Commerce Bancshares, Inc. (Nasdaq: CBSH) announced earnings of $.85 per common share for the three months ended March 31, 2019, compared to $.88 per share in the same quarter last year and $.96 per share in the fourth quarter of 2018. Net income attributable to Commerce Bancshares, Inc. for the first quarter of 2019 amounted to $97.1 million, compared to $101.0 million in the first quarter of 2018 and $109.7 million in the prior quarter. For the current quarter, the return on average assets was 1.58%, the return on average common equity was 13.6% and the efficiency ratio was 58.8%.
In announcing these results, John Kemper, Chief Executive Officer, said, “While the U.S. economy remained solid and profits this quarter were strong at our Bank, we experienced only modest growth in average loans, driven mainly by the commercial category. Consumer lending was seasonally lower, especially in auto and consumer credit card loans. Net interest income declined compared to the prior quarter but included several non-recurring items recorded in the prior quarter. Adjusted for these items and income on our inflation bonds, our net yield on earning assets continued to grow, resulting from increased loan yields, while deposit costs grew modestly. Fee income totaled $121.2 million this quarter and reflected year-over-year growth in trust, cash sweep and mortgage banking revenue, but was partly offset by lower net bank card fees. The increase in non-interest expense compared to last year was mainly due to higher salaries and benefits, but included several non-recurring items and reflected a core growth rate of 3.2%."
Mr. Kemper continued, “This quarter net loan charge-offs totaled $11.7 million, compared to $12.1 million in the prior quarter and $10.4 million in the first quarter of 2018, as the overall credit environment remained favorable. The ratio of annualized net loan charge-offs to average loans was .34% in both the current and prior quarters and was .30% in the first quarter of last year. Net loan charge-offs on commercial loans declined $1.1 million from the previous quarter and remained low, while net loan charge-offs on personal banking loans increased $737 thousand to $11.3 million, mostly the result of higher consumer credit card losses. During the current quarter, the provision for loan losses exceeded net loan charge-offs by $750 thousand and totaled $12.5 million. The allowance for loan losses amounted to $160.7 million at March 31, 2019, or 1.14% of period end loans. Non-performing assets totaled $12.9 million this quarter and remained at very low levels."
Total assets at March 31, 2019 were $25.0 billion, total loans were $14.1 billion, and total deposits were $20.0 billion. During the quarter, the Company paid a common cash dividend of $.26 per share, representing a 16.1% increase over the rate paid in the fourth quarter of 2018, and paid a 6% cash dividend on its preferred stock. The Company purchased 647,054 of its common shares this quarter.
Commerce Bancshares, Inc. is a registered bank holding company offering a full line of banking services, including investment management and securities brokerage. The Company currently operates banking facilities in nine key markets including St. Louis, Kansas City, Springfield, Central Missouri, Central Illinois, Wichita, Tulsa, Oklahoma City and Denver. The Company also maintains commercial offices in Dallas, Houston, Cincinnati, Nashville, Des Moines, Indianapolis, and Grand Rapids.
This financial news release, including management's discussion of first quarter results, is posted to the Company's web site at www.commercebank.com.
COMMERCE BANCSHARES, INC. and SUBSIDIARIES FINANCIAL HIGHLIGHTS | ||||||||||||||
| For the Three Months Ended | ||||||||||||||
(Unaudited) | March 31, 2019 |
December 31, 2018 |
March 31, 2018 | |||||||||||
| FINANCIAL SUMMARY | ||||||||||||||
| Net interest income | $203,488 | $212,220 | $192,892 | |||||||||||
| Non-interest income | 121,240 | 133,087 | 119,690 | |||||||||||
| Total revenue | 324,728 | 345,307 | 312,582 | |||||||||||
| Investment securities gains (losses), net | (925 | ) | (7,129 | ) | 5,410 | |||||||||
| Provision for loan losses | 12,463 | 12,256 | 10,396 | |||||||||||
| Non-interest expense | 191,425 | 188,625 | 182,277 | |||||||||||
| Income before taxes | 119,915 | 137,297 | 125,319 | |||||||||||
| Income taxes | 22,860 | 26,537 | 23,258 | |||||||||||
| Non-controlling interest expense (income) | (83 | ) | 1,108 | 1,077 | ||||||||||
| Net income attributable to Commerce Bancshares, Inc. | 97,138 | 109,652 | 100,984 | |||||||||||
| Preferred stock dividends | 2,250 | 2,250 | 2,250 | |||||||||||
| Net income available to common shareholders | $94,888 | $107,402 | $98,734 | |||||||||||
| Earnings per common share: | ||||||||||||||
| Net income — basic | $.85 | $.96 | $.88 | |||||||||||
