Exhibit 99.1 |
|
 CBSH |
1000 Walnut Street / Post Office Box 419248 / Kansas City, Missouri 64151-6248 / 816.243.2000 |
|
FOR IMMEDIATE RELEASE:
Thursday, October 13, 2011
COMMERCE BANCSHARES, INC. ANNOUNCES THIRD QUARTER
EARNINGS PER SHARE OF $.76
Commerce Bancshares, Inc. announced earnings of $.76 per share for the three months ended September 30, 2011 compared to $.64 per share in the third quarter of 2010, or an increase of 18.8%. Net income for the third quarter amounted to $65.4 million compared to $55.9 million in the same quarter last year. For the quarter, the return on average assets totaled 1.32%, the return on average equity was 12.2% and the efficiency ratio was 58.7%.
For the nine months ended September 30, 2011, earnings per share totaled $2.24 compared to $1.82 for the first nine months of 2010, an increase of 23.1%. Net income amounted to $194.8 million for the first nine months of 2011 compared with $159.8 million for the same period last year, or an increase of $35.1 million. The return on average assets for the first nine months of 2011 was 1.37%.
In announcing these results, David W. Kemper, Chairman and CEO, said, “We are pleased to report a 16.9% increase in net income in the third quarter of 2011 compared with the same period last year. This growth in net income was primarily the result of a $10.4 million decline in our provision for loan losses coupled with flat expenses. Compared to the same period in the previous year, bankcard and trust fees grew 11.7% and 9.6%, respectively. Deposits increased to $16.0 billion this quarter, however, loan demand remained weak and, coupled with record low interest rates, interest margins were pressured.”
Further, Mr. Kemper noted, “Net loan charge-offs in the current quarter totaled $14.9 million, compared to $15.2 million in the previous quarter and $21.8 million in the third quarter of 2010. Bankcard net loan charge-offs declined to $7.1 million this quarter, or 3.8% of average bankcard loans, while commercial loan net charge-offs totaled only $3.5 million. As a result of this improved credit environment, our allowance for loan losses declined by $3.5 million during the current quarter to $188.0 million, and represents 2.5 times our non-performing loans. Total non-performing assets decreased this quarter to $99.7 million, but represents only 1.1% of our total loans. Our ratio of tangible common equity to assets was 9.7%, while our loans to deposits ratio totaled 58.3%, reflecting strong capital and liquidity positions.”
Total assets at September 30, 2011 were $20.6 billion, total loans were $9.1 billion, and total deposits were $16.0 billion.
(more)
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 in over 360 locations in Missouri, Illinois, Kansas, Oklahoma and Colorado. The Company also has operating subsidiaries involved in mortgage banking, credit related insurance, and private equity activities.
Summary of Non-Performing Assets and Past Due Loans
|
| | | | | | | | | | | | |
| (Dollars in thousands) | | 6/30/2011 | | 9/30/2011 | | 9/30/2010 |
| Non-Accrual Loans | | $ | 79,717 |
| | $ | 75,912 |
| | $ | 89,609 |
|
| Foreclosed Real Estate | | $ | 23,551 |
| | $ | 23,813 |
| | $ | 12,539 |
|
| Total Non-Performing Assets | | $ | 103,268 |
| | $ | 99,725 |
| | $ | 102,148 |
|
| Non-Performing Assets to Loans | | 1.12 | % | | 1.10 | % | | 1.05 | % |
| Non-Performing Assets to Total Assets | | .53 | % | | .48 | % | | .54 | % |
| Loans 90 Days & Over Past Due — Still Accruing | | $ | 23,598 |
| | $ | 20,104 |
| | $ | 42,723 |
|
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
Jeffery Aberdeen, Controller
at PO Box 419248, Kansas City, MO
or by telephone at (816) 234-2081
