Commerce Bancshares, Inc. (NASDAQ: CBSH) announced earnings of $.98 per common share for the three months ended September 30, 2019, compared to $.98 per share in the same quarter last year and $.96 per share in the prior quarter. Net income attributable to Commerce Bancshares, Inc. for the third quarter of 2019 amounted to $109.2 million, compared to $112.6 million in the third quarter of 2018 and $108.0 million in the prior quarter. For the quarter, the return on average assets was 1.72%, the return on average common equity was 14.2% and the efficiency ratio was 56.7%.
For the nine months ended September 30, 2019, earnings per common share totaled $2.79 compared to $2.82 for the first nine months of 2018. Net income attributable to Commerce Bancshares, Inc. amounted to $314.4 million for the nine months ended September 30, 2019 compared to $323.9 million in the comparable period last year. Year to date, the return on average assets was 1.68%, and the return on average common equity was 14.1%.
In announcing these results, John Kemper, Chief Executive Officer, said, “We are pleased to announce another quarter of strong operating results, driven by growth in our diversified, fee-based businesses. Fee income totaled $132.7 million this quarter and represented 39% of our total revenue. Compared to the same period last year, fee income grew 7.3%, driven mainly by increases in bank card, trust, and loan fees and sales. Average loan growth was stronger this quarter compared to the previous quarter mainly due to demand for business loans, primarily commercial and industrial loans. Also, we continued to see strong demand for residential mortgage loans this quarter, which resulted in higher average loan balances and higher fee income. Net interest income contracted in the third quarter of 2019 mostly due to lower inflation income from our inflation-protected securities and less interest on floating rate commercial loans that are indexed to LIBOR. Adjusted for inflation income, the net yield on interest earning assets decreased ten basis points. While the recent drop in interest rates has started to impact net interest income, the strength of our fee-based businesses, disciplined approach to credit, and focus on expense management are mitigating some of the adverse effects of the declining interest rate environment.”
Mr. Kemper continued, “This quarter net loan charge-offs totaled $11.5 million, compared to $11.3 million in the prior quarter and $9.8 million in the third quarter of 2018, as the overall credit environment remained favorable. The ratio of annualized net loan charge-offs to average loans was .32% in both the current and previous quarters and .28% in the third quarter of last year. Net loan charge-offs on commercial loans totaled $291 thousand this quarter and remained exceptionally low, while net loan charge-offs on personal banking loans increased slightly to $11.2 million. During the current quarter, the provision for loan losses totaled $11.0 million, or $500 thousand lower than net loan charge-offs. The allowance for loan losses amounted to $160.7 million at September 30, 2019, or 1.11% of period end loans. Non-performing assets totaled $12.2 million this quarter and remained at very low levels.”
Total assets at September 30, 2019 were $25.9 billion, total loans were $14.5 billion, and total deposits were $20.3 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 2018, and paid a 6% cash dividend on its preferred stock. The Company purchased 2,576,012 of its common shares this quarter.
Commerce Bancshares, Inc. is a regional bank holding company offering a full line of banking services, including payment solutions, investment management and securities brokerage. Commerce Bank, a subsidiary of Commerce Bancshares, Inc., leverages more than 150 years of proven strength and experience to help individuals and businesses solve financial challenges. In addition to offering payment solutions across the U.S., Commerce Bank currently operates full service banking facilities across the Midwest including the St. Louis and Kansas City metropolitan areas, Springfield, Central Missouri, Central Illinois, Wichita, Tulsa, Oklahoma City, and Denver. It also maintains commercial offices in Dallas, Houston, Cincinnati, Nashville, Des Moines, Indianapolis, and Grand Rapids. Commerce delivers high-touch service and sophisticated financial solutions at regional branches, commercial offices, ATMs, online, mobile and through a 24/7 customer service line.
This financial news release, including management's discussion of third quarter results, is posted to the Company's web site at www.commercebank.com.
* * * * * * * * * * * * * * *
For additional information, contact
Matthew Burkemper, Investor Relations
at 8000 Forsyth, Mailstop: CBIR-1
Clayton, MO 63105
or by telephone at (314) 746-7485
Web Site: http://www.commercebank.com
Email: matthew.burkemper@commercebank.com
