Exhibit 99.1
|
| |
| CBSH |
| 1000 Walnut Street / Suite 700 / Kansas City, Missouri 64106 / 816.234.2000 |
|
FOR IMMEDIATE RELEASE:
Thursday, April 12, 2018
COMMERCE BANCSHARES, INC. REPORTS RECORD
FIRST QUARTER EARNINGS PER SHARE OF $.92
Commerce Bancshares, Inc. announced record earnings of $.92 per common share for the three months ended March 31, 2018, compared to $.65 per share in the same quarter last year and $.86 per share in the fourth quarter of 2017. Net income attributable to Commerce Bancshares, Inc. for the first quarter of 2018 amounted to $101.0 million, compared to $71.5 million in the first quarter of 2017 and $94.4 million in the prior quarter. For the current quarter, the return on average assets was 1.66%, the return on average common equity was 15.6% and the efficiency ratio was 58.2%.
In making this announcement, David W. Kemper, Chairman and CEO, said, “We continued to see strong growth in top line revenue this quarter driven by a favorable interest rate environment and growth in our fee-based businesses. Net interest income grew $14.6 million this quarter compared to the first quarter of last year, as the yield on our loan portfolio grew from 3.92% to 4.33%, and our funding costs remained low. Our net interest margin increased to 3.37%. Compared to the prior year, fee income was strong as revenues from our bank card and trust businesses grew 15.9% and 12.6%, respectively. We also saw good growth in deposit fees driven by our expanding payments businesses. Non-interest expense grew 1.6% this quarter compared to the same quarter last year and remained well controlled. Compared to the previous quarter, average loans grew $122.3 million this quarter mostly driven by agribusiness lending while average deposits declined $98.6 million.”
Mr. Kemper continued, “This quarter net loan charge-offs totaled $10.4 million, compared to $11.0 million in the prior quarter and $9.2 million in the first quarter of 2017, as the overall credit environment remained favorable. The ratio of annualized net loan charge-offs to average loans was
.30% in the current quarter, .32% in the prior quarter and .28% in the same period last year. Non-performing assets also declined this quarter to $11.6 million. Net recoveries on commercial loans totaled $255 thousand in the current quarter, compared to net loan charge-offs in the prior quarter of $633 thousand. Net loan charge-offs of personal banking loans increased slightly this quarter to $10.7 million, mostly the result of higher losses in our consumer lending portfolio. During the current quarter, the provision for loan losses totaled $10.4 million and the allowance for loan losses amounted to $159.5 million at March 31, 2018, or 1.15% of period end loans.”
Total assets at March 31, 2018 were $24.6 billion, total loans were $13.9 billion, and total deposits were $20.5 billion. During the quarter, the Company paid a common cash dividend of $.235 per share, representing a 9.8% increase over the rate paid in the fourth quarter of 2017, and also paid a 6% cash dividend on its preferred stock.
(more)
Commerce Bancshares, Inc. is a regional bank holding company offering a full range of financial products to consumers and commercial customers including personal banking, lending, mortgage banking, wealth management, brokerage and capital markets services. The Company currently operates in approximately 330 locations in the central United States and has a nationwide presence in the commercial payments industry.
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,
2018 | December 31,
2017 | March 31,
2017 |
| FINANCIAL SUMMARY |
| Net interest income | |
| $192,892 |
|
| $190,008 |
|
| $178,273 |
|
| Non-interest income | | 119,690 |
| 119,383 |
| 109,613 |
|
| Total revenue | | 312,582 |
| 309,391 |
| 287,886 |
|
| Investment securities gains (losses), net | | 5,410 |
| 27,209 |
| (772 | ) |
| Provision for loan losses | | 10,396 |
| 12,654 |
| 11,128 |
|
| Non-interest expense | | 182,277 |
