Exhibit 99.1
|
| |
| CBSH |
| 1000 Walnut Street / Suite 700 / Kansas City, Missouri 64106 / 816.234.2000 |
|
FOR IMMEDIATE RELEASE:
Thursday, April 13, 2017
COMMERCE BANCSHARES, INC. REPORTS FIRST
QUARTER GROWTH IN EARNINGS PER SHARE OF 10%
Commerce Bancshares, Inc. announced earnings of $.68 per common share for the three months ended March 31, 2017 compared to $.62 per share in the same quarter last year and $.68 per share in the fourth quarter of 2016. Net income attributable to Commerce Bancshares, Inc. for the first quarter amounted to $71.5 million, compared to $65.4 million in the first quarter of 2016 and $71.6 million in the prior quarter. For the quarter, the return on average assets was 1.15%, the return on average common equity was 11.7% and the efficiency ratio was 63.1%.
In making this announcement, David W. Kemper, Chairman and CEO, said, “This quarter we continued to experience solid loan demand as average loans grew 8% annualized, with most of this growth occurring in our commercial lending business. Average deposits also grew $373 million, or 7% annualized, this quarter after strong growth in the previous quarter. Net interest income increased $14.5 million this quarter compared to the same period last year while our net interest margin expanded to 3.14%. Growth in earning assets, coupled with an improving rate environment, had a positive impact to our margins. We continue to see good growth in both trust and deposit fees which grew 9% and 6%, respectively, this quarter over the same period last year, while mortgage banking fees continued to reflect solid growth. Non-interest expense grew by $5.6 million over the previous quarter but included seasonally higher benefits costs of $5.1 million which normally occur in the first quarter of each year.”
Mr. Kemper added, “The overall credit environment continues to be very favorable as both net loan charge-offs and non-performing loans remain at low levels. For the current quarter, net loan charge-offs totaled $9.2 million, compared to $9.0 million in the previous quarter and $8.8 million in the first quarter of 2016. The ratio of annualized net loan charge-offs to average loans was .28% in both the current quarter and the same period last year. This quarter, net recoveries on commercial loans totaled $477 thousand compared to net recoveries in the prior quarter of $517 thousand. Net loan charge-offs of personal banking loans increased slightly to $9.7 million, mostly the result of higher credit card losses. During the current quarter, the provision for loan losses totaled $11.1 million, or $1.9 million higher than net loan charge-offs. The allowance for loan losses amounted to $157.8 million at March 31, 2017, or 1.16% of period end loans. ”
Total assets at March 31, 2017 were $25.3 billion, total loans were $13.6 billion, and total deposits were $21.1 billion. During the quarter, the Company paid a common cash dividend of $.225 per share, representing a 5% increase over the rate paid in 2016, and also paid a 6% cash dividend on its preferred stock.
(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 approximately 340 locations in Missouri, Illinois, Kansas, Oklahoma and Colorado.
This financial news release, including management's discussion of first quarter results, is posted to the Company's web site at www.commercebank.com.
* * * * * * * * * * * * * * *
For additional information, contact
Jeffery Aberdeen, Controller
at 1000 Walnut Street, Suite 700
Kansas City, MO 64106
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 |
| (Unaudited) (Dollars in thousands, except per share data) | | March 31,
2017 | December 31,
2016 | March 31,
2016 |
| FINANCIAL SUMMARY |
| Net interest income | |
| $178,273 |
|
| $173,202 |
|
| $163,775 |
|
| Non-interest income | | 117,066 |
| 119,479 |
| 119,024 |
|
| Total revenue | | 295,339 |
| 292,681 |
| 282,799 |
|
| Investment securities gains (losses), net | | (772 | ) | 3,651 |
| (995 | ) |
| Provision for loan losses | | 11,128 |
| 10,400 |
| 9,439 |
|
| Non-interest expense | | 186,830 |
| 181,261 |
| 177,473 |
|
| Income before taxes | | 96,609 |
| 104,671 |
| 94,892 |
|
| Income taxes | | 24,907 |
| 32,297 |
| 29,370 |
|
| Non-controlling interest expense (income) | | 198 |
| 795 |
| 148 |
|