Web Site: http://www.commercebank.com
Email: mymoney@commercebank.com
COMMERCE BANCSHARES, INC. and SUBSIDIARIES
FINANCIAL HIGHLIGHTS |
| | | | | | | | | | | | | | | |
| | For the Three Months Ended | For the Nine Months Ended |
| (Unaudited) | June 30,
2011 | September 30,
2011 | September 30,
2010 | September 30,
2011 | September 30,
2010 |
FINANCIAL SUMMARY (In thousands, except per share data) | | |
| Net interest income |
| $164,710 |
|
| $158,630 |
|
| $159,437 |
|
| $484,313 |
|
| $485,255 |
|
| Taxable equivalent net interest income | 170,779 |
| 164,317 |
| 164,773 |
| 501,575 |
| 500,133 |
|
| Non-interest income | 101,344 |
| 101,632 |
| 100,010 |
| 298,882 |
| 294,657 |
|
| Investment securities gains (losses), net | 1,956 |
| 2,587 |
| 16 |
| 5,870 |
| (2,989 | ) |
| Provision for loan losses | 12,188 |
| 11,395 |
| 21,844 |
| 39,372 |
| 78,353 |
|
| Non-interest expense | 153,513 |
| 153,746 |
| 155,586 |
| 461,219 |
| 467,103 |
|
| Net income attributable to | | | | | |
| Commerce Bancshares, Inc. | 69,034 |
| 65,352 |
| 55,885 |
| 194,839 |
| 159,789 |
|
| Cash dividends | 20,056 |
| 19,526 |
| 19,621 |
| 59,636 |
| 58,836 |
|
| Net total loan charge-offs | 15,188 |
| 14,895 |
| 21,844 |
| 48,872 |
| 75,295 |
|
| Business | 1,439 |
| 889 |
| 582 |
| 4,338 |
| 3,072 |
|
| Real estate — construction and land | 1,125 |
| 1,215 |
| 1,971 |
| 4,326 |
| 13,417 |
|
| Real estate — business | 339 |
| 1,429 |
| 776 |
| 2,832 |
| 2,229 |
|
| Consumer credit card | 8,490 |
| 7,103 |
| 12,592 |
| 24,631 |
| 37,995 |
|
| Consumer | 2,229 |
| 3,232 |
| 4,914 |
| 9,474 |
| 15,184 |
|
| Revolving home equity | 344 |
| 72 |
| 276 |
| 783 |
| 1,506 |
|
| Real estate — personal | 1,027 |
| 673 |
| 379 |
| 1,974 |
| 1,095 |
|
| Overdraft | 195 |
| 282 |
| 354 |
| 514 |
| 797 |
|
| Per common share: | | | | | |
| Net income — basic |
| $.80 |
|
| $.76 |
|
| $.63 |
|
| $2.25 |
|
| $1.82 |
|
| Net income — diluted |
| $.79 |
|
| $.76 |
|
| $.64 |
|
| $2.24 |
|
| $1.82 |
|
| Cash dividends |
| $.230 |
|
| $.230 |
|
| $.224 |
|
| $.690 |
|
| $.671 |
|
| Diluted wtd. average shares o/s | 86,927 |
| 85,464 |
| 87,560 |
| 86,404 |
| 87,535 |
|
| RATIOS | | | | | |
Average loans to deposits (1) | 60.17 | % | 58.29 | % | 68.88 | % | 60.27 | % | 71.88 | % |
| Return on total average assets | 1.47 | % | 1.32 | % | 1.19 | % | 1.37 | % | 1.17 | % |
| Return on total average equity | 13.12 | % | 12.15 | % | 10.98 | % | 12.41 | % | 10.85 | % |
Non-interest income to revenue (2) | 38.09 | % | 39.05 | % | 38.55 | % | 38.16 | % | 37.78 | % |
Efficiency ratio (3) | 57.40 | % | 58.71 | % | 59.58 | % | 58.57 | % | 59.49 | % |
| AT PERIOD END | | | | | |
| Book value per share based on total equity |
| $24.55 |
|
| $25.15 |
|
| $23.37 |
| | |
| Market value per share |
| $43.00 |
|
| $34.75 |
|
| $35.80 |
| | |
| Allowance for losses as a percentage | | | | | |
| of loans | 2.07 | % | 2.07 | % | 2.04 | % | | |
| Tier I leverage ratio | 10.32 | % | 9.74 | % | 9.93 | % | | |
Tangible common equity to assets ratio (4) | 10.27 | % | 9.72 | % | 10.26 | % | | |
| Common shares outstanding | 86,840,077 |
| 84,690,060 |
| 87,578,505 |
| | |
| Shareholders of record | 4,253 |
| 4,224 |
| 4,311 |
| | |
| Number of bank/ATM locations | 364 |
| 363 |
| 369 |
| | |
| Full-time equivalent employees | 4,786 |
| 4,762 |
| 5,011 |
| | |
| OTHER QTD INFORMATION | | | | | |
| High market value per share |
| $43.90 |
|
| $44.00 |
|
| $38.42 |
| | |
| Low market value per share |
| $40.05 |
|
| $33.23 |
|
| $33.43 |
| | |
| |
| (1) | Includes loans held for sale. |
| |
| (2) | Revenue includes net interest income and non-interest income. |
| |