| 208,859 |
| 179,377 |
|
| Income before taxes | | 125,319 |
| 115,087 |
| 96,609 |
|
| Income taxes | | 23,258 |
| 20,104 |
| 24,907 |
|
| Non-controlling interest expense | | 1,077 |
| 628 |
| 198 |
|
| Net income attributable to Commerce Bancshares, Inc. | 100,984 |
| 94,355 |
| 71,504 |
|
| Preferred stock dividends | | 2,250 |
| 2,250 |
| 2,250 |
|
| Net income available to common shareholders |
| $98,734 |
|
| $92,105 |
|
| $69,254 |
|
| Earnings per common share: | | | | |
| Net income — basic | |
| $.92 |
|
| $.86 |
|
| $.65 |
|
| Net income — diluted | |
| $.92 |
|
| $.86 |
|
| $.65 |
|
| Effective tax rate | | 18.72 | % | 17.56 | % | 25.83 | % |
| Tax equivalent net interest income | |
| $196,638 |
|
| $197,917 |
|
| $187,322 |
|
Average total interest earning assets (1) | | $ | 23,693,350 |
| $ | 23,926,315 |
| $ | 24,253,430 |
|
Diluted wtd. average shares outstanding
| | 105,965,845 |
| 105,976,402 |
| 105,805,425 |
|
| | | | | |
| RATIOS | | | | |
Average loans to deposits (2) | | 69.09 | % | 68.15 | % | 64.39 | % |
| Return on total average assets | | 1.66 |
| 1.50 |
| 1.15 |
|
Return on average common equity (3) | | 15.58 |
| 14.17 |
| 11.74 |
|
| Non-interest income to total revenue | | 38.29 |
| 38.59 |
| 38.08 |
|
Efficiency ratio (4) | | 58.21 |
| 67.40 |
| 62.19 |
|
| Net yield on interest earning assets | | 3.37 |
| 3.29 |
| 3.13 |
|
| | | | | |
| EQUITY SUMMARY | | | | |
| Cash dividends per common share | |
| $.235 |
|
| $.214 |
|
| $.214 |
|
| Cash dividends on common stock | |
| $25,106 |
|
| $22,897 |
|
| $22,913 |
|
| Cash dividends on preferred stock | |
| $2,250 |
|
| $2,250 |
|
| $2,250 |
|
Book value per common share (5) | |
| $24.02 |
|
| $24.14 |
|
| $22.66 |
|
Market value per common share (5) | |
| $59.91 |
|
| $55.84 |
|
| $53.49 |
|
| High market value per common share | |
| $61.88 |
|
| $57.91 |
|
| $57.72 |
|
| Low market value per common share | |
| $54.85 |
|
| $52.07 |
|
| $50.62 |
|
Common shares outstanding (5) | | 106,617,497 |
| 106,615,043 |
| 106,752,265 |
|
Tangible common equity to tangible assets (6) | | 9.88 | % | 9.84 | % | 9.03 | % |
| Tier I leverage ratio | | 10.84 | % | 10.39 | % | 9.56 | % |
| | | | | |
| OTHER QTD INFORMATION | | | | |
| Number of bank/ATM locations | | 325 |
| 327 |
| 336 |
|
| Full-time equivalent employees | | 4,799 |
| 4,800 |
| 4,807 |
|
| |
| (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. |
| |
| (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,
2018 | December 31,
2017 | September 30,
2017 | June 30,
2017 | March 31,
2017 |
| Interest income | �� |
| $205,995 |
|
| $201,572 |
|
| $194,244 |
|
| $193,594 |
|
| $187,997 |
|
| Interest expense | | 13,103 |
| 11,564 |
| 11,653 |
| 10,787 |
| 9,724 |
|
| Net interest income | | 192,892 |
| 190,008 |
| 182,591 |
| 182,807 |
| 178,273 |
|
| Provision for loan losses | | 10,396 |
| 12,654 |
| 10,704 |
| 10,758 |
| 11,128 |
|
| Net interest income after provision for loan losses | 182,496 |
| 177,354 |
| 171,887 |
| 172,049 |
| 167,145 |
|
| NON-INTEREST INCOME | | | | | | |
| Bank card transaction fees | | 41,453 |
| 42,888 |
| 39,166 |
| 37,295 |
| 35,751 |
|
| Trust fees | | 36,062 |
| 35,405 |
| 34,620 |
| 33,120 |
| 32,014 |
|
| Deposit account charges and other fees | 22,982 |
| 22,598 |
| 22,659 |
| 22,861 |
| 21,942 |
|
| Capital market fees | | 2,291 |
| 1,743 |
| 1,755 |
| 2,156 |
| 2,342 |
|
| Consumer brokerage services | | 3,768 |
| 3,576 |
| 3,679 |
| 3,726 |
| 3,649 |
|
| Loan fees and sales | | 2,862 |
| 3,099 |
| 3,590 |
| 4,091 |
| 3,168 |
|
| Other | | 10,272 |
| 10,074 |
| 11,418 |
| 12,131 |
| 10,747 |
|
| Total non-interest income | | 119,690 |
| 119,383 |
| 116,887 |
| 115,380 |
| 109,613 |
|
| INVESTMENT SECURITIES GAINS (LOSSES), NET | 5,410 |
| 27,209 |
| (3,037 | ) | 1,651 |
| (772 | ) |
| NON-INTEREST EXPENSE | | | | | | |
| Salaries and employee benefits | | 115,894 |
| 115,741 |
| 111,382 |
| 108,829 |
| 112,369 |
|
| Net occupancy | | 11,584 |
