iii) compensation arrangements are supported by strong corporate governance, including active and effective board oversight.
This guidance covers all employees that have the ability to materially affect the risk profile of an organization, either individually or as part of a group, based on key principles that (i) incentives do not encourage risk-taking beyond the organization's ability to identify and manage risk, (ii) compensation arrangements are compatible with effective internal controls and risk management, and (iii) compensation arrangements are supported by strong corporate governance, including active and effective board oversight.
In its two largest markets, the Company has approximately 12% of the deposit market share in Kansas City and approximately 8% of the deposit market share in St. Louis. Operating Segments The Company is managed in three operating segments: Commercial, Consumer, and Wealth.
In its two largest markets, the Company has approximately 12% of the deposit market share in Kansas City and approximately 7% of the deposit market share in St. Louis. Operating Segments The Company is managed in three operating segments: Commercial, Consumer, and Wealth.
The amount of dividends paid by the Bank in any calendar year is limited to the net profit of the current year combined with the retained net profits of the preceding two years, and permission must be obtained from the Federal Reserve Board for dividends exceeding these amounts.
The amount of dividends paid by the Bank in any calendar year is limited to the net profit of the current year combined with the retained net profits of the preceding two years, and permission must be obtained from the Federal Reserve Board for 6 Table of Contents dividends exceeding these amounts.
The GLB Act also included privacy provisions that limit banks’ abilities to disclose non-public information about customers to non-affiliated entities. 5 Table of Conte nts The Company must also comply with the requirements of the Bank Secrecy Act (BSA). The BSA is designed to help fight drug trafficking, money laundering, and other crimes. Compliance is monitored by the Federal Reserve.
The GLB Act also included privacy provisions that limit banks’ abilities to disclose non-public information about customers to non-affiliated entities. The Company must also comply with the requirements of the Bank Secrecy Act (BSA). The BSA is designed to help fight drug trafficking, money laundering, and other crimes. Compliance is monitored by the Federal Reserve.
The personal real estate lending operations of the Bank are predominantly centered in its lower Midwestern markets. From time to time, the Company evaluates the potential acquisition of various financial institutions. In addition, the Company regularly considers the purchase and disposition of real estate assets and branch locations.
The personal real estate lending operations of the Bank are predominantly centered in its principal markets. From time to time, the Company evaluates the potential acquisition of various financial institutions. In addition, the Company regularly considers the purchase and disposition of real estate assets and branch locations.
The FDIC Board also increased base deposit insurance assessment rates by 2 basis points, which takes effect on January 1, 2023.
The FDIC Board also increased base deposit insurance assessment rates by 2 basis points, which took effect on January 1, 2023.
These include, for example, the 4 Table of Conte nts statutory minimum legal lending rates, domestic monetary policies of the Board of Governors of the Federal Reserve System, U.S. fiscal policy, international currency regulations and monetary policies, the U.S. Patriot Act, and capital adequacy and liquidity constraints imposed by federal and state bank regulatory agencies.
These include, for example, the statutory minimum legal lending rates, domestic monetary policies of the Board of Governors of the Federal Reserve System, U.S. fiscal policy, international currency regulations and monetary policies, the U.S. Patriot Act, and capital adequacy and liquidity constraints imposed by federal and state bank regulatory agencies.
At December 31, 2022, the Company's capital ratios are well in excess of those minimum ratios required by Basel III.
At December 31, 2023, the Company's capital ratios are well in excess of those minimum ratios required by Basel III.
Deficiencies in compensation practices may affect supervisory ratings and enforcement actions may be taken if incentive compensation arrangements pose a risk to safety and soundness. Transactions with Affiliates The Federal Reserve Board regulates transactions between the Bank and its subsidiaries.
Deficiencies in compensation practices may affect supervisory ratings and enforcement actions may be taken if incentive compensation arrangements pose a risk to safety and soundness. 7 Table of Contents Transactions with Affiliates The Federal Reserve Board regulates transactions between the Bank and its subsidiaries.
These filings include the annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to those reports. 8 Table of Conte nts
These filings include the annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to those reports. 8 Table of Contents
Employees and Human Capital The Company employed 4,447 persons on a full-time basis and 151 persons on a part-time basis at December 31, 2022. None of the Company's employees are represented by collective bargaining agreements. Attracting and retaining talented team members is key to the Company’s ability to execute its strategy and compete effectively.
Employees and Human Capital The Company employed 4,592 persons on a full-time basis and 136 persons on a part-time basis at December 31, 2023. None of the Company's employees are represented by collective bargaining agreements. Attracting and retaining talented team members is key to the Company’s ability to execute its strategy and compete effectively.
Among other things, the Dodd-Frank Act raised the minimum designated reserve ratio from 1.15% to 1.35% of estimated insured deposits, removed the upper limit of the designated reserve ratio, required that the designated reserve ratio reach 1.35% by September 30, 2020, and required the FDIC to offset the effect of increasing the minimum designated reserve ratio on depository institutions with total assets of less than $10 billion.
Among other things, the Dodd-Frank Act raised the minimum designated reserve ratio from 1.15% to 1.35% of estimated insured deposits, removed the upper limit of the designated reserve ratio, and required the FDIC to offset the effect of increasing the minimum designated reserve ratio on depository institutions with total assets of less than $10 billion.
The Wealth segment provides traditional trust and estate planning services, brokerage services, and advisory and discretionary investment portfolio management services to both personal and institutional corporate customers. In 2022, the Commercial, Consumer and Wealth segments contributed 53%, 23% and 24% of total segment pre-tax income, respectively.
The Wealth segment provides traditional trust and estate planning services, consumer brokerage services, and advisory and discretionary investment portfolio management services to both personal and institutional corporate customers. In 2023, the Commercial, Consumer and Wealth segments contributed 53%, 25% and 21% of total segment pre-tax income, respectively.
A list of Commerce Bancshares, Inc.'s subsidiaries is included as Exhibit 21. Commerce Bancshares, Inc. and its subsidiaries (collectively, the "Company") is one of the nation’s top 50 bank holding companies, based on asset size. At December 31, 2022, the Company had consolidated assets of $31.9 billion, loans of $16.3 billion, deposits of $26.2 billion, and equity of $2.5 billion.
A list of Commerce Bancshares, Inc.'s subsidiaries is included as Exhibit 21. Commerce Bancshares, Inc. and its subsidiaries (collectively, the "Company") is one of the nation’s top 50 bank holding companies, based on asset size. At December 31, 2023, the Company had consolidated assets of $31.7 billion, loans of $17.2 billion, deposits of $25.4 billion, and equity of $3.0 billion.
The Company continues to build a sense of belonging by engaging team members in a variety of Employee Resource Groups (ERGs) to support its diverse workforce.
Internal teams continue to iterate to build plans for growth in all four areas. The Company continues to build a sense of belonging by engaging team members in a variety of Employee Resource Groups (ERGs) to support its diverse workforce.
RISE (empowering women), EMERGE (connecting young professionals), VIBE (valuing multicultural perspectives), PRIDE (engaging the LGBTQIA+ community), and SALUTE (supporting veterans) are important forums that provide team members opportunities to connect, learn, and encourage diverse perspectives. Participation in these ERGs is voluntary, and more than 40% of team members belong to one of these groups.
RISE (empowering women), EMERGE (connecting young professionals), VIBE (valuing multicultural perspectives), PRIDE (engaging the LGBTQIA+ community), SALUTE (supporting veterans), and ENABLE (supporting team members with disabilities and their caregivers) are important forums that provide team members opportunities to connect, learn, and encourage diverse perspectives.
The Company seeks merger or acquisition partners that are culturally similar, have experienced management and either possess significant market presence or have potential for improved profitability through financial management, economies of scale and expanded services. The Company has not completed any bank acquisitions since 2013.
The Company seeks merger or acquisition partners that are culturally similar, have experienced management and either possess significant market presence or have potential for improved profitability through financial management, economies of scale and expanded services. In the second quarter of 2023, the Company acquired L.J. Hart & Company, a municipal bond underwriter and advisor.
General The Company, as a bank holding company, is primarily regulated by the Board of Governors of the Federal Reserve System under the Bank Holding Company Act of 1956, as amended (BHC Act).
It does not discuss all provisions of these laws and regulations, and it does not include all laws and regulations that affect the Company presently or may affect the Company in the future. 4 Table of Contents General The Company, as a bank holding company, is primarily regulated by the Board of Governors of the Federal Reserve System under the Bank Holding Company Act of 1956, as amended (BHC Act).
For the year ended December 31, 2022, the Company's deposit insurance expense was $10.6 million. 6 Table of Conte nts Payment of Dividends The Federal Reserve Board may prohibit the payment of cash dividends to shareholders by bank holding companies if their actions constitute unsafe or unsound practices.
Payment of Dividends The Federal Reserve Board may prohibit the payment of cash dividends to shareholders by bank holding companies if their actions constitute unsafe or unsound practices. The principal source of the Parent's cash revenues is cash dividends paid by the Bank.
Supervision and Regulation The following information summarizes existing laws and regulations that materially affect the Company's operations. It does not discuss all provisions of these laws and regulations, and it does not include all laws and regulations that affect the Company presently or may affect the Company in the future.
Supervision and Regulation The following information summarizes existing laws and regulations that materially affect the Company's operations.
Job shadowing, leadership 3 Table of Conte nts development programs, Aspiring Managers program, Managing at Commerce, competency assessments and education assistance are just a few of the ways the Company helps team members excel. During the COVID-19 pandemic, the Company focused efforts on providing team members support and resources to navigate the ever-changing environment.
Job shadowing, leadership 3 Table of Contents development programs, Aspiring Managers program, Managing at Commerce, competency assessments and education assistance are just a few of the ways the Company helps team members excel. The Company believes inclusion builds stronger companies with better results and focuses its efforts around four key pillars: its workforce, its suppliers, its community and its customers.
Removed
Initiatives included routine communications providing relevant updates and information, resources for leaders to help keep their teams engaged and connected, new resources for working parents, and access to emotional support resources. The Company implemented a phased-in approach to returning to on-site work and created more flexible work categories for team members to provide for ongoing flexibility.
Added
Participation in these ERGs is voluntary, and more than 40% of team members belong to one of these groups. The Company’s longstanding approach of “doing what’s right” continues to guide its focus on its team members and communities.
Removed
While the most significant impacts of the pandemic appear to have passed, the Company continues to provide most of its team members flexible work schedules. The Company believes diversity, equity, and inclusion (DEI) builds stronger companies with better results.
Added
In November 2023, the FDIC Board of Directors approved a final rule implementing a special assessment to recover the loss to the DIF associated with protecting uninsured depositors following the closures of Silicon Valley Bank and Signature Bank earlier in 2023.
Removed
In 2022, the Company’s efforts continued around a key initiative focusing on DEI through the lens of our workforce, our suppliers, our community and our customers. Internal teams continue to iterate to build plans for growth in all four areas.
Added
As a result of the FDIC's approval of its final rule, the Company accrued $16.0 million in the fourth quarter of 2023 for the one-time special assessment. For the year ended December 31, 2023, the Company's deposit insurance expense was $33.2 million.
Removed
Other internal DEI efforts have included unconscious bias training, book clubs, listen, talk, and learn sessions, courageous conversation training, mentoring programs, and review of talent at all levels of the organization. The Company’s longstanding approach of “doing what’s right” continues to guide its focus on its team members and communities.
Removed
The USA PATRIOT Act, established in 2001, substantially broadened the scope of U.S. anti-money laundering laws and regulations by imposing significant new compliance and due diligence obligations, creating new crimes and penalties and expanding the extra-territorial jurisdiction of the U.S.
Removed
The Dodd-Frank Act provided the FDIC flexibility in the implementation of the increase in the designated reserve ratio and also required that the FDIC redefine the assessment base to average consolidated assets minus average tangible equity.
Removed
The principal source of the Parent's cash revenues is cash dividends paid by the Bank.
Item 1A. Risk Factors
Risk Factors — what could go wrong, per management
33 edited+22 added−15 removed48 unchanged
Item 1A. Risk Factors
Risk Factors — what could go wrong, per management
33 edited+22 added−15 removed48 unchanged
2022 filing
2023 filing
Biggest changeThe Company’s investment portfolio values may be adversely impacted by deterioration in the credit quality of underlying collateral within the various categories of investment securities it owns. The Company generally invests in liquid, investment grade securities, however, these securities are subject to changes in market value due to changing interest rates and implied credit spreads.
Biggest changeThe Company generally invests in liquid, investment grade securities, however, these securities are subject to changes in market value due to changing interest rates and implied credit spreads. While the Company maintains prudent risk management practices over bonds issued by municipalities and other issuers, credit deterioration in these bonds could occur and result in losses.
See Note 2 to the consolidated financial statements and the section captioned “Allowance for Credit Losses on Loans and Liability for Unfunded Lending Commitments” in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, of this report for further discussion related to the Company’s process for determining the appropriate level of the allowance for credit losses on loans and the liability for unfunded lending commitments at December 31, 2022.
See Note 2 to the consolidated financial statements and the section captioned “Allowance for Credit Losses on Loans and Liability for Unfunded Lending Commitments” in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, of this report for further discussion related to the Company’s process for determining the appropriate level of the allowance for credit losses on loans and the liability for unfunded lending commitments at December 31, 2023.
Failure to successfully manage these risks in the development and implementation of new lines of business and new products or services could have a material adverse effect on the Company’s financial condition and results of operations. General Risks A successful cyber attack or other computer system breach could significantly harm the Company, its reputation and its customers.
Failure to successfully manage these risks in the development and implementation of new lines of business and new products or services could have a material adverse effect on the Company’s financial condition and results of operations. Technology Risks A successful cyber attack or other computer system breach could significantly harm the Company, its reputation and its customers.
The allowance for credit losses on loans and the liability for unfunded lending commitments at December 31, 2022 reflect management's estimate of credit losses expected in the loan portfolio, including unfunded lending commitments, as of the balance sheet date.
The allowance for credit losses on loans and the liability for unfunded lending commitments at December 31, 2023 reflect management's estimate of credit losses expected in the loan portfolio, including unfunded lending commitments, as of the balance sheet date.
However, there can be no assurance that any such failures, interruptions or security breaches will not occur, or if they do occur, that they will be adequately addressed. In addition to unauthorized access, denial-of-service attacks or other operational disruptions could prevent the Company from adequately serving customers.
However, there can be no assurance that any such failures, interruptions or security breaches will not occur, or if 13 Table of Contents they do occur, that they will be adequately addressed. In addition to unauthorized access, denial-of-service attacks or other operational disruptions could prevent the Company from adequately serving customers.
As the Company does not have a significant banking presence in other parts of the country, a prolonged economic downturn in these markets could have a material adverse effect on the Company’s financial condition and results of operations. The Company operates in a highly competitive industry and market area.
As the Company does not have a significant banking presence in other parts of the country, a prolonged economic downturn in these markets could have a material adverse effect on the Company’s financial condition and results of operations. 9 Table of Contents The Company operates in a highly competitive industry and market area.