| Net income — diluted | $.85 | $.96 | $.88 | |||||||||||
| Effective tax rate | 19.05 | % | 19.49 | % | 18.72 | % | ||||||||
| Tax equivalent net interest income | $207,104 | $216,281 | $196,638 | |||||||||||
| Average total interest earning assets (1) | $ | 23,874,861 | $ | 23,974,108 | $ | 23,693,350 | ||||||||
| Diluted wtd. average shares outstanding | 110,300,988 | 110,770,084 | 111,264,137 | |||||||||||
| RATIOS | ||||||||||||||
| Average loans to deposits (2) | 70.96 | % | 69.87 | % | 69.09 | % | ||||||||
| Return on total average assets | 1.58 | 1.75 | 1.66 | |||||||||||
| Return on average common equity (3) | 13.64 | 15.85 | 15.58 | |||||||||||
| Non-interest income to total revenue | 37.34 | 38.54 | 38.29 | |||||||||||
| Efficiency ratio (4) | 58.76 | 54.53 | 58.21 | |||||||||||
| Net yield on interest earning assets | 3.52 | 3.58 | 3.37 | |||||||||||
| EQUITY SUMMARY | ||||||||||||||
| Cash dividends per common share | $.260 | $.224 | $.224 | |||||||||||
| Cash dividends on common stock | $28,858 | $24,997 | $25,106 | |||||||||||
| Cash dividends on preferred stock | $2,250 | $2,250 | $2,250 | |||||||||||
| Book value per common share (5) | $26.18 | $25.13 | $22.88 | |||||||||||
| Market value per common share (5) | $58.06 | $56.37 | $57.06 | |||||||||||
| High market value per common share | $64.02 | $64.70 | $58.93 | |||||||||||
| Low market value per common share | $55.62 | $53.40 | $52.24 | |||||||||||
| Common shares outstanding (5) | 110,696,250 | 111,331,350 | 111,948,372 | |||||||||||
| Tangible common equity to tangible assets (6) | 11.06 | % | 10.45 | % | 9.88 | % | ||||||||
| Tier I leverage ratio | 11.67 | % | 11.52 | % | 10.84 | % | ||||||||
| OTHER QTD INFORMATION | ||||||||||||||
| Number of bank/ATM locations | 319 | 320 | 325 | |||||||||||
| Full-time equivalent employees | 4,841 | 4,795 | 4,799 | |||||||||||
(1) | Excludes allowance for loan losses and unrealized gains/(losses) on available for sale debt securities. | |
(2) | Includes loans held for sale. | |
(3) | Annualized net income available to common shareholders divided by average total equity less preferred stock. | |
(4) | The efficiency ratio is calculated as non-interest expense (excluding intangibles amortization) as a percent of revenue. | |
(5) | As of period end. | |
(6) | The tangible common equity ratio is calculated as stockholders’ equity reduced by preferred stock, goodwill and other intangible assets (excluding mortgage servicing rights) divided by total assets reduced by goodwill and other intangible assets (excluding mortgage servicing rights). |
All share and per share amounts have been restated to reflect the 5% stock dividend distributed in December 2018.
COMMERCE BANCSHARES, INC. and SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME | |||||||||||||||||||||||||
| For the Three Months Ended | |||||||||||||||||||||||||
(Unaudited) | March 31, 2019 |
December 31, 2018 |
September 30, 2018 |
June 30, 2018 |
March 31, 2018 | ||||||||||||||||||||
| Interest income | $ | 227,865 | $ | 232,832 | $ | 224,751 | $ | 225,623 | $ | 205,995 | |||||||||||||||
| Interest expense | 24,377 | 20,612 | 16,997 | 14,664 | 13,103 | ||||||||||||||||||||
| Net interest income | 203,488 | 212,220 | 207,754 | 210,959 | 192,892 | ||||||||||||||||||||
| Provision for loan losses | 12,463 | 12,256 | 9,999 | 10,043 | 10,396 | ||||||||||||||||||||
| Net interest income after provision for loan losses | 191,025 | 199,964 | 197,755 | 200,916 | 182,496 | ||||||||||||||||||||
| NON-INTEREST INCOME | |||||||||||||||||||||||||
| Bank card transaction fees | 39,644 | 44,481 | 42,427 | 43,215 | 41,453 | ||||||||||||||||||||
| Trust fees | 37,256 | 37,466 | 37,400 | 37,036 | 36,062 | ||||||||||||||||||||
| Deposit account charges and other fees | 23,018 | 23,887 | 23,755 | 23,893 | 22,982 | ||||||||||||||||||||
| Capital market fees | 1,879 | 1,843 | 1,595 | 1,992 | 2,291 | ||||||||||||||||||||
| Consumer brokerage services | 3,747 | 4,184 | 3,884 | 3,971 | 3,768 | ||||||||||||||||||||
| Loan fees and sales | 3,309 | 3,053 | 3,579 | 3,229 | 2,862 | ||||||||||||||||||||
| Other | 12,387 | 18,173 | 11,074 | 11,514 | 10,272 | ||||||||||||||||||||
| Total non-interest income | 121,240 | 133,087 | 123,714 | 124,850 | 119,690 | ||||||||||||||||||||
| INVESTMENT SECURITIES GAINS (LOSSES), NET | (925 | ) | (7,129 | ) | 4,306 | (3,075 | ) | 5,410 | |||||||||||||||||
| NON-INTEREST EXPENSE | |||||||||||||||||||||||||
| Salaries and employee benefits | 122,128 | 120,517 | 116,194 | 115,589 | 115,894 | ||||||||||||||||||||
| Net occupancy | 11,501 | 11,711 | 11,631 | 11,118 | 11,584 | ||||||||||||||||||||
| Equipment | 4,471 | 4,508 | 4,592 | 4,594 | 4,431 | ||||||||||||||||||||
| Supplies and communication | 5,162 | 5,095 | 5,103 | 5,126 | 5,313 | ||||||||||||||||||||
| Data processing and software | 22,260 | 22,216 | 22,056 | 21,016 | 20,690 | ||||||||||||||||||||