| 11,280 |
| 11,459 |
| 11,430 |
| 11,443 |
|
| Equipment | | 4,431 |
| 4,692 |
| 4,491 |
| 4,776 |
| 4,609 |
|
| Supplies and communication | | 5,313 |
| 6,118 |
| 5,517 |
| 5,446 |
| 5,709 |
|
| Data processing and software | | 20,690 |
| 21,090 |
| 19,968 |
| 20,035 |
| 19,905 |
|
| Marketing | | 4,805 |
| 3,937 |
| 4,676 |
| 4,488 |
| 3,224 |
|
| Deposit insurance | | 3,457 |
| 3,444 |
| 3,479 |
| 3,592 |
| 3,471 |
|
| Community service | | 729 |
| 25,511 |
| 3,006 |
| 2,916 |
| 2,944 |
|
| Other | | 15,374 |
| 17,046 |
| 15,239 |
| 15,378 |
| 15,703 |
|
| Total non-interest expense | | 182,277 |
| 208,859 |
| 179,217 |
| 176,890 |
| 179,377 |
|
| Income before income taxes | | 125,319 |
| 115,087 |
| 106,520 |
| 112,190 |
| 96,609 |
|
| Less income taxes | | 23,258 |
| 20,104 |
| 32,294 |
| 33,201 |
| 24,907 |
|
| Net income | | 102,061 |
| 94,983 |
| 74,226 |
| 78,989 |
| 71,702 |
|
| Less non-controlling interest expense (income) | 1,077 |
| 628 |
| (338 | ) | 29 |
| 198 |
|
| Net income attributable to Commerce Bancshares, Inc. | 100,984 |
| 94,355 |
| 74,564 |
| 78,960 |
| 71,504 |
|
| Less preferred stock dividends | | 2,250 |
| 2,250 |
| 2,250 |
| 2,250 |
| 2,250 |
|
| Net income available to common shareholders |
| $98,734 |
|
| $92,105 |
|
| $72,314 |
|
| $76,710 |
|
| $69,254 |
|
| Net income per common share — basic |
| $.92 |
|
| $.86 |
|
| $.68 |
|
| $.71 |
|
| $.65 |
|
| Net income per common share — diluted |
| $.92 |
|
| $.86 |
|
| $.67 |
|
| $.71 |
|
| $.65 |
|
| | | | | | | |
| OTHER INFORMATION | | | | | | |
| Return on total average assets | | 1.66 | % | 1.50 | % | 1.19 | % | 1.26 | % | 1.15 | % |
Return on average common equity (1) | 15.58 |
| 14.17 |
| 11.35 |
| 12.48 |
| 11.74 |
|
Efficiency ratio (2) | | 58.21 |
| 67.40 |
| 59.73 |
| 59.21 |
| 62.19 |
|
| Effective tax rate | | 18.72 |
| 17.56 |
| 30.22 |
| 29.60 |
| 25.83 |
|
Net yield on interest earning assets
| 3.37 |
| 3.29 |
| 3.17 |
| 3.18 |
| 3.13 |
|
| Tax equivalent net interest income | |
| $196,638 |
|
| $197,917 |
|
| $190,497 |
|
| $190,865 |
|
| $187,322 |
|
| |
| (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,
2018 | December 31,
2017 | March 31,
2017 |
| ASSETS | | | | |
| Loans | | | | |
| Business | | $ | 4,960,614 |
| $ | 4,958,554 |
| $ | 4,888,011 |
|
| Real estate — construction and land | | 932,058 |
| 968,820 |
| 846,904 |
|
| Real estate — business | | 2,724,584 |
| 2,697,452 |
| 2,710,595 |
|
| Real estate — personal | | 2,069,012 |
| 2,062,787 |
| 2,013,437 |
|
| Consumer | | 2,069,235 |
| 2,104,487 |
| 1,975,521 |
|
| Revolving home equity | | 382,825 |
| 400,587 |
| 396,542 |
|
| Consumer credit card | | 752,651 |
| 783,864 |
| 736,766 |
|
| Overdrafts | | 2,382 |
| 7,123 |
| 4,733 |
|
| Total loans | | 13,893,361 |
| 13,983,674 |
| 13,572,509 |
|
| Allowance for loan losses | | (159,532 | ) | (159,532 | ) | (157,832 | ) |
| Net loans | | 13,733,829 |
| 13,824,142 |
| 13,414,677 |
|
| Loans held for sale | | 16,435 |
| 21,398 |
| 15,559 |
|
| Investment securities: | | | | |
| Available for sale debt securities | | 8,432,180 |
| 8,725,442 |
| 9,618,109 |
|
| Trading debt securities | | 32,025 |
| 18,269 |
| 20,200 |
|
| Equity securities | | 51,512 |
| 50,591 |
| 55,691 |
|
| Other securities | | 108,320 |
| 99,005 |
| 99,863 |
|
| Total investment securities | | 8,624,037 |
| 8,893,307 |
| 9,793,863 |
|
| Federal funds sold and short-term securities purchased under agreements to resell | | 17,000 |
| 42,775 |
| 2,205 |
|
| Long-term securities purchased under agreements to resell | | 700,000 |
| 700,000 |
| 725,000 |
|
| Interest earning deposits with banks | | 134,697 |
| 30,631 |
| 120,234 |
|
| Cash and due from banks | | 423,048 |
| 438,439 |
| 416,161 |
|
| Land, buildings and equipment — net | | 332,253 |
| 335,110 |
| 335,191 |
|
| Goodwill | | 138,921 |
| 138,921 |
| 138,921 |
|
| Other intangible assets — net | | 7,893 |
| 7,618 |
| 6,700 |
|
| Other assets | | 483,129 |
| 401,074 |