| (3) | The efficiency ratio is calculated as non-interest expense (excluding intangibles amortization) as a percent of revenue. |
| |
| (4) | The tangible common equity ratio is calculated as stockholders’ equity reduced by goodwill and other intangible assets (excluding mortgage servicing rights) divided by total assets reduced by goodwill and other intangible assets (excluding mortgage servicing rights). |
COMMERCE BANCSHARES, INC. and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
|
| | | | | | | | | | | | | | | | | | | | |
| | | For the Three Months Ended | | For the Nine Months Ended |
(Unaudited) (In thousands, except per share data) | | June 30,
2011 | | September 30,
2011 | | September 30,
2010 | | September 30,
2011 | | September 30,
2010 |
| Interest income | |
| $178,087 |
| |
| $170,835 |
| |
| $178,916 |
| |
| $524,748 |
| |
| $552,042 |
|
| Interest expense | | 13,377 |
| | 12,205 |
| | 19,479 |
| | 40,435 |
| | 66,787 |
|
| Net interest income | | 164,710 |
| | 158,630 |
| | 159,437 |
| | 484,313 |
| | 485,255 |
|
| Provision for loan losses | | 12,188 |
| | 11,395 |
| | 21,844 |
| | 39,372 |
| | 78,353 |
|
| Net interest income after provision for loan losses | | 152,522 |
| | 147,235 |
| | 137,593 |
| | 444,941 |
| | 406,902 |
|
| NON-INTEREST INCOME | | | | | | | | | | |
| Bank card transaction fees | | 41,304 |
| | 42,149 |
| | 37,723 |
| | 120,915 |
| | 107,872 |
|
| Trust fees | | 22,544 |
| | 22,102 |
| | 20,170 |
| | 66,218 |
| | 59,846 |
|
| Deposit account charges and other fees | | 20,789 |
| | 21,939 |
| | 21,693 |
| | 62,028 |
| | 71,146 |
|
| Bond trading income | | 4,979 |
| | 5,556 |
| | 5,133 |
| | 15,255 |
| | 15,524 |
|
| Consumer brokerage services | | 2,880 |
| | 2,333 |
| | 2,390 |
| | 7,876 |
| | 6,879 |
|
| Loan fees and sales | | 2,075 |
| | 2,034 |
| | 5,830 |
| | 5,933 |
| | 11,141 |
|
| Other | | 6,773 |
| | 5,519 |
| | 7,071 |
| | 20,657 |
| | 22,249 |
|
| Total non-interest income | | 101,344 |
| | 101,632 |
| | 100,010 |
| | 298,882 |
| | 294,657 |
|
| INVESTMENT SECURITIES | | | | | | | | | | |
| GAINS (LOSSES), NET | | | | | | | | | | |
| Impairment (losses) reversals on debt securities | | (2,119 | ) | | (1,200 | ) | | 5,645 |
| | 2,986 |
| | 11,355 |
|
| Noncredit-related losses (reversals) on | | | | | | | | | | |
| securities not expected to be sold | | 1,469 |
| | 369 |
| | (7,690 | ) | | (4,741 | ) | | (15,533 | ) |
| Net impairment losses | | (650 | ) | | (831 | ) | | (2,045 | ) | | (1,755 | ) | | (4,178 | ) |
| Realized gains on sales and | | | | | | | | | | |
| fair value adjustments | | 2,606 |
| | 3,418 |
| | 2,061 |
| | 7,625 |
| | 1,189 |
|
| Investment securities gains (losses), net | | 1,956 |
| | 2,587 |
| | 16 |
| | 5,870 |
| | (2,989 | ) |
| NON-INTEREST EXPENSE | | | | | | | | | | |
| Salaries and employee benefits | | 84,223 |
| | 85,700 |
| | 85,442 |
| | 257,315 |
| | 259,988 |
|
| Net occupancy | | 11,213 |
| | 11,510 |
| | 12,086 |
| | 34,760 |
| | 35,697 |
|
| Equipment | | 5,702 |
| | 5,390 |
| | 5,709 |
| | 16,669 |
| | 17,548 |
|
| Supplies and communication | | 5,692 |
| | 5,674 |
| | 6,724 |
| | 16,898 |
| | 20,891 |
|
| Data processing and software | | 17,531 |
| | 16,232 |
| | 16,833 |
| | 50,230 |
| | 50,936 |
|
| Marketing | | 4,495 |
| | 4,545 |
| | 5,064 |
| | 13,298 |
| | 14,784 |
|
| Deposit insurance | | 2,780 |
| | 2,772 |
| | 4,756 |
| | 10,443 |
| | 14,445 |
|
| Indemnification obligation | | — |
| | — |
| | — |
| | (1,359 | ) | | (1,683 | ) |
| Other | | 21,877 |
| | 21,923 |
| | 18,972 |
| | 62,965 |
| | 54,497 |
|
| Total non-interest expense | | 153,513 |
| | 153,746 |
| | 155,586 |
| | 461,219 |
| | 467,103 |
|
| Income before income taxes | | 102,309 |
| | 97,708 |