| Marketing | 5,900 | 5,602 | 4,999 | 5,142 | 4,805 | ||||||||||||||||||||
| Deposit insurance | 1,710 | 1,796 | 3,167 | 3,126 | 3,457 | ||||||||||||||||||||
| Community service | 803 | 480 | 580 | 656 | 729 | ||||||||||||||||||||
| Other | 17,490 | 16,700 | 16,737 | 15,493 | 15,374 | ||||||||||||||||||||
| Total non-interest expense | 191,425 | 188,625 | 185,059 | 181,860 | 182,277 | ||||||||||||||||||||
| Income before income taxes | 119,915 | 137,297 | 140,716 | 140,831 | 125,319 | ||||||||||||||||||||
| Less income taxes | 22,860 | 26,537 | 26,647 | 29,507 | 23,258 | ||||||||||||||||||||
| Net income | 97,055 | 110,760 | 114,069 | 111,324 | 102,061 | ||||||||||||||||||||
| Less non-controlling interest expense (income) | (83 | ) | 1,108 | 1,493 | 994 | 1,077 | |||||||||||||||||||
| Net income attributable to Commerce Bancshares, Inc. | 97,138 | 109,652 | 112,576 | 110,330 | 100,984 | ||||||||||||||||||||
| Less preferred stock dividends | 2,250 | 2,250 | 2,250 | 2,250 | 2,250 | ||||||||||||||||||||
| Net income available to common shareholders | $ | 94,888 | $ | 107,402 | $ | 110,326 | $ | 108,080 | $ | 98,734 | |||||||||||||||
| Net income per common share — basic | $ | .85 | $ | .96 | $ | .99 | $ | .96 | $ | .88 | |||||||||||||||
| Net income per common share — diluted | $ | .85 | $ | .96 | $ | .98 | $ | .96 | $ | .88 | |||||||||||||||
| OTHER INFORMATION | |||||||||||||||||||||||||
| Return on total average assets | 1.58 | % | 1.75 | % | 1.81 | % | 1.80 | % | 1.66 | % | |||||||||||||||
| Return on average common equity (1) | 13.64 | 15.85 | 16.43 | 16.78 | 15.58 | ||||||||||||||||||||
| Efficiency ratio (2) | 58.76 | 54.53 | 55.73 | 54.06 | 58.21 | ||||||||||||||||||||
| Effective tax rate | 19.05 | 19.49 | 19.14 | 21.10 | 18.72 | ||||||||||||||||||||
| Net yield on interest earning assets | 3.52 | 3.58 | 3.52 | 3.65 | 3.37 | ||||||||||||||||||||
| Tax equivalent net interest income | $ | 207,104 | $ | 216,281 | $ | 211,368 | $ | 215,775 | $ | 196,638 | |||||||||||||||
(1) | Annualized net income available to common shareholders divided by average total equity less preferred stock. | |
(2) | The efficiency ratio is calculated as non-interest expense (excluding intangibles amortization) as a percent of revenue. | |
COMMERCE BANCSHARES, INC. and SUBSIDIARIES CONSOLIDATED BALANCE SHEETS - PERIOD END | ||||||||||||||
(Unaudited) | March 31, 2019 |
December 31, 2018 |
March 31, 2018 | |||||||||||
| ASSETS | ||||||||||||||
| Loans | ||||||||||||||
| Business | $ | 5,175,541 | $ | 5,106,427 | $ | 4,960,614 | ||||||||
| Real estate — construction and land | 925,269 | 869,659 | 932,058 | |||||||||||
| Real estate — business | 2,859,614 | 2,875,788 | 2,724,584 | |||||||||||
| Real estate — personal | 2,125,087 | 2,127,083 | 2,069,012 | |||||||||||
| Consumer | 1,893,212 | 1,955,572 | 2,069,235 | |||||||||||
| Revolving home equity | 364,010 | 376,399 | 382,825 | |||||||||||
| Consumer credit card | 772,396 | 814,134 | 752,651 | |||||||||||
| Overdrafts | 5,593 | 15,236 | 2,382 | |||||||||||
| Total loans | 14,120,722 | 14,140,298 | 13,893,361 | |||||||||||
| Allowance for loan losses | (160,682 | ) | (159,932 | ) | (159,532 | ) | ||||||||
| Net loans | 13,960,040 | 13,980,366 | 13,733,829 | |||||||||||
| Loans held for sale | 20,085 | 20,694 | 16,435 | |||||||||||
| Investment securities: | ||||||||||||||
| Available for sale debt securities | 8,627,890 | 8,538,041 | 8,432,180 | |||||||||||
| Trading debt securities | 30,427 | 27,059 | 32,025 | |||||||||||
| Equity securities | 4,694 | 4,409 | 51,512 | |||||||||||
| Other securities | 129,504 | 129,157 | 108,320 | |||||||||||
| Total investment securities | 8,792,515 | 8,698,666 | 8,624,037 | |||||||||||
| Federal funds sold and short-term securities purchased under agreements to resell | 250 | 3,320 | 17,000 | |||||||||||
| Long-term securities purchased under agreements to resell | 700,000 | 700,000 | 700,000 | |||||||||||
| Interest earning deposits with banks | 166,077 | 689,876 | 134,697 | |||||||||||
| Cash and due from banks | 428,018 | 507,892 | 423,048 | |||||||||||
| Premises and equipment — net | 362,679 | 333,119 | 332,253 | |||||||||||
| Goodwill | 138,921 | 138,921 | 138,921 | |||||||||||
| Other intangible assets — net | 8,511 | 8,794 | 7,893 | |||||||||||
| Other assets | 456,375 | 382,194 | 483,129 | |||||||||||
| Total assets | $ | 25,033,471 | $ | 25,463,842 | $ | 24,611,242 | ||||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||||
| Deposits: | ||||||||||||||
| Non-interest bearing | $ | 6,298,724 | $ | 6,980,298 | $ | 6,953,430 | ||||||||
| Savings, interest checking and money market | 11,799,346 | 11,685,239 | 11,828,138 | |||||||||||
| Certificates of deposit of less than $100,000 | 599,289 | 586,091 | 615,401 | |||||||||||
| Certificates of deposit of $100,000 and over | 1,276,994 | 1,072,031 | 1,141,502 | |||||||||||