| 339,660 |
|
| Total assets | | $ | 24,611,242 |
| $ | 24,833,415 |
| $ | 25,308,171 |
|
| LIABILITIES AND STOCKHOLDERS’ EQUITY | | | | |
| Deposits: | | | | |
| Non-interest bearing | | $ | 6,953,430 |
| $ | 7,158,962 |
| $ | 7,237,815 |
|
| Savings, interest checking and money market | | 11,828,138 |
| 11,499,620 |
| 11,439,078 |
|
| Time open and C.D.’s of less than $100,000 | | 615,401 |
| 634,646 |
| 696,776 |
|
| Time open and C.D.’s of $100,000 and over | | 1,141,502 |
| 1,132,218 |
| 1,718,184 |
|
| Total deposits | | 20,538,471 |
| 20,425,446 |
| 21,091,853 |
|
| Federal funds purchased and securities sold under agreements to repurchase | | 1,132,329 |
| 1,507,138 |
| 1,321,149 |
|
| Other borrowings | | 9,214 |
| 1,758 |
| 101,975 |
|
| Other liabilities | | 225,500 |
| 180,889 |
| 229,629 |
|
| Total liabilities | | 21,905,514 |
| 22,115,231 |
| 22,744,606 |
|
| Stockholders’ equity: | | | | |
| Preferred stock | | 144,784 |
| 144,784 |
| 144,784 |
|
| Common stock | | 535,407 |
| 535,407 |
| 510,015 |
|
| Capital surplus | | 1,802,785 |
| 1,815,360 |
| 1,544,034 |
|
| Retained earnings | | 325,390 |
| 221,374 |
| 337,046 |
|
| Treasury stock | | (15,681 | ) | (14,473 | ) | (7,588 | ) |
| Accumulated other comprehensive income (loss) | | (89,563 | ) | 14,108 |
| 30,412 |
|
| Total stockholders’ equity | | 2,703,122 |
| 2,716,560 |
| 2,558,703 |
|
| Non-controlling interest | | 2,606 |
| 1,624 |
| 4,862 |
|
| Total equity | | 2,705,728 |
| 2,718,184 |
| 2,563,565 |
|
| Total liabilities and equity | | $ | 24,611,242 |
| $ | 24,833,415 |
| $ | 25,308,171 |
|
COMMERCE BANCSHARES, INC. and SUBSIDIARIES
AVERAGE BALANCE SHEETS |
| | | | | | | | | | | | | | | |
(Unaudited) (In thousands) | For the Three Months Ended |
| March 31, 2018 | December 31, 2017 | September 30, 2017 | June 30, 2017 | March 31, 2017 |
| ASSETS: | | | | | |
| Loans: | | | | | |
| Business | $ | 4,934,621 |
| $ | 4,818,419 |
| $ | 4,777,222 |
| $ | 4,827,439 |
| $ | 4,906,672 |
|
| Real estate — construction and land | 951,930 |
| 948,043 |
| 887,596 |
| 862,479 |
| 828,017 |
|
| Real estate — business | 2,733,812 |
| 2,720,356 |
| 2,710,453 |
| 2,701,144 |
| 2,645,531 |
|
| Real estate — personal | 2,062,083 |
| 2,044,651 |
| 2,017,264 |
| 2,003,997 |
| 2,012,456 |
|
| Consumer | 2,072,168 |
| 2,100,762 |
| 2,070,398 |
| 1,997,761 |
| 1,974,894 |
|
| Revolving home equity | 392,727 |
| 394,231 |
| 395,212 |
| 399,730 |
| 405,432 |
|
| Consumer credit card | 757,692 |
| 756,544 |
| 739,692 |
| 731,471 |
| 747,783 |
|
| Overdrafts | 4,628 |
| 5,295 |
| 4,373 |
| 4,505 |
| 4,185 |
|
Total loans | 13,909,661 |
| 13,788,301 |
| 13,602,210 |
| 13,528,526 |
| 13,524,970 |
|
| Allowance for loan losses | (158,779 | ) | (157,026 | ) | (156,909 | ) | (157,003 | ) | (155,328 | ) |
| Net loans | 13,750,882 |
| 13,631,275 |
| 13,445,301 |
| 13,371,523 |
| 13,369,642 |
|
| Loans held for sale | 19,115 |
| 18,158 |
| 21,227 |
| 18,341 |
| 11,972 |
|
| Investment securities: | | | | | |
| U.S. government and federal agency obligations | 916,655 |
| 917,664 |
| 917,808 |
| 910,821 |
| 913,474 |
|
| Government-sponsored enterprise obligations | 405,681 |
| 452,104 |
| 456,668 |
| 450,362 |
| 450,489 |
|
| State and municipal obligations | 1,513,243 |
| 1,630,660 |
| 1,699,365 |
| 1,771,674 |
| 1,783,103 |
|
| Mortgage-backed securities | 3,925,904 |
| 3,949,933 |
| 3,718,697 |
| 3,708,124 |
| 3,760,294 |
|
| Asset-backed securities | 1,469,488 |
| 1,622,778 |
| 2,025,415 |
| 2,335,344 |
| 2,359,644 |
|
Other debt securities | 341,821 |
| 351,177 |
| 322,231 |
| 320,869 |
| 327,006 |
|
| Unrealized gain (loss) on debt securities | (43,238 | ) | 36,875 |
| 73,291 |
| 57,547 |
| 14,783 |
|
| Total available for sale debt securities | 8,529,554 |
| 8,961,191 |
| 9,213,475 |
| 9,554,741 |
| 9,608,793 |
|
Trading debt securities | 21,966 |
| 20,401 |
| 21,149 |
| 21,062 |
| 25,165 |
|
| Equity securities | 50,507 |
| 82,416 |
| 51,204 |
| 53,162 |
| 56,122 |
|