COMMERCE BANCSHARES, INC. and SUBSIDIARIES | ||||||||||||||||||||
FINANCIAL HIGHLIGHTS | ||||||||||||||||||||
For the Three Months Ended | For the Nine Months Ended | |||||||||||||||||||
(Unaudited)
| September 30,
|
June 30,
|
September 30,
| September 30,
|
September 30,
| |||||||||||||||
FINANCIAL SUMMARY | ||||||||||||||||||||
Net interest income | $203,512 | $211,634 | $207,754 | $618,634 | $611,605 | |||||||||||||||
Non-interest income | 132,743 | 127,259 | 123,714 | 381,242 | 368,254 | |||||||||||||||
Total revenue | 336,255 | 338,893 | 331,468 | 999,876 | 979,859 | |||||||||||||||
Investment securities gains (losses), net | 4,909 | (110 | ) | 4,306 | 3,874 | 6,641 | ||||||||||||||
Provision for loan losses | 10,963 | 11,806 | 9,999 | 35,232 | 30,438 | |||||||||||||||
Non-interest expense | 191,020 | 189,779 | 185,059 | 572,224 | 549,196 | |||||||||||||||
Income before taxes | 139,181 | 137,198 | 140,716 | 396,294 | 406,866 | |||||||||||||||
Income taxes | 29,101 | 28,899 | 26,647 | 80,860 | 79,412 | |||||||||||||||
Non-controlling interest expense | 838 | 328 | 1,493 | 1,083 | 3,564 | |||||||||||||||
Net income attributable to Commerce Bancshares, Inc. | 109,242 | 107,971 | 112,576 | 314,351 | 323,890 | |||||||||||||||
Preferred stock dividends | 2,250 | 2,250 | 2,250 | 6,750 | 6,750 | |||||||||||||||
Net income available to common shareholders | $106,992 | $105,721 | $110,326 | $307,601 | $317,140 | |||||||||||||||
Earnings per common share: | ||||||||||||||||||||
Net income — basic | $.98 | $.96 | $.99 | $2.79 | $2.83 | |||||||||||||||
Net income — diluted | $.98 | $.96 | $.98 | $2.79 | $2.82 | |||||||||||||||
Effective tax rate | 21.04 | % | 21.11 | % | 19.14 | % | 20.46 | % | 19.69 | % | ||||||||||
Tax equivalent net interest income | $206,958 | $215,203 | $211,368 | $629,265 | $623,781 | |||||||||||||||
Average total interest earning assets (1) | $23,947,084 | $23,939,495 | $23,826,980 | $23,920,745 | $23,735,128 | |||||||||||||||
Diluted wtd. average shares outstanding | 107,856,257 | 109,752,238 | 111,260,224 | 109,294,206 | 111,285,069 | |||||||||||||||
RATIOS | ||||||||||||||||||||
Average loans to deposits (2) | 72.48 | % | 70.97 | % | 69.28 | % | 71.47 | % | 69.07 | % | ||||||||||
Return on total average assets | 1.72 | 1.73 | 1.81 | 1.68 | 1.76 | |||||||||||||||
Return on average common equity (3) | 14.21 | 14.46 | 16.43 | 14.11 | 16.27 | |||||||||||||||
Non-interest income to total revenue | 39.48 | 37.55 | 37.32 | 38.13 | 37.58 | |||||||||||||||
Efficiency ratio (4) | 56.66 | 55.88 | 55.73 | 57.08 | 55.95 | |||||||||||||||
Net yield on interest earning assets | 3.43 | 3.61 | 3.52 | 3.52 | 3.51 | |||||||||||||||
EQUITY SUMMARY | ||||||||||||||||||||
Cash dividends per common share | $.260 | $.260 | $.224 | $.780 | $.671 | |||||||||||||||
Cash dividends on common stock | $27,993 | $28,682 | $25,059 | $85,533 | $75,261 | |||||||||||||||
Cash dividends on preferred stock | $2,250 | $2,250 | $2,250 | $6,750 | $6,750 | |||||||||||||||
Book value per common share (5) | $27.58 | $27.53 | $23.84 | |||||||||||||||||
Market value per common share (5) | $60.65 | $59.66 | $62.88 | |||||||||||||||||
High market value per common share | $61.84 | $61.96 | $69.10 | |||||||||||||||||
Low market value per common share | $54.65 | $56.63 | $61.26 | |||||||||||||||||
Common shares outstanding (5) | 107,364,746 | 109,927,645 | 111,691,094 | |||||||||||||||||
Tangible common equity to tangible assets (6) | 10.95 | % | 11.25 | % | 10.10 | % | ||||||||||||||
Tier I leverage ratio | 11.32 | % | 11.75 | % | 11.38 | % | ||||||||||||||
OTHER QTD INFORMATION | ||||||||||||||||||||
Number of bank/ATM locations | 316 | 319 | 322 | |||||||||||||||||
Full-time equivalent employees | 4,873 | 4,857 | 4,797 | |||||||||||||||||
(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 | For the Nine Months Ended | ||||||||||||||||||||
(Unaudited)
| September 30,
|
June 30,
|
March 31,
|
December 31,
|
September 30,
| September 30,
|
September 30,
| ||||||||||||||
Interest income | $231,743 | $238,412 | $227,865 | $232,832 | $224,751 | $698,020 | $656,369 | ||||||||||||||
Interest expense | 28,231 | 26,778 | 24,377 | 20,612 | 16,997 | 79,386 | 44,764 | ||||||||||||||
Net interest income | 203,512 | 211,634 | 203,488 | 212,220 | 207,754 | 618,634 | 611,605 | ||||||||||||||
Provision for loan losses | 10,963 | 11,806 | 12,463 | 12,256 | 9,999 | 35,232 | 30,438 | ||||||||||||||
Net interest income after provision for loan losses | 192,549 | 199,828 | 191,025 | 199,964 | 197,755 | 583,402 | 581,167 | ||||||||||||||
NON-INTEREST INCOME | |||||||||||||||||||||
Bank card transaction fees | 44,510 | 42,646 | 39,644 | 44,481 | 42,427 | 126,800 | 127,095 | ||||||||||||||
Trust fees | 39,592 | 38,375 | 37,256 | 37,466 | 37,400 | 115,223 | 110,498 | ||||||||||||||
Deposit account charges and other fees | 24,032 | 23,959 | 23,018 | 23,887 | 23,755 | 71,009 | 70,630 | ||||||||||||||