| Total deposits | 19,974,353 | 20,323,659 | 20,538,471 | |||||||||||
| Federal funds purchased and securities sold under agreements to repurchase | 1,722,751 | 1,956,389 | 1,132,329 | |||||||||||
| Other borrowings | 2,022 | 8,702 | 9,214 | |||||||||||
| Other liabilities | 291,132 | 237,943 | 225,500 | |||||||||||
| Total liabilities | 21,990,258 | 22,526,693 | 21,905,514 | |||||||||||
| Stockholders’ equity: | ||||||||||||||
| Preferred stock | 144,784 | 144,784 | 144,784 | |||||||||||
| Common stock | 559,432 | 559,432 | 535,407 | |||||||||||
| Capital surplus | 2,074,912 | 2,084,824 | 1,802,785 | |||||||||||
| Retained earnings | 307,193 | 241,163 | 325,390 | |||||||||||
| Treasury stock | (60,547 | ) | (34,236 | ) | (15,681 | ) | ||||||||
| Accumulated other comprehensive income (loss) | 11,981 | (64,669 | ) | (89,563 | ) | |||||||||
| Total stockholders’ equity | 3,037,755 | 2,931,298 | 2,703,122 | |||||||||||
| Non-controlling interest | 5,458 | 5,851 | 2,606 | |||||||||||
| Total equity | 3,043,213 | 2,937,149 | 2,705,728 | |||||||||||
| Total liabilities and equity | $ | 25,033,471 | $ | 25,463,842 | $ | 24,611,242 | ||||||||
COMMERCE BANCSHARES, INC. and SUBSIDIARIES AVERAGE BALANCE SHEETS | ||||||||||||||||||||||||
(Unaudited) | For the Three Months Ended | |||||||||||||||||||||||
March 31, |
December 31, |
September 30, |
June 30, |
March 31, | ||||||||||||||||||||
| ASSETS: | ||||||||||||||||||||||||
| Loans: | ||||||||||||||||||||||||
| Business | $ | 5,084,920 | $ | 5,028,635 | $ | 4,926,063 | $ | 4,962,171 | $ | 4,934,621 | ||||||||||||||
| Real estate — construction and land | 907,062 | 953,166 | 992,045 | 971,854 | 951,930 | |||||||||||||||||||
| Real estate — business | 2,864,177 | 2,757,595 | 2,732,968 | 2,726,697 | 2,733,812 | |||||||||||||||||||
| Real estate — personal | 2,119,365 | 2,122,357 | 2,110,945 | 2,078,972 | 2,062,083 | |||||||||||||||||||
| Consumer | 1,929,202 | 1,962,401 | 1,984,643 | 2,025,585 | 2,072,168 | |||||||||||||||||||
| Revolving home equity | 370,962 | 374,216 | 373,819 | 378,366 | 392,727 | |||||||||||||||||||
| Consumer credit card | 781,167 | 788,353 | 774,512 | 754,199 | 757,692 | |||||||||||||||||||
| Overdrafts | 4,205 | 5,277 | 4,704 | 4,497 | 4,628 | |||||||||||||||||||
| Total loans | 14,061,060 | 13,992,000 | 13,899,699 | 13,902,341 | 13,909,661 | |||||||||||||||||||
| Allowance for loan losses | (159,275 | ) | (158,880 | ) | (158,840 | ) | (158,664 | ) | (158,779 | ) | ||||||||||||||
| Net loans | 13,901,785 | 13,833,120 | 13,740,859 | 13,743,677 | 13,750,882 | |||||||||||||||||||
| Loans held for sale | 18,350 | 18,475 | 18,201 | 22,202 | 19,115 | |||||||||||||||||||
| Investment securities: | ||||||||||||||||||||||||
| U.S. government and federal agency obligations | 909,466 | 923,545 | 923,557 | 923,183 | 916,655 | |||||||||||||||||||
| Government-sponsored enterprise obligations | 199,480 | 214,913 | 261,938 | 354,156 | 405,681 | |||||||||||||||||||
| State and municipal obligations | 1,283,349 | 1,361,079 | 1,375,768 | 1,394,766 | 1,513,243 | |||||||||||||||||||
| Mortgage-backed securities | 4,360,428 | 4,379,805 | 4,434,119 | 4,067,152 | 3,925,904 | |||||||||||||||||||
| Asset-backed securities | 1,525,623 | 1,518,706 | 1,427,041 | 1,407,300 | 1,469,488 | |||||||||||||||||||
| Other debt securities | 335,612 | 339,841 | 339,952 | 340,246 | 341,821 | |||||||||||||||||||
| Unrealized loss on debt securities | (48,925 | ) | (166,181 | ) | (119,319 | ) | (122,114 | ) | (43,238 | ) | ||||||||||||||
| Total available for sale debt securities | 8,565,033 | 8,571,708 | 8,643,056 | 8,364,689 | 8,529,554 | |||||||||||||||||||
| Trading debt securities | 25,411 | 26,322 | 24,490 | 26,101 | 21,966 | |||||||||||||||||||
| Equity securities | 4,568 | 4,432 | 4,466 | 47,179 | 50,507 | |||||||||||||||||||
| Other securities | 130,057 | 127,634 | 120,206 | 108,563 | 100,993 | |||||||||||||||||||
| Total investment securities | 8,725,069 | 8,730,096 | 8,792,218 | 8,546,532 | 8,703,020 | |||||||||||||||||||
| Federal funds sold and short-term securities purchased under agreements to resell | 4,797 | 14,415 | 13,042 | 36,791 | 44,339 | |||||||||||||||||||
| Long-term securities purchased under agreements to resell | 700,000 | 699,999 | 685,869 | 700,000 | 700,000 | |||||||||||||||||||
| Interest earning deposits with banks | 316,660 | 352,942 | 298,632 | 353,607 | 273,977 | |||||||||||||||||||
| Other assets | 1,197,261 | 1,158,816 | 1,147,250 | 1,119,454 | 1,145,200 | |||||||||||||||||||
| Total assets | $ | 24,863,922 | $ | 24,807,863 | $ | 24,696,071 | $ | 24,522,263 | $ | 24,636,533 | ||||||||||||||
| LIABILITIES AND EQUITY: | ||||||||||||||||||||||||
| Non-interest bearing deposits | $ | 6,324,738 | $ | 6,666,715 | $ | 6,677,665 | $ | 6,749,104 | $ | 6,824,700 | ||||||||||||||