| Net income attributable to Commerce Bancshares, Inc. | 71,504 |
| 71,579 |
| 65,374 |
|
| Preferred stock dividends | | 2,250 |
| 2,250 |
| 2,250 |
|
| Net income available to common shareholders |
| $69,254 |
|
| $69,329 |
|
| $63,124 |
|
| Earnings per common share: | | | | |
| Net income — basic | |
| $.68 |
|
| $.68 |
|
| $.62 |
|
| Net income — diluted | |
| $.68 |
|
| $.68 |
|
| $.62 |
|
| Effective tax rate | | 25.83 | % | 31.09 | % | 31.00 | % |
| Tax equivalent net interest income | |
| $187,322 |
|
| $181,301 |
|
| $171,425 |
|
Average total interest earning assets (1) | | $ | 24,205,227 |
| $ | 23,775,165 |
| $ | 23,332,333 |
|
Diluted wtd. average shares outstanding
| | 100,767,071 |
| 100,558,345 |
| 100,571,214 |
|
| | | | | |
| RATIOS | | | | |
Average loans to deposits (2) | | 64.39 | % | 64.24 | % | 62.81 | % |
| Return on total average assets | | 1.15 |
| 1.14 |
| 1.07 |
|
Return on average common equity (3) | | 11.74 |
| 11.48 |
| 11.20 |
|
| Non-interest income to total revenue | | 39.64 |
| 40.82 |
| 42.09 |
|
Efficiency ratio (4) | | 63.14 |
| 61.82 |
| 62.62 |
|
| Net yield on interest earning assets | | 3.14 |
| 3.03 |
| 2.95 |
|
| | | | | |
| EQUITY SUMMARY | | | | |
| Cash dividends per common share | |
| $.225 |
|
| $.214 |
|
| $.214 |
|
| Cash dividends on common stock | |
| $22,913 |
|
| $21,776 |
|
| $21,760 |
|
| Cash dividends on preferred stock | |
| $2,250 |
|
| $2,250 |
|
| $2,250 |
|
Book value per common share (5) | |
| $23.79 |
|
| $23.22 |
|
| $22.71 |
|
Market value per common share (5) | |
| $56.16 |
|
| $57.81 |
|
| $42.81 |
|
| High market value per common share | |
| $60.61 |
|
| $59.22 |
|
| $43.77 |
|
| Low market value per common share | |
| $53.15 |
|
| $45.37 |
|
| $35.66 |
|
Common shares outstanding (5) | | 101,668,824 |
| 101,460,962 |
| 101,364,853 |
|
Tangible common equity to tangible assets (6) | | 9.03 | % | 8.66 | % | 8.84 | % |
| Tier I leverage ratio | | 9.56 | % | 9.55 | % | 9.11 | % |
| | | | | |
| OTHER QTD INFORMATION | | | | |
| Number of bank/ATM locations | | 336 |
| 336 |
| 346 |
|
| Full-time equivalent employees | | 4,807 |
| 4,784 |
| 4,765 |
|
| |
| (1) | Excludes allowance for loan losses and unrealized gains/(losses) on available for sale 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. |
| |
| (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). |
COMMERCE BANCSHARES, INC. and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME |
| | | | | | | | | | | | | | | | |
| | | For the Three Months Ended |
(Unaudited) (In thousands, except per share data) | | March 31,
2017 | December 31,
2016 | September 30,
2016 | June 30,
2016 | March 31,
2016 |
| Interest income | |
| $187,997 |
|
| $181,498 |
|
| $179,361 |
|
| $180,065 |
|
| $172,128 |
|
| Interest expense | | 9,724 |
| 8,296 |
| 8,118 |
| 8,236 |
| 8,353 |
|
| Net interest income | | 178,273 |
| 173,202 |
| 171,243 |
| 171,829 |
| 163,775 |
|
| Provision for loan losses | | 11,128 |
| 10,400 |
| 7,263 |
| 9,216 |
| 9,439 |
|
| Net interest income after provision for loan losses | 167,145 |
| 162,802 |
| 163,980 |
| 162,613 |
| 154,336 |
|
| NON-INTEREST INCOME | | | | | | |
| Bank card transaction fees | | 43,204 |
| 45,338 |
| 47,006 |
| 45,065 |
| 44,470 |
|
| Trust fees | | 32,014 |
| 31,360 |
| 30,951 |
| 30,241 |
| 29,243 |
|
| Deposit account charges and other fees | 21,942 |
| 22,134 |
| 22,241 |
| 21,328 |
| 20,691 |
|
| Capital market fees | | 2,342 |
| 2,679 |
| 2,751 |
| 2,500 |
| 2,725 |
|
| Consumer brokerage services | | 3,649 |
| 3,409 |
| 3,375 |
| 3,491 |
| 3,509 |
|
| Loan fees and sales | | 3,168 |
| 2,583 |
| 3,123 |
| 3,196 |
| 2,510 |
|
| Other | | 10,747 |
| 11,976 |
| 9,872 |
| 10,749 |
| 15,876 |
|
| Total non-interest income | | 117,066 |
| 119,479 |
| 119,319 |
| 116,570 |
| 119,024 |
|
| INVESTMENT SECURITIES GAINS (LOSSES), NET | (772 | ) | 3,651 |
| (1,965 | ) | (744 | ) | (995 | ) |
| NON-INTEREST EXPENSE | | | | | | |
| Salaries and employee benefits | | 112,369 |
| 108,639 |
| 107,004 |
| 104,808 |
| 106,859 |
|
| Net occupancy | | 11,443 |
| 11,529 |
| 12,366 |
| 11,092 |
| 11,303 |
|
| Equipment | | 4,609 |
| 4,884 |
| 4,842 |
| 4,781 |
| 4,634 |
|
| Supplies and communication | | 5,709 |
| 5,645 |
| 5,968 |
| 5,693 |
| 6,829 |
|
| Data processing and software | | 23,097 |
| 23,390 |
| 23,663 |