Capital market fees | 1,787 | 1,944 | 1,879 | 1,843 | 1,595 | 5,610 | 5,878 | ||||||||||||||
Consumer brokerage services | 4,030 | 3,888 | 3,747 | 4,184 | 3,884 | 11,665 | 11,623 | ||||||||||||||
Loan fees and sales | 4,755 | 4,238 | 3,309 | 3,053 | 3,579 | 12,302 | 9,670 | ||||||||||||||
Other | 14,037 | 12,209 | 12,387 | 18,173 | 11,074 | 38,633 | 32,860 | ||||||||||||||
Total non-interest income | 132,743 | 127,259 | 121,240 | 133,087 | 123,714 | 381,242 | 368,254 | ||||||||||||||
INVESTMENT SECURITIES GAINS (LOSSES), NET | 4,909 | (110 | ) | (925 | ) | (7,129 | ) | 4,306 | 3,874 | 6,641 | |||||||||||
NON-INTEREST EXPENSE | |||||||||||||||||||||
Salaries and employee benefits | 123,836 | 120,062 | 122,128 | 120,517 | 116,194 | 366,026 | 347,677 | ||||||||||||||
Net occupancy | 12,293 | 11,145 | 11,501 | 11,711 | 11,631 | 34,939 | 34,333 | ||||||||||||||
Equipment | 4,941 | 4,790 | 4,471 | 4,508 | 4,592 | 14,202 | 13,617 | ||||||||||||||
Supplies and communication | 5,106 | 5,275 | 5,162 | 5,095 | 5,103 | 15,543 | 15,542 | ||||||||||||||
Data processing and software | 23,457 | 23,248 | 22,260 | 22,216 | 22,056 | 68,965 | 63,762 | ||||||||||||||
Marketing | 6,048 | 6,015 | 5,900 | 5,602 | 4,999 | 17,963 | 14,946 | ||||||||||||||
Deposit insurance | 1,621 | 1,693 | 1,710 | 1,796 | 3,167 | 5,024 | 9,750 | ||||||||||||||
Community service | 564 | 641 | 803 | 480 | 580 | 2,008 | 1,965 | ||||||||||||||
Other | 13,154 | 16,910 | 17,490 | 16,700 | 16,737 | 47,554 | 47,604 | ||||||||||||||
Total non-interest expense | 191,020 | 189,779 | 191,425 | 188,625 | 185,059 | 572,224 | 549,196 | ||||||||||||||
Income before income taxes | 139,181 | 137,198 | 119,915 | 137,297 | 140,716 | 396,294 | 406,866 | ||||||||||||||
Less income taxes | 29,101 | 28,899 | 22,860 | 26,537 | 26,647 | 80,860 | 79,412 | ||||||||||||||
Net income | 110,080 | 108,299 | 97,055 | 110,760 | 114,069 | 315,434 | 327,454 | ||||||||||||||
Less non-controlling interest expense (income) | 838 | 328 | (83 | ) | 1,108 | 1,493 | 1,083 | 3,564 | |||||||||||||
Net income attributable to Commerce Bancshares, Inc. | 109,242 | 107,971 | 97,138 | 109,652 | 112,576 | 314,351 | 323,890 | ||||||||||||||
Less preferred stock dividends | 2,250 | 2,250 | 2,250 | 2,250 | 2,250 | 6,750 | 6,750 | ||||||||||||||
Net income available to common shareholders | $106,992 | $105,721 | $94,888 | $107,402 | $110,326 | $307,601 | $317,140 | ||||||||||||||
Net income per common share — basic | $.98 | $.96 | $.85 | $.96 | $.99 | $2.79 | $2.83 | ||||||||||||||
Net income per common share — diluted | $.98 | $.96 | $.85 | $.96 | $.98 | $2.79 | $2.82 | ||||||||||||||
OTHER INFORMATION | |||||||||||||||||||||
Return on total average assets | 1.72 | % | 1.73 | % | 1.58 | % | 1.75 | % | 1.81 | % | 1.68 | % | 1.76 | % | |||||||
Return on average common equity (1) | 14.21 | 14.46 | 13.64 | 15.85 | 16.43 | 14.11 | 16.27 | ||||||||||||||
Efficiency ratio (2) | 56.66 | 55.88 | 58.76 | 54.53 | 55.73 | 57.08 | 55.95 | ||||||||||||||
Effective tax rate | 21.04 | 21.11 | 19.05 | 19.49 | 19.14 | 20.46 | 19.69 | ||||||||||||||
Net yield on interest earning assets | 3.43 | 3.61 | 3.52 | 3.58 | 3.52 | 3.52 | 3.51 | ||||||||||||||
Tax equivalent net interest income | $206,958 | $215,203 | $207,104 | $216,281 | $211,368 | $629,265 | $623,781 | ||||||||||||||
| (1) | Annualized net income available to common shareholders divided by average total equity less preferred stock. | |
| (2) | The efficiency ratio is calculated as non-interest expense (excluding intangibles amortization) as a percent of revenue. | |
COMMERCE BANCSHARES, INC. and SUBSIDIARIES | ||||||||||||
CONSOLIDATED BALANCE SHEETS - PERIOD END | ||||||||||||
(Unaudited)
| September 30,
|
June 30,
|
September 30,
| |||||||||
ASSETS | ||||||||||||
Loans | ||||||||||||
Business | $ | 5,393,268 | $ | 5,257,682 | $ | 4,966,722 | ||||||
Real estate — construction and land | 932,737 | 909,784 | 999,691 | |||||||||
Real estate — business | 2,833,146 | 2,867,831 | 2,726,042 | |||||||||
Real estate — personal | 2,226,663 | 2,160,515 | 2,120,672 | |||||||||
Consumer | 1,953,690 | 1,927,623 | 1,967,465 | |||||||||
Revolving home equity | 349,111 | 357,406 | 375,322 | |||||||||
Consumer credit card | 766,743 | 776,333 | 788,111 | |||||||||
Overdrafts | 7,236 | 3,074 | 11,534 | |||||||||
Total loans | 14,462,594 | 14,260,248 | 13,955,559 | |||||||||
Allowance for loan losses | (160,682 | ) | (161,182 | ) | (159,732 | ) | ||||||
Net loans | 14,301,912 | 14,099,066 | 13,795,827 | |||||||||
Loans held for sale | 20,064 | 20,067 | 16,890 | |||||||||
Investment securities: | ||||||||||||
Available for sale debt securities | 8,660,419 | 8,682,303 | 8,674,986 | |||||||||
Trading debt securities | 35,918 | 36,508 | 19,676 | |||||||||
Equity securities | 4,186 | 4,744 | 4,467 | |||||||||
Other securities | 147,211 | 130,038 | 127,120 | |||||||||
Total investment securities | 8,847,734 | 8,853,593 | 8,826,249 | |||||||||