| Savings | 896,378 | 870,844 | 877,347 | 881,045 | 838,900 | |||||||||||||||||||
| Interest checking and money market | 10,762,550 | 10,840,048 | 10,839,310 | 10,850,123 | 10,737,829 | |||||||||||||||||||
| Certificates of deposit of less than $100,000 | 590,200 | 584,828 | 593,936 | 609,011 | 625,319 | |||||||||||||||||||
| Certificates of deposit of $100,000 and over | 1,267,517 | 1,090,546 | 1,100,299 | 1,134,900 | 1,134,194 | |||||||||||||||||||
| Total deposits | 19,841,383 | 20,052,981 | 20,088,557 | 20,224,183 | 20,160,942 | |||||||||||||||||||
| Borrowings: | ||||||||||||||||||||||||
| Federal funds purchased and securities sold under agreements to repurchase | 1,771,534 | 1,655,997 | 1,499,837 | 1,339,278 | 1,560,573 | |||||||||||||||||||
| Other borrowings | 1,248 | 1,335 | 1,833 | 1,913 | 1,913 | |||||||||||||||||||
| Total borrowings | 1,772,782 | 1,657,332 | 1,501,670 | 1,341,191 | 1,562,486 | |||||||||||||||||||
| Other liabilities | 284,018 | 264,449 | 296,884 | 229,080 | 198,398 | |||||||||||||||||||
| Total liabilities | 21,898,183 | 21,974,762 | 21,887,111 | 21,794,454 | 21,921,826 | |||||||||||||||||||
| Equity | 2,965,739 | 2,833,101 | 2,808,960 | 2,727,809 | 2,714,707 | |||||||||||||||||||
| Total liabilities and equity | $ | 24,863,922 | $ | 24,807,863 | $ | 24,696,071 | $ | 24,522,263 | $ | 24,636,533 | ||||||||||||||
COMMERCE BANCSHARES, INC. and SUBSIDIARIES AVERAGE RATES | |||||||||||||||||||
| (Unaudited) | For the Three Months Ended | ||||||||||||||||||
March 31, |
December 31, |
September 30, |
June 30, |
March 31, | |||||||||||||||
| ASSETS: | |||||||||||||||||||
| Loans: | |||||||||||||||||||
| Business (1) | 4.07 | % | 3.93 | % | 3.80 | % | 3.69 | % | 3.48 | % | |||||||||
| Real estate — construction and land | 5.73 | 5.47 | 5.21 | 5.06 | 4.69 | ||||||||||||||
| Real estate — business | 4.61 | 4.53 | 4.35 | 4.22 | 4.06 | ||||||||||||||
| Real estate — personal | 4.00 | 3.87 | 3.83 | 3.84 | 3.80 | ||||||||||||||
| Consumer | 4.73 | 4.62 | 4.46 | 4.39 | 4.25 | ||||||||||||||
| Revolving home equity | 5.17 | 4.98 | 4.72 | 4.51 | 4.25 | ||||||||||||||
| Consumer credit card | 12.18 | 11.91 | 11.99 | 12.05 | 12.06 | ||||||||||||||
| Overdrafts | — | — | — | — | — | ||||||||||||||
| Total loans | 4.85 | 4.72 | 4.59 | 4.49 | 4.33 | ||||||||||||||
| Loans held for sale | 7.38 | 6.59 | 6.87 | 6.72 | 6.45 | ||||||||||||||
| Investment securities: | |||||||||||||||||||
| U.S. government and federal agency obligations | .78 | 1.90 | 2.23 | 3.18 | 2.12 | ||||||||||||||
| Government-sponsored enterprise obligations | 2.35 | 2.24 | 2.10 | 1.88 | 1.84 | ||||||||||||||
| State and municipal obligations (1) | 3.19 | 3.06 | 2.98 | 3.06 | 3.06 | ||||||||||||||
| Mortgage-backed securities | 2.76 | 2.75 | 2.65 | 2.60 | 2.62 | ||||||||||||||
| Asset-backed securities | 2.70 | 2.55 | 2.42 | 2.32 | 2.11 | ||||||||||||||
| Other debt securities | 2.69 | 2.60 | 2.59 | 2.63 | 2.65 | ||||||||||||||
| Total available for sale debt securities | 2.59 | 2.65 | 2.60 | 2.66 | 2.52 | ||||||||||||||
| Trading debt securities (1) | 3.24 | 3.21 | 3.13 | 3.15 | 2.73 | ||||||||||||||
| Equity securities (1) | 37.55 | 39.92 | 32.69 | 89.68 | 3.64 | ||||||||||||||
| Other securities (1) | 5.73 | 15.51 | 13.00 | 6.68 | 6.73 | ||||||||||||||
| Total investment securities | 2.66 | 2.86 | 2.76 | 3.19 | 2.58 | ||||||||||||||
| Federal funds sold and short-term securities purchased under agreements to resell | 2.79 | 2.56 | 2.10 | 1.93 | 1.65 | ||||||||||||||
| Long-term securities purchased under agreements to resell | 2.18 | 2.31 | 2.26 | 2.17 | 2.38 | ||||||||||||||
| Interest earning deposits with banks | 2.42 | 2.28 | 1.96 | 1.80 | 1.69 | ||||||||||||||
| Total interest earning assets | 3.93 | 3.92 | 3.80 | 3.90 | 3.59 | ||||||||||||||
| LIABILITIES AND EQUITY: | |||||||||||||||||||
| Interest bearing deposits: | |||||||||||||||||||
| Savings | .11 | .11 | .11 | .11 | .12 | ||||||||||||||
| Interest checking and money market | .35 | .30 | .26 | .23 | .20 | ||||||||||||||
| Certificates of deposit of less than $100,000 | .87 | .70 | .56 | .46 | .43 | ||||||||||||||
| Certificates of deposit of $100,000 and over | 1.92 | 1.61 | 1.41 | 1.23 | 1.02 | ||||||||||||||
| Total interest bearing deposits | .51 | .41 | .35 | .32 | .28 | ||||||||||||||
| Borrowings: | |||||||||||||||||||
| Federal funds purchased and securities sold under agreements to repurchase | 1.72 | 1.60 | 1.33 | 1.18 | 1.04 | ||||||||||||||
| Other borrowings | 1.62 | 2.67 | 2.60 | 2.52 | 2.54 | ||||||||||||||
| Total borrowings | 1.72 | 1.60 | 1.33 | 1.19 | 1.04 | ||||||||||||||
| Total interest bearing liabilities | .65 | % | .54 | % | .45 | % | .40 | % | .36 | % | |||||||||
| Net yield on interest earning assets | 3.52 | % | 3.58 | % | 3.52 | % | 3.65 | % | 3.37 | % | |||||||||
(1) Stated on a tax equivalent basis using a federal income tax rate of 21%.