| 22,770 |
| 22,899 |
|
| Marketing | | 3,224 |
| 3,431 |
| 4,399 |
| 4,389 |
| 3,813 |
|
| Deposit insurance | | 3,471 |
| 3,443 |
| 3,576 |
| 3,143 |
| 3,165 |
|
| Other | | 22,908 |
| 20,300 |
| 19,424 |
| 20,413 |
| 17,971 |
|
| Total non-interest expense | | 186,830 |
| 181,261 |
| 181,242 |
| 177,089 |
| 177,473 |
|
| Income before income taxes | | 96,609 |
| 104,671 |
| 100,092 |
| 101,350 |
| 94,892 |
|
| Less income taxes | | 24,907 |
| 32,297 |
| 30,942 |
| 31,542 |
| 29,370 |
|
| Net income | | 71,702 |
| 72,374 |
| 69,150 |
| 69,808 |
| 65,522 |
|
| Less non-controlling interest expense (income) | 198 |
| 795 |
| 605 |
| (85 | ) | 148 |
|
| Net income attributable to Commerce Bancshares, Inc. | 71,504 |
| 71,579 |
| 68,545 |
| 69,893 |
| 65,374 |
|
| Less preferred stock dividends | | 2,250 |
| 2,250 |
| 2,250 |
| 2,250 |
| 2,250 |
|
| Net income available to common shareholders |
| $69,254 |
|
| $69,329 |
|
| $66,295 |
|
| $67,643 |
|
| $63,124 |
|
| Net income per common share — basic |
| $.68 |
|
| $.68 |
|
| $.65 |
|
| $.67 |
|
| $.62 |
|
| Net income per common share — diluted |
| $.68 |
|
| $.68 |
|
| $.65 |
|
| $.66 |
|
| $.62 |
|
| | | | | | | |
| OTHER INFORMATION | | | | | | |
| Return on total average assets | | 1.15 | % | 1.14 | % | 1.12 | % | 1.15 | % | 1.07 | % |
Return on average common equity (1) | 11.74 |
| 11.48 |
| 10.97 |
| 11.69 |
| 11.20 |
|
Efficiency ratio (2) | | 63.14 |
| 61.82 |
| 62.25 |
| 61.27 |
| 62.62 |
|
| Effective tax rate | | 25.83 |
| 31.09 |
| 31.10 |
| 31.10 |
| 31.00 |
|
Net yield on interest earning assets
| 3.14 |
| 3.03 |
| 3.08 |
| 3.11 |
| 2.95 |
|
| Tax equivalent net interest income | |
| $187,322 |
|
| $181,301 |
|
| $179,115 |
|
| $179,592 |
|
| $171,425 |
|
| |
| (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) (In thousands) | | March 31,
2017 | December 31,
2016 | March 31,
2016 |
| ASSETS | | | | |
| Loans | | | | |
| Business | | $ | 4,888,011 |
| $ | 4,776,365 |
| $ | 4,575,081 |
|
| Real estate — construction and land | | 846,904 |
| 791,236 |
| 745,369 |
|
| Real estate — business | | 2,710,595 |
| 2,643,374 |
| 2,395,933 |
|
| Real estate — personal | | 2,013,437 |
| 2,010,397 |
| 1,903,969 |
|
| Consumer | | 1,975,521 |
| 1,990,801 |
| 1,904,320 |
|
| Revolving home equity | | 396,542 |
| 413,634 |
| 423,005 |
|
| Consumer credit card | | 736,766 |
| 776,465 |
| 744,364 |
|
| Overdrafts | | 4,733 |
| 10,464 |
| 5,829 |
|
| Total loans | | 13,572,509 |
| 13,412,736 |
| 12,697,870 |
|
| Allowance for loan losses | | (157,832 | ) | (155,932 | ) | (152,132 | ) |
| Net loans | | 13,414,677 |
| 13,256,804 |
| 12,545,738 |
|
| Loans held for sale | | 15,559 |
| 14,456 |
| 60,078 |
|
| Investment securities: | | | | |
| Available for sale | | 9,671,975 |
| 9,649,203 |
| 9,552,179 |
|
| Trading | | 20,200 |
| 22,225 |
| 23,130 |
|
| Non-marketable | | 101,688 |
| 99,558 |
| 117,259 |
|
| Total investment securities | | 9,793,863 |
| 9,770,986 |
| 9,692,568 |
|
| Federal funds sold and short-term securities purchased under agreements to resell | | 2,205 |
| 15,470 |
| 9,075 |
|
| Long-term securities purchased under agreements to resell | | 725,000 |
| 725,000 |
| 825,000 |
|
| Interest earning deposits with banks | | 120,234 |
| 272,275 |
| 171,651 |
|
| Cash and due from banks | | 416,161 |
| 494,690 |
| 375,481 |
|
| Land, buildings and equipment — net | | 335,191 |
| 337,705 |
| 350,423 |
|
| Goodwill | | 138,921 |
| 138,921 |
| 138,921 |
|
| Other intangible assets — net | | 6,700 |
| 6,709 |
| 6,539 |
|
| Other assets | | 339,660 |
| 608,408 |
| 331,478 |
|
| Total assets | | $ | 25,308,171 |
| $ | 25,641,424 |
| $ | 24,506,952 |
|
| LIABILITIES AND STOCKHOLDERS’ EQUITY | | | | |
| Deposits: | | | | |
| Non-interest bearing | | $ | 7,237,815 |
| $ | 7,429,398 |
| $ | 7,065,066 |
|
| Savings, interest checking and money market | | 11,439,078 |
| 11,430,789 |
| 11,205,357 |
|
| Time open and C.D.’s of less than $100,000 | | 696,776 |
| 713,075 |
| 766,810 |
|
| Time open and C.D.’s of $100,000 and over | | 1,718,184 |
| 1,527,833 |
| 1,649,076 |
|
| Total deposits | | 21,091,853 |
| 21,101,095 |
| 20,686,309 |
|
| Federal funds purchased and securities sold under agreements to repurchase | | 1,321,149 |
| 1,723,905 |
| 957,388 |
|
| Other borrowings | | 101,975 |