Federal funds sold and short-term securities purchased under agreements to resell | 2,850 | — | 14,375 | |||||||||
Long-term securities purchased under agreements to resell | 850,000 | 700,000 | 700,000 | |||||||||
Interest earning deposits with banks | 344,129 | 492,318 | 334,752 | |||||||||
Cash and due from banks | 512,254 | 456,192 | 443,004 | |||||||||
Premises and equipment — net | 365,949 | 363,554 | 331,869 | |||||||||
Goodwill | 138,921 | 138,921 | 138,921 | |||||||||
Other intangible assets — net | 9,139 | 8,763 | 8,470 | |||||||||
Other assets | 483,527 | 639,700 | 452,035 | |||||||||
Total assets | $ | 25,876,479 | $ | 25,772,174 | $ | 25,062,392 | ||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||
Deposits: | ||||||||||||
Non-interest bearing | $ | 6,816,527 | $ | 6,274,838 | $ | 6,728,605 | ||||||
Savings, interest checking and money market | 11,424,404 | 11,452,849 | 11,733,057 | |||||||||
Certificates of deposit of less than $100,000 | 627,630 | 613,505 | 585,765 | |||||||||
Certificates of deposit of $100,000 and over | 1,441,590 | 1,488,416 | 1,086,193 | |||||||||
Total deposits | 20,310,151 | 19,829,608 | 20,133,620 | |||||||||
Federal funds purchased and securities sold under agreements to repurchase | 1,641,274 | 2,394,294 | 1,862,117 | |||||||||
Other borrowings | 257,383 | 4,510 | 1,534 | |||||||||
Other liabilities | 561,657 | 372,399 | 257,311 | |||||||||
Total liabilities | 22,770,465 | 22,600,811 | 22,254,582 | |||||||||
Stockholders’ equity: | ||||||||||||
Preferred stock | 144,784 | 144,784 | 144,784 | |||||||||
Common stock | 559,432 | 559,432 | 535,407 | |||||||||
Capital surplus | 2,042,643 | 2,077,491 | 1,804,031 | |||||||||
Retained earnings | 463,231 | 384,232 | 493,641 | |||||||||
Treasury stock | (251,663 | ) | (106,106 | ) | (33,174 | ) | ||||||
Accumulated other comprehensive income (loss) | 144,173 | 108,898 | (141,596 | ) | ||||||||
Total stockholders’ equity | 3,102,600 | 3,168,731 | 2,803,093 | |||||||||
Non-controlling interest | 3,414 | 2,632 | 4,717 | |||||||||
Total equity | 3,106,014 | 3,171,363 | 2,807,810 | |||||||||
Total liabilities and equity | $ | 25,876,479 | $ | 25,772,174 | $ | 25,062,392 | ||||||
COMMERCE BANCSHARES, INC. and SUBSIDIARIES | ||||||||||||||||||||
AVERAGE BALANCE SHEETS | ||||||||||||||||||||
(Unaudited)
| For the Three Months Ended | |||||||||||||||||||
September 30,
|
June 30,
|
March 31,
|
December 31,
|
September 30,
| ||||||||||||||||
ASSETS: | ||||||||||||||||||||
Loans: | ||||||||||||||||||||
Business | $ | 5,263,312 | $ | 5,142,794 | $ | 5,084,920 | $ | 5,028,635 | $ | 4,926,063 | ||||||||||
Real estate — construction and land | 920,206 | 908,777 | 907,062 | 953,166 | 992,045 | |||||||||||||||
Real estate — business | 2,883,379 | 2,868,503 | 2,864,177 | 2,757,595 | 2,732,968 | |||||||||||||||
Real estate — personal | 2,175,156 | 2,135,048 | 2,119,365 | 2,122,357 | 2,110,945 | |||||||||||||||
Consumer | 1,924,434 | 1,907,979 | 1,929,202 | 1,962,401 | 1,984,643 | |||||||||||||||
Revolving home equity | 354,040 | 361,673 | 370,962 | 374,216 | 373,819 | |||||||||||||||
Consumer credit card | 763,377 | 766,080 | 781,167 | 788,353 | 774,512 | |||||||||||||||
Overdrafts | 9,240 | 4,889 | 4,205 | 5,277 | 4,704 | |||||||||||||||
Total loans | 14,293,144 | 14,095,743 | 14,061,060 | 13,992,000 | 13,899,699 | |||||||||||||||
Allowance for loan losses | (160,387 | ) | (161,403 | ) | (159,275 | ) | (158,880 | ) | (158,840 | ) | ||||||||||
Net loans | 14,132,757 | 13,934,340 | 13,901,785 | 13,833,120 | 13,740,859 | |||||||||||||||
Loans held for sale | 19,882 | 20,731 | 18,350 | 18,475 | 18,201 | |||||||||||||||
Investment securities: | ||||||||||||||||||||
U.S. government and federal agency obligations | 825,544 | 843,974 | 909,466 | 923,545 | 923,557 | |||||||||||||||
Government-sponsored enterprise obligations | 181,929 | 199,506 | 199,480 | 214,913 | 261,938 | |||||||||||||||
State and municipal obligations | 1,172,259 | 1,222,008 | 1,283,349 | 1,361,079 | 1,375,768 | |||||||||||||||
Mortgage-backed securities | 4,712,508 | 4,614,703 | 4,360,428 | 4,379,805 | 4,434,119 | |||||||||||||||
Asset-backed securities | 1,297,685 | 1,412,452 | 1,525,623 | 1,518,706 | 1,427,041 | |||||||||||||||
Other debt securities | 334,218 | 331,459 | 335,612 | 339,841 | 339,952 | |||||||||||||||
Unrealized gain (loss) on debt securities | 152,706 | 42,009 | (48,925 | ) | (166,181 | ) | (119,319 | ) | ||||||||||||
Total available for sale debt securities | 8,676,849 | 8,666,111 | 8,565,033 | 8,571,708 | 8,643,056 | |||||||||||||||
Trading debt securities | 29,622 | 30,169 | 25,411 | 26,322 | 24,490 | |||||||||||||||
Equity securities | 4,705 | 4,717 | 4,568 | 4,432 | 4,466 | |||||||||||||||
Other securities | 134,896 | 130,433 | 130,057 | 127,634 | 120,206 | |||||||||||||||
Total investment securities | 8,846,072 | 8,831,430 | 8,725,069 | 8,730,096 | 8,792,218 | |||||||||||||||