As consolidation occurs, larger regional and national banks may enter the Company's markets and add to existing competition. Large, national financial institutions have substantial capital, technology and marketing resources. These new competitors may lower fees to grow market share, which could result in a loss of 9 Table of Conte nts customers and lower fee revenue for the Company.
As consolidation occurs, larger regional and national banks may enter the Company's markets and add to existing competition. Large, national financial institutions have substantial capital, technology and marketing resources. These new competitors may lower fees to grow market share, which could result in a loss of customers and lower fee revenue for the Company.
The Company’s efforts to take these risks into account in making lending and other decisions, including by increasing the Company’s business with climate-friendly companies, may not be effective in protecting the Company from the adverse impact of new laws and regulations or changes in consumer or business behavior. Item 1b. UNRESOLVED STAFF COMMENTS None 14 Table of Conte nts
The Company’s efforts to take these risks into account in making lending and other decisions, including by increasing the Company’s business with climate-friendly companies, may not be effective in protecting the Company from the adverse impact of new laws and regulations or changes in consumer or business behavior. Item 1b. UNRESOLVED STAFF COMMENTS None
The interest rate environment in which the Company operates fluctuates in response to general economic conditions and policies of various governmental and regulatory agencies, particularly the Federal Reserve Board, which regulates the supply of money and credit in the U.S.
The interest rate environment in which the Company operates fluctuates in response to general economic conditions and policies of various governmental and 10 Table of Contents regulatory agencies, particularly the Federal Reserve Board, which regulates the supply of money and credit in the U.S.
With oversight from its Asset-Liability Management Committee, the Company devotes substantial resources to monitoring its liquidity and interest rate risk on a monthly basis. The Company's net interest income is the largest source of overall revenue to the Company, representing 63% of total revenue for the year ended December 31, 2022.
With oversight from its Asset-Liability Management Committee, the Company devotes substantial resources to monitoring its liquidity and interest rate risk on a monthly basis. The Company's net interest income is the largest source of overall revenue to the Company, representing 64% of total revenue for the year ended December 31, 2023.
Unlike larger national or other regional banks that are more geographically diversified, the Company provides financial services primarily throughout the states of Missouri, Kansas, central Illinois, Oklahoma, and Colorado. It also has a growing presence in additional states through its commercial banking offices in: Texas, Iowa, Indiana, Michigan, Ohio, and Tennessee.
Unlike larger national or other regional banks that are more geographically diversified, the Company provides financial services primarily throughout the states of Missouri, Kansas, central Illinois, Oklahoma, and Colorado. It also has a growing presence in additional states through its offices in: Texas, Iowa, Indiana, Michigan, Ohio, Florida, and Tennessee that serve commercial or trust customers.
Failure to comply with laws, regulations, or policies could result in sanctions by regulatory agencies, civil money penalties, and/or reputation damage, which could have a material adverse effect on the Company’s business, financial condition, and results of operations.
Beyond the expense of additional regulation, failure to comply with laws, regulations, or policies could result in sanctions by regulatory agencies, civil money penalties, and/or reputation damage, which could have a material adverse effect on the Company’s business, financial condition, and results of operations.
Failure to successfully keep pace with technological change affecting the financial services industry or failure to successfully complete the replacement of technological systems could have a material adverse effect on the Company’s business, financial condition and results of operations. 13 Table of Conte nts The Company must attract and retain skilled employees.
Failure to successfully keep pace with technological change affecting the financial services industry or failure to successfully complete the replacement of technological systems could have a material adverse effect on the Company’s business, financial condition and results of operations. General Risks The Company must attract and retain skilled employees.
In addition, the Company could experience reductions in creditworthiness on the part of some customers or in the value of assets securing loans.
In addition, the 14 Table of Contents Company could experience reductions in creditworthiness on the part of some customers or in the value of assets securing loans.
The soundness of other financial institutions could adversely affect the Company. The Company’s ability to engage in routine funding transactions could be adversely affected by the actions and commercial soundness of other financial institution counterparties. Financial services institutions are interrelated because of trading, clearing, counterparty or other relationships.
The soundness of other financial institutions could adversely affect the Company. As demonstrated within the industry during 2023, the Company’s ability to engage in routine funding transactions could be adversely affected by the actions and commercial soundness of other financial institution counterparties. Financial services institutions are interrelated because of trading, clearing, counterparty or other relationships.
In addition, the Company’s credit risk may be exacerbated when the collateral held cannot be realized or is liquidated at prices not sufficient to recover the full amount of the exposure due to the Company. Any such losses could materially and adversely affect results of operations. Regulatory and Compliance Risks The Company is subject to extensive government regulation and supervision.
In addition, the Company’s credit risk may be exacerbated when the collateral held cannot be realized or is liquidated at prices not sufficient to recover the full amount of the exposure due to the Company. Any such losses could materially and adversely affect results of operations.
Such changes could subject the Company to additional costs, limit the types of financial services and products it may offer, and/or increase the ability of non-banks to offer competing financial services and products, among other things.
Such changes could subject the Company to additional costs, limit the types of financial services and products it may offer, restrict the Company's ability to pay dividends, subject the Company to higher capital requirements, and/or increase the ability of non-banks to offer competing financial services and products, among other things.
Assets and liabilities carried at fair value inherently result in greater financial statement volatility. Fair values and the information used to record valuation adjustments for certain assets and liabilities are based on quoted market prices and/or other observable inputs provided by independent third-party sources, when available.
Fair values and the information used to record valuation adjustments for certain assets and liabilities are based on quoted market prices and/or other observable inputs provided by independent third-party sources, when available.
It receives substantially all of its revenue from dividends from its subsidiary bank. These dividends, which are limited by various federal and state regulations, are the principal source of funds to pay dividends on its common stock and to meet its other cash needs.
Commerce Bancshares, Inc. is a separate and distinct legal entity from its banking and other subsidiaries. It receives substantially all of its revenue from dividends from its subsidiary bank. These dividends, which are limited by various federal and state regulations, are the principal source of funds to pay dividends on its common stock and to meet its other cash needs.
Congress and federal regulatory agencies continually review banking laws, regulations, and policies for possible changes. Changes to statutes, regulations, or regulatory policies, including changes in interpretation or implementation of statutes, regulations, or policies, could affect the Company in substantial and unpredictable ways.
These regulations affect the Company’s lending practices, capital structure, investment practices, dividend policy, and growth, among other things. Congress and federal regulatory agencies continually review banking laws, regulations, and policies for possible changes. Changes to statutes, regulations, or regulatory policies, including changes in interpretation or implementation of statutes, regulations, or policies, could affect the Company in substantial and unpredictable ways.
Market Risks Difficult market conditions may affect the Company’s industry. The concentration of the Company’s banking business in the United States particularly exposes it to downturns in the U.S. economy. In particular, the Company may face the following risks in connection with market conditions: • In 2022, the United States economy saw an uneven year.
Market Risks Difficult market conditions may affect the Company’s industry. The concentration of the Company’s banking business in the United States particularly exposes it to downturns in the U.S. economy.
While the Company maintains prudent risk management practices over bonds issued by municipalities and other issuers, credit deterioration in these bonds could occur and result in losses. Certain mortgage and asset-backed securities (which are collateralized by residential mortgages, credit cards, automobiles, mobile homes or other assets) may decline in value due to actual or expected deterioration in the underlying collateral.
Certain mortgage and asset-backed securities (which are collateralized by residential mortgages, credit cards, automobiles, mobile homes or other assets) may decline in value due to actual or expected deterioration in the underlying collateral.
Changes in monetary policy, including changes in interest rates, will influence loan originations, deposit generation, demand for investments and revenues and costs for earning assets and liabilities, and could significantly impact the Company’s net interest income.
Changes in monetary policy, including changes in interest rates, will influence loan originations, deposit generation, demand for investments and revenues and costs for earning assets and liabilities, and could significantly impact the Company’s net interest income. As the economy rebounded from the COVID-19 pandemic-induced recession, high inflation experienced in 2022 continued into 2023.
As part of the financial services industry, the Company is subject to extensive federal and state regulation and supervision. Banking regulations are primarily intended to protect depositors’ funds, federal deposit insurance funds, and the banking system, not shareholders. These regulations affect the Company’s lending practices, capital structure, investment practices, dividend policy, and growth, among other things.
Regulatory and Compliance Risks The Company is subject to extensive government regulation and supervision. As part of the financial services industry, the Company is subject to extensive federal and state regulation and supervision. Banking regulations are primarily intended to protect depositors’ funds, federal deposit insurance funds, and the banking system, not shareholders.
These could impact the Company’s future provision for credit losses, as a significant part of the Company’s business includes consumer and credit card lending. • In addition to the results above, a slowdown in economic activity may cause declines in financial services activity, including declines in bank card, corporate cash management and other fee businesses, as well as the fees earned by the Company on such transactions. • The process used to estimate credit losses in the Company’s loan portfolio requires difficult, subjective, and complex judgments, including consideration of economic conditions and how these economic predictions might impair the ability of its borrowers to repay their loans.
These could impact the Company’s future provision for credit losses, as a significant part of the Company’s business includes consumer and credit card lending. • In addition to the results above, a slowdown in economic activity may cause declines in financial services activity, including declines in bank card, corporate cash management and other fee businesses, as well as the fees earned by the Company on such transactions. • While the COVID-19 pandemic appears to be over, the impact on businesses is still uncertain.
Additionally, the current expected credit loss model (CECL) implemented by the Company on January 1, 2020, requires that lifetime expected credit losses on securities be recorded in current earnings. This could result in significant losses. 12 Table of Conte nts Strategic Risk New lines of business or new products and services may subject the Company to additional risk.
Additionally, the current expected credit loss model (CECL) implemented by the Company on January 1, 2020, requires that lifetime expected credit losses on securities be recorded in current earnings. This could result in significant losses.
Changes in Federal Reserve Board policies are beyond the Company’s control and difficult to predict, and such changes may result in lower interest margins and a lack of demand for credit products. Liquidity and Capital Risks The Company is subject to both interest rate and liquidity risk.
Changes in Federal Reserve Board policies are beyond the Company’s control and difficult to predict, and such changes may result in lower interest margins and a lack of demand for credit products. Climate-related and other Environmental, Social, and Governance ("ESG") developments could result in additional regulation and reporting for the Company.
Additionally, the volatility of the Company's provision for credit losses may change from year to year due to macroeconomic variables that influence the Company's loss estimates, and the volatility in credit losses may be material to the Company's earnings.
Additionally, the volatility of the Company's provision for credit losses may change from year to year due to macroeconomic variables that influence the Company's loss estimates, and the volatility in credit losses may be material to the Company's earnings. 12 Table of Contents The Company’s investment portfolio values may be adversely impacted by deterioration in the credit quality of underlying collateral within the various categories of investment securities it owns.
The Company regularly upgrades or replaces technological systems to increase efficiency, enhance product and service capabilities, eliminate risks of end-of-lifecycle products, reduce costs, and better serve our customers. During 2022, the Company replaced its core customer and deposit systems and other ancillary systems (collectively referred to as "core system").
The Company regularly upgrades or replaces technological systems to increase efficiency, enhance product and service capabilities, eliminate risks of end-of-lifecycle products, reduce costs, and better serve our customers. As the Company completes system upgrades, it may face operational risks after system conversions, including disruptions to its technology systems, which may adversely impact customers.
Furthermore, if models used to calculate fair value of financial instruments are inadequate or inaccurate due to flaws in their design or execution, upon sale, the Company may not realize the cash flows of a financial instrument as modeled and could incur material, unexpected losses. 11 Table of Conte nts During periods of market disruption, including periods of significantly rising or high interest rates, rapidly widening credit spreads or illiquidity, it may be difficult to value certain assets if trading becomes less frequent and/or market data becomes less observable.
Furthermore, if models used to calculate fair value of financial instruments are inadequate or inaccurate due to flaws in their design or execution, upon sale, the Company may not realize the cash flows of a financial instrument as modeled and could incur material, unexpected losses.
In the event the subsidiary bank is unable to pay dividends, the Company may not be able to pay dividends or other obligations, which would have a material adverse effect on the Company's financial condition and results of operations. Operational Risks The impact of the phase-out of LIBOR is uncertain.
In the event the subsidiary bank is unable to pay dividends, the Company may not be able to pay dividends or other obligations, which would have a material adverse effect on the Company's financial condition and results of operations. 11 Table of Contents Operational Risks The Company’s asset valuation may include methodologies, models, estimations and assumptions which are subject to differing interpretations and could result in changes to asset valuations that may materially adversely affect its results of operations or financial condition.
The Company’s asset valuation may include methodologies, models, estimations and assumptions which are subject to differing interpretations and could result in changes to asset valuations that may materially adversely affect its results of operations or financial condition. The Company uses estimates, assumptions, and judgments when certain financial assets and liabilities are measured and reported at fair value.
The Company uses estimates, assumptions, and judgments when certain financial assets and liabilities are measured and reported at fair value. Assets and liabilities carried at fair value inherently result in greater financial statement volatility.
The pace of inflation slowed late in 2022, but the probability of a looming recession appears to be growing, as many economists are now predicting a recession in 2023. • The U.S. economy is affected by global events and conditions, including U.S. trade disputes and renewed trade agreements with various countries.
Despite these challenges, the U.S. economy was resilient in 2023 with stronger-than-expected results in the fourth quarter, including a robust labor market and a rallying stock market. • The U.S. economy is affected by global events and conditions, including U.S. trade disputes and renewed trade agreements with various countries.
Removed
Consumer spending and corporate profit growth were resilient despite high inflation, rising geopolitical tensions, and supply chain disruptions. The Federal Reserve responded to persistently high inflation by raising its benchmark interest rate in a series of hikes starting in March 2022 and continuing into 2023.
Added
In particular, the Company may face the following risks in connection with market conditions: • In 2023, the United States ("U.S.") economy faced a series of challenges, including high inflation, rising interest rates, and slowing economic growth. Uncertainties about global geopolitical tensions and volatile financial markets raised concerns about the potential for a recession in the U.S.
Removed
While unemployment levels remained low during 2022, an increasing number of companies, especially in the technology sector, announced layoffs toward the end of 2022 and into 2023.
Added
During the pandemic, there was a shift from in-office work to remote work. This shift appears to be permanent for some businesses and partial for others. As a result, businesses are reevaluating their office space needs and, in some cases, reducing their leased office space, selling commercial office buildings, or leasing space no longer needed.
Removed
As the economy rebounded from the COVID-19 pandemic-induced recession, strong inflation in 2022 caused the Federal Reserve Board to significantly increase the benchmark interest rate from nearly zero to between 4.25% and 4.50%. Future economic conditions or other factors could shift monetary policy resulting in additional increases or decreases in the benchmark 10 Table of Conte nts rate.
Added
The impact of this shift is not fully known and could result in reduced demand for office space, lower lease rates for office space, and lower values of office buildings. These factors may contribute to higher delinquencies and net charge-offs for commercial office real estate loans.