| 102,049 |
| 103,806 |
|
| Other liabilities | | 229,629 |
| 213,243 |
| 312,167 |
|
| Total liabilities | | 22,744,606 |
| 23,140,292 |
| 22,059,670 |
|
| Stockholders’ equity: | | | | |
| Preferred stock | | 144,784 |
| 144,784 |
| 144,784 |
|
| Common stock | | 510,015 |
| 510,015 |
| 489,862 |
|
| Capital surplus | | 1,544,034 |
| 1,552,454 |
| 1,332,429 |
|
| Retained earnings | | 337,046 |
| 292,849 |
| 424,677 |
|
| Treasury stock | | (7,588 | ) | (15,294 | ) | (52,653 | ) |
| Accumulated other comprehensive income | | 30,412 |
| 10,975 |
| 102,929 |
|
| Total stockholders’ equity | | 2,558,703 |
| 2,495,783 |
| 2,442,028 |
|
| Non-controlling interest | | 4,862 |
| 5,349 |
| 5,254 |
|
| Total equity | | 2,563,565 |
| 2,501,132 |
| 2,447,282 |
|
| Total liabilities and equity | | $ | 25,308,171 |
| $ | 25,641,424 |
| $ | 24,506,952 |
|
COMMERCE BANCSHARES, INC. and SUBSIDIARIES
AVERAGE BALANCE SHEETS |
| | | | | | | | | | | | | | | |
(Unaudited) (In thousands) | For the Three Months Ended |
| March 31, 2017 | December 31, 2016 | September 30, 2016 | June 30, 2016 | March 31, 2016 |
| ASSETS: | | | | | |
| Loans: | | | | | |
| Business | $ | 4,906,672 |
| $ | 4,731,405 |
| $ | 4,694,340 |
| $ | 4,691,476 |
| $ | 4,491,556 |
|
| Real estate — construction and land | 828,017 |
| 821,048 |
| 821,422 |
| 789,329 |
| 682,557 |
|
| Real estate — business | 2,645,531 |
| 2,559,028 |
| 2,432,325 |
| 2,389,170 |
| 2,382,094 |
|
| Real estate — personal | 2,012,456 |
| 1,985,606 |
| 1,943,951 |
| 1,905,968 |
| 1,909,532 |
|
| Consumer | 1,974,894 |
| 1,978,154 |
| 1,947,956 |
| 1,927,925 |
| 1,934,577 |
|
| Revolving home equity | 405,432 |
| 415,429 |
| 411,832 |
| 413,198 |
| 429,682 |
|
| Consumer credit card | 747,783 |
| 757,618 |
| 750,412 |
| 738,130 |
| 752,098 |
|
| Overdrafts | 4,185 |
| 5,501 |
| 4,652 |
| 3,916 |
| 4,772 |
|
Total loans | 13,524,970 |
| 13,253,789 |
| 13,006,890 |
| 12,859,112 |
| 12,586,868 |
|
| Allowance for loan losses | (155,328 | ) | (154,040 | ) | (153,517 | ) | (151,622 | ) | (151,308 | ) |
| Net loans | 13,369,642 |
| 13,099,749 |
| 12,853,373 |
| 12,707,490 |
| 12,435,560 |
|
| Loans held for sale | 11,972 |
| 10,765 |
| 26,597 |
| 56,272 |
| 9,360 |
|
| Investment securities: | | | | | |
| U.S. government and federal agency obligations | 913,474 |
| 811,524 |
| 726,469 |
| 698,374 |
| 703,212 |
|
| Government-sponsored enterprise obligations | 450,489 |
| 445,544 |
| 481,573 |
| 666,354 |
| 776,488 |
|
| State and municipal obligations | 1,783,103 |
| 1,784,407 |
| 1,747,794 |
| 1,763,849 |
| 1,718,587 |
|
| Mortgage-backed securities | 3,760,294 |
| 3,656,695 |
| 3,366,292 |
| 3,394,466 |
| 3,424,716 |
|
| Asset-backed securities | 2,359,644 |
| 2,417,367 |
| 2,340,783 |
| 2,377,708 |
| 2,537,472 |
|
Other marketable securities | 332,643 |
| 333,236 |
| 334,747 |
| 337,572 |
| 342,382 |
|
| Unrealized gain on investment securities | 62,986 |
| 155,818 |
| 235,169 |
| 191,565 |
| 149,319 |
|
| Total available for sale securities | 9,662,633 |
| 9,604,591 |
| 9,232,827 |
| 9,429,888 |
| 9,652,176 |
|
Trading securities | 25,165 |
| 21,717 |
| 18,433 |
| 20,540 |
| 18,190 |
|
| Non-marketable securities | 100,740 |
| 105,420 |
| 113,954 |
| 116,103 |
| 127,769 |
|
| Total investment securities | 9,788,538 |
| 9,731,728 |
| 9,365,214 |
| 9,566,531 |
| 9,798,135 |
|
| Federal funds sold and short-term securities purchased under agreements to resell | 9,887 |
| 8,336 |
| 13,054 |
| 11,916 |
| 17,378 |
|
| Long-term securities purchased under agreements to resell | 725,001 |
| 724,998 |
| 766,302 |
| 824,999 |
| 850,275 |
|
| Interest earning deposits with banks | 207,845 |
| 201,367 |
| 207,944 |
| 125,024 |
| 219,636 |
|
| Other assets | 1,139,402 |
| 1,153,982 |
| 1,151,549 |
| 1,113,214 |
| 1,172,916 |
|
| Total assets | $ | 25,252,287 |
| $ | 24,930,925 |
| $ | 24,384,033 |
| $ | 24,405,446 |
| $ | 24,503,260 |
|
| | | | | | |
| LIABILITIES AND EQUITY: | | | | | |
| Non-interest bearing deposits | $ | 7,246,698 |
| $ | 7,307,407 |
| $ | 7,096,218 |
| $ | 6,885,889 |
| $ | 6,905,673 |
|
| Savings | 795,695 |
| 773,304 |
| 778,663 |
| 787,478 |
| 761,020 |
|
| Interest checking and money market | 10,603,988 |
| 10,512,268 |
| 10,210,744 |
| 10,287,923 |
| 10,128,543 |
|