| Other securities | 100,993 |
| 95,485 |
| 100,776 |
| 99,545 |
| 98,458 |
|
| Total investment securities | 8,703,020 |
| 9,159,493 |
| 9,386,604 |
| 9,728,510 |
| 9,788,538 |
|
| Federal funds sold and short-term securities purchased under agreements to resell | 44,339 |
| 27,017 |
| 23,807 |
| 13,115 |
| 9,887 |
|
| Long-term securities purchased under agreements to resell | 700,000 |
| 699,999 |
| 662,490 |
| 665,655 |
| 725,001 |
|
| Interest earning deposits with banks | 273,977 |
| 270,222 |
| 211,219 |
| 139,061 |
| 207,845 |
|
| Other assets | 1,145,200 |
| 1,157,289 |
| 1,122,230 |
| 1,106,528 |
| 1,139,402 |
|
| Total assets | $ | 24,636,533 |
| $ | 24,963,453 |
| $ | 24,872,878 |
| $ | 25,042,733 |
| $ | 25,252,287 |
|
| | | | | |
| LIABILITIES AND EQUITY: | | | | | |
| Non-interest bearing deposits | $ | 6,824,700 |
| $ | 7,257,102 |
| $ | 7,135,703 |
| $ | 7,065,849 |
| $ | 7,246,698 |
|
| Savings | 838,900 |
| 821,908 |
| 829,197 |
| 831,038 |
| 795,695 |
|
| Interest checking and money market | 10,737,829 |
| 10,416,221 |
| 10,387,212 |
| 10,667,042 |
| 10,603,988 |
|
| Time open & C.D.’s of less than $100,000 | 625,319 |
| 644,951 |
| 667,710 |
| 688,047 |
| 705,135 |
|
| Time open & C.D.’s of $100,000 and over | 1,134,194 |
| 1,119,352 |
| 1,326,290 |
| 1,510,001 |
| 1,671,125 |
|
| Total deposits | 20,160,942 |
| 20,259,534 |
| 20,346,112 |
| 20,761,977 |
| 21,022,641 |
|
| Borrowings: | | | | | |
| Federal funds purchased and securities sold under agreements to repurchase | 1,560,573 |
| 1,625,828 |
| 1,500,987 |
| 1,363,031 |
| 1,356,316 |
|
| Other borrowings | 1,913 |
| 42,060 |
| 101,904 |
| 105,311 |
| 102,011 |
|
| Total borrowings | 1,562,486 |
| 1,667,888 |
| 1,602,891 |
| 1,468,342 |
| 1,458,327 |
|
| Other liabilities | 198,398 |
| 312,172 |
| 251,714 |
| 203,139 |
| 234,144 |
|
| Total liabilities | 21,921,826 |
| 22,239,594 |
| 22,200,717 |
| 22,433,458 |
| 22,715,112 |
|
| Equity | 2,714,707 |
| 2,723,859 |
| 2,672,161 |
| 2,609,275 |
| 2,537,175 |
|
| Total liabilities and equity | $ | 24,636,533 |
| $ | 24,963,453 |
| $ | 24,872,878 |
| $ | 25,042,733 |
| $ | 25,252,287 |
|
COMMERCE BANCSHARES, INC. and SUBSIDIARIES
AVERAGE RATES |
| | | | | | | | | | | |
| (Unaudited) | For the Three Months Ended | |
| March 31, 2018 | December 31, 2017 | September 30, 2017 | June 30, 2017 | March 31, 2017 | |
| ASSETS: | | | | | | |
| Loans: | | | | | | |
Business (1) | 3.48 | % | 3.32 | % | 3.25 | % | 3.21 | % | 3.02 | % | |
| Real estate — construction and land | 4.69 |
| 4.41 |
| 4.31 |
| 4.30 |
| 3.85 |
| |
| Real estate — business | 4.06 |
| 3.90 |
| 3.85 |
| 3.74 |
| 3.63 |
| |
| Real estate — personal | 3.80 |
| 3.72 |
| 3.72 |
| 3.72 |
| 3.74 |
| |
| Consumer | 4.25 |
| 4.07 |
| 4.02 |
| 3.94 |
| 3.89 |
| |
| Revolving home equity | 4.25 |
| 4.06 |
| 4.03 |
| 3.84 |
| 3.64 |
| |
| Consumer credit card | 12.06 |
| 11.90 |
| 12.03 |
| 11.90 |
| 11.66 |
| |
| Overdrafts | — |
| — |
| — |
| — |
| — |
| |
| Total loans | 4.33 |
| 4.18 |
| 4.13 |
| 4.06 |
| 3.92 |
| |
| Loans held for sale | 6.45 |
| 5.55 |
| 5.36 |
| 5.75 |
| 6.64 |
| |
| Investment securities: | | | | | | |
| U.S. government and federal agency obligations | 2.12 |
| 2.60 |
| 1.40 |
| 2.52 |
| 2.09 |
| |
| Government-sponsored enterprise obligations | 1.84 |
| 1.69 |
| 1.61 |
| 1.59 |
| 1.58 |
| |
State and municipal obligations (1) | 3.06 |
| 3.60 |
| 3.57 |
| 3.61 |
| 3.65 |
| |
| Mortgage-backed securities | 2.62 |
| 2.38 |
| 2.36 |
| 2.35 |
| 2.38 |
| |
| Asset-backed securities | 2.11 |
| 1.94 |
| 1.82 |
| 1.72 |
| 1.63 |
| |
| Other debt securities | 2.65 |
| 2.56 |
| 2.51 |
| 2.54 |
| 2.56 |
| |
| Total available for sale debt securities | 2.52 |
| 2.52 |
| 2.34 |
| 2.42 |
| 2.37 |
| |
Trading debt securities (1) | 2.73 |
| 2.63 |
| 2.51 |
| 2.70 |
| 2.77 |
| |
Equity securities (1) | 3.64 |
| 3.30 |
| 4.02 |
| 3.97 |
| 3.99 |
| |
Other securities (1) | 6.73 |
| 6.67 |
| 5.39 |
| 10.50 |
| 20.30 |
| |
| Total investment securities | 2.58 |