Removed
Furthermore, changes in interest rates could result in unanticipated changes to customer deposit balances and adversely affect the Company’s liquidity position. Commerce Bancshares, Inc. relies on dividends from its subsidiary bank for most of its revenue. Commerce Bancshares, Inc. is a separate and distinct legal entity from its banking and other subsidiaries.
Added
Additionally, businesses that cater to or are located near dense areas of office buildings may be adversely impacted, which could result in higher delinquencies and net charge-offs for certain commercial borrowers. • The process used to estimate credit losses in the Company’s loan portfolio requires difficult, subjective, and complex judgments, including consideration of economic conditions and how these economic predictions might impair the ability of its borrowers to repay their loans.
Removed
In 2017, the United Kingdom Financial Conduct Authority, which regulates LIBOR, announced that LIBOR would likely be discontinued at the end of 2021 as panel banks would no longer be required to submit estimates that are used to construct LIBOR. U.S. regulatory authorities voiced similar support for phasing out LIBOR.
Added
During November 2023, the FDIC approved a final rule implementing a one-time special assessment to recover the loss to the DIF associated with protecting uninsured depositors following the closures of Silicon Valley Bank and Signature Bank earlier in 2023. The Company accrued $16.0 million in the fourth quarter of 2023 for the special assessment.
Removed
On March 5, 2021, LIBOR’s regulator and its administrator announced that the publication of certain LIBOR tenors will cease immediately after December 31, 2021 and the remaining LIBOR tenors, including 1-month USD LIBOR, will cease immediately after June 30, 2023.
Added
Assessments driven by regulation, such as these, increased the Company's expenses in 2023 and additional assessments could further increase the Company's expenses.
Removed
The Alternative Rates Reference Committee (the “ARRC”), a group of market participants convened by the Federal Reserve Board and the New York Fed to help ensure a successful transition from LIBOR, identified the Secured Overnight Financing Rate (“SOFR”) as its preferred alternative rate.
Added
In recent years, federal, state and international lawmakers and regulators have increased their focus on financial institutions' and other companies' risk oversight, disclosures and practices in connection with climate change and other ESG matters. For example, in March 2022, the SEC issued a proposed rule on the enhancement and standardization of climate-related disclosures for investors.
Removed
The Company established a LIBOR Transition Program, which is led by the LIBOR Transition Steering Committee (Committee) whose purpose is to guide the overall transition process for the Company. The Committee is an internal, cross-functional team with representatives from all relevant business lines, support functions and legal counsel.
Added
The proposed rule would require public issuers, including the Company, to significantly expand the scope of climate-related disclosures in their SEC filings. The SEC has also announced plans to propose rules to require enhanced disclosure regarding human capital management and board diversity for public issuers. Liquidity and Capital Risks The Company is subject to both interest rate and liquidity risk.
Removed
A LIBOR impact and risk assessment has been performed, and the Company has developed and prioritized action items. All of the Company's financial contracts that reference LIBOR have been identified, and LIBOR fallback language has been included in key loan provisions of new and renewed loans in preparation for the cessation of LIBOR.
Added
In response, the Federal Reserve Board significantly increased the benchmark interest rate from nearly zero at the start of 2022 to between 4.25% and 4.50% at the end of 2022. The Federal Reserve Board continued to raise interest rates at a more modest pace to between 5.25% and 5.50% by the end of July 2023.
Removed
Significant progress has been made in converting loans that reference LIBOR to an alternative reference rate during 2022. Additionally, changes to the Company's systems to utilize alternative reference rates were completed in 2022. The Company has loans, derivative contracts, and other financial instruments with attributes that are either directly or indirectly dependent on LIBOR, mostly 1-month LIBOR.
Added
Elevated rates have created competition for deposits and unrealized losses in fixed rate asset portfolios. Future economic conditions or other factors could shift monetary policy resulting in additional increases or decreases in the benchmark rate. Furthermore, changes in interest rates could result in unanticipated changes to customer deposit balances and adversely affect the Company’s liquidity position.
Removed
As of December 31, 2022, the Company had approximately $1.0 billion of commercial loans, $948 million of derivative contracts (notional value), and $691 million of investment securities that are expected to mature after June 30, 2023. These amounts are expected to decrease as the Company continues to work with customers to replace contracts that use LIBOR with alternative reference rates.
Added
Events impacting the banking industry during the first few months of 2023, including the failure of Silicon Valley Bank in March, resulted in decreased confidence in regional banks among deposit customers, investors, and other counterparties. Additionally, these events caused significant disruption, volatility and reduced valuations of equity and other securities of banks in the capital markets.
Removed
The Company ceased entering any new loan contracts that use USD LIBOR as a reference rate in December 2021. The Company may be adversely affected if the interest rates currently tied to LIBOR on the Company's loans, derivatives, and other financial instruments are not able to be transitioned to an alternative rate.
Added
These events occurred during a period of rapidly rising interest rates, which, among other things, resulted in unrealized losses in the Company's available for sale debt securities portfolio and increased competition for bank deposits. These events had, and could again have, adverse impacts on the market price and volatility of the Company’s stock.
Removed
Furthermore, the Company may be faced with disputes or litigation with customers regarding interpretation and enforcement of fallback language used in loan agreements as the transition to a new benchmark rate continues to evolve.
Added
These events could also lead to increases in the Company’s interest expense, as it has raised and may continue to raise interest rates paid to depositors in order to compete with other banks, and in an effort to replace deposits, seek borrowings which carry higher interest rates.
Removed
While the conversion was completed successfully, the Company may face operational risks after the conversion, including disruptions to its technology systems, which may adversely impact customers.
Added
Bank failures during 2023 caused concern and uncertainty regarding the liquidity adequacy of the banking sector as a whole and resulted in some regional bank customers choosing to maintain deposits with larger financial institutions. A significant reduction in the Company’s deposits could materially and adversely impact the Company’s liquidity, ability to fund loans, and results of operations.
Removed
Companies throughout the U.S. saw significant turnover during 2021 and into 2022, and the number of candidates in the job market was generally much lower than the demand for talent.
Added
In addition to customer deposits, the Company borrows on an overnight and short-term basis from third parties in the form of federal funds purchased and repurchase agreements and through lines of credit and borrowings from the FHLB and FRB.
Added
If the Company were not able to access borrowings through those facilities due to an increase in demand from other banks or due to insufficient levels of pledgeable assets, its ability to borrow funds may be materially adversely impacted. Commerce Bancshares, Inc. relies on dividends from its subsidiary bank for most of its revenue.
Added
During periods of market disruption, including periods of significantly rising or high interest rates, rapidly widening credit spreads or illiquidity, it may be difficult to value certain assets if trading becomes less frequent and/or market data becomes less observable.
Added
The Company maintains a portfolio of investments, which includes available for sale debt securities, trading securities, equity securities, and other investments. Throughout 2023 and at December 31, 2023, the Company did not hold any investments classified as held-to-maturity.
Added
The Company could recognize losses on securities held in its securities portfolio, particularly if it were to sell a significant portion of its investments prior to maturity. The Company's available for sale debt securities portfolio is carried at fair value, with unrealized gains and losses carried in accumulated other comprehensive income (loss) within shareholder's equity.
Added
The fair value of investments, including available for sale debt investments, may change with changes in interest rates, credit concerns, or other economic factors. Due to the rapid rise of interest rates during 2022 and 2023, the fair value of the Company's available of sale debt securities included a net unrealized loss of $1.2 billion at December 31, 2023.
Added
As of December 31, 2023, the Company has the intent and ability to maintain its available for sale debt investments until recovery of their amortized cost basis.
Added
However, if in the future the Company were to elect to sell or needed to sell the investments before the recovery of their amortized cost basis, the Company could realize significant losses in its income statement. Strategic Risk New lines of business or new products and services may subject the Company to additional risk.
Item 2. Properties
Properties — owned and leased real estate
1 edited+1 added−0 removed1 unchanged
Item 2. Properties
Properties — owned and leased real estate
1 edited+1 added−0 removed1 unchanged
2022 filing
2023 filing
Biggest changeThe larger office buildings include: Building Net rentable square footage % occupied in total % occupied by Bank 1000 Walnut Kansas City, MO 391,000 95 % 53 % 922 Walnut Kansas City, MO 256,000 95 91 811 Main Kansas City, MO 237,000 100 100 8000 Forsyth Clayton, MO 178,000 100 100 The Company has an additional 148 branch locations in Missouri, Illinois, Kansas, Oklahoma and Colorado which are owned or leased.
Biggest changeThe larger office buildings include: Building Net rentable square footage % occupied in total % occupied by Bank 1000 Walnut Kansas City, MO 391,000 95 % 53 % 922 Walnut Kansas City, MO 256,000 95 91 811 Main Kansas City, MO 237,000 100 100 8001 Forsyth Clayton, MO 274,000 70 19 8000 Forsyth Clayton, MO 178,000 100 100 The Company has an additional 141 branch locations in Missouri, Illinois, Kansas, Oklahoma and Colorado which are owned or leased.
Added
Item 3. LEGAL PROCEEDINGS The information required by this item is set forth in Item 8 under Note 21, Commitments, Contingencies and Guarantees on page 137.
Item 4. Mine Safety Disclosures
Mine Safety Disclosures — required of mining issuers
15 edited+0 added−0 removed1 unchanged
Item 4. Mine Safety Disclosures
Mine Safety Disclosures — required of mining issuers
15 edited+0 added−0 removed1 unchanged
2022 filing
2023 filing
Biggest changeRoller, 52 Senior Vice President of the Company since July 2016 and Senior Vice President of Commerce Bank since September 2010. Paul A. Steiner, 51 Controller of the Company since April 2019. He is also Controller of the Company's subsidiary bank, Commerce Bank.
Biggest changeRoller, 53 Senior Vice President of the Company since July 2016 and Senior Vice President of Commerce Bank since September 2010. Paul A. Steiner, 52 Controller and Chief Accounting Officer of the Company since April 2019. He is also Controller of the Company's subsidiary bank, Commerce Bank.
Item 4. MINE SAFETY DISCLOSURES Not applicable Information about the Company's Executive Officers The following are the executive officers of the Company as of February 22, 2023, each of whom is designated annually. There are no arrangements or understandings between any of the persons so named and any other person pursuant to which such person was designated an executive officer.
Item 4. MINE SAFETY DISCLOSURES Not applicable Information about the Company's Executive Officers The following are the executive officers of the Company as of February 22, 2024, each of whom is designated annually. There are no arrangements or understandings between any of the persons so named and any other person pursuant to which such person was designated an executive officer.
Prior to his employment with Commerce Bank in February 2017, he was employed at a healthcare tech services company where he served as a senior vice president of revenue cycle and financial services. Robert S. Holmes, 59 Executive Vice President of the Company since April 2015, and Community President and Chief Executive Officer of Commerce Bank since January 2016.
Prior to his employment with Commerce Bank in February 2017, he was employed at a healthcare tech services company where he served as a senior vice president of revenue cycle and financial services. Robert S. Holmes, 60 Executive Vice President of the Company since April 2015, and Community President and Chief Executive Officer of Commerce Bank since January 2016.
Prior to his employment with Commerce Bank in March 2015, he was employed at a Midwest regional bank where he served as managing director and head of Regional Banking. Kim L. Jakovich, 53 Senior Vice President of the Company since April 2022, and Officer of the Company prior thereto.
Prior to his employment with Commerce Bank in March 2015, he was employed at a Midwest regional bank where he served as managing director and head of Regional Banking. Kim L. Jakovich, 54 Senior Vice President of the Company since April 2022, and Officer of the Company prior thereto.
Name and Age Positions with Registrant Kevin G. Barth, 62 Executive Vice President of the Company since April 2005, and Community President and Chief Executive Officer of Commerce Bank since October 1998. Senior Vice President of the Company and Officer of Commerce Bank prior thereto. Derrick R.
Name and Age Positions with Registrant Kevin G. Barth, 63 Executive Vice President of the Company since April 2005, and Community President and Chief Executive Officer of Commerce Bank since October 1998. Senior Vice President of the Company and Officer of Commerce Bank prior thereto. Derrick R.
He was Secretary, General Counsel and Vice President of the Company prior to October 2018. Executive Vice President of Commerce Bank since September 2021. Prior thereto, he was Secretary, General Counsel and Vice President of Commerce Bank. David L. Orf, 56 Executive Vice President of the Company since October 2020 and Chief Credit Officer of the Company since January 2021.
He was Secretary, General Counsel and Vice President of the Company prior to October 2018. Executive Vice President of Commerce Bank since September 2021. Prior thereto, he was Secretary, General Counsel and Vice President of Commerce Bank. David L. Orf, 57 Executive Vice President of the Company since October 2020 and Chief Credit Officer of the Company since January 2021.
Kemper, 72 Executive Chairman of the Company and of the Board of Directors of the Company since August 2018. Prior thereto, he was Chief Executive Officer of the Company and Chairman of the Board of Directors of the Company. He was President of the Company from April 1982 until February 2013. He is the brother of Jonathan M.
Kemper, 73 Executive Chairman of the Company and of the Board of Directors of the Company since August 2018. Prior thereto, he was Chief Executive Officer of the Company and Chairman of the Board of Directors of the Company. He was President of the Company from April 1982 until February 2013. He is the brother of Jonathan M.
Kim, 62 Chief Financial Officer of the Company since July 2009. Executive Vice President of the Company since April 1995 and Executive Vice President of Commerce Bank since January 2004. Prior thereto, he was Senior Vice President of Commerce Bank. Douglas D.
Kim, 63 Chief Financial Officer of the Company since July 2009. Executive Vice President of the Company since April 1995 and Executive Vice President of Commerce Bank since January 2004. Prior thereto, he was Senior Vice President of Commerce Bank. Douglas D.
Kemper (a former Vice Chairman of the Company), and father of John W. Kemper, President and Chief Executive Officer of the Company. John W. Kemper, 45 Chief Executive Officer of the Company and Chairman and Chief Executive Officer of Commerce Bank since August 2018. Prior thereto, he was Chief Operating Officer of the Company.
Kemper (a former Vice Chairman of the Company), and father of John W. Kemper, President and Chief Executive Officer of the Company. John W. Kemper, 46 Chief Executive Officer of the Company and Chairman and Chief Executive Officer of Commerce Bank since August 2018. Prior thereto, he was Chief Operating Officer of the Company.
Community President and Chief Executive Officer of Commerce Bank since January 2018 and Senior Vice President of Commerce Bank prior thereto. Richard W. Heise, 54 Senior Vice President of the Company since April 2022 and Executive Vice President of Commerce Bank since July 2021.
Community President and Chief Executive Officer of Commerce Bank since January 2018 and Senior Vice President of Commerce Bank prior thereto. Richard W. Heise, 55 Senior Vice President of the Company since April 2022 and Executive Vice President of Commerce Bank since July 2021.
Executive Vice President of Commerce Bank since January 2014 and Senior Vice President of Commerce Bank prior thereto. Paula S. Petersen, 56 Executive Vice President of the Company since January 2022 and Senior Vice President of the Company prior thereto. Executive Vice President of Commerce Bank since March 2012. David L.