| COMMERCE BANCSHARES, INC. and SUBSIDIARIES | |||||||||||||||||||||||||
| CREDIT QUALITY | |||||||||||||||||||||||||
| For the Three Months Ended | |||||||||||||||||||||||||
(Unaudited) | March 31, |
December 31, |
September 30, |
June 30, |
March 31, | ||||||||||||||||||||
| ALLOWANCE FOR LOAN LOSSES | |||||||||||||||||||||||||
| Balance at beginning of period | $ | 159,932 | $ | 159,732 | $ | 159,532 | $ | 159,532 | $ | 159,532 | |||||||||||||||
| Provision for losses | 12,463 | 12,256 | 9,999 | 10,043 | 10,396 | ||||||||||||||||||||
| Net charge-offs (recoveries): | |||||||||||||||||||||||||
| Commercial portfolio: | |||||||||||||||||||||||||
| Business | 447 | 1,748 | 332 | 36 | (14 | ) | |||||||||||||||||||
| Real estate — construction and land | (16 | ) | (183 | ) | (119 | ) | (297 | ) | (36 | ) | |||||||||||||||
| Real estate — business | (37 | ) | (91 | ) | (42 | ) | (40 | ) | (205 | ) | |||||||||||||||
| 394 | 1,474 | 171 | (301 | ) | (255 | ) | |||||||||||||||||||
| Personal banking portfolio: | |||||||||||||||||||||||||
| Consumer credit card | 8,958 | 7,421 | 7,340 | 8,251 | 7,566 | ||||||||||||||||||||
| Consumer | 1,924 | 2,805 | 2,091 | 1,862 | 2,528 | ||||||||||||||||||||
| Overdraft | 317 | 500 | 351 | 326 | 444 | ||||||||||||||||||||
| Real estate — personal | 101 | (144 | ) | (153 | ) | (95 | ) | 57 | |||||||||||||||||
| Revolving home equity | 19 | — | (1 | ) | — | 56 | |||||||||||||||||||
| 11,319 | 10,582 | 9,628 | 10,344 | 10,651 | |||||||||||||||||||||
| Total net loan charge-offs | 11,713 | 12,056 | 9,799 | 10,043 | 10,396 | ||||||||||||||||||||
| Balance at end of period | $ | 160,682 | $ | 159,932 | $ | 159,732 | $ | 159,532 | $ | 159,532 | |||||||||||||||
| NET CHARGE-OFF RATIOS* | |||||||||||||||||||||||||
| Commercial portfolio: | |||||||||||||||||||||||||
| Business | .04 | % | .14 | % | .03 | % | — | % | — | % | |||||||||||||||
| Real estate — construction and land | (.01 | ) | (.08 | ) | (.05 | ) | (.12 | ) | (.02 | ) | |||||||||||||||
| Real estate — business | (.01 | ) | (.01 | ) | (.01 | ) | (.01 | ) | (.03 | ) | |||||||||||||||
| .02 | .07 | .01 | (.01 | ) | (.01 | ) | |||||||||||||||||||
| Personal banking portfolio: | |||||||||||||||||||||||||
| Consumer credit card | 4.65 | 3.73 | 3.76 | 4.39 | 4.05 | ||||||||||||||||||||
| Consumer | .40 | .57 | .42 | .37 | .49 | ||||||||||||||||||||
| Overdraft | 30.57 | 37.59 | 29.60 | 29.08 | 38.91 | ||||||||||||||||||||
| Real estate — personal | .02 | (.03 | ) | (.03 | ) | (.02 | ) | .01 | |||||||||||||||||
| Revolving home equity | .02 | — | — | — | .06 | ||||||||||||||||||||
| .88 | .80 | .73 | .79 | .82 | |||||||||||||||||||||
| Total | .34 | % | .34 | % | .28 | % | .29 | % | .30 | % | |||||||||||||||
| CREDIT QUALITY RATIOS | |||||||||||||||||||||||||
| Non-performing assets to total loans | .09 | % | .10 | % | .07 | % | .08 | % | .08 | % | |||||||||||||||
| Non-performing assets to total assets | .05 | .05 | .04 | .04 | .05 | ||||||||||||||||||||
| Allowance for loan losses to total loans | 1.14 | 1.13 | 1.14 | 1.14 | 1.15 | ||||||||||||||||||||
| NON-PERFORMING ASSETS | |||||||||||||||||||||||||
| Non-accrual loans: | |||||||||||||||||||||||||
| Business | $ | 8,569 | $ | 8,985 | $ | 5,131 | $ | 5,114 | $ | 5,557 | |||||||||||||||
| Real estate — construction and land | 4 | 4 | 4 | 5 | 5 | ||||||||||||||||||||
| Real estate — business | 1,746 | 1,715 | 1,467 | 2,465 | 2,546 | ||||||||||||||||||||
| Real estate — personal | 1,848 | 1,832 | 1,767 | 1,888 | 2,169 | ||||||||||||||||||||
| Total | 12,167 | 12,536 | 8,369 | 9,472 | 10,277 | ||||||||||||||||||||
| Foreclosed real estate | 737 | 1,413 | 1,181 | 1,039 | 1,300 | ||||||||||||||||||||
| Total non-performing assets | $ | 12,904 | $ | 13,949 | $ | 9,550 | $ | 10,511 | $ | 11,577 | |||||||||||||||
| Loans past due 90 days and still accruing interest | $ | 16,655 | $ | 16,658 | $ | 13,991 | $ | 13,453 | $ | 14,928 | |||||||||||||||
*as a percentage of average loans (excluding loans held for sale)
For the quarter ended March 31, 2019, net income attributable to Commerce Bancshares, Inc. (net income) amounted to $97.1 million, compared to $109.7 million in the previous quarter and $101.0 million in the same quarter last year. The decrease in net income from the previous quarter was the result of lower net interest income and non-interest income and higher non-interest expense, partly offset by lower securities losses. Excluding inflation income on the Company’s inflation protected securities (TIPs) and certain non-recurring interest income received last quarter, the net interest margin grew five basis points to 3.55%, mainly due to higher loan rates, while funding costs rose modestly. Non-interest income declined $11.8 million this quarter, but the prior quarter included net branch gains of $7.7 million. Average loans increased $68.9 million this quarter over the previous quarter, while average deposits decreased $211.6 million. For the quarter, the return on average assets was 1.58%, the return on average common equity was 13.6%, and the efficiency ratio was 58.8%.