| | 82,033 |
| | 288,474 |
| | 231,467 |
|
| Less income taxes | | 32,692 |
| | 31,699 |
| | 26,012 |
| | 91,898 |
| | 71,817 |
|
| Net income | | 69,617 |
| | 66,009 |
| | 56,021 |
| | 196,576 |
| | 159,650 |
|
| Less non-controlling interest expense (income) | | 583 |
| | 657 |
| | 136 |
| | 1,737 |
| | (139 | ) |
| Net income attributable to | | | | | | | | | | |
| Commerce Bancshares, Inc. | |
| $69,034 |
| |
| $65,352 |
| |
| $55,885 |
| |
| $194,839 |
| |
| $159,789 |
|
| Net income per common share — basic | |
| $.80 |
| |
| $.76 |
| |
| $.63 |
| |
| $2.25 |
| |
| $1.82 |
|
| Net income per common share — diluted | |
| $.79 |
| |
| $.76 |
| |
| $.64 |
| |
| $2.24 |
| |
| $1.82 |
|
COMMERCE BANCSHARES, INC. and SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
|
| | | | | | | | | | | | |
(Unaudited) (In thousands) | | June 30,
2011 | | September 30,
2011 | | September 30,
2010 |
| ASSETS | | | | | | |
| Loans | |
| $9,237,078 |
| |
| $9,073,123 |
| |
| $9,706,265 |
|
| Allowance for loan losses | | (191,538 | ) | | (188,038 | ) | | (197,538 | ) |
| Net loans | | 9,045,540 |
| | 8,885,085 |
| | 9,508,727 |
|
| Loans held for sale | | 42,359 |
| | 39,576 |
| | 248,108 |
|
| Investment securities: | | | | | | |
| Available for sale | | 7,717,634 |
| | 9,278,066 |
| | 7,164,273 |
|
| Trading | | 32,074 |
| | 9,695 |
| | 20,828 |
|
| Non-marketable | | 109,867 |
| | 111,808 |
| | 110,487 |
|
| Total investment securities | | 7,859,575 |
| | 9,399,569 |
| | 7,295,588 |
|
| Short-term federal funds sold and securities purchased under agreements to resell | | 10,845 |
| | 11,400 |
| | 4,550 |
|
| Long-term securities purchased under agreements to resell | | 850,000 |
| | 850,000 |
| | 350,000 |
|
| Interest earning deposits with banks | | 535,696 |
| | 133,419 |
| | 4,047 |
|
| Cash and due from banks | | 340,594 |
| | 424,861 |
| | 412,315 |
|
| Land, buildings and equipment — net | | 374,732 |
| | 368,965 |
| | 387,792 |
|
| Goodwill | | 125,585 |
| | 125,585 |
| | 125,585 |
|
| Other intangible assets — net | | 9,394 |
| | 8,452 |
| | 11,285 |
|
| Other assets | | 376,540 |
| | 391,756 |
| | 403,762 |
|
| Total assets | | $ | 19,570,860 |
| | $ | 20,638,668 |
| | $ | 18,751,759 |
|
| LIABILITIES AND STOCKHOLDERS’ EQUITY | | | | | | |
| Deposits: | | | | | | |
| Non-interest bearing | |
| $4,834,750 |
| |
| $5,003,587 |
| |
| $4,170,224 |
|
| Savings, interest checking and money market | | 8,139,989 |
| | 8,416,839 |
| | 7,294,794 |
|
| Time open and C.D.’s of less than $100,000 | | 1,273,961 |
| | 1,204,896 |
| | 1,607,664 |
|
| Time open and C.D.’s of $100,000 and over | | 1,407,866 |
| | 1,388,755 |
| | 1,318,877 |
|
| Total deposits | | 15,656,566 |
| | 16,014,077 |
| | 14,391,559 |
|
| Federal funds purchased and securities sold under agreements to repurchase | | 1,282,470 |
| | 1,057,728 |
| | 1,530,555 |
|
| Other borrowings | | 111,929 |
| | 111,869 |
| | 337,863 |
|
| Other liabilities | | 388,328 |
| | 1,325,029 |
| | 445,177 |
|
| Total liabilities | | 17,439,293 |
| | 18,508,703 |
| | 16,705,154 |
|
| Stockholders’ equity: | | | | | | |
| Preferred stock | | — |
| | — |
| | — |
|
| Common stock | | 436,481 |
| | 436,481 |
| | 417,827 |
|
| Capital surplus | | 979,247 |
| | 980,176 |
| | 865,246 |
|
| Retained earnings | | 645,155 |
| | 690,981 |
| | 669,485 |
|
| Treasury stock | | (14,515 | ) | | (96,205 | ) | | (2,323 | ) |
| Accumulated other comprehensive income | | 83,000 |
| | 115,781 |
| | 95,204 |
|
| Total stockholders’ equity | | 2,129,368 |
| | 2,127,214 |
| | 2,045,439 |
|
| Non-controlling interest | | 2,199 |
| | 2,751 |
| | 1,166 |
|
| Total equity | | 2,131,567 |
| | 2,129,965 |
| | 2,046,605 |
|