| 2.58 |
| 2.37 |
| 2.50 |
| 2.57 |
| |
| Federal funds sold and short-term securities purchased under agreements to resell | 1.65 |
| 1.35 |
| 1.30 |
| 1.13 |
| .94 |
| |
| Long-term securities purchased under agreements to resell | 2.38 |
| 2.36 |
| 2.28 |
| 2.22 |
| 2.12 |
| |
| Interest earning deposits with banks | 1.69 |
| 1.18 |
| 1.24 |
| 1.04 |
| .77 |
| |
| Total interest earning assets | 3.59 |
| 3.48 |
| 3.36 |
| 3.36 |
| 3.29 |
| |
| | | | | | | |
| LIABILITIES AND EQUITY: | | | | | | |
| Interest bearing deposits: | | | | | | |
| Savings | .12 |
| .12 |
| .12 |
| .12 |
| .13 |
| |
| Interest checking and money market | .20 |
| .17 |
| .16 |
| .15 |
| .14 |
| |
| Time open & C.D.’s of less than $100,000 | .43 |
| .40 |
| .40 |
| .39 |
| .37 |
| |
| Time open & C.D.’s of $100,000 and over | 1.02 |
| .88 |
| .83 |
| .75 |
| .67 |
| |
| Total interest bearing deposits | .28 |
| .24 |
| .24 |
| .23 |
| .21 |
| |
| Borrowings: | | | | | | |
| Federal funds purchased and securities sold under agreements to repurchase | 1.04 |
| .83 |
| .75 |
| .60 |
| .46 |
| |
| Other borrowings | 2.54 |
| 3.59 |
| 3.53 |
| 3.47 |
| 3.53 |
| |
| Total borrowings | 1.04 |
| .90 |
| .93 |
| .81 |
| .67 |
| |
| Total interest bearing liabilities | .36 | % | .31 | % | .31 | % | .29 | % | .26 | % | |
| | | | | | | |
| Net yield on interest earning assets | 3.37 | % | 3.29 | % | 3.17 | % | 3.18 | % | 3.13 | % | |
(1) Stated on a tax equivalent basis using a federal income tax rate of 21% in 2018 and 35% in prior periods.
|
| | | | | | | | | | | | | | | |
COMMERCE BANCSHARES, INC. and SUBSIDIARIES
|
| CREDIT QUALITY |
| | | | | | |
| | For the Three Months Ended |
| (Unaudited) (In thousands, except per share data) | March 31, 2018 | December 31, 2017 | September 30, 2017 | June 30, 2017 | March 31, 2017 |
| ALLOWANCE FOR LOAN LOSSES | | | | | |
| Balance at beginning of period | $ | 159,532 |
| $ | 157,832 |
| $ | 157,832 |
| $ | 157,832 |
| $ | 155,932 |
|
| Provision for losses | 10,396 |
| 12,654 |
| 10,704 |
| 10,758 |
| 11,128 |
|
| Net charge-offs (recoveries): | | | | | |
| Commercial portfolio: | | | | | |
| Business | (14 | ) | 768 |
| 195 |
| 318 |
| 97 |
|
| Real estate — construction and land | (36 | ) | (87 | ) | (362 | ) | (207 | ) | (535 | ) |
| Real estate — business | (205 | ) | (48 | ) | (106 | ) | (10 | ) | (39 | ) |
| | (255 | ) | 633 |
| (273 | ) | 101 |
| (477 | ) |
| Personal banking portfolio: | | | | | |
| Consumer credit card | 7,566 |
| 7,724 |
| 7,631 |
| 7,750 |
| 7,148 |
|
| Consumer | 2,528 |
| 2,184 |
| 3,057 |
| 2,642 |
| 2,096 |
|
| Overdraft | 444 |
| 376 |
| 445 |
| 292 |
| 435 |
|
| Real estate — personal | 57 |
| (56 | ) | (137 | ) | (131 | ) | 19 |
|
| Revolving home equity | 56 |
| 93 |
| (19 | ) | 104 |
| 7 |
|
| | 10,651 |
| 10,321 |
| 10,977 |
| 10,657 |
| 9,705 |
|
| Total net loan charge-offs | 10,396 |
| 10,954 |
| 10,704 |
| 10,758 |
| 9,228 |
|
| Balance at end of period | $ | 159,532 |
| $ | 159,532 |
| $ | 157,832 |
| $ | 157,832 |
| $ | 157,832 |
|
| | | | | | |
| NET CHARGE-OFF RATIOS* | | | | | |
| Commercial portfolio: | | | | | |
| Business | — | % | .06 | % | .02 | % | .03 | % | .01 | % |
| Real estate — construction and land | (.02 | ) | (.04 | ) | (.16 | ) | (.10 | ) | (.26 | ) |
| Real estate — business | (.03 | ) | (.01 | ) | (.02 | ) | — |
| (.01 | ) |
| | (.01 | ) | .03 |
| (.01 | ) | — |
| (.02 | ) |
| Personal banking portfolio: | | | | | |
| Consumer credit card | 4.05 |
| 4.05 |
| 4.09 |
| 4.25 |
| 3.88 |
|
| Consumer | .49 |
| .41 |
| .59 |
| .53 |
| .43 |
|
| Overdraft | 38.91 |
| 28.17 |
| 40.37 |
| 26.00 |
| 42.15 |
|
| Real estate — personal | .01 |
| (.01 | ) | (.03 | ) | (.03 | ) | — |
|
| Revolving home equity | .06 |
| .09 |
| (.02 | ) | .10 |
| .01 |
|
| | .82 |
| .77 |
| .83 |
| .83 |
| .77 |
|
| Total | .30 | % | .32 | % | .31 | % | .32 | % | .28 | % |
| | | | | | |
| CREDIT QUALITY RATIOS | | | | | |