Balance Sheet Review
During the 1st quarter of 2019, average loans totaled $14.1 billion, an increase of $68.9 million over the prior quarter, and grew $150.6 million, or 1.1%, over the same period last year. Period-end loans, however, declined slightly from the prior quarter. Compared to the previous quarter, average business real estate and business loans grew $106.6 million, and $56.3 million, respectively. This growth was partly offset by declines in average construction (decline of $46.1 million) and auto (decline of $24.3 million) lending activities. Growth in business loans was the result of increased leasing activities, new commercial and industrial lending and seasonal agribusiness borrowings, but other seasonal loan paydowns partly offset this growth. Business real estate loans continued to grow from new lending in a number of our markets. The decline in construction loans resulted mainly from paydowns on completed projects, partly offset by additional loan draws on existing projects. The decline in auto loans of $24.3 million mainly resulted from paydowns on existing loan balances, which exceeded new loan originations. During the current quarter, the Company sold certain fixed rate personal real estate loans totaling $45.6 million, compared to $49.7 million in the prior quarter.
Total average available for sale debt securities decreased $6.7 million from the previous quarter to $8.6 billion, at fair value. The decrease in investment securities was mainly the result of lower municipal, mortgage-backed, U.S. government and federal agency, and government-sponsored enterprise obligation securities. Purchases of securities during the quarter totaled $406.5 million, and sales, maturities and pay downs were $404.6 million. At March 31, 2019, the duration of the investment portfolio was 2.9 years, and maturities and pay downs of approximately $1.0 billion are expected to occur during the next 12 months.
Total average deposits decreased $211.6 million this quarter compared to the previous quarter. The decrease in average deposits resulted mainly from lower balances of business demand deposits (decline of $457.8 million), and money market accounts (decline of $282.7 million). These declines were partly offset by increases in interest checking deposits, certificates of deposit, government demand deposits, personal demand deposits, and savings deposits of $205.2 million, $182.3 million, $64.1 million, $55.0 million, and $25.5 million, respectively. Compared to the previous quarter, total average consumer and wealth (including private banking) deposits increased $127.9 million and $31.4 million, respectively, while average commercial banking deposits declined $274.1 million. The average loans to deposits ratio was 71.0% in the current quarter and 69.9% in the prior quarter. The Company’s average borrowings, which includes customer repurchase agreements, were $1.8 billion in the 1st quarter of 2019, an increase of $115.5 million over the prior quarter’s balance.
Net Interest Income
Net interest income in the 1st quarter of 2019 amounted to $203.5 million compared to $212.2 million in the previous quarter, a decrease of $8.7 million. On a tax equivalent basis, net interest income for the current quarter decreased $9.2 million from the previous quarter to $207.1 million. The decline in net interest income was partly due to fewer days in the quarter but also included non-recurring dividends and interest of $3.1 million from the Company’s private equity investments in the prior quarter. Additionally, inflation income on the Company’s TIPs declined $3.5 million this quarter. Excluding these items, net interest income declined $2.4 million and the adjusted net yield on earning assets (tax equivalent) increased to 3.55%, compared to 3.50% in the prior quarter.
Compared to the previous quarter, interest income on loans (tax equivalent) increased $1.7 million as a result of higher overall loan yields coupled with growth in business real estate loan balances. The average tax-equivalent yield on the loan portfolio increased 13 basis points this quarter to 4.85%, compared to 4.72% in the previous quarter.
Interest income on investment securities (tax equivalent) decreased $6.6 million from the previous quarter, mainly due to the discrete interest and dividends received in the prior quarter, as noted above, coupled with lower inflation income on TIPs. A decline in the Consumer Price Index this quarter resulted in negative inflation income of $2.0 million. The adjustment to premium amortization on mortgage-backed securities for pre-payment speed changes was not material this quarter. The yield on total investment securities was 2.66% in the current quarter and 2.86% in the previous quarter.
Interest costs on deposits totaled 51 basis points in the 1st quarter of 2019, compared to 41 basis points in the prior quarter. Interest expense on deposits increased $2.9 million this quarter compared to the previous quarter mainly due to higher rates on money market and certificates of deposit (CD), coupled with growth in jumbo CD balances. Borrowing costs increased $829 thousand this quarter due to higher rates and balances of customer repurchase agreements. The overall rate paid on interest bearing liabilities was .65% in the current quarter, compared to .54% in the prior quarter.