| Time open & C.D.’s of less than $100,000 | 705,135 |
| 722,775 |
| 740,729 |
| 758,703 |
| 775,221 |
|
| Time open & C.D.’s of $100,000 and over | 1,671,125 |
| 1,333,764 |
| 1,435,001 |
| 1,635,892 |
| 1,483,700 |
|
| Total deposits | 21,022,641 |
| 20,649,518 |
| 20,261,355 |
| 20,355,885 |
| 20,054,157 |
|
| Borrowings: | | | | | |
| Federal funds purchased and securities sold under agreements to repurchase | 1,356,316 |
| 1,284,916 |
| 1,163,728 |
| 1,211,892 |
| 1,404,754 |
|
| Other borrowings | 102,011 |
| 101,412 |
| 102,769 |
| 104,649 |
| 377,711 |
|
| Total borrowings | 1,458,327 |
| 1,386,328 |
| 1,266,497 |
| 1,316,541 |
| 1,782,465 |
|
| Other liabilities | 234,144 |
| 346,900 |
| 306,306 |
| 260,179 |
| 254,437 |
|
| Total liabilities | 22,715,112 |
| 22,382,746 |
| 21,834,158 |
| 21,932,605 |
| 22,091,059 |
|
| Equity | 2,537,175 |
| 2,548,179 |
| 2,549,875 |
| 2,472,841 |
| 2,412,201 |
|
| Total liabilities and equity | $ | 25,252,287 |
| $ | 24,930,925 |
| $ | 24,384,033 |
| $ | 24,405,446 |
| $ | 24,503,260 |
|
COMMERCE BANCSHARES, INC. and SUBSIDIARIES
AVERAGE RATES |
| | | | | | | | | | | |
| (Unaudited) | For the Three Months Ended | |
| March 31, 2017 | December 31, 2016 | September 30, 2016 | June 30, 2016 | March 31, 2016 | |
| ASSETS: | | | | | | |
| Loans: | | | | | | |
Business (1) | 3.02 | % | 2.91 | % | 2.87 | % | 2.90 | % | 2.87 | % | |
| Real estate — construction and land | 3.85 |
| 3.64 |
| 3.48 |
| 3.46 |
| 3.51 |
| |
| Real estate — business | 3.63 |
| 3.61 |
| 3.63 |
| 3.69 |
| 3.70 |
| |
| Real estate — personal | 3.74 |
| 3.69 |
| 3.73 |
| 3.76 |
| 3.77 |
| |
| Consumer | 3.89 |
| 3.85 |
| 3.91 |
| 3.80 |
| 3.87 |
| |
| Revolving home equity | 3.64 |
| 3.50 |
| 3.56 |
| 3.59 |
| 3.52 |
| |
| Consumer credit card | 11.66 |
| 11.38 |
| 11.56 |
| 11.54 |
| 11.42 |
| |
| Overdrafts | — |
| — |
| — |
| — |
| — |
| |
| Total loans | 3.92 |
| 3.85 |
| 3.86 |
| 3.86 |
| 3.89 |
| |
| Loans held for sale | 6.64 |
| 5.77 |
| 5.00 |
| 4.95 |
| 5.80 |
| |
| Investment securities: | | | | | | |
| U.S. government and federal agency obligations | 2.09 |
| 2.18 |
| 2.43 |
| 3.48 |
| .40 |
| |
| Government-sponsored enterprise obligations | 1.58 |
| 1.54 |
| 2.24 |
| 3.03 |
| 1.93 |
| |
State and municipal obligations (1) | 3.65 |
| 3.57 |
| 3.60 |
| 3.60 |
| 3.66 |
| |
| Mortgage-backed securities | 2.38 |
| 2.40 |
| 2.38 |
| 2.36 |
| 2.45 |
| |
| Asset-backed securities | 1.63 |
| 1.52 |
| 1.48 |
| 1.45 |
| 1.39 |
| |
Other marketable securities (1) | 2.82 |
| 2.95 |
| 2.74 |
| 2.77 |
| 2.79 |
| |
| Total available for sale securities | 2.38 |
| 2.36 |
| 2.39 |
| 2.51 |
| 2.20 |
| |
Trading securities (1) | 2.77 |
| 2.40 |
| 2.42 |
| 2.27 |
| 2.87 |
| |
Non-marketable securities (1) | 21.08 |
| 5.42 |
| 10.24 |
| 8.03 |
| 6.54 |
| |
| Total investment securities | 2.58 |
| 2.39 |
| 2.49 |
| 2.58 |
| 2.26 |
| |
| Federal funds sold and short-term securities purchased under agreements to resell | .94 |
| .72 |
| .61 |
| .64 |
| .56 |
| |
| Long-term securities purchased under agreements to resell | 2.12 |
| 1.86 |
| 1.73 |
| 1.64 |
| 1.64 |
| |
| Interest earning deposits with banks | .77 |
| .56 |
| .51 |
| .49 |
| .49 |
| |
| Total interest earning assets | 3.30 |
| 3.17 |
| 3.22 |
| 3.25 |
| 3.10 |
| |
| | | | | | | |
| LIABILITIES AND EQUITY: | | | | | | |
| Interest bearing deposits: | | | | | | |
| Savings | .13 |
| .12 |
| .12 |
| .11 |
| .12 |
| |
| Interest checking and money market | .14 |
| .13 |
| .13 |
| .13 |
| .13 |
| |
| Time open & C.D.’s of less than $100,000 | .37 |
| .37 |
| .37 |
| .38 |
| .38 |
| |
| Time open & C.D.’s of $100,000 and over | .67 |
| .60 |
| .61 |
| .58 |
| .54 |
| |
| Total interest bearing deposits | .21 |
| .19 |
| .20 |
| .20 |
| .19 |
| |
| Borrowings: | | | | | | |
| Federal funds purchased and securities sold under agreements to repurchase | .46 |
| .30 |
| .25 |
| .24 |
| .25 |
| |
| Other borrowings | 3.53 |
| 3.54 |
| 3.51 |
| 3.49 |
| 1.33 |
| |
| Total borrowings | .67 |
| .54 |
| .51 |
| .50 |
| .48 |
| |
| Total interest bearing liabilities | .26 | % | .22 | % | .22 | % | .22 | % | .23 | % | |
| | | | | | | |
| Net yield on interest earning assets | 3.14 | % | 3.03 | % | 3.08 | % | 3.11 | % | 2.95 | % | |
(1) Stated on a tax equivalent basis using a federal income tax rate of 35%.