| Non-performing assets to total loans | .08 | % | .09 | % | .11 | % | .10 | % | .11 | % |
| Non-performing assets to total assets | .05 |
| .05 |
| .06 |
| .06 |
| .06 |
|
| Allowance for loan losses to total loans | 1.15 |
| 1.14 |
| 1.15 |
| 1.16 |
| 1.16 |
|
| | | | | | |
| NON-PERFORMING ASSETS | | | | | |
| Non-accrual loans: | | | | | |
| Business | $ | 5,557 |
| $ | 5,947 |
| $ | 6,821 |
| $ | 6,330 |
| $ | 7,935 |
|
| Real estate — construction and land | 5 |
| 5 |
| 533 |
| 544 |
| 585 |
|
| Real estate — business | 2,546 |
| 2,736 |
| 2,346 |
| 1,833 |
| 1,764 |
|
| Real estate — personal | 2,169 |
| 2,461 |
| 2,863 |
| 3,504 |
| 3,368 |
|
| Consumer | — |
| 834 |
| 1,077 |
| 1,151 |
| 1,151 |
|
| Total | 10,277 |
| 11,983 |
| 13,640 |
| 13,362 |
| 14,803 |
|
| Foreclosed real estate | 1,300 |
| 681 |
| 1,063 |
| 515 |
| 387 |
|
| Total non-performing assets | $ | 11,577 |
| $ | 12,664 |
| $ | 14,703 |
| $ | 13,877 |
| $ | 15,190 |
|
| Loans past due 90 days and still accruing interest | $ | 14,928 |
| $ | 18,127 |
| $ | 16,464 |
| $ | 14,630 |
| $ | 14,908 |
|
COMMERCE BANCSHARES, INC.
Management Discussion of First Quarter Results
March 31, 2018
For the quarter ended March 31, 2018, net income attributable to Commerce Bancshares, Inc. (net income) amounted to $101.0 million, compared to $94.4 million in the previous quarter and $71.5 million in the same quarter last year. The increase in net income over the previous quarter was the result of continued growth in net interest income coupled with lower non-interest expense and a reduction in the provision for loan losses. The net interest margin increased to 3.37%. The Company also recorded securities gains of $5.4 million this quarter, mostly related to its private equity investments. Quarterly average loans increased $122.3 million over the previous quarter, while average deposits decreased $98.6 million. For the quarter, the return on average assets was 1.66%, the return on average common equity was 15.6%, and the efficiency ratio was 58.2%.
In the current quarter, the Company adopted ASU 2014-09 - Revenue from Contracts with Customers, and as a result reclassified certain bank card related network and rewards costs from non-interest expense to bank card transaction fees and restated all prior periods for this reclassification. The effect on the 1st and 4th quarters of 2017 was to lower bank card fee income and non-interest expense by $7.5 million and $4.8 million, respectively. Additionally, the Company adopted ASU 2016-01 - Recognition and Measurement of Financial Assets and Financial Liabilities. The ASU requires all changes in fair value of equity securities to be reflected in net income. As a result, the Company recorded $947 thousand in net securities gains this quarter due to an increase in fair value of the Company’s equity securities.
Balance Sheet Review
During the 1st quarter of 2018, average loans totaled $13.9 billion, up 3.6% (annualized) over the prior quarter, and grew $391.8 million, or 2.9%, over the same period last year. Compared to the previous quarter, average business and business real estate loans grew $116.2 million and $13.5 million, respectively. Personal real estate loans also increased $17.4 million, while consumer loans declined $28.6 million this quarter. Construction loans increased slightly but were constrained as a result of some larger principal pay downs. The growth in business loans was mainly the result of higher seasonal agribusiness lending activities and growth in both leasing and tax-free lending, but was partially offset by several seasonal loan pay downs on outstanding lines of credit. The decrease in consumer loans was mainly due to a decline in auto, marine/RV and home equity lending totaling $29.5 million, but was partially offset by growth of $13.5 million in patient health care loans. During the current quarter, the Company sold certain fixed rate personal real estate loans totaling $47.8 million, compared to $48.0 million in the prior quarter.