Federal funds sold and short-term securities purchased under agreements to resell | 1,080 | 1,601 | 4,797 | 14,415 | 13,042 | |||||||||||||||
Long-term securities purchased under agreements to resell | 713,030 | 700,000 | 700,000 | 699,999 | 685,869 | |||||||||||||||
Interest earning deposits with banks | 226,582 | 331,999 | 316,660 | 352,942 | 298,632 | |||||||||||||||
Other assets | 1,292,191 | 1,251,555 | 1,197,261 | 1,158,816 | 1,147,250 | |||||||||||||||
Total assets | $ | 25,231,594 | $ | 25,071,656 | $ | 24,863,922 | $ | 24,807,863 | $ | 24,696,071 | ||||||||||
LIABILITIES AND EQUITY: | ||||||||||||||||||||
Non-interest bearing deposits | $ | 6,290,036 | $ | 6,335,620 | $ | 6,324,738 | $ | 6,666,715 | $ | 6,677,665 | ||||||||||
Savings | 924,581 | 929,974 | 896,378 | 870,844 | 877,347 | |||||||||||||||
Interest checking and money market | 10,409,111 | 10,642,648 | 10,762,550 | 10,840,048 | 10,839,310 | |||||||||||||||
Certificates of deposit of less than $100,000 | 620,138 | 605,440 | 590,200 | 584,828 | 593,936 | |||||||||||||||
Certificates of deposit of $100,000 and over | 1,503,805 | 1,378,402 | 1,267,517 | 1,090,546 | 1,100,299 | |||||||||||||||
Total deposits | 19,747,671 | 19,892,084 | 19,841,383 | 20,052,981 | 20,088,557 | |||||||||||||||
Borrowings: | ||||||||||||||||||||
Federal funds purchased and securities sold under agreements to repurchase | 1,884,939 | 1,793,526 | 1,771,534 | 1,655,997 | 1,499,837 | |||||||||||||||
Other borrowings | 77,248 | 1,318 | 1,248 | 1,335 | 1,833 | |||||||||||||||
Total borrowings | 1,962,187 | 1,794,844 | 1,772,782 | 1,657,332 | 1,501,670 | |||||||||||||||
Other liabilities | 390,560 | 307,433 | 284,018 | 264,449 | 296,884 | |||||||||||||||
Total liabilities | 22,100,418 | 21,994,361 | 21,898,183 | 21,974,762 | 21,887,111 | |||||||||||||||
Equity | 3,131,176 | 3,077,295 | 2,965,739 | 2,833,101 | 2,808,960 | |||||||||||||||
Total liabilities and equity | $ | 25,231,594 | $ | 25,071,656 | $ | 24,863,922 | $ | 24,807,863 | $ | 24,696,071 | ||||||||||
COMMERCE BANCSHARES, INC. and SUBSIDIARIES | |||||||||||||||
AVERAGE RATES | |||||||||||||||
(Unaudited) | For the Three Months Ended | ||||||||||||||
September 30,
|
June 30,
|
March 31,
|
December 31,
|
September 30,
| |||||||||||
ASSETS: | |||||||||||||||
Loans: | |||||||||||||||
Business (1) | 3.85 | % | 4.02 | % | 4.07 | % | 3.93 | % | 3.80 | % | |||||
Real estate — construction and land | 5.46 | 5.63 | 5.73 | 5.47 | 5.21 | ||||||||||
Real estate — business | 4.42 | 4.60 | 4.61 | 4.53 | 4.35 | ||||||||||
Real estate — personal | 3.91 | 3.97 | 4.00 | 3.87 | 3.83 | ||||||||||
Consumer | 4.88 | 4.77 | 4.73 | 4.62 | 4.46 | ||||||||||
Revolving home equity | 5.17 | 5.20 | 5.17 | 4.98 | 4.72 | ||||||||||
Consumer credit card | 12.42 | 12.33 | 12.18 | 11.91 | 11.99 | ||||||||||
Overdrafts | — | — | — | — | — | ||||||||||
Total loans | 4.71 | 4.82 | 4.85 | 4.72 | 4.59 | ||||||||||
Loans held for sale | 6.15 | 6.98 | 7.38 | 6.59 | 6.87 | ||||||||||
Investment securities: | |||||||||||||||
U.S. government and federal agency obligations | 2.36 | 4.66 | .78 | 1.90 | 2.23 | ||||||||||
Government-sponsored enterprise obligations | 2.69 | 2.32 | 2.35 | 2.24 | 2.10 | ||||||||||
State and municipal obligations (1) | 3.14 | 3.18 | 3.19 | 3.06 | 2.98 | ||||||||||
Mortgage-backed securities | 2.61 | 2.70 | 2.76 | 2.75 | 2.65 | ||||||||||
Asset-backed securities | 2.80 | 2.79 | 2.70 | 2.55 | 2.42 | ||||||||||
Other debt securities | 2.63 | 2.68 | 2.69 | 2.60 | 2.59 | ||||||||||
Total available for sale debt securities | 2.69 | 2.97 | 2.59 | 2.65 | 2.60 | ||||||||||
Trading debt securities (1) | 2.91 | 3.14 | 3.24 | 3.21 | 3.13 | ||||||||||
Equity securities (1) | 35.67 | 35.97 | 37.55 | 39.92 | 32.69 | ||||||||||
Other securities (1) | 6.19 | 6.69 | 5.73 | 15.51 | 13.00 | ||||||||||
Total investment securities | 2.76 | 3.04 | 2.66 | 2.86 | 2.76 | ||||||||||
Federal funds sold and short-term securities purchased under agreements to resell | 2.57 | 2.76 | 2.79 | 2.56 | 2.10 | ||||||||||
Long-term securities purchased under agreements to resell | 2.01 | 2.11 | 2.18 | 2.31 | 2.26 | ||||||||||
Interest earning deposits with banks | 2.17 | 2.40 | 2.42 | 2.28 | 1.96 | ||||||||||
Total interest earning assets | 3.90 | 4.05 | 3.93 | 3.92 | 3.80 | ||||||||||
LIABILITIES AND EQUITY: | |||||||||||||||
Interest bearing deposits: | |||||||||||||||
Savings | .11 | .11 | .11 | .11 | .11 | ||||||||||
Interest checking and money market | .38 | .38 | .35 | .30 | .26 | ||||||||||
Certificates of deposit of less than $100,000 | 1.11 | 1.01 | .87 | .70 | .56 | ||||||||||
Certificates of deposit of $100,000 and over | 1.99 | 2.02 | 1.92 | 1.61 | 1.41 | ||||||||||
Total interest bearing deposits | .58 | .55 | .51 | .41 | .35 | ||||||||||
Borrowings: | |||||||||||||||
Federal funds purchased and securities sold under agreements to repurchase | 1.74 | 1.80 | 1.72 | 1.60 | 1.33 | ||||||||||