Executive Vice President of Commerce Bank since January 2014 and Senior Vice President of Commerce Bank prior thereto. Paula S. Petersen, 57 Executive Vice President of the Company since January 2022 and Senior Vice President of the Company prior thereto. Executive Vice President of Commerce Bank since March 2012. David L.
Neff, 54 Senior Vice President of the Company since January 2019 and Chairman and Chief Executive Officer of Commerce Bank Southwest Region since 2013. Thomas J. Noack, 67 Senior Vice President of the Company since October 2018 and was also Secretary and General Counsel of the Company from October 2018 to March 2022.
Neff, 55 Senior Vice President of the Company since January 2019 and Chairman and Chief Executive Officer of Commerce Bank Southwest Region since 2013. Thomas J. Noack, 68 Senior Vice President of the Company since October 2018 and was also Secretary and General Counsel of the Company from October 2018 to March 2022.
Brooks, 46 Senior Vice President of the Company and Executive Vice President of Commerce Bank since January 2021. Senior Vice President of Commerce Bank prior thereto. John K. Handy, 59 Executive Vice President of the Company since January 2018 and Senior Vice President of the Company prior thereto.
Brooks, 47 Senior Vice President of the Company and Executive Vice President of Commerce Bank since January 2021. Senior Vice President of Commerce Bank prior thereto. John K. Handy, 60 Executive Vice President of the Company since January 2018 and Senior Vice President of the Company prior thereto.
Senior Vice President of Commerce Bank since July 2015. 15 Table of Conte nts Name and Age Positions with Registrant Patricia R. Kellerhals, 65 Senior Vice President of the Company since February 2016 and Vice President of the Company prior thereto. Executive Vice President of Commerce Bank since 2005. David W.
Senior Vice President of Commerce Bank since July 2015. 18 Table of Contents Name and Age Positions with Registrant Patricia R. Kellerhals, 66 Senior Vice President of the Company since February 2016 and Vice President of the Company prior thereto. Executive Vice President of Commerce Bank since 2005. David W.
Assistant Controller and Director of Tax of the Company prior thereto. 16 Table of Conte nts PART II
Assistant Controller and Director of Tax of the Company prior thereto. 19 Table of Contents PART II
Item 5. Market for Registrant's Common Equity
Market for Common Equity — stock, dividends, buybacks
6 edited+1 added−3 removed0 unchanged
Item 5. Market for Registrant's Common Equity
Market for Common Equity — stock, dividends, buybacks
6 edited+1 added−3 removed0 unchanged
2022 filing
2023 filing
Biggest changePeriod Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Program Maximum Number that May Yet Be Purchased Under the Program October 1 - 31 2022 1,491 $71.23 1,491 3,442,745 November 1 - 30 2022 189,860 $72.27 189,860 3,252,885 December 1 - 31 2022 140,827 $67.28 140,827 3,112,058 Total 332,178 $70.15 332,178 3,112,058 The Company’s stock purchases shown above were made under authorizations by the Board of Directors.
Biggest changePeriod Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Program Maximum Number that May Yet Be Purchased Under the Program October 1 - 31 2023 58,835 $44.18 58,835 2,111,333 November 1 - 30 2023 224,014 $48.05 224,014 1,887,319 December 1 - 31 2023 130,072 $52.32 130,072 1,757,247 Total 412,921 $48.84 412,921 1,757,247 The Company’s stock purchases shown above were made under authorizations by the Board of Directors.
Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Commerce Bancshares, Inc. Common Stock Data Commerce Bancshares, Inc. common shares are listed on the Nasdaq Global Select Market (NASDAQ) under the symbol CBSH. The Company had 3,421 common shareholders of record as of December 31, 2022.
Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Commerce Bancshares, Inc. Common Stock Data Commerce Bancshares, Inc. common shares are listed on the Nasdaq Global Select Market (NASDAQ) under the symbol CBSH. The Company had 3,373 common shareholders of record as of December 31, 2023.
Certain of the Company's shares are held in "nominee" or "street" name and the number of beneficial owners of such shares is approximately 148,500. Performance Graph The following graph presents a comparison of Company (CBSH) performance to the indices named below.
Certain of the Company's shares are held in "nominee" or "street" name and the number of beneficial owners of such shares is approximately 150,000. Performance Graph The following graph presents a comparison of Company (CBSH) performance to the indices named below.
However, 17 Table of Conte nts payment of future dividends is within the discretion of the Board of Directors and will depend, among other factors, on earnings, capital requirements, and the operating and financial condition of the Company. The Board of Directors makes the dividend determination quarterly.
However, payment of future dividends is within the discretion of the Board of Directors and will depend, among other factors, on earnings, capital requirements, and the operating and financial condition of the Company.
The following table sets forth information about the Company’s purchases of its $5 par value common stock, its only class of common stock registered pursuant to Section 12 of the Exchange Act, during the fourth quarter of 2022.
The Board of Directors makes the dividend determination quarterly. 20 Table of Contents The following table sets forth information about the Company’s purchases of its $5 par value common stock, its only class of common stock registered pursuant to Section 12 of the Exchange Act, during the fourth quarter of 2023.
Under the most recent authorization in April 2022 of 5,000,000 shares, 3,112,058 shares remained available for purchase at December 31, 2022. Item 6. RESERVED 18 Table of Conte nts
Under the most recent authorization in April 2022 of 5,000,000 shares, 1,757,247 shares remained available for purchase at December 31, 2023. Item 6. RESERVED 21 Table of Contents
Removed
It assumes $100 invested on December 31, 2017 with dividends reinvested on a cumulative total shareholder return basis. 2017 2018 2019 2020 2021 2022 Commerce (CBSH) $ 100.00 $ 107.56 $ 138.44 $ 143.26 $ 159.78 $ 168.73 KBW NASDAQ Regional Banking 100.00 82.51 102.20 93.35 127.57 118.73 NASDAQ OMX Global-Bank 100.00 83.60 114.68 100.00 137.32 113.60 S&P 500 100.00 95.61 125.70 148.74 191.40 156.70 In the preceding year, the Company selected the NASDAQ OMX Global-Bank Index with which to compare its performance.
Added
It assumes $100 invested on December 31, 2018 with dividends reinvested on a cumulative total shareholder return basis. 2018 2019 2020 2021 2022 2023 Commerce (CBSH) $ 100.00 $ 128.71 $ 133.19 $ 148.55 $ 156.88 $ 131.93 KBW NASDAQ Regional Banking 100.00 123.87 113.14 154.61 143.91 143.34 S&P 500 100.00 131.47 155.58 200.19 163.91 206.95 The Company has a long history of paying dividends. 2023 marked the 55th consecutive year of growth in our regular common dividend, and the Company has also issued an annual 5% common stock dividend for the past 30 years.
Removed
The Company is replacing this index with the KBW NASDAQ Regional Banking Index as it believes the index to be more representative of companies similar in size and market capitalization to the Company. In addition, the Company is a member of the KBW NASDAQ Regional Banking Index.
Removed
The Company has a long history of paying dividends. 2022 marked the 54th consecutive year of growth in our regular common dividend, and the Company has also issued an annual 5% common stock dividend for the past 29 years.
Item 7. Management's Discussion & Analysis
Management's Discussion & Analysis (MD&A) — revenue / margin commentary
278 edited+48 added−74 removed149 unchanged
Item 7. Management's Discussion & Analysis
Management's Discussion & Analysis (MD&A) — revenue / margin commentary
278 edited+48 added−74 removed149 unchanged
2022 filing
2023 filing
Biggest change(C) Interest expense of $1,370,000, $29,000 and $14,000, which was capitalized on construction projects in 2022, 2021, and 2020, respectively, is not deducted from the interest expense shown above. 61 Table of Conte nts QUARTERLY AVERAGE BALANCE SHEETS — AVERAGE RATES AND YIELDS Year ended December 31, 2022 Fourth Quarter Third Quarter Second Quarter First Quarter (Dollars in millions) Average Balance Average Rates Earned/Paid Average Balance Average Rates Earned/Paid Average Balance Average Rates Earned/Paid Average Balance Average Rates Earned/Paid ASSETS Loans: Business (A) $ 5,478 4.68 % $ 5,318 3.94 % $ 5,384 3.16 % $ 5,324 2.93 % Real estate – construction and land 1,269 6.80 1,289 5.27 1,225 4.09 1,135 3.76 Real estate – business 3,301 5.15 3,258 4.40 3,164 3.70 3,095 3.38 Real estate – personal 2,887 3.45 2,844 3.36 2,826 3.27 2,809 3.28 Consumer 2,090 4.77 2,102 4.17 2,071 3.62 2,040 3.59 Revolving home equity 294 5.89 281 4.82 272 3.69 274 3.48 Consumer credit card 559 12.64 550 12.05 538 11.32 541 11.35 Overdrafts 7 — 4 — 6 — 5 — Total loans 15,885 5.03 15,646 4.37 15,486 3.72 15,223 3.54 Loans held for sale 7 10.09 7 8.80 8 8.14 9 6.48 Investment securities: U.S. government & federal agency obligations 1,056 2.01 1,113 4.51 1,119 4.93 1,104 3.42 Government-sponsored enterprise obligations 56 2.36 56 2.36 56 2.39 52 2.33 State & municipal obligations (A) 1,991 2.29 2,053 2.27 2,126 2.30 2,078 2.29 Mortgage-backed securities 6,606 1.88 6,848 1.93 7,158 1.99 7,317 1.98 Asset-backed securities 3,714 1.96 3,871 1.62 4,038 1.35 3,934 1.13 Other debt securities 561 1.89 587 1.93 643 1.97 636 2.00 Trading debt securities (A) 44 3.81 36 2.74 44 2.46 41 1.84 Equity securities (A) 10 28.44 9 27.11 9 26.90 9 26.00 Other securities (A) 219 6.67 209 7.09 195 22.38 192 5.91 Total investment securities 14,257 2.07 14,782 2.18 15,388 2.36 15,363 1.97 Federal funds sold 28 4.27 13 2.77 4 1.79 1 .39 Securities purchased under agreements to resell 1,174 2.36 1,379 1.72 1,704 1.03 1,734 1.24 Interest earning deposits with banks 640 3.69 980 2.25 1,249 .78 2,608 .18 Total interest earning assets 31,991 3.59 32,807 3.21 33,839 2.86 34,938 2.49 Allowance for credit losses on loans (143) (138) (135) (150) Unrealized loss on debt securities (1,582) (1,065) (851) (174) Cash and due from banks 327 311 315 340 Premises and equipment – net 419 409 402 407 Other assets 593 538 522 557 Total assets $ 31,605 $ 32,862 $ 34,092 $ 35,918 LIABILITIES AND EQUITY Interest bearing deposits: Savings $ 1,567 .06 $ 1,596 .04 $ 1,610 .04 $ 1,563 .05 Interest checking and money market 13,694 .38 14,424 .20 14,846 .06 14,950 .04 Certificates of deposit under $100,000 388 .73 397 .41 412 .20 430 .13 Certificates of deposit $100,000 & over 597 1.42 578 .60 649 .29 862 .20 Total interest bearing deposits 16,246 .40 16,995 .21 17,517 .07 17,805 .05 Borrowings: Federal funds purchased 144 3.56 52 2.41 113 .79 23 .12 Securities sold under agreements to repurchase 2,260 2.29 2,200 1.37 2,258 .48 2,713 .10 Other borrowings 179 4.02 2 1.78 2 2.37 1 .53 Total borrowings 2,583 2.48 2,254 1.39 2,373 .50 2,737 .10 Total interest bearing liabilities 18,829 .69 % 19,249 .34 % 19,890 .12 % 20,542 .06 % Non-interest bearing deposits 10,361 10,758 11,210 11,545 Other liabilities 29 124 140 505 Equity 2,386 2,731 2,852 3,326 Total liabilities and equity $ 31,605 $ 32,862 $ 34,092 $ 35,918 Net interest margin (FTE) $ 257 $ 249 $ 235 $ 211 Net yield on interest earning assets 3.18 % 3.01 % 2.79 % 2.45 % (A) Stated on a fully taxable-equivalent basis using a federal income tax rate of 21%. 62 Table of Conte nts — AVERAGE RATES AND YIELDS Year ended December 31, 2021 Fourth Quarter Third Quarter Second Quarter First Quarter (Dollars in millions) Average Balance Average Rates Earned/Paid Average Balance Average Rates Earned/Paid Average Balance Average Rates Earned/Paid Average Balance Average Rates Earned/Paid ASSETS Loans: Business (A) $ 5,193 3.16 % $ 5,437 3.43 % $ 6,212 3.15 % $ 6,533 3.09 % Real estate – construction and land 1,228 3.61 1,169 3.51 1,088 3.56 1,092 3.54 Real estate – business 3,003 3.41 2,983 3.46 3,015 3.49 3,023 3.52 Real estate – personal 2,785 3.21 2,776 3.27 2,804 3.31 2,826 3.40 Consumer 2,044 3.65 2,041 3.71 2,005 3.84 1,947 4.02 Revolving home equity 276 3.47 282 3.46 287 3.43 299 3.38 Consumer credit card 559 11.06 566 11.29 576 11.22 609 10.97 Overdrafts 5 — 5 — 4 — 4 — Total loans 15,093 3.62 15,259 3.74 15,991 3.65 16,333 3.66 Loans held for sale 11 5.10 16 4.63 23 4.20 36 3.44 Investment securities: U.S. government & federal agency obligations 1,009 3.11 728 5.74 720 5.52 725 2.54 Government-sponsored enterprise obligations 51 2.30 51 2.30 51 2.33 51 2.36 State & municipal obligations (A) 2,096 2.26 2,040 2.35 1,967 2.41 1,959 2.46 Mortgage-backed securities 7,141 1.40 7,115 1.53 6,685 1.11 6,999 1.39 Asset-backed securities 3,515 1.03 3,028 1.08 2,654 1.25 2,086 1.39 Other debt securities 630 2.07 609 2.04 606 2.06 570 2.15 Trading debt securities (A) 46 1.54 32 1.01 35 1.19 32 1.08 Equity securities (A) 9 27.64 9 23.92 5 43.10 4 49.56 Other securities (A) 190 18.39 183 7.46 157 11.90 154 5.26 Total investment securities 14,687 1.82 13,795 1.89 12,880 1.78 12,580 1.72 Federal funds sold 1 .70 1 .50 1 .60 — — Securities purchased under agreements to resell 1,670 1.62 1,633 2.19 937 4.46 850 5.31 Interest earning deposits with banks 2,857 .15 2,603 .15 2,725 .11 1,480 .10 Total interest earning assets 34,319 2.47 33,307 2.62 32,557 2.64 31,279 2.76 Allowance for credit losses on loans (162) (172) (201) (221) Unrealized gain on debt securities 86 230 197 284 Cash and due from banks 345 329 329 355 Premises and equipment – net 420 409 404 401 Other assets 522 523 526 552 Total assets $ 35,530 $ 34,626 $ 33,812 $ 32,650 LIABILITIES AND EQUITY Interest bearing deposits: Savings $ 1,507 .08 $ 1,485 .08 $ 1,474 .08 $ 1,333 .08 Interest checking and money market 13,875 .04 13,343 .05 13,284 .05 12,971 .06 Certificates of deposit under $100,000 442 .14 464 .18 491 .27 517 .37 Certificates of deposit $100,000 & over 1,105 .14 1,290 .14 1,355 .20 1,230 .35 Total interest bearing deposits 16,929 .05 16,582 .06 16,604 .07 16,051 .09 Borrowings: Federal funds purchased 21 .11 14 .10 23 .05 37 .05 Securities sold under agreements to repurchase 2,620 .08 2,347 .08 2,143 .06 2,129 .06 Other borrowings 1 — — 1.14 1 .82 1 .98 Total borrowings 2,642 .08 2,361 .08 2,167 .06 2,167 .06 Total interest bearing liabilities 19,571 .06 % 18,943 .06 % 18,771 .07 % 18,218 .09 % Non-interest bearing deposits 11,919 11,475 11,109 10,439 Other liabilities 562 668 527 608 Equity 3,478 3,540 3,405 3,385 Total liabilities and equity $ 35,530 $ 34,626 $ 33,812 $ 32,650 Net interest margin (FTE) $ 210 $ 217 $ 211 $ 209 Net yield on interest earning assets 2.43 % 2.58 % 2.60 % 2.71 % (A) Stated on a fully taxable-equivalent basis using a federal income tax rate of 21%. 