Non-Interest Income
In the 1st quarter of 2019, total non-interest income amounted to $121.2 million, an increase of $1.6 million, or 1.3%, compared to the same period last year and decreased $11.8 million compared to the prior quarter. The prior quarter included net gains of $7.7 million from the disposition of several branch properties (included in other income). The increase in non-interest income over the same period last year was mainly due to growth in trust, cash sweep, and loan fee income, partly offset by lower net bank card fees.
Total net bank card fees in the current quarter decreased $1.8 million, or 4.4%, from the same period last year and decreased $4.8 million, or 10.9%, compared to the prior quarter. Net corporate card fees declined $1.3 million, or 5.4%, from the same quarter last year mainly due to higher rewards and network expense. Net debit card fees declined $261 thousand, or 2.8%, due to lower interchange income. Overall net merchant income declined $287 thousand due to lower interchange fees and higher network expense, while net credit card fees increased slightly on higher interchange revenue. Total net bank card fees this quarter were comprised of fees on corporate card ($22.9 million), debit card ($9.1 million), merchant ($4.5 million) and credit card ($3.2 million) transactions.
In the current quarter, trust fees increased $1.2 million, or 3.3%, over the same period last year, resulting from growth in private client fee income. Compared to the same period last year, deposit account fees increased slightly due to growth in corporate cash management fees, offset by lower overdraft and deposit account fees.
During the 1st quarter of 2019, cash sweep fees grew 59% over the same period last year to $3.4 million, while capital market fees declined $412 thousand. Loan fees and sales increased $447 thousand, or 15.6%, over amounts recorded in the same quarter last year, mainly due to higher mortgage banking revenue. The Company’s deferred compensation plan assets are held in a trust and are recorded as both an asset and a liability. Fair value equity adjustments on these assets affecting both other income and other expense increased $1.4 million over the same quarter last year and $2.7 million over the previous quarter. Non-interest income comprised 37.3% of the Company’s total revenue this quarter.
Investment Securities Gains and Losses
The Company recorded net securities losses of $925 thousand in the current quarter, compared to losses of $7.1 million in the prior quarter and gains of $5.4 million in the 1st quarter of 2018. Net securities losses in the current quarter resulted mainly from unrealized fair value losses of $1.8 million on the Company’s private equity investment portfolio, partly offset by net gains of $694 thousand from sales of investment securities with a book value of $150.1 million.
Non-Interest Expense
Non-interest expense for the current quarter amounted to $191.4 million, compared to $182.3 million in the same period last year and $188.6 million in the prior quarter. The increase in non-interest expense compared to the same period last year was mainly due to higher salaries and benefits, but included several non-recurring items, and reflected a core growth rate of 3.2%.
Compared to the 1st quarter of last year, salaries and benefits expense increased $6.2 million, or 5.4%. Salaries expense grew $5.0 million, mostly due to higher full-time salary costs. Benefits expense increased $1.2 million, or 5.8%, due to higher medical expense. Full-time equivalent employees totaled 4,841 and 4,799 at March 31, 2019 and 2018, respectively.
Marketing costs increased $1.1 million mainly due to increased marketing efforts for consumer deposit customers and healthcare banking initiatives. Data processing costs increased $1.6 million due to higher costs for service providers and software expense. However, deposit insurance expense declined $1.7 million due to reduced FDIC insurance rates. Additionally, costs for occupancy, supplies and communication, loan collection, and repossessed property declined a combined $984 thousand this quarter compared to the same period last year.
Income Taxes
The effective tax rate for the Company was 19.1% in the current quarter, 19.5% in the previous quarter, and 18.7% in the 1st quarter of 2018.
Credit Quality
Net loan charge-offs in the 1st quarter of 2019 amounted to $11.7 million, compared to $12.1 million in the prior quarter and $10.4 million in the same period last year. The ratio of annualized net loan charge-offs to total average loans was .34% in both the current quarter and the previous quarter, and .30% in the 1st quarter of last year. During the 1st quarter of 2019, net loan charge-offs on commercial loans declined $1.1 million to $394 thousand, while net loan charge-offs on personal banking loans increased $737 thousand over the previous quarter to $11.3 million, mainly due to higher consumer credit card net losses.
In the 1st quarter of 2019, annualized net loan charge-offs on average consumer credit card loans were 4.65%, compared to 3.73% in the previous quarter, and 4.05% in the same quarter last year. Consumer loan net charge-offs were .40% of average consumer loans in the current quarter, .57% in the prior quarter and .49% in the same quarter last year. This quarter, the provision for loan losses totaled $12.5 million and exceeded net loan charge-offs by $750 thousand. At March 31, 2019, the allowance totaled $160.7 million, or 1.14% of total loans.
At March 31, 2019, total non-performing assets amounted to $12.9 million, a decrease of $1.0 million from the previous quarter. Non-performing assets are comprised of non-accrual loans and foreclosed real estate ($12.2 million and $737 thousand, respectively). At March 31, 2019, the balance of non-accrual loans, which represented .09% of loans outstanding, included business loans of $8.6 million, business real estate loans of $1.7 million, and personal real estate loans of $1.8 million. Loans more than 90 days past due and still accruing interest totaled $16.7 million at March 31, 2019.
Other
During the 1st quarter of 2019, the Company paid a cash dividend of $.26 per common share, representing a 16.1% increase over the same period last year. The Company also paid an annualized 6% cash dividend on its preferred stock. The Company purchased 647,054 shares of treasury stock during the current quarter at an average price of $61.35.
Forward-Looking Information
This information contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements include future financial and operating results, expectations, intentions and other statements that are not historical facts. Such statements are based on current beliefs and expectations of the Company’s management and are subject to significant risks and uncertainties. Actual results may differ
View source version on businesswire.com: https://www.businesswire.com/news/home/20190411005175/en/
Contacts:
(816) 234-2081
Web
Site: http://www.commercebank.com
Email:
mymoney@commercebank.com