Other borrowings | 2.33 | 1.52 | 1.62 | 2.67 | 2.60 | ||||||||||
Total borrowings | 1.76 | 1.80 | 1.72 | 1.60 | 1.33 | ||||||||||
Total interest bearing liabilities | .73 | % | .70 | % | .65 | % | .54 | % | .45 | % | |||||
Net yield on interest earning assets | 3.43 | % | 3.61 | % | 3.52 | % | 3.58 | % | 3.52 | % | |||||
(1) Stated on a tax equivalent basis using a federal income tax rate of 21%. | |||||||||||||||
COMMERCE BANCSHARES, INC. and SUBSIDIARIES | ||||||||||||||||||||||||||||
CREDIT QUALITY | ||||||||||||||||||||||||||||
For the Three Months Ended | For the Nine Months Ended | |||||||||||||||||||||||||||
(Unaudited)
| September 30,
|
June 30,
|
March 31,
|
December 31,
|
September 30,
| September 30,
|
September 30,
| |||||||||||||||||||||
ALLOWANCE FOR LOAN LOSSES | ||||||||||||||||||||||||||||
Balance at beginning of period | $ | 161,182 | $ | 160,682 | $ | 159,932 | $ | 159,732 | $ | 159,532 | $ | 159,932 | $ | 159,532 | ||||||||||||||
Provision for losses | 10,963 | 11,806 | 12,463 | 12,256 | 9,999 | 35,232 | 30,438 | |||||||||||||||||||||
Net charge-offs (recoveries): | ||||||||||||||||||||||||||||
Commercial portfolio: | ||||||||||||||||||||||||||||
Business | 335 | 284 | 447 | 1,748 | 332 | 1,066 | 354 | |||||||||||||||||||||
Real estate — construction and land | — | (101 | ) | (16 | ) | (183 | ) | (119 | ) | (117 | ) | (452 | ) | |||||||||||||||
Real estate — business | (44 | ) | (14 | ) | (37 | ) | (91 | ) | (42 | ) | (95 | ) | (287 | ) | ||||||||||||||
291 | 169 | 394 | 1,474 | 171 | 854 | (385 | ) | |||||||||||||||||||||
Personal banking portfolio: | ||||||||||||||||||||||||||||
Consumer credit card | 8,568 | 9,066 | 8,958 | 7,421 | 7,340 | 26,592 | 23,157 | |||||||||||||||||||||
Consumer | 2,069 | 1,723 | 1,924 | 2,805 | 2,091 | 5,716 | 6,481 | |||||||||||||||||||||
Overdraft | 446 | 253 | 317 | 500 | 351 | 1,016 | 1,121 | |||||||||||||||||||||
Real estate — personal | (30 | ) | (21 | ) | 101 | (144 | ) | (153 | ) | 50 | (191 | ) | ||||||||||||||||
Revolving home equity | 119 | 116 | 19 | — | (1 | ) | 254 | 55 | ||||||||||||||||||||
11,172 | 11,137 | 11,319 | 10,582 | 9,628 | 33,628 | 30,623 | ||||||||||||||||||||||
Total net loan charge-offs | 11,463 | 11,306 | 11,713 | 12,056 | 9,799 | 34,482 | 30,238 | |||||||||||||||||||||
Balance at end of period | $ | 160,682 | $ | 161,182 | $ | 160,682 | $ | 159,932 | $ | 159,732 | $ | 160,682 | $ | 159,732 | ||||||||||||||
NET CHARGE-OFF RATIOS* | ||||||||||||||||||||||||||||
Commercial portfolio: | ||||||||||||||||||||||||||||
Business | .03 | % | .02 | % | .04 | % | .14 | % | .03 | % | .03 | % | .01 | % | ||||||||||||||
Real estate — construction and land | — | (.04 | ) | (.01 | ) | (.08 | ) | (.05 | ) | (.02 | ) | (.06 | ) | |||||||||||||||
Real estate — business | (.01 | ) | — | (.01 | ) | (.01 | ) | (.01 | ) | — | (.01 | ) | ||||||||||||||||
.01 | .01 | .02 | .07 | .01 | .01 | (.01 | ) | |||||||||||||||||||||
Personal banking portfolio: | ||||||||||||||||||||||||||||
Consumer credit card | 4.45 | 4.75 | 4.65 | 3.73 | 3.76 | 4.62 | 4.06 | |||||||||||||||||||||
Consumer | .43 | .36 | .40 | .57 | .42 | .40 | .43 | |||||||||||||||||||||
Overdraft | 19.15 | 20.76 | 30.57 | 37.59 | 29.60 | 22.16 | 32.51 | |||||||||||||||||||||
Real estate — personal | (.01 | ) | — | .02 | (.03 | ) | (.03 | ) | — | (.01 | ) | |||||||||||||||||
Revolving home equity | .13 | .13 | .02 | — | — | .09 | .02 | |||||||||||||||||||||
.85 | .86 | .88 | .80 | .73 | .86 | .78 | ||||||||||||||||||||||
Total | .32 | % | .32 | % | .34 | % | .34 | % | .28 | % | .33 | % | .29 | % | ||||||||||||||
CREDIT QUALITY RATIOS | ||||||||||||||||||||||||||||
Non-performing assets to total loans | .08 | % | .08 | % | .09 | % | .10 | % | .07 | % | ||||||||||||||||||
Non-performing assets to total assets | .05 | .05 | .05 | .05 | .04 | |||||||||||||||||||||||
Allowance for loan losses to total loans | 1.11 | 1.13 | 1.14 | 1.13 | 1.14 | |||||||||||||||||||||||
NON-PERFORMING ASSETS | ||||||||||||||||||||||||||||
Non-accrual loans: | ||||||||||||||||||||||||||||
Business | $ | 7,753 | $ | 8,428 | $ | 8,569 | $ | 8,985 | $ | 5,131 | ||||||||||||||||||
Real estate — construction and land | 3 | 3 | 4 | 4 | 4 | |||||||||||||||||||||||
Real estate — business | 2,359 | 950 | 1,746 | 1,715 | 1,467 | |||||||||||||||||||||||
Real estate — personal | 1,618 | 1,752 | 1,848 | 1,832 | 1,767 | |||||||||||||||||||||||
Total | 11,733 | 11,133 | 12,167 | 12,536 | 8,369 | |||||||||||||||||||||||
Foreclosed real estate | 502 | 897 | 737 | 1,413 | 1,181 | |||||||||||||||||||||||
Total non-performing assets | $ | 12,235 | $ | 12,030 | $ | 12,904 | $ | 13,949 | $ | 9,550 | ||||||||||||||||||
Loans past due 90 days and still accruing interest | $ | 16,308 | $ | 16,532 | $ | 16,655 | $ | 16,658 | $ | 13,991 | ||||||||||||||||||
*as a percentage of average loans (excluding loans held for sale) | ||||||||||||||||||||||||||||
COMMERCE BANCSHARES, INC.