|
| | | | | | | | | | | | | | | | |
COMMERCE BANCSHARES, INC. and SUBSIDIARIES
|
| CREDIT QUALITY |
| | | | | | | |
| | | For the Three Months Ended |
| (Unaudited) (In thousands, except per share data) | | March 31, 2017 | December 31, 2016 | September 30, 2016 | June 30, 2016 | March 31, 2016 |
| ALLOWANCE FOR LOAN LOSSES | | | | | | |
| Balance at beginning of period | | $ | 155,932 |
| $ | 154,532 |
| $ | 153,832 |
| $ | 152,132 |
| $ | 151,532 |
|
| Provision for losses | | 11,128 |
| 10,400 |
| 7,263 |
| 9,216 |
| 9,439 |
|
| Net charge-offs (recoveries): | | | | | | |
| Commercial portfolio: | | | | | | |
| Business | | 97 |
| 268 |
| (50 | ) | (65 | ) | 463 |
|
| Real estate — construction and land | | (535 | ) | (882 | ) | (2,312 | ) | (507 | ) | (11 | ) |
| Real estate — business | | (39 | ) | 97 |
| (106 | ) | (1,030 | ) | (242 | ) |
| | | (477 | ) | (517 | ) | (2,468 | ) | (1,602 | ) | 210 |
|
| Personal banking portfolio: | | | | | | |
| Consumer credit card | | 7,148 |
| 6,506 |
| 6,356 |
| 6,650 |
| 5,918 |
|
| Consumer | | 2,096 |
| 2,427 |
| 2,240 |
| 1,781 |
| 2,599 |
|
| Overdraft | | 435 |
| 379 |
| 434 |
| 307 |
| 219 |
|
| Real estate — personal | | 19 |
| (38 | ) | (78 | ) | 305 |
| (195 | ) |
| Revolving home equity | | 7 |
| 243 |
| 79 |
| 75 |
| 88 |
|
| | | 9,705 |
| 9,517 |
| 9,031 |
| 9,118 |
| 8,629 |
|
| Total net loan charge-offs | | 9,228 |
| 9,000 |
| 6,563 |
| 7,516 |
| 8,839 |
|
| Balance at end of period | | $ | 157,832 |
| $ | 155,932 |
| $ | 154,532 |
| $ | 153,832 |
| $ | 152,132 |
|
| | | | | | | |
| NET CHARGE-OFF RATIOS* | | | | | | |
| Commercial portfolio: | | | | | | |
| Business | | .01 | % | .02 | % | — | % | (.01 | )% | .04 | % |
| Real estate — construction and land | | (.26 | ) | (.43 | ) | (1.12 | ) | (.26 | ) | (.01 | ) |
| Real estate — business | | (.01 | ) | .02 |
| (.02 | ) | (.17 | ) | (.04 | ) |
| | | (.02 | ) | (.03 | ) | (.12 | ) | (.08 | ) | .01 |
|
| Personal banking portfolio: | | | | | | |
| Consumer credit card | | 3.88 |
| 3.42 |
| 3.37 |
| 3.62 |
| 3.16 |
|
| Consumer | | .43 |
| .49 |
| .46 |
| .37 |
| .54 |
|
| Overdraft | | 42.15 |
| 27.41 |
| 37.11 |
| 31.53 |
| 18.46 |
|
| Real estate — personal | | — |
| (.01 | ) | (.02 | ) | .06 |
| (.04 | ) |
| Revolving home equity | | .01 |
| .23 |
| .08 |
| .07 |
| .08 |
|
| | | .77 |
| .74 |
| .71 |
| .74 |
| .69 |
|
| Total | | .28 | % | .27 | % | .20 | % | .24 | % | .28 | % |
| | | | | | | |
| CREDIT QUALITY RATIOS | | | | | | |
| Non-performing assets to total loans | | .11 | % | .11 | % | .13 | % | .20 | % | .25 | % |
| Non-performing assets to total assets | | .06 |
| .06 |
| .07 |
| .11 |
| .13 |
|
| Allowance for loan losses to total loans | | 1.16 |
| 1.16 |
| 1.17 |
| 1.18 |
| 1.20 |
|
| | | | | | | |
| NON-PERFORMING ASSETS | | | | | | |
| Non-accrual loans: | | | | | | |
| Business | | $ | 7,935 |
| $ | 8,682 |
| $ | 8,758 |
| $ | 12,716 |
| $ | 16,098 |
|
| Real estate — construction and land | | 585 |
| 564 |
| 1,310 |
| 2,170 |
| 2,710 |
|
| Real estate — business | | 1,764 |
| 1,634 |
| 1,920 |
| 5,236 |
| 6,234 |
|
| Real estate — personal | | 3,368 |
| 3,403 |
| 3,634 |
| 4,293 |
| 4,205 |
|
| Consumer | | 1,151 |
| — |
| — |
| — |
| — |
|
| Revolving home equity | | — |
| — |
| 23 |
| 109 |
| 120 |
|
| Total | | 14,803 |
| 14,283 |
| 15,645 |
| 24,524 |
| 29,367 |
|
| Foreclosed real estate | | 387 |
| 366 |
| 950 |
| 1,609 |
| 1,997 |
|
| Total non-performing assets | | $ | 15,190 |
| $ | 14,649 |
| $ | 16,595 |
| $ | 26,133 |
| $ | 31,364 |
|
| | | | | | | |
| Loans past due 90 days and still accruing interest | $ | 14,908 |
| $ | 16,396 |
| $ | 16,916 |
| $ | 15,892 |
| $ | 15,360 |
|
COMMERCE BANCSHARES, INC.