63 Table of Conte nts SUMMARY OF QUARTERLY STATEMENTS OF INCOME Year ended December 31, 2022 For the Quarter Ended (In thousands, except per share data) 12/31/2022 9/30/2022 6/30/2022 3/31/2022 Interest income $ 286,377 $ 262,666 $ 238,154 $ 211,782 Interest expense (31,736) (16,293) (5,769) (2,996) Net interest income 254,641 246,373 232,385 208,786 Non-interest income 136,825 138,514 139,427 131,769 Investment securities gains, net 8,904 3,410 1,029 7,163 Salaries and employee benefits (138,458) (137,393) (142,243) (135,953) Other expense (78,282) (75,491) (71,262) (69,695) Provision for credit losses (15,477) (15,290) (7,162) 9,858 Income before income taxes 168,153 160,123 152,174 151,928 Income taxes (34,499) (33,936) (32,021) (31,902) Non-controlling interest (2,026) (3,364) (4,359) (1,872) Net income attributable to Commerce Bancshares, Inc. $ 131,628 $ 122,823 $ 115,794 $ 118,154 Net income per common share — basic* $ 1.05 $ .97 $ .92 $ .92 Net income per common share — diluted* $ 1.04 $ .97 $ .92 $ .92 Weighted average shares — basic* 124,311 124,840 125,987 126,341 Weighted average shares — diluted* 124,589 125,117 125,916 126,647 Year ended December 31, 2021 For the Quarter Ended (In thousands, except per share data) 12/31/2021 9/30/2021 6/30/2021 3/31/2021 Interest income $ 210,479 $ 216,981 $ 211,133 $ 209,697 Interest expense (2,822) (2,944) (3,151) (3,949) Net interest income 207,657 214,037 207,982 205,748 Non-interest income 147,699 137,506 139,143 136,045 Investment securities gains (losses), net (9,706) 13,108 16,804 9,853 Salaries and employee benefits (132,640) (132,824) (130,751) (129,033) Other expense (70,942) (78,796) (67,375) (63,540) Provision for credit losses 7,054 7,385 45,655 6,232 Income before income taxes 149,122 160,416 211,458 165,305 Income taxes (33,764) (34,662) (45,209) (32,076) Non-controlling interest (452) (3,193) (3,923) (2,257) Net income attributable to Commerce Bancshares, Inc. $ 114,906 $ 122,561 $ 162,326 $ 130,972 Net income per common share — basic* $ .90 $ .95 $ 1.26 $ 1.01 Net income per common share — diluted* $ .90 $ .95 $ 1.25 $ 1.01 Weighted average shares — basic* 127,012 127,709 128,070 128,176 Weighted average shares — diluted* 127,283 127,975 128,387 128,522 Year ended December 31, 2020 For the Quarter Ended (In thousands, except per share data) 12/31/2020 9/30/2020 6/30/2020 3/31/2020 Interest income $ 214,726 $ 223,114 $ 213,323 $ 221,485 Interest expense (4,963) (7,152) (10,266) (20,420) Net interest income 209,763 215,962 203,057 201,065 Non-interest income 135,117 129,572 117,515 123,663 Investment securities gains (losses), net 12,307 16,155 (4,129) (13,301) Salaries and employee benefits (129,983) (127,308) (126,759) (128,937) Other expense (66,327) (63,550) (60,753) (64,761) Provision for credit losses 4,403 (3,101) (80,539) (57,953) Income before income taxes 165,280 167,730 48,392 59,776 Income taxes (33,084) (34,375) (9,661) (10,173) Non-controlling interest (2,307) (907) 1,132 2,254 Net income attributable to Commerce Bancshares, Inc. $ 129,889 $ 132,448 $ 39,863 $ 51,857 Net income per common share — basic* $ 1.00 $ .97 $ .29 $ .38 Net income per common share — diluted* $ 1.00 $ .97 $ .29 $ .38 Weighted average shares — basic* 128,185 128,173 128,157 128,633 Weighted average shares — diluted* 128,450 128,380 128,377 128,932 * Restated for the 5% stock dividend distributed in 2022. 64 Table of Conte nts Item 7a.
Biggest change(C) Interest expense of $903,000, $1,370,000, $29,000 and $14,000, which was capitalized on construction projects in 2023, 2022, 2021, and 2020, respectively,is not deducted from the interest expense shown above. 61 Table of Contents QUARTERLY AVERAGE BALANCE SHEETS — AVERAGE RATES AND YIELDS Year ended December 31, 2023 Fourth Quarter Third Quarter Second Quarter First Quarter (Dollars in millions) Average Balance Average Rates Earned/Paid Average Balance Average Rates Earned/Paid Average Balance Average Rates Earned/Paid Average Balance Average Rates Earned/Paid ASSETS Loans: Business (A) $ 5,861 5.91 % $ 5,849 5.77 % $ 5,756 5.58 % $ 5,657 5.31 % Real estate – construction and land 1,524 8.34 1,509 8.17 1,450 7.92 1,411 7.33 Real estate – business 3,645 6.18 3,642 6.13 3,541 5.96 3,478 5.65 Real estate – personal 3,028 3.85 2,993 3.73 2,961 3.68 2,934 3.61 Consumer 2,117 6.21 2,102 5.97 2,099 5.63 2,067 5.31 Revolving home equity 310 7.70 304 7.76 301 7.55 297 7.03 Consumer credit card 568 13.83 564 13.77 556 13.77 556 13.68 Overdrafts 5 — 5 — 5 — 4 — Total loans 17,058 6.15 16,968 6.02 16,669 5.84 16,404 5.56 Loans held for sale 5 9.93 6 10.55 6 10.17 6 10.30 Investment securities: U.S. government & federal agency obligations 889 2.32 986 2.31 1,036 3.42 1,099 1.90 Government-sponsored enterprise obligations 56 2.36 56 2.36 56 2.38 87 3.21 State & municipal obligations (A) 1,364 1.94 1,392 1.95 1,533 2.04 1,794 2.26 Mortgage-backed securities 6,024 2.05 6,161 2.06 6,316 2.09 6,454 2.06 Asset-backed securities 2,325 2.30 2,554 2.20 2,828 2.08 3,234 2.01 Other debt securities 511 1.85 515 1.75 520 1.86 529 1.93 Trading debt securities (A) 37 5.05 35 5.11 46 4.53 46 4.59 Equity securities (A) 12 27.47 12 23.06 12 23.25 12 23.24 Other securities (A) 222 8.60 237 13.13 274 9.40 230 7.11 Total investment securities 11,440 2.27 11,948 2.33 12,621 2.37 13,485 2.18 Federal funds sold 1 6.65 3 6.56 7 5.63 39 5.09 Securities purchased under agreements to resell 450 1.64 712 2.08 825 1.99 825 1.94 Interest earning deposits with banks 2,387 5.47 2,338 5.39 2,284 5.14 810 4.67 Total interest earning assets 31,341 4.62 31,975 4.51 32,412 4.34 31,569 4.00 Allowance for credit losses on loans (162) (158) (159) (150) Unrealized gain (loss) on debt securities (1,596) (1,458) (1,331) (1,387) Cash and due from banks 299 296 310 314 Premises and equipment – net 473 464 449 431 Other assets 1,026 990 1,182 631 Total assets $ 31,381 $ 32,109 $ 32,863 $ 31,408 LIABILITIES AND EQUITY Interest bearing deposits: Savings $ 1,358 .05 $ 1,436 .05 $ 1,517 .05 $ 1,550 .05 Interest checking and money market 13,167 1.57 13,048 1.33 12,919 .93 13,266 .61 Certificates of deposit under $100,000 1,097 4.21 1,424 4.32 1,075 3.78 415 1.39 Certificates of deposit $100,000 & over 1,839 4.55 1,718 4.37 1,472 3.93 903 2.98 Total interest bearing deposits 17,461 1.93 17,626 1.76 16,983 1.29 16,134 .71 Borrowings: Federal funds purchased 474 5.40 509 5.33 507 5.06 494 4.59 Securities sold under agreements to repurchase 2,467 3.25 2,283 3.20 2,207 3.09 2,419 2.93 Other borrowings 179 5.45 685 5.30 1,618 5.24 551 4.94 Total borrowings 3,120 3.71 3,477 3.93 4,332 4.13 3,464 3.49 Total interest bearing liabilities 20,581 2.20 % 21,103 2.12 % 21,315 1.87 % 19,598 1.20 % Non-interest bearing deposits 7,749 7,939 8,224 9,115 Other liabilities 421 369 598 112 Equity 2,630 2,698 2,726 2,583 Total liabilities and equity $ 31,381 $ 32,109 $ 32,863 $ 31,408 Net interest margin (FTE) $ 251 $ 251 $ 252 $ 253 Net yield on interest earning assets 3.17 % 3.11 % 3.12 % 3.26 % (A) Stated on a fully taxable-equivalent basis using a federal income tax rate of 21%. 62 Table of Contents — AVERAGE RATES AND YIELDS Year ended December 31, 2022 Fourth Quarter Third Quarter Second Quarter First Quarter (Dollars in millions) Average Balance Average Rates Earned/Paid Average Balance Average Rates Earned/Paid Average Balance Average Rates Earned/Paid Average Balance Average Rates Earned/Paid ASSETS Loans: Business (A) $ 5,478 4.68 % $ 5,318 3.94 % $ 5,384 3.16 % $ 5,324 2.93 % Real estate – construction and land 1,269 6.80 1,289 5.27 1,225 4.09 1,135 3.76 Real estate – business 3,301 5.15 3,258 4.40 3,164 3.70 3,095 3.38 Real estate – personal 2,887 3.45 2,844 3.36 2,826 3.27 2,809 3.28 Consumer 2,090 4.77 2,102 4.17 2,071 3.62 2,040 3.59 Revolving home equity 294 5.89 281 4.82 272 3.69 274 3.48 Consumer credit card 559 12.64 550 12.05 538 11.32 541 11.35 Overdrafts 7 — 4 — 6 — 5 — Total loans 15,885 5.03 15,646 4.37 15,486 3.72 15,223 3.54 Loans held for sale 7 10.09 7 8.80 8 8.14 9 6.48 Investment securities: U.S. government & federal agency obligations 1,056 2.01 1,113 4.51 1,119 4.93 1,104 3.42 Government-sponsored enterprise obligations 56 2.36 56 2.36 56 2.39 52 2.33 State & municipal obligations (A) 1,991 2.29 2,053 2.27 2,126 2.30 2,078 2.29 Mortgage-backed securities 6,606 1.88 6,848 1.93 7,158 1.99 7,317 1.98 Asset-backed securities 3,714 1.96 3,871 1.62 4,038 1.35 3,934 1.13 Other debt securities 561 1.89 587 1.93 643 1.97 636 2.00 Trading debt securities (A) 44 3.81 36 2.74 44 2.46 41 1.84 Equity securities (A) 10 28.44 9 27.11 9 26.90 9 26.00 Other securities (A) 219 6.67 209 7.09 195 22.38 192 5.91 Total investment securities 14,257 2.07 14,782 2.18 15,388 2.36 15,363 1.97 Federal funds sold 28 4.27 13 2.77 4 1.79 1 .39 Securities purchased under agreements to resell 1,174 2.36 1,379 1.72 1,704 1.03 1,734 1.24 Interest earning deposits with banks 640 3.69 980 2.25 1,249 .78 2,608 .18 Total interest earning assets 31,991 3.59 32,807 3.21 33,839 2.86 34,938 2.49 Allowance for credit losses on loans (143) (138) (135) (150) Unrealized gain (loss) on debt securities (1,582) (1,065) (851) (174) Cash and due from banks 327 311 315 340 Premises and equipment – net 419 409 402 407 Other assets 593 538 522 557 Total assets $ 31,605 $ 32,862 $ 34,092 $ 35,918 LIABILITIES AND EQUITY Interest bearing deposits: Savings $ 1,567 .06 $ 1,596 .04 $ 1,610 .04 $ 1,563 .05 Interest checking and money market 13,694 .38 14,424 .20 14,846 .06 14,950 .04 Certificates of deposit under $100,000 388 .73 397 .41 412 .20 430 .13 Certificates of deposit $100,000 & over 597 1.42 578 .60 649 .29 862 .20 Total interest bearing deposits 16,246 .40 16,995 .21 17,517 .07 17,805 .05 Borrowings: Federal funds purchased 144 3.56 52 2.41 113 .79 23 .12 Securities sold under agreements to repurchase 2,260 2.29 2,200 1.37 2,258 .48 2,713 .10 Other borrowings 179 4.02 2 1.78 2 2.37 1 .53 Total borrowings 2,583 2.48 2,254 1.39 2,373 .50 2,737 .10 Total interest bearing liabilities 18,829 .69 % 19,249 .34 % 19,890 .12 % 20,542 .06 % Non-interest bearing deposits 10,361 10,758 11,210 11,545 Other liabilities 29 124 140 505 Equity 2,386 2,731 2,852 3,326 Total liabilities and equity $ 31,605 $ 32,862 $ 34,092 $ 35,918 Net interest margin (FTE) $ 257 $ 249 $ 235 $ 211 Net yield on interest earning assets 3.18 % 3.01 % 2.79 % 2.45 % (A) Stated on a fully taxable-equivalent basis using a federal income tax rate of 21%. 63 Table of Contents SUMMARY OF QUARTERLY STATEMENTS OF INCOME Year ended December 31, 2023 For the Quarter Ended (In thousands, except per share data) 12/31/2023 9/30/2023 6/30/2023 3/31/2023 Interest income $ 362,609 $ 361,162 $ 348,663 $ 308,857 Interest expense (114,188) (112,615) (99,125) (57,234) Net interest income 248,421 248,547 249,538 251,623 Non-interest income 144,879 142,949 147,605 137,612 Investment securities gains (losses), net 7,601 4,298 3,392 (306) Salaries and employee benefits (147,456) (146,805) (145,429) (144,373) Other expense (103,798) (81,205) (82,182) (79,734) Provision for credit losses (5,879) (11,645) (6,471) (11,456) Income before income taxes 143,768 156,139 166,453 153,366 Income taxes (32,307) (33,439) (35,990) (32,813) Non-controlling interest (2,238) (2,104) (2,674) (1,101) Net income attributable to Commerce Bancshares, Inc. $ 109,223 $ 120,596 $ 127,789 $ 119,452 Net income per common share — basic* $ .84 $ .92 $ .97 $ .91 Net income per common share — diluted* $ .84 $ .92 $ .97 $ .91 Weighted average shares — basic* 129,507 129,904 130,079 130,204 Weighted average shares — diluted* 129,608 130,009 130,208 130,472 Year ended December 31, 2022 For the Quarter Ended (In thousands, except per share data) 12/31/2022 9/30/2022 6/30/2022 3/31/2022 Interest income $ 286,377 $ 262,666 $ 238,154 $ 211,782 Interest expense (31,736) (16,293) (5,769) (2,996) Net interest income 254,641 246,373 232,385 208,786 Non-interest income 136,825 138,514 139,427 131,769 Investment securities gains (losses), net 8,904 3,410 1,029 7,163 Salaries and employee benefits (138,458) (137,393) (142,243) (135,953) Other expense (78,282) (75,491) (71,262) (69,695) Provision for credit losses (15,477) (15,290) (7,162) 9,858 Income before income taxes 168,153 160,123 152,174 151,928 Income taxes (34,499) (33,936) (32,021) (31,902) Non-controlling interest (2,026) (3,364) (4,359) (1,872) Net income attributable to Commerce Bancshares, Inc. $ 131,628 $ 122,823 $ 115,794 $ 118,154 Net income per common share — basic* $ 1.00 $ .93 $ .87 $ .88 Net income per common share — diluted* $ 1.00 $ .92 $ .87 $ .88 Weighted average shares — basic* 130,527 131,082 131,919 132,658 Weighted average shares — diluted* 130,819 131,372 132,212 132,979 Year ended December 31, 2021 For the Quarter Ended (In thousands, except per share data) 12/31/2021 9/30/2021 6/30/2021 3/31/2021 Interest income $ 210,479 $ 216,981 $ 211,133 $ 209,697 Interest expense (2,822) (2,944) (3,151) (3,949) Net interest income 207,657 214,037 207,982 205,748 Non-interest income 147,699 137,506 139,143 136,045 Investment securities gains (losses), net (9,706) 13,108 16,804 9,853 Salaries and employee benefits (132,640) (132,824) (130,751) (129,033) Other expense (70,942) (78,796) (67,375) (63,540) Provision for credit losses 7,054 7,385 45,655 6,232 Income before income taxes 149,122 160,416 211,458 165,305 Income taxes (33,764) (34,662) (45,209) (32,076) Non-controlling interest (452) (3,193) (3,923) (2,257) Net income attributable to Commerce Bancshares, Inc. $ 114,906 $ 122,561 $ 162,326 $ 130,972 Net income per common share — basic* $ .85 $ .91 $ 1.20 $ .96 Net income per common share — diluted* $ .85 $ .91 $ 1.19 $ .96 Weighted average shares — basic* 133,362 134,095 134,473 134,585 Weighted average shares — diluted* 133,647 134,374 134,806 134,948 * Restated for the 5% stock dividend distributed in 2023. 64 Table of Contents Item 7a.