Management Discussion of Third Quarter Results
September 30, 2019
For the quarter ended September 30, 2019, net income attributable to Commerce Bancshares, Inc. (net income) amounted to $109.2 million, compared to $108.0 million in the previous quarter and $112.6 million in the same quarter last year. The increase in net income over the previous quarter was primarily the result of higher non-interest income and gains on investment securities, partly offset by lower net interest income. Non-interest income increased $5.5 million and securities gains increased $5.0 million over the previous quarter. Excluding inflation income on inflation protected securities (TIPs), the net interest margin declined ten basis points to 3.40%, mainly due to lower rates on interest earning assets. Average loans increased $196.6 million over the previous quarter, while average deposits decreased $144.4 million. For the quarter, the return on average assets was 1.72%, the return on average common equity was 14.2%, and the efficiency ratio was 56.7%.
Balance Sheet Review
During the 3rd quarter of 2019, average loans totaled $14.3 billion, or an increase of $196.6 million over the prior quarter, and grew $395.1 million, or 2.8%, over the same quarter last year. Period-end loans grew $202.3 million over the prior quarter and $510.2 million over September 30, 2018. Compared to the previous quarter, average business loans grew $120.5 million, and average personal real estate loans grew $40.1 million. Average consumer, business real estate, and construction loans also grew this quarter (growth of $16.5 million, $14.9 million, and $11.4 million, respectively). This growth was partly offset by declines in average revolving home equity and consumer credit card lending activities. Growth in business loans was the result of increased commercial and industrial lending activities. Personal real estate loans grew on higher loan originations during the 3rd quarter of 2019 compared to the previous quarter. Growth in average consumer loans was driven by higher demand for auto, health services financing, and other consumer lending, but was partially offset by lower marine/RV, fixed home equity and other vehicle and equipment lending. During the current quarter, the Company sold certain fixed rate personal real estate loans totaling $71.5 million, compared to $60.4 million in the prior quarter.
Total average available for sale debt securities increased $10.7 million over the previous quarter to $8.7 billion, at fair value. The increase in investment securities was mainly the result of growth in average mortgage-backed securities, partially offset by declines in average asset-backed, state and municipal securities, U.S. government and federal agency obligations, and government-sponsored enterprise obligations. Additionally, the average balance of unrealized gains on available for sale debt securities increased $110.7 million during the current quarter. Purchases of securities during the quarter totaled $354.8 million, and sales, maturities and pay downs were $396.7 million. At September 30, 2019, the duration of the investment portfolio was 2.6 years, and maturities and pay downs of approximately $1.3 billion are expected to occur during the next 12 months.
Total average deposits decreased $144.4 million this quarter compared to the previous quarter. The decrease in average deposits resulted from declines in interest checking and money market deposits ($233.5 million) and trust demand deposits ($102.0 million). These decreases were partially offset by increases in certificates of deposit ($140.1 million) and other demand deposits ($56.4 million), respectively. Compared to the previous quarter, total average consumer and wealth deposits (including private banking) declined $106.3 million and $154.8 million, respectively, while average commercial deposits increased $96.0 million this quarter. The average loans to deposits ratio was 72.5% in the current quarter and 71.0% in the prior quarter. The Company’s average borrowings, which includes customer repurchase agreements, were $2.0 billion in the 3rd quarter of 2019 and $1.8 billion in the prior quarter.
Net Interest Income
Net interest income in the 3rd quarter of 2019 amounted to $203.5 million compared to $211.6 million in the previous quarter, a decrease of $8.1 million. On a tax equivalent basis, net interest income for the current quarter decreased $8.2 million from the previous quarter to $207.0 million. The decline in net interest income was mainly due to a $4.8 million decrease this quarter in inflation income on TIPs. Excluding changes in TIPs, net interest income decreased $3.5 million, while the adjusted net yield on earning assets (tax equivalent) decreased to 3.40%, compared to 3.50% in the prior quarter.
Compared to the previous quarter, interest income on loans (tax equivalent) increased $216 thousand, mostly as a result of higher loan balances and yields on consumer loans, combined with higher yields on consumer credit card loans. Growth in average commercial loan balances also contributed to increases in net interest income, but the increase was offset by lower yields on those loans. The average tax-equivalent yield on the loan portfolio declined 11 basis points this quarter to 4.71%, compared to 4.82% in the previous quarter, as yields on commercial loans contracted, more than offsetting yield growth on consumer and consumer credit card loans.
Interest income on investment securities (tax equivalent) decreased $6.1 million from the previous quarter, mainly due to the lower inflation income on TIPs, as noted above. The yield on total investment securities was 2.76% in the current quarter, down from 3.04% in the previous quarter.
Interest costs on deposits totaled 58 basis points in the 3rd quarter of 2019, compared to 55 basis points in the prior quarter. Interest expense on deposits increased $789 thousand this quarter compared to the previous quarter mainly due to higher balances of certificates of deposit (CD), mainly in jumbo CD balances. Borrowing costs increased $664 thousand this quarter due to higher balances of federal funds purchased and higher balances and rates on Federal Home Loan Bank borrowings. The overall rate paid on interest bearing liabilities was .73% in the current quarter, compared to .70% in the prior quarter.