Management Discussion of First Quarter Results
March 31, 2017
For the quarter ended March 31, 2017, net income attributable to Commerce Bancshares, Inc. (net income) amounted to $71.5 million, compared to $71.6 million in the previous quarter and $65.4 million in the same quarter last year. Quarterly average loans grew by 8.2% (annualized) over the previous quarter, while average deposits increased by 7.2% (annualized). Compared to the previous quarter, net interest income increased by $5.1 million while non-interest income declined $2.4 million. Non-interest expense increased $5.6 million this quarter but included expense of $2.3 million related to the contribution of appreciated securities to a related foundation as explained below. The provision for loan losses totaled $11.1 million, an increase of $728 thousand over the previous quarter, while net securities losses of $772 thousand were recorded this quarter compared to gains of $3.7 million in the prior quarter. The effective income tax rate declined to 25.8% this quarter due mainly to a change in the accounting rules for equity-based compensation that was effective this quarter. For the current quarter, the return on total average assets was 1.15%, the return on average common equity was 11.7%, and the efficiency ratio was 63.1%.
Balance Sheet Review
During the 1st quarter of 2017, average total loans increased $272.4 million, or 8.2% annualized, compared to the previous quarter, and increased $940.7 million, or 7.5%, over the same period last year. Compared to the previous quarter, the increase in average loans resulted mainly from growth in business (up $175.3 million), business real estate (up $86.5 million), and personal real estate (up $26.9 million) loans. Growth in business loans was driven in part by seasonal demand for agribusiness loans along with higher demand for lease, tax-free and other commercial and industrial loans. Demand continued to be solid for business real estate loans. While overall consumer loans declined slightly, demand continued for private banking loans. During the current quarter, the Company sold certain fixed rate personal real estate loans totaling $33.0 million, compared to $41.7 million in the prior quarter. Additionally, growth in personal real estate loans was mainly the result of continued demand for 15 year fixed rate loans, which the Company did not sell into the secondary market.
During the 1st quarter of 2017, total average available for sale investment securities increased $58.0 million to $9.7 billion, at fair value. This small growth in investment securities was the result of higher average balances of U.S. government securities (most of which were purchased in the prior quarter) and mortgage-backed securities. Purchases of securities this quarter totaled $480.7 million and were offset by maturities and pay downs of $478.6 million. Current quarter purchases consisted mainly of mortgage-backed and asset-backed securities. At March 31, 2017, the duration of the investment portfolio was 2.9 years, and maturities and pay downs of approximately $2.1 billion are expected to occur during the next 12 months.
Total average deposits increased $373.1 million, or 7.2% (annualized), this quarter compared to the previous quarter. The increase in average deposits resulted mainly from growth in certificates of deposit (increase of $319.7 million), money market (increase of $97.7 million) and government and personal demand deposit (increase of $98.9 million) accounts. Business demand deposits declined on average by $136.1 million. Compared to the previous quarter, total average consumer, commercial and private banking deposits increased $131.6 million, $181.3 million, and $92.5 million, respectively. The average loans to deposits ratio
was 64.4% in the current quarter and 64.2% in the prior quarter. Compared to the previous quarter, the Company’s average borrowings increased $72.0 million to $1.5 billion in the current quarter, mostly due to higher balances of customer repurchase agreements.
Net Interest Income
Net interest income (tax equivalent) in the 1st quarter of 2017 amounted to $187.3 million compared with $181.3 million in the previous quarter. Net interest income (tax equivalent) for the current quarter increased $15.9 million compared to the 1st quarter of last year. During the 1st quarter of 2017, the net yield on earning assets (tax equivalent) was 3.14%, compared with 3.03% in the previous quarter and 2.95% in the same period last year. The increase in net interest income (tax equivalent) in the current quarter compared to the prior quarter was due mainly to higher interest income of $6.9 million on loans and investment securities, partly offset by an increase in interest expense of $1.4 million.
Compared to the previous quarter, interest on loans (tax equivalent) increased $2.6 million, mainly as a result of higher average balances of business, business real estate, and personal real estate loans, partly offset by lower yields on business real estate loans. Overall, the average yield on the loan portfolio increased this quarter to 3.92% compared to 3.85% in the previous quarter.
Interest on investment securities (tax equivalent) increased $4.3 million over the previous quarter. The current quarter included one-time interest payments of $2.7 million received on a private equity investment. Also, the current quarter included an adjustment of $413 thousand lowering premium amortization expense due to slowing prepayment speeds on mortgage-backed securities, compared to a similar adjustment lowering amortization by $1.8 million in the previous quarter. Total inflation income on treasury inflation-protected securities (TIPS) totaled $1.9 million for both the current and previous quarters. The yield on total investment securities was 2.58% in the current quarter compared to 2.39% in the prior quarter.
Interest expense on deposits increased $881 thousand this quarter compared with the previous quarter due mainly to higher rates and balances of certificates of deposit, while borrowing costs increased $547 thousand this quarter mostly due to higher rates paid on customer repurchase agreements. Overall rates paid on interest bearing liabilities increased 4 basis points to .26% this quarter.
Non-Interest Income
In the 1st quarter of 2017, total non-interest income amounted to $117.1 million, a decrease of $2.0 million, or 1.6%, compared to the same period last year. Also, current quarter non-interest income declined by $2.4 million when compared to amounts recorded in the previous quarter. The decline in non-interest income from the same period last year was mainly due to lower gains on branch property sales coupled with lower bank card and swap fee income. Trust fees grew by 9.5% this quarter while deposit fees increased by 6.0%.
Total bank card fees in the current quarter declined $1.3 million, or 2.8%, from the same period last year. The decrease was mainly the result of a decline in merchant fees of $1.3 million. Commercial card fees declined by $342 thousand this quarter but were offset by higher debit and credit card interchange fees. The decline in merchant fees resulted from the loss of several large merchant
COMMERCE BANCSHARES, INC.
Management Discussion of First Quarter Results
March 31, 2017
customers affecting this quarter but also lowered operating expenses in this business line. Total bank card fees this quarter were comprised of fees on corporate card ($22.0 million), debit card ($9.6 million), merchant ($5.8 million) and credit card ($5.7 million) transactions.