This growth was mainly due to an increase of $75.7 million in interest earned on loans, due to higher average rates paid and an increase of $76.9 million in interest earned on investment securities, due to higher rates and average balances, partly offset by an increase of $45.3 million in interest expense on deposits and borrowings, due to higher average rates paid.
This growth was mainly due to an increase of $75.7 million in interest earned on loans, due to higher average rates earned and an increase of $76.9 million in interest earned on investment securities, due to higher rates and average balances, partly offset by an increase of $45.3 million in interest expense on deposits and borrowings, due to higher average rates paid.
The Company’s most liquid assets include available for sale debt securities, federal funds sold, balances at the Federal Reserve Bank, and securities purchased under agreements to resell.
The Company’s most liquid assets include balances at the Federal Reserve Bank, federal funds sold, available for sale debt securities, and securities purchased under agreements to resell.
The Company pledges portions of its investment securities portfolio to secure public fund deposits, securities sold under agreements to repurchase, trust funds, letters of credit issued by the FHLB, and borrowing capacity at the Federal Reserve Bank.
The Company pledges portions of its investment securities portfolio to secure public fund deposits, securities sold under agreements to repurchase, trust funds, letters of credit issued by the FHLB, and borrowing capacity at the FHLB and the Federal Reserve Bank.
The tables below show the effects of gradual shifts in interest rates over a twelve month period on the Company’s net interest income versus the Company's net interest income in a flat rate scenario. Simulation A presents three rising rate scenarios and three falling rate scenarios and in each scenario, rates are assumed to change evenly over 12 months.
The tables below show the effects of gradual shifts in interest rates over a twelve month period on the Company’s net interest income versus the Company's net interest income in a flat rate scenario. The simulation presents three rising rate scenarios and three falling rate scenarios and in each scenario, rates are assumed to change evenly over 12 months.
The market value of total customer trust assets totaled $60.3 billion at year end 2022, which was a decrease of 13.0% from year end 2021 balances. Bank card fees increased $8.3 million, or 4.9%, over the prior year, mainly due to an increase in net corporate card fees of $8.3 million.
The market value of total customer trust assets totaled $60.3 billion at year end 2022, which was a decrease of 13.0% from year end 2021 balances. Bank card fees increased $8.3 million, or 4.9%, over 2021, mainly due to an increase in net corporate card fees of $8.3 million.
The new guidance provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if they reference LIBOR or another reference rate expected to be discontinued because of reference rate reform.
The guidance provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if they reference LIBOR or another reference rate expected to be discontinued because of reference rate reform.
Health services financing and fixed rate home equity loans also increased, offset by declines in auto lending, other vehicle and equipment lending (mostly comprised of motorcycle loans), and continued run off of marine and recreational vehicle loan balances.
Health services financing and fixed rate home equity loans also increased, offset by declines in other vehicle and equipment lending (mostly comprised of motorcycle loans) and continued run off of marine and recreational vehicle loan balances.
Average balances of business loans included average balances of $41.9 million in Paycheck Protection Program (PPP) loans at December 31, 2022, which was a decline of $812.2 million from balances of $854.1 billion at December 31, 2021.
Average balances of business loans included average balances of $41.9 million in Paycheck Protection Program (PPP) loans at December 31, 2022, which was a decline of $812.2 million from balances of $854.1 million at December 31, 2021.
Net securities gains of $30.1 million were recorded in 2021, which included $1.5 million in net gains realized on sales of private equity investments, net gains totaling $31.7 million of fair value adjustments on private equity investments, and $187 thousand of fair value adjustments on equity investments.
Net securities gains of $30.1 million were recorded in 2021, which included $1.5 million in net gains realized on sales of private equity investments, net gains of $31.7 million in fair value adjustments on private equity investments, and net gains of $187 thousand in fair value adjustments on equity investments.
The funds transfer pricing process attempts to remove interest rate risk from valuation, allowing management to compare profitability under various rate environments. The Company also assigns loan charge-offs and recoveries (labeled in the table below as “provision for credit losses”) directly to each operating segment instead of allocating an estimated credit loss provision.
The funds transfer pricing process attempts to remove interest rate risk from valuation, allowing management to compare profitability under various rate environments. The Company also assigns loan charge-offs and recoveries (labeled in the table below as “provision for credit 55 Table of Contents losses”) directly to each operating segment instead of allocating an estimated credit loss provision.
The increase of $26.0 million in interest earned on asset-backed securities was due to an increase of 35 basis points in the average rate earned coupled with growth of $1.1 billion in average balances. Interest earned on U.S. government securities grew $8.2 million and was mainly impacted by growth of $7.3 million in inflation income on treasury inflation-protected securities (TIPS).
The increase of $26.0 million in interest earned on asset-backed securities was due to an increase of 35 basis points in the average rate earned coupled with growth of $1.1 billion in average balances. Interest earned on U.S. government securities grew $8.2 million and was mainly impacted by growth of $7.3 million in inflation income on TIPS.
Issuer rating A- Rating outlook Stable Commerce Bank Issuer rating A A2 Baseline credit assessment a1 Short-term rating A-1 P-1 Rating outlook Stable Stable The Company considers these ratings to be indications of a sound capital base and strong liquidity and believes that these ratings would help ensure the ready marketability of its commercial paper, should the need arise.
Issuer rating A- Rating outlook Stable Commerce Bank Issuer rating A A3 Baseline credit assessment a2 Short-term rating A-1 P-1 Rating outlook Stable Stable The Company considers these ratings to be indications of a sound capital base and strong liquidity and believes that these ratings would help ensure the ready marketability of its commercial paper, should the need arise.
The provision for credit losses increased $6.0 million due to net charge-offs recorded on business loans in 2022 compared to net recoveries recorded in the prior year. Non-interest income increased $13.8 million, or 6.6%, over 2021 due to higher net bank card fees (mainly corporate card), deposit account fees (mainly corporate cash management fees), and higher cash sweep commissions.
The provision for credit losses increased $6.0 million due to net charge-offs recorded on business loans in 2022 compared to net recoveries recorded in 2021. Non-interest income increased $13.8 million, or 6.6%, over 2021 due to higher net bank card fees (mainly corporate card), deposit account fees (mainly corporate cash management fees), and higher cash sweep commissions.
Customers are served from 275 locations in Missouri, Kansas, Illinois, Oklahoma and Colorado and commercial offices throughout the nation's midsection. A variety of delivery platforms are utilized, including an extensive network of branches and ATM machines, full-featured online banking, a mobile application, and a centralized contact center.
Customers are served from 257 locations in Missouri, Kansas, Illinois, Oklahoma and Colorado and commercial offices throughout the nation's midsection. A variety of delivery platforms are utilized, including an extensive network of branches and ATM machines, full-featured online banking, a mobile application, and a centralized contact center.
Total rates earned on average interest earning assets increased 41 basis points this year, while funding costs for deposits and borrowings increased 23 basis points. The provision for credit losses increased in 2022 compared to 2021 due to a significant reduction in the allowance for credit losses on loans during 2021, which did not reoccur in 2022.
Total rates earned on average interest earning assets increased 41 basis points in 2022, while funding costs for deposits and borrowings increased 23 basis points. The provision for credit losses increased in 2022 compared to 2021 due to a significant reduction in the allowance for credit losses on loans during 2021, which did not reoccur in 2022.
Because the Company generally only enters into transactions with high quality counterparties, there have been no losses associated with counterparty nonperformance on derivative financial instruments. The following table summarizes the notional amounts and estimated fair values of the Company’s derivative instruments at December 31, 2022 and 2021.
Because the Company generally only enters into transactions with high quality counterparties, there have been no losses associated with counterparty nonperformance on derivative financial instruments. The following table summarizes the notional amounts and estimated fair values of the Company’s derivative instruments at December 31, 2023 and 2022.
Private banking loans comprised 32% of the consumer loan portfolio at December 31, 2022. The Company's private banking loans are generally well-collateralized and at December 31, 2022 were secured primarily by assets held by the Company's trust department. The remaining portion of the Company's consumer loan portfolio is comprised of health services financing, motorcycles, marine and RV loans.
Private banking loans comprised 32% of the consumer loan portfolio at December 31, 2023. The Company's private banking loans are generally well-collateralized and at December 31, 2023 were secured primarily by assets held by the Company's trust department. The remaining portion of the Company's consumer loan portfolio is comprised of health services financing, motorcycles, marine and RV loans.
The Federal Reserve Bank also establishes a collateral value of assets pledged and permits borrowings from the discount window. The following table reflects the collateral value of assets pledged, borrowings, and letters of credit outstanding, in addition to the estimated future funding capacity available to the Company at December 31, 2022.
The Federal Reserve Bank also establishes a collateral value of assets pledged and permits borrowings from the discount window. The following table reflects the collateral value of assets pledged, borrowings, and letters of credit outstanding, in addition to the estimated future funding capacity available to the Company at December 31, 2023.
While the Company considers core consumer and wealth management deposits less volatile, corporate deposits could decline if interest rates increase significantly, encouraging corporate customers to increase investing activities, or if the economy declines and companies experience lower cash inflows, reducing deposit balances.
While the Company considers core consumer and wealth management deposits less volatile, corporate deposits could decline if interest rates increase significantly, encouraging corporate customers to increase investing activities, or if the economy deteriorates and companies experience lower cash inflows, reducing deposit balances.
Additionally, fixed rate loans were generally originated in 2022 at higher interest rates than the weighted-average of the portfolio of fixed rate loans. The increase in interest rates earned was partly offset a decline in average loan balances of $102.4 million, or .7%, this year.
Additionally, fixed rate loans were generally originated in 2022 at higher interest rates than the weighted-average of the portfolio of fixed rate loans. The increase in interest rates earned was partly offset a decline in average loan balances of $102.4 million, or .7%, in 2022.
The Company offers a variety of credit card products, including affinity cards, rewards cards, and standard and premium credit cards, and emphasizes its credit card relationship product, Special Connections. Approximately 38% of the households that own a Commerce credit card product also maintain a deposit relationship with the subsidiary bank.
The Company offers a variety of credit card products, including affinity cards, rewards cards, and standard and premium credit cards, and emphasizes its credit card relationship product, Special Connections. Approximately 37% of the households that own a Commerce credit card product also maintain a deposit relationship with the subsidiary bank.
Special emphasis is placed on securities whose credit rating has fallen below Baa3 (Moody's) or BBB- (Standard & Poor's), whose fair values have fallen more than 20% below purchase price, or who have been identified based on management’s judgment. These securities are placed on a watch list and cash flow analyses are prepared on an individual security basis.
Special emphasis is placed on securities whose credit rating has fallen below Baa3 (Moody's) or BBB- (Standard & Poor's), whose fair values have fallen more than 20% below purchase price, or those which have been identified based on management’s judgment. These securities are placed on a watch list and cash flow analyses are prepared on an individual security basis.
Average balances by major deposit category for the last six years are disclosed in the Average Balance Sheets section of Management's Discussion and Analysis of Financial Condition and Results of Operations below. A maturity schedule of all certificates of deposits outstanding at December 31, 2022 is included in Note 7 on Deposits in the consolidated financial statements.
Average balances by major deposit category for the last six years are disclosed in the Average Balance Sheets section of Management's Discussion and Analysis of Financial Condition and Results of Operations. A maturity schedule of all certificates of deposits outstanding at December 31, 2023 is included in Note 7 on Deposits in the consolidated financial statements.
Non-interest income fell 2.5% in 2022, mainly due to a decrease in loan fees and sales income. Net investment securities gains of $20.5 million were recorded in 2022 and were comprised mainly of net fair value gains on the Company's private equity investment portfolio, partly offset by losses on sales of available for sale securities.