| Total liabilities and equity | | $ | 19,570,860 |
| | $ | 20,638,668 |
| | $ | 18,751,759 |
|
COMMERCE BANCSHARES, INC. and SUBSIDIARIES
AVERAGE BALANCE SHEETS — AVERAGE RATES AND YIELDS |
| | | | | | | | | | | | | | | | | | | | |
(Unaudited) (Dollars in thousands) | For the Three Months Ended |
| June 30, 2011 | | September 30, 2011 | | September 30, 2010 |
| | Average Balance | | Avg. Rates Earned/Paid | | Average Balance | | Avg. Rates Earned/Paid | | Average Balance | | Avg. Rates Earned/Paid |
| ASSETS: | | | | | | | | | | | |
| Loans: | | | | | | | | | | | |
Business (A) | $ | 2,959,012 |
| | 3.64 | % | | $ | 2,815,064 |
| | 3.56 | % | | $ | 2,917,798 |
| | 3.82 | % |
| Real estate — construction and land | 429,649 |
| | 4.51 |
| | 412,490 |
| | 4.42 |
| | 530,472 |
| | 4.00 |
|
| Real estate — business | 2,100,726 |
| | 4.94 |
| | 2,123,034 |
| | 4.74 |
| | 1,998,500 |
| | 5.10 |
|
| Real estate — personal | 1,440,747 |
| | 4.87 |
| | 1,430,014 |
| | 4.75 |
| | 1,450,898 |
| | 5.13 |
|
| Consumer | 1,112,315 |
| | 6.32 |
| | 1,104,684 |
| | 6.20 |
| | 1,234,138 |
| | 6.65 |
|
| Revolving home equity | 468,380 |
| | 4.24 |
| | 466,503 |
| | 4.27 |
| | 485,034 |
| | 4.32 |
|
| Student | — |
| | — |
| | — |
| | — |
| | 315,150 |
| | 2.40 |
|
| Consumer credit card | 743,317 |
| | 11.13 |
| | 735,179 |
| | 11.59 |
| | 762,987 |
| | 11.29 |
|
| Overdrafts | 6,654 |
| | — |
| | 6,936 |
| | — |
| | 6,667 |
| | — |
|
Total loans (B) | 9,260,800 |
| | 5.12 |
| | 9,093,904 |
| | 5.07 |
| | 9,701,644 |
| | 5.21 |
|
| Loans held for sale | 52,390 |
| | 2.37 |
| | 41,677 |
| | 2.57 |
| | 305,013 |
| | 1.78 |
|
| Investment securities: | | | | | | | | | | | |
| U.S. government & federal agency | 576,693 |
| | 6.67 |
| | 590,003 |
| | 3.19 |
| | 672,447 |
| | 1.44 |
|
State & municipal obligations (A) | 1,160,164 |
| | 4.75 |
| | 1,185,263 |
| | 4.20 |
| | 982,137 |
| | 4.53 |
|
| Mortgage and asset-backed securities | 5,460,506 |
| | 2.61 |
| | 6,167,884 |
| | 2.24 |
| | 5,100,958 |
| | 2.77 |
|
Other marketable securities (A) | 172,754 |
| | 4.18 |
| | 172,588 |
| | 4.27 |
| | 182,966 |
| | 5.18 |
|
Total available for sale securities (B) | 7,370,117 |
| | 3.30 |
| | 8,115,738 |
| | 2.64 |
| | 6,938,508 |
| | 2.95 |
|
Trading securities (A) | 20,456 |
| | 2.78 |
| | 20,770 |
| | 2.52 |
| | 22,525 |
| | 2.87 |
|
Non-marketable securities (A) | 105,015 |
| | 6.24 |
| | 110,585 |
| | 6.59 |
| | 109,215 |
| | 9.43 |
|
| Total investment securities | 7,495,588 |
| | 3.34 |
| | 8,247,093 |
| | 2.69 |
| | 7,070,248 |
| | 3.05 |
|
| Short-term federal funds sold and securities | | | | | | | | | | | |
| purchased under agreements to resell | 16,513 |
| | .53 |
| | 10,927 |
| | .47 |
| | 6,903 |
| | .69 |
|
| Long-term securities purchased | | | | | | | | | | | |
| under agreements to resell | 803,846 |
| | 1.58 |
| | 850,000 |
| | 1.83 |
| | 199,302 |
| | 1.72 |
|
| Interest earning deposits with banks | 179,763 |
| | .25 |
| | 326,302 |
| | .26 |
| | 170,504 |
| | .25 |
|
| Total interest earning assets | 17,808,900 |
| | 4.15 |
| | 18,569,903 |
| | 3.77 |
| | 17,453,614 |
| | 4.19 |
|
Non-interest earning assets (B) | 1,054,328 |
| | | | 1,094,161 |
| | | | 1,167,692 |
| | |
| Total assets | $ | 18,863,228 |
| | | | $ | 19,664,064 |
| | | | $ | 18,621,306 |
| | |
| LIABILITIES AND EQUITY: | | | | | | | | | | | |
| Interest bearing deposits: | | | | | | | | | | | |
| Savings | $ | 537,364 |
| | .14 |
| | $ | 534,295 |
| | .19 |
| | $ | 481,997 |
| | .16 |
|
| Interest checking and money market | 7,580,895 |
| | .33 |
| | 7,756,104 |
| | .32 |
| | 6,793,839 |
| | .41 |
|
| Time open & C.D.’s of less than $100,000 | 1,324,192 |
| | .90 |
| | 1,231,280 |