In the current quarter, trust fees increased $2.8 million, or 9.5%, over the same period last year, resulting mainly from growth in private client customer fee income. Compared to the same period last year, deposit account fees increased $1.3 million, or 6.0%, as a result of growth in deposit account service, overdraft and corporate cash management fees.
Compared to the 1st quarter of 2016, loan fees and sales grew 26.2% to $3.2 million, due to higher mortgage banking revenue related to the Company’s fixed rate residential mortgage sale program. Included in other non-interest income are fees from sales of interest rate swaps, which declined by $2.0 million this quarter due to several larger swap transactions occurring in the same period last year. Also in the 1st quarter of 2016, the Company sold a former branch property for a gain of $3.3 million that did not reoccur this quarter. Fees from the sales of tax credits were strong this quarter, totaling $1.2 million, but were lower by $319 thousand when compared to the same period last year. Non-interest income comprised 39.6% of the Company’s total revenue this quarter.
Investment Securities Gains and Losses
The Company recorded net securities losses of $772 thousand this quarter, compared with net gains of $3.7 million last quarter and net losses of $995 thousand in the same period last year. Net losses in the current quarter resulted mainly from the write-down of $2.9 million in unrealized fair value adjustments on the Company’s private equity investment portfolio, which was offset by a gain of $2.2 million related to the Company’s contribution of appreciated securities mentioned above.
Non-Interest Expense
Non-interest expense for the current quarter amounted to $186.8 million compared to $177.5 million in the same period last year, which was a 5.3% increase. The increase was mainly due to higher costs for salaries and benefits, bank card expense and professional fees, partly offset by lower supplies and communication and marketing costs. Also, non-interest expense this quarter included contribution expense of $2.3 million related to the donation of appreciated securities. Exclusive of this amount, non-interest expense would have grown 4.0% over amounts recorded in the previous year.
Compared to the 1st quarter of last year, salaries and benefits expense increased $5.5 million, or 5.2%. Salaries expense grew by 5.1% mainly due to higher full-time salaries and incentive compensation costs. Benefits expense increased $1.0 million, or 5.4%, mainly due to higher payroll taxes and 401(k) plan expense, which are seasonally higher in the 1st quarter. Growth in total salaries expense compared to the previous year resulted mainly from increased staffing costs in commercial banking, commercial card, residential mortgage, trust, information technology, and other support units. Full-time equivalent employees totaled 4,807 and 4,765 at March 31, 2017 and 2016, respectively.
The decline in supplies and communication costs compared to the 1st quarter of last year was the result of higher chip card reissue costs last year that have now declined. Marketing costs were down
this quarter due to lower overall spending but are expected to increase in future quarters this year. The donation of appreciated securities to a related foundation increased non-interest expense, but resulted in a pre-tax loss of $118 thousand (due to a related securities gain) and tax benefits of $856 thousand. It also lowered the annual contribution requirement of approximately $1.5 million. The Company intends to repeat this strategy in subsequent quarters this year at similar amounts.
Income Taxes
The effective tax rate for the Company was 25.8% in the current quarter, 31.1% in the previous quarter, and 31.0% in the 1st quarter of 2016. The lower effective tax rate and related tax expense mainly resulted from a change in the accounting rules for equity-based compensation which was effective January 1, 2017 and lowered tax expense in the current quarter by approximately $4.5 million. These tax benefits are expected to be seasonally higher in the 1st quarter when the majority of the Company’s restricted stock awards vest. Tax benefits related to the donation of appreciated securities also lowered the effective tax rate.
Credit Quality
Net loan charge-offs in the 1st quarter of 2017 amounted to $9.2 million, compared to $9.0 million in the prior quarter and $8.8 million in the same period last year. The ratio of annualized net loan charge-offs to total average loans was .28% in the current quarter compared to .27% in the previous quarter and .28% in the 1st quarter of last year. During the 1st quarter of 2017, the Company recorded net recoveries on commercial loans of $477 thousand, compared to net recoveries of $517 thousand in the prior quarter. Net loan charge-offs in the personal banking portfolio totaled $9.7 million in the current quarter and $9.5 million in the previous quarter.
In the 1st quarter of 2017, annualized net loan charge-offs on average consumer credit card loans were 3.88%, compared with 3.42% in the previous quarter and 3.16% in the same period last year. Consumer loan net charge-offs were .43% of average consumer loans in the current quarter, .49% in the prior quarter and .54% in the same quarter last year. The provision for loan losses in the current quarter totaled $11.1 million, compared to $10.4 million in the prior quarter and $9.4 million in the 1st quarter of last year. This quarter, the provision for loan losses exceeded net loan charge-offs by $1.9 million. At March 31, 2017, the allowance totaled $157.8 million, which was 1.16% of total loans.
At March 31, 2017, total non-performing assets amounted to $15.2 million, an increase of $541 thousand over the previous quarter. Non-performing assets are comprised of non-accrual loans and foreclosed real estate ($14.8 million and $387 thousand, respectively, at March 31, 2017). At March 31, 2017, the balance of non-accrual loans, which represented .11% of loans outstanding, included business loans of $7.9 million, business real estate loans of $1.8 million, personal real estate loans of $3.4 million and consumer loans of $1.2 million. Loans more than 90 days past due and still accruing interest totaled $14.9 million at March 31, 2017.
Other
During the 1st quarter of 2017, the Company paid a cash dividend of $.225 per common share, representing an increase of 5% over the rate paid in 2016. Also, a cash dividend of $2.3 million was paid on its preferred stock. The Company purchased 126,737
COMMERCE BANCSHARES, INC.
Management Discussion of First Quarter Results
March 31, 2017
shares of treasury stock during the current quarter at an average price of $57.47.
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.