Non-interest income fell 2.5% in 2022, mainly due to a decrease in loan fees and sales income. Net investment securities gains of $20.5 million were recorded in 2022 and were comprised mainly of net fair value gains on the Company's private 24 Table of Contents equity investment portfolio, partly offset by losses on sales of available for sale securities.
Most of these loans (91.4%) are written with terms requiring interest-only monthly payments. These loans are offered in three main product lines: LTV up to 80%, 80% to 90%, and 90% to 100%.
Most of these loans (91.9%) are written with terms requiring interest-only monthly payments. These loans are offered in three main product lines: LTV up to 80%, 80% to 90%, and 90% to 100%.
Key assumptions include segmentation of the portfolio into pools, calculations of life of a loan using a combination of contractual terms and expected prepayment speeds and forecast of macroeconomic conditions. The Company utilizes a third-party macro-economic forecast that continuously changes due to economic conditions and events.
Key assumptions include segmentation of the portfolio into pools, calculations of life of a loan using a combination of contractual terms and expected prepayment speeds and forecast of macroeconomic conditions. The Company utilizes a third-party macro-economic forecast 25 Table of Contents that continuously changes due to economic conditions and events.
At December 31, 2022, the Parent’s investment securities totaled $16.3 million at fair value, consisting mainly of corporate bonds and preferred stock. To support its various funding commitments, the Parent maintains a $20.0 million line of credit with its subsidiary bank. There were no borrowings outstanding under the line during 2022 or 2021.
At December 31, 2023, the Parent’s investment securities totaled $16.5 million at fair value, consisting mainly of corporate bonds and preferred stock. To support its various funding commitments, the Parent maintains a $20.0 million line of credit with its subsidiary bank. There were no borrowings outstanding under the line during 2023 or 2022.
These estimates and related policies are the Company's allowance for credit losses and fair value measurement policies. Allowance for Credit Losses The Company's Allowance for Credit Losses policies govern the processes and procedures used to estimate the collectability of its loan portfolio and unfunded lending commitments, and the potential for credit losses in its available for sale investment portfolio.
These estimates and related policies are the Company's allowance for credit losses and fair value measurement policies. Allowance for Credit Losses The Company's Allowance for Credit Losses policies govern the processes and procedures used to estimate the collectability of its loan portfolio and unfunded lending commitments, and the potential for credit losses in its available for sale debt securities portfolio.
Interest on personal real estate loans increased $2.6 million as the average balance grew $44.0 million and the average rate earned increased four basis points. Interest on consumer loans grew $7.7 million over the prior year as the average rate earned increased 25 basis points and average balances were higher by $66.2 million.
Interest on personal real estate loans increased $2.6 million as the average balance grew $44.0 million and the average rate earned increased four basis points. Interest on consumer loans grew $7.7 million over 2021 as the average rate earned increased 25 basis points and average balances were higher by $66.2 million.
This has remained an effective means of evaluating credit trends and identifying problem loans, partly because the Company offers standard, conservative lending products. Real Estate - Construction and Land Loans The Company’s portfolio of construction and land loans, as shown in the table below, amounted to 8.3% of total loans outstanding at December 31, 2022.
This has remained an effective means of evaluating credit trends and identifying problem loans, partly because the Company offers standard, conservative lending products. Real Estate - Construction and Land Loans The Company’s portfolio of construction and land loans, as shown in the table below, amounted to 8.4% of total loans outstanding at December 31, 2023.
The operating segments also include a number of allocations of income and expense from various support and overhead centers within the Company. 55 Table of Conte nts The table below is a summary of segment pre-tax income results for the past three years.
The operating segments also include a number of allocations of income and expense from various support and overhead centers within the Company. The table below is a summary of segment pre-tax income results for the past three years.
Growth in net interest income resulted principally from increases in interest income from investment securities and loans, partly offset by an increase in interest expense on deposits and borrowings.
Growth in net interest income resulted principally from increases in interest income from loans, partly offset by an increase in interest expense on deposits and borrowings.
Deposit account fees decreased $2.8 million, or 2.9%, mainly due to lower overdraft and return item fees of $4.2 million and personal account deposit fees of $1.2 million, partly offset by growth in corporate cash management fees of $2.5 million.
Deposit account fees decreased $2.8 million, or 2.9%, mainly due to lower overdraft and return item fees of $4.2 million and personal account deposit fees of $1.2 million, partly offset by growth in corporate cash management 31 Table of Contents fees of $2.5 million.
For the year ended December 31, 2022, the Company did not recognize a credit loss expense on any available for sale debt securities.
For the year ended December 31, 2023, the Company did not recognize a credit loss expense on any available for sale debt securities.
As shown in the following tables, the percentage of loans with LTV ratios greater than 80% has remained a small segment of this portfolio, and delinquencies have been low and stable. The weighted average FICO score for the total portfolio balance at December 31, 2022 was 789.
As shown in the following tables, the percentage of loans with LTV ratios greater than 80% has remained a small segment of this portfolio, and delinquencies have been low and stable. The weighted average FICO score for the total portfolio balance at December 31, 2023 was 785.
The Company maintains a treasury stock buyback program under authorizations by its Board of Directors and periodically purchases stock in the open market. During 2021, the Company purchased 1.8 million shares, and during 2022 the Company purchased 2.7 million shares. At December 31, 2022, 3.1 million shares remained available for purchase under the current Board authorization.
The Company maintains a treasury stock buyback program under authorizations by its Board of Directors and periodically purchases stock in the open market. During 2022, the Company purchased 2.7 million shares, and during 2023 the Company purchased 1.4 million shares. At December 31, 2023, 1.8 million shares remained available for purchase under the current Board authorization.
In connection with the adoption of CECL on January 1, 2020, the Company has elected to utilize this option. As a result, the two year deferral period for the Company extends through December 31, 2021.
In connection with the adoption of CECL on January 1, 2020, the Company elected to utilize this option. As a result, the two year deferral period for the Company extended through December 31, 2021.
Capital market fees decreased $1.7 million, or 10.7%, compared to the prior year, while revenue from consumer brokerage services increased $755 thousand, or 4.1%, mainly due to growth in annuity fees. Loan fees and sales decreased $16.6 million, or 55.8%, mainly due to lower mortgage banking revenue.
Capital market fees decreased $1.7 million, or 10.7%, compared to 2021, while revenue from consumer brokerage services increased $755 thousand, or 4.1%, mainly due to growth in annuity fees. Loan fees and sales decreased $16.6 million, or 55.8%, mainly due to lower mortgage banking revenue.
Net interest income decreased $1.0 million, or .2%, due to a $21.4 million decrease in net allocated funding credits assigned to the Commercial segment's loan and deposit portfolios, coupled with higher interest expense on customer repurchase agreements and deposits of $22.6 million and 18.5 million, respectively. The decreases were partly offset by a $61.2 million increase in loan interest income.
Net interest income decreased $1.0 million, or .2%, due to a $21.4 million decrease in net allocated funding credits, coupled with higher interest expense on customer repurchase agreements and deposits of $22.6 million and 18.5 million, respectively. The decreases were partly offset by a $61.2 million increase in loan interest income.
Adjustments to the allowance for credit losses are made by increases to or reductions in the provision for credit losses, which are reflected in the consolidated statements of income. 22 Table of Conte nts Assumptions, Judgments, and Uncertainties: The uncertainty in the estimation of the allowance for credit losses is created because key assumptions and judgements are applied throughout the process.
Adjustments to the allowance for credit losses are made by increases to or reductions in the provision for credit losses, which are reflected in the consolidated statements of income. Assumptions, Judgments, and Uncertainties: The uncertainty in the estimation of the allowance for credit losses is created because key assumptions and judgements are applied throughout the process.
An additional $846.4 million was available in unused lines of credit, which can be drawn at the discretion of the borrower. Home equity loans are secured mainly by second mortgages (and less frequently, first mortgages) on residential property of the borrower.
An additional $900.0 million was available in unused lines of credit, which can be drawn at the discretion of the borrower. Home equity loans are secured mainly by second mortgages (and less frequently, first mortgages) on residential property of the borrower.
Key Ratios 2022 2021 2020 2019 2018 (Based on average balances) Return on total assets 1.45 % 1.55 % 1.20 % 1.67 % 1.76 % Return on common equity 17.31 15.37 10.64 14.06 16.16 Equity to total assets 8.39 10.11 11.18 12.20 11.24 Loans to deposits (1) 55.41 56.46 67.73 71.54 69.27 Non-interest bearing deposits to total deposits 39.02 40.46 37.83 32.03 33.43 Net yield on interest earning assets (tax equivalent basis) 2.85 2.58 2.99 3.48 3.53 (Based on end of period data) Non-interest income to revenue (2) 36.71 40.15 37.87 38.98 37.83 Efficiency ratio (3) 56.90 57.64 57.19 56.87 55.58 Tier I common risk-based capital ratio 14.13 14.34 13.71 13.93 14.22 Tier I risk-based capital ratio 14.13 14.34 13.71 14.66 14.98 Total risk-based capital ratio 14.89 15.12 14.82 15.48 15.82 Tier I leverage ratio 10.34 9.13 9.45 11.38 11.52 Tangible common equity to tangible assets ratio (4) 7.32 9.01 9.92 10.99 10.45 Common cash dividend payout ratio 26.10 23.12 35.32 27.52 23.61 (1) Includes loans held for sale.
Key Ratios 2023 2022 2021 2020 2019 (Based on average balances) Return on total assets 1.49 % 1.45 % 1.55 % 1.20 % 1.67 % Return on common equity 17.94 17.31 15.37 10.64 14.06 Equity to total assets 8.33 8.39 10.11 11.18 12.20 Loans to deposits (1) 66.31 55.41 56.46 67.73 71.54 Non-interest bearing deposits to total deposits 32.61 39.02 40.46 37.83 32.03 Net yield on interest earning assets (tax equivalent basis) 3.16 2.85 2.58 2.99 3.48 (Based on end of period data) Non-interest income to revenue (2) 36.47 36.71 40.15 37.87 38.98 Efficiency ratio (3) 59.17 56.90 57.64 57.19 56.87 Tier I common risk-based capital ratio 15.25 14.13 14.34 13.71 13.93 Tier I risk-based capital ratio 15.25 14.13 14.34 13.71 14.66 Total risk-based capital ratio 16.03 14.89 15.12 14.82 15.48 Tier I leverage ratio 11.25 10.34 9.13 9.45 11.38 Tangible common equity to tangible assets ratio (4) 8.85 7.32 9.01 9.92 10.99 Common cash dividend payout ratio 28.24 26.10 23.12 35.32 27.52 (1) Includes loans held for sale.
The portions of private equity investment gains and losses that are attributable to minority interests are reported as non-controlling interest in the consolidated statements of income, and resulted in expense of $8.5 million in 2022 and $6.5 million in 2021, compared to income of $1.4 million in 2020.
The portions of private equity investment gains and losses that are attributable to minority interests are reported as non-controlling interest in the consolidated statements of income, and resulted in expense of $4.8 million in 2023, $8.5 million in 2022, and $6.5 million in 2021.
The business real estate borrowers and/or properties are generally located in local and regional markets where Commerce does business, and emphasis is placed on owner-occupied lending (33.3% of this portfolio), which presents lower risk levels.
The business real estate borrowers and/or properties are generally located in local and regional markets where Commerce does business, and emphasis is placed on owner-occupied lending (31.6% of this portfolio), which presents lower risk levels.
Adjustments in the inputs and assumptions described above could significantly impact the fair values of the Company’s assets and liabilities and have a significant impact on our financial condition and results of operations. 24 Table of Conte nts Net Interest Income Net interest income, the largest source of revenue, results from the Company’s lending, investing, borrowing, and deposit gathering activities.
Adjustments in the inputs and assumptions described above could significantly impact the fair values of the Company’s assets and liabilities and have a significant impact on our financial condition and results of operations. 27 Table of Contents Net Interest Income Net interest income, the largest source of revenue, results from the Company’s lending, investing, borrowing, and deposit gathering activities.
Consumer Loans The Company's consumer loans totaled $2.1 billion and comprised 13% of total loans outstanding at December 31, 2022. Within the consumer loan portfolio are several direct and indirect product lines comprised mainly of loans secured by automobiles, motorcycles, marine, and RVs.
Consumer Loans The Company's consumer loans totaled $2.1 billion and comprised 12% of total loans outstanding at December 31, 2023. Within the consumer loan portfolio are several direct and indirect product lines comprised mainly of loans secured by automobiles, motorcycles, marine, and RVs.
In determining the fair value, management uses models and applies the techniques and assumptions previously discussed. At December 31, 2022, assets and liabilities measured using observable inputs that are classified as either Level 1 or Level 2 represented 98.5% and 99.8% of total assets and liabilities recorded at fair value, respectively.
In determining the fair value, management uses models and applies the techniques and assumptions previously discussed. At December 31, 2023, assets and liabilities measured using observable inputs that are classified as either Level 1 or Level 2 represented 98.2% and 99.6% of total assets and liabilities recorded at fair value, respectively.
This portfolio is further discussed in Note 2 to the consolidated financial statements. 35 Table of Conte nts Allowance for Credit Losses on Loans and Liability for Unfunded Lending Commitments To determine the amount of the allowance for credit losses on loans and the liability for unfunded lending commitments, the Company has established a process which assesses the risks and losses expected in its portfolios.
This portfolio is further discussed in Note 2 to the consolidated financial statements. 37 Table of Contents Allowance for Credit Losses on Loans and Liability for Unfunded Lending Commitments To determine the amount of the allowance for credit losses on loans and the liability for unfunded lending commitments, the Company has established a process which assesses the risks and losses expected in its portfolios.
Valuations generated from model-based techniques that use at least one significant assumption not observable in the market are considered Level 3, and the Company's Level 3 assets totaled $180.0 million, or 1.4% of total assets recorded at fair value on a recurring basis.
Valuations generated from model-based techniques that use at least one significant assumption not observable in the market are considered Level 3, and the Company's Level 3 assets totaled $177.8 million, or 1.8% of total assets recorded at fair value on a recurring basis.
Significant deterioration in circumstances relating to loan quality and economic conditions could result in a requirement for additional allowance. Likewise, an upturn in loan quality and improved economic conditions may allow a reduction in the required allowance. In either instance, changes could have a significant impact on our financial condition and results of operations.
Significant deterioration in circumstances relating to loan quality and economic conditions could result in a requirement for additional allowance. Likewise, an upturn in loan quality and improved economic conditions may require a reduction in the allowance for credit losses. In either instance, changes could have a significant impact on our financial condition and results of operations.
The net yield on earning assets (FTE) was 2.85% in 2022 compared with 2.58% in 2021. 25 Table of Conte nts During 2022, loan interest income (FTE) grew $75.7 million over 2021 mainly due to an increase in rates earned for all loan categories.
The net yield on earning assets (FTE) was 2.85% in 2022 compared with 2.58% in 2021. 29 Table of Contents During 2022, loan interest income (FTE) grew $75.7 million over 2021 mainly due to an increase in rates earned for all loan categories.