| | .78 |
| | 1,642,200 |
| | 1.32 |
|
| Time open & C.D.’s of $100,000 and over | 1,466,214 |
| | .67 |
| | 1,372,842 |
| | .62 |
| | 1,417,162 |
| | .97 |
|
| Total interest bearing deposits | 10,908,665 |
| | .43 |
| | 10,894,521 |
| | .40 |
| | 10,335,198 |
| | .62 |
|
| Borrowings: | | | | | | | | | | | |
| Federal funds purchased and securities | | | | | | | | | | | |
| sold under agreements to repurchase | 952,032 |
| | .29 |
| | 1,016,623 |
| | .11 |
| | 1,023,961 |
| | .23 |
|
| Other borrowings | 112,099 |
| | 3.29 |
| | 111,930 |
| | 3.28 |
| | 350,328 |
| | 3.09 |
|
| Total borrowings | 1,064,131 |
| | .61 |
| | 1,128,553 |
| | .43 |
| | 1,374,289 |
| | .96 |
|
| Total interest bearing liabilities | 11,972,796 |
| | .45 | % | | 12,023,074 |
| | .40 | % | | 11,709,487 |
| | .66 | % |
| Non-interest bearing deposits | 4,570,721 |
| | | | 4,778,780 |
| | | | 4,192,026 |
| | |
| Other liabilities | 208,606 |
| | | | 728,974 |
| | | | 700,754 |
| | |
| Equity | 2,111,105 |
| | | | 2,133,236 |
| | | | 2,019,039 |
| | |
| Total liabilities and equity | $ | 18,863,228 |
| | | | $ | 19,664,064 |
| | | | $ | 18,621,306 |
| | |
| Net interest income (T/E) | $ | 170,779 |
| | | | $ | 164,317 |
| | | | $ | 164,773 |
| | |
| Net yield on interest earning assets | | | 3.85 | % | | | | 3.51 | % | | | | 3.75 | % |
| |
| (A) | Stated on a tax equivalent basis using a federal income tax rate of 35%. |
| |
| (B) | The allowance for loan losses and unrealized gains/(losses) on available for sale securities are included in non-interest earning assets. |
COMMERCE BANCSHARES, INC.
Management Discussion of Third Quarter Results
September 30, 2011
For the quarter ended September 30, 2011, net income attributable to Commerce Bancshares, Inc. (net income) amounted to $65.4 million, an increase of $9.5 million over the same quarter last year, and a decrease of $3.7 million compared to the previous quarter. For the current quarter, the return on average assets was 1.32%, the return on average equity was 12.2%, and the efficiency ratio was 58.7%. Compared to the same quarter last year, net interest income (tax equivalent) decreased by $456 thousand to $164.3 million, while non-interest income increased to $101.6 million. Non-interest expense for the current quarter totaled $153.7 million, a decrease of $1.8 million from the same period last year. The provision for loan losses totaled $11.4 million, representing a decline of $10.4 million from the amount recorded in the same quarter last year.
Balance Sheet Review
During the 3rd quarter of 2011, average loans, including loans held for sale, decreased $177.6 million, or 1.9%, compared to the previous quarter. Also, these same loans decreased $871.1 million, or 8.7%, this quarter compared to the same period last year, primarily due to a decline in average student loans of $573.8 million, as most of these loans were sold in 2010. The decrease in average loans compared to the previous quarter was mainly due to a decline in average business loans of $143.9 million. Construction, personal real estate, consumer and consumer credit card loans also declined this quarter. Business real estate loans, however, grew by $22.3 million. Part of the decline in business loans was seasonal line usage in the quarter, although several larger new loans, totaling over $68 million, were recorded at the end of the quarter. Nevertheless, usage on business lines of credit continues at low levels. The decline in consumer loans resulted from the Company's decision to exit the marine/RV loan origination business, while demand for personal real estate and construction loans continues to be affected by housing industry weakness.