Non-Interest Income
In the 3rd quarter of 2019, total non-interest income amounted to $132.7 million, an increase of $9.0 million, or 7.3%, compared to the same period last year and increased $5.5 million, or 4.3%, compared to the prior quarter. The increase in non-interest income over the same period last year was mainly due to growth in net bank card, trust, loan fees and sales, and swap fees, coupled with gains on sales of assets.
Total net bank card fees in the current quarter increased $2.1 million, or 4.9%, over the same period last year, and increased $1.9 million, or 4.4%, compared to the prior quarter. Net corporate card fees increased $1.1 million, or 4.6%, over the same quarter last year mainly due to lower rewards expense. Net debit card fees increased $573 thousand, or 5.8%, due to higher interchange income. Net merchant income declined $684 thousand, or 13.2%, mainly due to higher network expense, while net credit card fees increased $1.1 million, or 41.2% on lower rewards expense and higher interchange revenue. Total net bank card fees this quarter were comprised of fees on corporate card ($25.9 million), debit card ($10.5 million), merchant ($4.5 million) and credit card ($3.6 million) transactions.
In the current quarter, trust fees increased $2.2 million, or 5.9%, over the same period last year, resulting from continued growth in private client fee income. Compared to the same period last year, deposit account fees increased $277 thousand, or 1.2%, due to growth in corporate cash management fees, partially offset by lower overdraft and deposit account fees.
During the 3rd quarter of 2019, loan fees and sales increased $1.2 million, or 32.9%, over amounts recorded in the same quarter last year, mainly due to higher mortgage banking revenue. In addition, other non-interest income included growth of $871 thousand in swap fees and $954 thousand in gains on the sales of leased assets to customers upon lease termination. Non-interest income comprised 39.5% of the Company’s total revenue this quarter.
Investment Securities Gains and Losses
The Company recorded net securities gains of $4.9 million in the current quarter, compared to losses of $110 thousand in the prior quarter and gains of $4.3 million in the 3rd quarter of 2018. Net securities gains in the current quarter resulted mainly from proceeds received on an equity investment and unrealized fair value gains in the Company’s private equity investment portfolio.
Non-Interest Expense
Non-interest expense for the current quarter amounted to $191.0 million, compared to $185.1 million in the same period last year and $189.8 million in the prior quarter. The increase in non-interest expense compared to the same period last year was mainly due to higher salaries and employee benefits, data processing and software and marketing expense, partly offset by lower deposit insurance expense and other non-interest expense.
Compared to the 3rd quarter of last year, salaries and employee benefits expense increased $7.6 million, or 6.6%, driven mainly by growth in full-time salary costs and higher medical expense, partly offset by lower incentive compensation expense. Full-time equivalent employees totaled 4,873 and 4,797 at September 30, 2019 and 2018, respectively.
For the current quarter compared to the same quarter of last year, marketing costs increased $1.0 million mainly due to increased marketing efforts for consumer deposit customers and healthcare banking initiatives. Data processing and software expense increased $1.4 million due to higher costs for service providers and higher bank card processing expense. Occupancy expense also increased $662 thousand, while deposit insurance expense declined $1.5 million on reduced FDIC insurance rates. Other non-interest expense decreased from the 3rd quarter of 2018 partly due to lower professional fees and travel and entertainment expenses.
Income Taxes
The effective tax rate for the Company was 21.0% in the current quarter, 21.1% in the previous quarter, and 19.1% in the 3rd quarter of 2018.
Credit Quality
Net loan charge-offs in the 3rd quarter of 2019 amounted to $11.5 million, compared to $11.3 million in the prior quarter and $9.8 million in the same period last year. The ratio of annualized net loan charge-offs to total average loans was .32% in both the current and previous quarters and .28% in the 3rd quarter of last year. Compared to prior quarter, net loan charge-offs on commercial loans increased $122 thousand to $291 thousand, while net loan charge-offs on personal banking loans increased $35 thousand to $11.2 million.
In the 3rd quarter of 2019, annualized net loan charge-offs on average consumer credit card loans were 4.45%, compared to 4.75% in the previous quarter, and 3.76% in the same quarter last year. Consumer loan net charge-offs were .43% of average consumer loans in the current quarter, .36% in the prior quarter and .42% in the same quarter last year. This quarter, the provision for loan losses totaled $11.0 million, or $500 thousand lower than net loan charge-offs. At September 30, 2019, the allowance totaled $160.7 million, or 1.11% of total loans.
At September 30, 2019, total non-performing assets amounted to $12.2 million, an increase of $205 thousand over the previous quarter. Non-performing assets are comprised of non-accrual loans and foreclosed real estate ($11.7 million and $502 thousand, respectively). At September 30, 2019, the balance of non-accrual loans, which represented .08% of loans outstanding, included business loans of $7.8 million, business real estate loans of $2.4 million, and personal real estate loans of $1.6 million. Loans more than 90 days past due and still accruing interest totaled $16.3 million at September 30, 2019.
Other
During the 3rd 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. On August 7, 2019, the Company entered into an accelerated share repurchase agreement (ASR) program. Under the terms of the ASR agreement, the Company paid $150.0 million in cash and received 1,994,327 shares of its common stock in treasury, representing a substantial majority of the shares expected to be delivered in the overall ASR program. The ASR is expected to be completed by the end of 2019, at which time any additional shares will be delivered to the Company. The total number of shares that the Company will receive and the total consideration per share paid ultimately will be determined based on the volume-weighted daily average price of its common stock during the repurchase program. The Company also purchased an additional 581,685 shares of treasury stock during the current quarter at an average price of $58.26.
Forward Looking Information
This information contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements include future financial and operating results, expectations, intentions and other statements that are not historical facts. Such statements are based on current beliefs and expectations of the Company’s management and are subject to significant risks and uncertainties. Actual results may differ materially from those set forth in the forward-looking statements.
View source version on businesswire.com: https://www.businesswire.com/news/home/20191016005175/en/
Contacts:
(314) 746-7485
Web Site: http://www.commercebank.com
Email: matthew.burkemper@commercebank.com