Other non-interest income increased $1.8 million, or 4.1%, over the prior year mainly due to higher 28 Table of Conte nts cash sweep commissions of $8.2 million and lease income of $1.3 million, income of $2.2 million from a life insurance death benefit recorded in the second quarter of 2022, a $2.6 million loss on an equity method investment recorded in 2021 and a lease impairment of $1.1 million recorded in 2021.
Other non-interest income increased $1.8 million, or 4.1%, over 2021 mainly due to higher cash sweep commissions of $8.2 million and lease income of $1.3 million, income of $2.2 million from a life insurance death benefit recorded in the second quarter of 2022, a $2.6 million loss on an equity method investment recorded in 2021 and a lease impairment of $1.1 million recorded in 2021.
Over the next three years, approximately 19.3% of the Company's current outstanding balances are expected to mature. Of these balances, 88.1% have a FICO score above 700. The Company does not expect a significant increase in losses as these loans mature, due to their high FICO scores, low LTVs, and low historical loss levels.
Over the next three years, approximately 17.3% of the Company's current outstanding balances are expected to mature. Of these balances, 84.0% have a FICO score above 700. The Company does not expect a significant increase in losses as these loans mature, due to their high FICO scores, low LTVs, and low historical loss levels.
December 31 2022 2021 Non-interest bearing 38.4 % 39.4 % Savings, interest checking and money market 57.8 55.7 Certificates of deposit of less than $100,000 1.5 1.5 Certificates of deposit of $100,000 and over 2.3 3.4 Total deposits 100.0 % 100.0 % Core deposits, which include non-interest bearing, interest checking, savings, and money market deposits, supported 81% and 79% of average earning assets in 2022 and 2021, respectively.
December 31 2023 2022 Non-interest bearing 31.4 % 38.4 % Savings, interest checking and money market 57.2 57.8 Certificates of deposit of less than $100,000 3.7 1.5 Certificates of deposit of $100,000 and over 7.7 2.3 Total deposits 100.0 % 100.0 % Core deposits, which include non-interest bearing, interest checking, savings, and money market deposits, supported 72% and 81% of average earning assets in 2023 and 2022, respectively.
At December 31, 2022, the balance of SNC loans totaled approximately $1.4 billion, with an additional $2.0 billion in unfunded commitments, compared to a balance of $1.2 billion, with an additional $1.9 billion in unfunded commitments, at year end 2021.
At December 31, 2023, the balance of SNC loans totaled approximately $1.5 billion, with an additional $2.2 billion in unfunded commitments, compared to a balance of $1.4 billion, with an additional $2.0 billion in unfunded commitments, at year end 2022.
The growth in net corporate card fees over the prior year was mainly due to higher interchange income, partly offset by higher rewards expense.
The growth in net corporate card fees over 2021 was mainly due to higher interchange income, partly offset by higher rewards expense.
Higher costs for travel and entertainment expense (up $5.1 million), insurance expense (up $1.9 million), depreciation expense on leased assets (up $958 thousand) and airplane expense (up $864 thousand) were offset by $8.2 million in non-recurring litigation settlement costs recorded in 2021.
Other non-interest expense increased slightly over 2021. Higher costs for travel and entertainment expense (up $5.1 million), insurance expense (up $1.9 million), depreciation expense on leased assets (up $958 thousand) and airplane expense (up $864 thousand) were offset by $8.2 million in non-recurring litigation settlement costs recorded in 2021.
These loans increased $201.6 million from 2021 year end balances, driving the growth in the total construction portfolio. Commercial construction loans are made during the construction phase for small and medium-sized office and medical buildings, manufacturing and warehouse facilities, apartment complexes, shopping centers, hotels and motels, and other commercial properties.
These loans increased $100.9 million from 2022 year end balances, driving the growth in the total construction portfolio. Commercial construction loans are made during the construction phase for small and medium-sized office and medical buildings, manufacturing and warehouse facilities, apartment complexes, shopping centers, hotels and motels, and other commercial properties.
The Parent obtains funding to meet its obligations from two main sources: dividends received from bank and non-bank subsidiaries (within regulatory limitations) and management fees charged to subsidiaries as reimbursement for services provided by the Parent, as presented below: (In millions) 2022 2021 2020 Dividends received from subsidiaries $ 300.0 $ 340.0 $ 210.0 Management fees 38.6 36.3 33.5 Total $ 338.6 $ 376.3 $ 243.5 These sources of funds are used mainly to pay cash dividends on outstanding stock, pay general operating expenses, and purchase treasury stock.
The Parent obtains funding to meet its obligations from two main sources: dividends received from bank and non-bank subsidiaries (within regulatory limitations) and management fees charged to subsidiaries as reimbursement for services provided by the Parent, as presented below: (In millions) 2023 2022 2021 Dividends received from subsidiaries $ 280.0 $ 300.0 $ 340.0 Management fees 47.8 38.6 36.3 Total $ 327.8 $ 338.6 $ 376.3 These sources of funds are used mainly to pay cash dividends on outstanding stock, pay general operating expenses, and purchase treasury stock.
Net interest income increased $2.9 million, or 4.0%, mainly due to a $16.4 million increase in loan interest income, partly offset by a $12.5 million decrease in net allocated funding credits assigned to the Wealth segment's loan and deposit portfolios and a $1.0 million increase in deposit interest expense.
Net interest income increased $2.9 million, or 4.0%, mainly due to a $16.4 million increase in loan interest income, partly offset by a $12.5 million decrease in net allocated funding credits and a $1.0 million increase in deposit interest expense.
Impact if actual results differ from assumptions : The allowance for credit losses represents management’s best estimate of expected credit losses in the available for sale debt portfolio, but significant deterioration in interest rates and economic 23 Table of Conte nts conditions could result in a requirement for additional allowance.
Impact if actual results differ from assumptions : The allowance for credit losses represents management’s best estimate of expected credit losses in the available for sale debt securities portfolio, but significant change in interest rates and deterioration in economic conditions could result in a requirement for additional allowance.
The Company's consumer loan portfolio also includes fixed rate home equity loans, typically for home repair or remodeling, and these loans comprised 11% of the consumer loan portfolio at December 31, 2022. Losses on these loans have historically been low, and the Company saw net recoveries of $46 thousand in 2022.
The Company's consumer loan portfolio also includes fixed rate home equity loans, typically for home repair or remodeling, and these loans comprised 11% of the consumer loan portfolio at December 31, 2023. Losses on these loans have historically been low, and the Company had net recoveries of $68 thousand in 2023.
In addition, as shown in the table of collateral available for future advances below, the Company has borrowing capacity of $2.1 billion through advances from the FHLB and the Federal Reserve.
In addition, as shown in the table of collateral available for future advances below, the Company has borrowing capacity of $6.8 billion through advances from the FHLB and the Federal Reserve.
Additional information about income tax expense is provided in Note 9 to the consolidated financial statements. 31 Table of Conte nts Financial Condition Loan Portfolio Analysis Classifications of consolidated loans by major category at December 31, 2022 and 2021 are shown in the table below.
Additional information about income tax expense is provided in Note 9 to the consolidated financial statements. 33 Table of Contents Financial Condition Loan Portfolio Analysis Classifications of consolidated loans by major category at December 31, 2023 and 2022 are shown in the table below.
Investment securities interest income includes tax equivalent adjustments of $6,874,000 in 2022, $7,546,000 in 2021, $8,042,000 in 2020, $7,845,000 in 2019, $10,306,000 in 2018, and $22,565,000 in 2017. These adjustments relate to state and municipal obligations, trading securities, equity securities, and other securities.
Investment securities interest income includes tax equivalent adjustments of $3,983,000 in 2023, $6,874,000 in 2022, $7,546,000 in 2021, $8,042,000 in 2020, $7,845,000 in 2019, and $10,306,000 in 2018. These adjustments relate to state and municipal obligations, trading securities, equity securities, and other securities.
Loan interest income includes tax free loan income (categorized as business loan income) which includes tax equivalent adjustments of $4,126,000 in 2022, $4,176,000 in 2021, $4,916,000 in 2020, $6,282,000 in 2019, $5,931,000 in 2018, and $10,357,000 in 2017.
Loan interest income includes tax free loan income (categorized as business loan income) which includes tax equivalent adjustments of $5,467,000 in 2023, $4,126,000 in 2022, $4,176,000 in 2021, $4,916,000 in 2020, $6,282,000 in 2019, and $5,931,000 in 2018.
Total repurchase agreements at December 31, 2022 were comprised of non-insured customer funds totaling $2.7 billion, and securities pledged for these retail agreements totaled $2.7 billion. 48 Table of Conte nts The Company pledges certain assets, including loans and investment securities to both the Federal Reserve Bank and the FHLB as security to establish lines of credit and borrow from these entities.
Total repurchase agreements at December 31, 2023 were comprised of non-insured customer funds totaling $2.6 billion, and securities pledged as collateral for these retail agreements totaled $2.7 billion. The Company pledges certain assets, including loans and investment securities, to both the Federal Reserve Bank and the FHLB as security to establish lines of credit and borrow from these entities.
Other debt securities include corporate bonds, notes and commercial paper. 44 Table of Conte nts The types of securities held in the available for sale security portfolio at year end 2022 are presented in the table below. Additional detail by maturity category is provided in Note 3 to the consolidated financial statements.
Other debt securities include corporate bonds, notes and commercial paper. 45 Table of Contents The types of securities held in the available for sale security portfolio at year end 2023 are presented in the table below. Additional detail by maturity category is provided in Note 3 to the consolidated financial statements.
Equity securities include common and preferred stock with readily determinable fair values that totaled $6.2 million at December 31, 2022, compared to $7.2 million at December 31, 2021. Other securities totaled $225.0 million at December 31, 2022 and $194.0 million at December 31, 2021.
Equity securities include common and preferred stock with readily determinable fair values that totaled $5.7 million at December 31, 2023, compared to $6.2 million at December 31, 2022. Other securities totaled $222.5 million at December 31, 2023 and $225.0 million at December 31, 2022.
Commercial Loans Business Total business loans amounted to $5.7 billion at December 31, 2022 and includes loans used mainly to fund customer accounts receivable, inventories, and capital expenditures. The business loan portfolio includes tax-advantaged loans and leases which carry tax-free interest rates.
Commercial Loans Business Total business loans amounted to $6.0 billion at December 31, 2023 and includes loans used mainly to fund customer accounts receivable, inventories, and capital expenditures. The business loan portfolio includes tax-advantaged loans and leases which carry tax-free interest rates.
Total non-performing assets, which include non-accrual loans and foreclosed real estate, amounted to $8.4 million at December 31, 2022, compared to $9.3 million at December 31, 2021, and represented .05% of loans outstanding at December 31, 2022. • Shareholder return — During 2022, the Company paid cash dividends of $1.01 per share on its common stock, representing an increase of 6.1% over the previous year.
Total non-performing assets, which include non-accrual loans and foreclosed real estate, amounted to $7.6 million at December 31, 2023, compared to $8.4 million at December 31, 2022, and represented .04% of loans outstanding at December 31, 2023. • Shareholder return — During 2023, the Company paid cash dividends of $1.03 per share on its common stock, representing an increase of 7.1% over the previous year.
Approximately $2.4 billion of the available for sale debt portfolio is expected to mature or pay down during 2023, and these funds offer substantial resources to meet either new loan demand or help offset potential reductions in the Company’s deposit funding base.
Approximately $1.8 billion of the available for sale debt portfolio is expected to mature or pay down during 2024, and these funds offer substantial resources to meet either new loan demand or offset potential reductions in the Company’s deposit funding base.
Core customer deposits, defined as non-interest bearing, interest checking, savings, and money market deposit accounts, totaled $25.2 billion and represented 96.2% of the Company’s total deposits at December 31, 2022. These core deposits are normally less volatile, often with customer relationships tied to other products offered by the Company promoting long lasting relationships and stable funding sources.
Core customer deposits, defined as non-interest bearing, interest checking, savings, and money market deposit accounts, totaled $22.5 billion and represented 88.7% of the Company’s total deposits at December 31, 2023. These core deposits are normally less volatile, often with customer relationships tied to other products offered by the Company promoting long lasting relationships and stable funding sources.
The underwriting terms for the home equity line product permit borrowing availability, in the aggregate, generally up to 80% or 90% of the appraised value of the collateral property at the time of origination. Net loan recoveries were $60 thousand in 2022, compared to net loan charge-offs of nearly zero in 2021.
The underwriting terms for the home equity line product permit borrowing availability, in the aggregate, generally up to 80% or 90% of the appraised value of the collateral property at the time of origination. Net loan recoveries were $57 thousand in 2023, compared to net loan recoveries of $60 thousand in 2022.
The balances over 30 days past due amounted to $9.9 million at December 31, 2022, compared to $9.0 million at the end of 2021, and comprised 1.2% of the outstanding balances of these loans at December 31, 2022 compared to 1.1% at December 31, 2021.
The balances over 30 days past due amounted to $9.5 million at December 31, 2023, compared to $9.9 million at the end of 2022, and comprised 1.2% of the outstanding balances of these loans at both December 31, 2023 and 2022.
If these corporate deposits decline, the Company's funding needs can be met by liquidity supplied by investment security maturities and pay downs expected to total $2.4 billion over the next year, as noted above.
If these corporate deposits decline, the Company's funding needs may be met by liquidity supplied by investment security maturities and pay downs expected to total $1.8 billion over the next year, as noted above.
Personal Banking Loans Real Estate-Personal At December 31, 2022, there were $2.9 billion in outstanding personal real estate loans, which comprised 17.9% of the Company’s total loan portfolio. The mortgage loans in this category are mainly for owner-occupied residential properties.
Personal Banking Loans Real Estate-Personal At December 31, 2023, there were $3.0 billion in outstanding personal real estate loans, which comprised 17.6% of the Company’s total loan portfolio. The mortgage loans in this category are mainly for owner-occupied residential properties.
The Company originates both adjustable and fixed rate mortgage loans, and at December 31, 2022, 33% of the portfolio was comprised of adjustable rate loans, while 67% was comprised of fixed rate loans. The Company does not purchase any loans from outside parties or brokers.
The Company originates both adjustable and fixed rate mortgage loans, and at December 31, 2023, 39% of the portfolio was comprised of adjustable rate loans, while 61% was comprised of fixed rate loans. The Company does not purchase any loans from outside parties or brokers.
Total uninsured deposits were calculated using the same methodology that the Company uses to determine uninsured deposits for regulatory reporting and amounted to $11.3 billion and $14.6 billion at December 31, 2022 and December 31, 2021. The following table shows a detailed breakdown of the maturities of uninsured certificates of deposit at December 31, 2022.
Total uninsured deposits were calculated using the same methodology that the Company uses to determine uninsured deposits for regulatory reporting and amounted to $10.8 billion and $11.0 billion at December 31, 2023 and December 31, 2022. The following table shows a detailed breakdown of the maturities of uninsured certificates of deposit at December 31, 2023.
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