Total available for sale investment securities (excluding fair value adjustments) averaged $8.1 billion this quarter, up $745.6 million compared to the previous quarter. The increase was mainly the result of purchases of agency mortgage-backed, other asset-backed and municipal securities totaling $1.5 billion, $417.7 million and $118.3 million, respectively, in the 3rd quarter. Maturities and pay-downs totaled $566.6 million this quarter. Included in these purchases were approximately $1.3 billion of agency mortgage- backed securities with forward settlement dates, of which approximately $1.0 billion will settle in the 4th quarter of 2011. Since interest does not accrue on these bonds until the actual settlement date, the effect of these forward purchases was to increase quarterly average earning assets by $284.0 million and reduce interest income by $1.5 million compared to estimated normal settlement. Because the market awards a lower price to forward settled securities, the Company will earn approximately 14 basis points more on these securities over their estimated lives. At September 30, 2011, the duration of the investment portfolio was 2.2 years, and maturities of approximately $1.5 billion are expected to occur during the next 12 months.
Total average deposits increased $193.9 million, or 1.3%, during the 3rd quarter of 2011 compared to the previous quarter. This increase in average deposits resulted mainly from growth in non-interest bearing and money market deposit balances of $208.1 million and $208.4 million, respectively, however interest checking and certificates of deposit (CD) balances declined $33.2 million and $186.3 million, respectively. The average loans to deposits ratio in the current quarter was 58.3%, compared to 60.2% in the previous quarter.
Certain non-interest bearing deposit accounts, which were previously included in interest bearing money market deposit totals, were reclassified to non-interest bearing deposits effective January 1, 2011. All prior periods have been revised to reflect this reclassification. The effect of this reclassification for the quarter ended September 30, 2010 was to increase average non-interest bearing deposits by $3.2 billion.
During the current quarter, the Company's average borrowings increased $64.4 million compared to the previous quarter. This increase was mainly due to an increase in the average balance of customer repurchase agreements.
Net Interest Income
Net interest income (tax equivalent) in the 3rd quarter of 2011 amounted to $164.3 million, compared with $170.8 million in the previous quarter, or a decrease of $6.5 million. Net interest income this quarter was also down $456 thousand compared to the 3rd quarter of last year. During the 3rd quarter of 2011, the net yield on earning assets (tax equivalent) was 3.51%, compared with 3.85% in the previous quarter and 3.75% in the same period last year.
The decrease in net interest income (tax equivalent) in the 3rd quarter of 2011 from the previous quarter was partly due to lower inflation income received on the Company's inflation protected securities (TIPS), partly offset by slightly lower rates on various interest bearing deposits. Interest on loans, including held for sale loans, declined $2.1 million (tax equivalent), mainly due to lower average balances and rates earned on most lending products. Interest income on investment securities decreased when
compared to the previous quarter by $6.4 million (tax equivalent) as a result of a decline of $5.4 million in inflation income earned on TIPS. This had the impact of reducing the net interest margin by 12 basis points this quarter. Also, as previously mentioned, the effect of the forward settled securities was to reduce the Company's net interest margin in the 3rd quarter by 8 basis points as a result of lower interest in the quarter coupled with higher average securities balances for which interest was not accrued. Since these securities were purchased at higher rates than under normal settlement transactions, the effect of lower interest earned in the 3rd quarter will be offset by higher earnings over the lives of the securities in future quarters.
Interest expense on deposits declined $783 thousand in the 3rd quarter of 2011 compared with the previous quarter as a result of continued low rates paid on money market and CD accounts. Overall rates paid on total interest bearing deposits declined 3 basis points to .40% this quarter. Interest expense on borrowings decreased by $389 thousand, due mainly to lower average rates paid on repurchase agreement balances.
The tax equivalent yield on interest earning assets in the 3rd quarter of 2011 was 3.77%, a decline of 38 basis points from the 2nd quarter of 2011, while the overall cost of interest bearing liabilities decreased 5 basis points to .40%.
Non-Interest Income
For the 3rd quarter of 2011, total non-interest income amounted to $101.6 million, an increase of $1.6 million compared to $100.0 million in the same period last year. Also, current quarter non-interest income increased $288 thousand compared to $101.3 million recorded in the previous quarter.
Bank card fees in the current quarter increased 11.7% over the 3rd quarter of last year due to growth in fees earned on corporate card (growth of 21.8%), debit card (growth of 6.6%) and merchant (growth of 12.3%) transactions. This quarter, corporate card and debit card fees, which totaled $15.2 million and $15.5 million, respectively, saw continued expansion in transaction volumes, while merchant sales volumes also continued to be strong. As a result of new Federal Reserve regulations for pricing debit card transactions, which were effective October 1, 2011, the Company estimates that debit card revenues will decline approximately $7.0 million in the 4th quarter of 2011.
Trust fees for the quarter increased 9.6% compared to the same period last year and mainly resulted from 10.7% growth in personal trust fees. Trust fees continue to be negatively affected by low interest rates on money market investments held in trust accounts. Deposit account fees increased 1.1% compared to the 3rd quarter of 2010, but increased $1.2 million, or 5.5%, compared to the previous quarter. Compared to the same period last year, this increase was due to higher overdraft fees, which grew by $404 thousand, or 3.6%, but was offset by lower corporate cash management fees which declined $454 thousand. Bond trading income for the current quarter totaled $5.6 million, an increase of 8.2% over the same period last year on higher securities sales to correspondent banks. Other non-interest income included write downs totaling $1.7 million on various banking properties currently held for sale.
Investment Securities Gains and Losses
Net securities gains amounted to $2.6 million in the 3rd quarter of 2011, compared to net gains of $2.0 million in the previous quarter and net gains of $16 thousand in the same quarter last year. During the current quarter, the Company recorded additional credit-related impairment losses of $831 thousand on certain non-agency guaranteed mortgage-backed securities identified as other-than-temporarily impaired, compared to losses of $650 thousand in the previous quarter and $2.0 million in the same quarter last year. The cumulative credit-related impairment reserve on these bonds totaled $9.3 million at quarter end. At September 30, 2011, the par value of non-agency guaranteed mortgage-backed securities identified as other-than-temporarily impaired totaled $153.2 million, compared to $197.5 million at September 30, 2010.
The current quarter also included a pre-tax gain of $3.4 million, which was primarily comprised of fair value adjustments on certain of the Company's private equity investments.
Non-Interest Expense
Non-interest expense for the current quarter amounted to $153.7 million, a decrease of $1.8 million, or 1.2%, from the same quarter last year and an increase of $233 thousand compared to the previous quarter. During the current quarter, the Company accrued an additional $5.9 million related to potential loss contingencies for litigation and has accrued a total of $13.2 million for these contingencies. Compared to the 3rd quarter of last year, salaries and benefits expense increased slightly, mainly due to higher incentives (increase of $1.5 million) offset by lower medical insurance costs, which declined by 18.5%. Full time equivalent employees totaled 4,762 and 5,011 at September 30, 2011 and 2010, respectively.
Compared to the 3rd quarter of last year, supplies and communication costs declined 15.6% to $5.7 million, reflecting continued effects of reducing paper supplies, customer checks and telephone and network costs. FDIC insurance expense declined $2.0 million as a result of new assessment rules which became effective in the 2nd quarter of 2011. Also, costs for foreclosed property
declined $1.8 million, partly due to lower losses on fair value adjustments in 2011. Costs for occupancy, equipment, data processing and a number of other smaller expenses also declined from the previous year, as the Company continued its focus on expense discipline.
Income Taxes
The effective tax rate for the Company was 32.7% in the current quarter, compared with 32.1% in the previous quarter and 31.8% in the 3rd quarter of 2010.
Credit Quality
Net loan charge-offs in the 3rd quarter of 2011 amounted to $14.9 million, compared with $15.2 million in the prior quarter and $21.8 million in the 3rd quarter of last year. The $293 thousand decrease in net loan charge-offs in the 3rd quarter of 2011 compared to the previous quarter was mainly the result of lower consumer credit card, business and personal real estate loan losses, which decreased by $1.4 million, $550 thousand and $354 thousand, respectively, reflecting continued improved delinquency and loss rates. Consumer net loan charge-offs increased $1.0 million over the previous quarter, mainly the result of higher marine/RV loan losses. Additionally, business real estate net loan charge-offs increased $1.1 million. The ratio of annualized net loan charge-offs to total average loans was .65% in the current quarter and .66% in the previous quarter.
For the 3rd quarter of 2011, annualized net charge-offs on average consumer credit card loans amounted to 3.83%, compared with 4.58% in the previous quarter and 6.55% in the same period last year. Consumer loan net charge-offs for the quarter amounted to 1.16% of average consumer loans, compared to .80% in the previous quarter and 1.58% in the same quarter last year. The provision for loan losses for the current quarter totaled $11.4 million, a decrease of $793 thousand from the previous quarter and $10.4 million lower than in the same period last year. The current quarter provision for loan losses was $3.5 million less than net loan charge-offs for the current quarter, thereby reducing the allowance for loan losses to $188.0 million. At September 30, 2011 this allowance was 2.07% of total loans, excluding loans held for sale, and was 248% of total non-accrual loans.
At September 30, 2011, total non-performing assets amounted to $99.7 million, a decrease of $3.5 million from the previous quarter. Non-performing assets are comprised of non-accrual loans ($75.9 million) and foreclosed real estate ($23.8 million). At September 30, 2011, the balance of non-accrual loans, which represented .8% of loans outstanding, included construction and land loans of $26.3 million, business loans of $26.3 million and business real estate loans of $15.9 million. Loans more than 90 days past due and still accruing interest totaled $20.1 million at September 30, 2011.
Other
During the quarter ended September 30, 2011, the Company purchased 2,175,885 shares of treasury stock at an average cost of $38.04.
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.