During the 1st quarter of 2018, total average available for sale debt securities decreased $431.6 million from the previous quarter to $8.5 billion, at fair value. The decline in investment securities was mainly the result of lower average balances of most investment categories as maturities of investment securities were reinvested to fund loan growth. Also, municipal securities totaling $148.4 million were sold at a small gain in response to recent changes in tax rules. Purchases of securities during the quarter totaled $318.1 million and were offset by sales, maturities and pay downs of $505.8 million. At March 31, 2018, the duration of the investment portfolio was 3.1 years, and maturities and pay downs of approximately $1.3 billion are expected to occur during the next 12 months.
Total average deposits decreased $98.6 million, or 2.0% (annualized), this quarter compared to the previous quarter. The decrease in average deposits resulted mainly from a decline in business demand (decrease of $493.5 million), but was offset by growth in money market accounts (increase of $266.7 million), interest checking (increase of $54.9 million), and other demand balances (increase of $61.1 million). The decline in business demand was partly offset by growth in commercial interest checking accounts of $254.7 million as certain commercial customer accounts were moved to interest bearing account types. Compared to the previous quarter, total average consumer deposits increased $116.3 million, while commercial and private banking deposits declined by $193.7 million and $10.8 million, respectively. The average loans to deposits ratio was 69.1% in the current quarter and 68.2% in the prior quarter. The Company’s average borrowings totaled $1.6 billion, a decline of $105.4 million from the prior quarter’s balance.
Net Interest Income
Net interest income in the 1st quarter of 2018 amounted to $192.9 million, compared to $190.0 million in the previous quarter, an increase of $2.9 million. On a tax equivalent basis, net interest income for the current quarter declined $1.3 million from the previous quarter to $196.6 million, as a result of lower tax rates in effect in 2018, which reduced the tax equivalent adjustment by $4.2 million. During the current quarter, the net yield on earning assets (tax equivalent) was 3.37%, compared to 3.29% in the previous quarter and 3.13% in the same period last year. Higher loan balances and rates, coupled with relatively stable funding costs, helped drive up the net interest margin this quarter. Inflation income on the Company’s treasury inflation-protected securities (TIPS) declined $1.1 million this quarter.
Compared to the previous quarter, interest income on loans (tax equivalent) increased $3.3 million, as a result of higher loan yields and average balances on most loan products. The average yield on the loan portfolio increased 15 basis points this quarter to 4.33%, compared to 4.18% in the previous quarter.
Interest income on investment securities (tax equivalent) decreased $3.5 million from the previous quarter, mainly due to a decline in inflation income mentioned above and a lower tax equivalent adjustment on the Company’s municipal investments. Also, the decline in total average investment securities balances of $376.4 million reduced interest income (tax-effected) by $2.3 million. The adjustment for premium amortization expense on changing prepayment speeds for mortgage-backed securities increased interest income $1.5 million this quarter, due to a higher overall interest rate environment. Total inflation income on TIPS totaled $2.0 million in the current quarter and $3.2 million in the previous quarter. The yield on total investment securities was 2.58% in both the current and previous quarter.
Interest costs on deposits remained low and totaled 28 basis points in the 1st quarter of 2018, compared to 24 basis points in the prior quarter. Interest expense on deposits increased $1.3 million this quarter compared with the previous quarter due mainly to higher rates on corporate money market accounts and short-term jumbo certificates of deposit. Borrowing costs increased $226 thousand this quarter mostly due to higher average rates paid on customer repurchase agreements. The overall rate paid on interest bearing liabilities was .36%, compared to .31% in the prior quarter.
COMMERCE BANCSHARES, INC.
Management Discussion of First Quarter Results
March 31, 2018
Non-Interest Income
In the 1st quarter of 2018, total non-interest income amounted to $119.7 million, an increase of $10.1 million, or 9.2%, compared to the same period last year. Also, current quarter non-interest income increased slightly compared to the prior quarter. The increase in non-interest income over the same period last year was mainly due to growth in trust, bank card and deposit fee income.
Total bank card fees in the current quarter increased $5.7 million, or 15.9%, over the same period last year but declined $1.4 million compared to the prior quarter. As part of the adoption of ASU 2014-09 on January 1, 2018, network and rewards costs related to bank card fees were reclassified from non-interest expense to bank card fee income for all current and prior periods. This reclass lowered bank card fee income $4.8 million in the prior quarter and $7.5 million in the 1st quarter of 2017. Total bank card fees this quarter were comprised of fees on corporate card ($24.2 million), debit card ($9.4 million), merchant ($4.8 million) and credit card ($3.1 million) transactions. Corporate card fees grew $4.2 million over the same period last year due to growth in interchange income of 13.5%, coupled with lower network costs. Debit card fees grew $1.4 million as interchange income was up slightly, and network costs declined $1.3 million compared to the prior year. Overall merchant income was flat with the prior quarter on lower merchant fees offset by lower network costs, while credit card fees grew by 3.6% on higher interchange income and lower network costs, mostly offset by higher rewards costs.
In the current quarter, trust fees increased $4.0 million, or 12.6%, over the same period last year, resulting mainly from growth in both private client and institutional trust fee income. Compared to the same period last year, deposit account fees increased $1.0 million, or 4.7%, due to growth in corporate cash management, deposit and overdraft fees.
During the 1st quarter of 2018, swap fees totaled $669 thousand, an increase of $516 thousand over the same period last year, while loan fees declined $306 thousand, or 9.7%, on lower gains on sales of residential mortgages. Gains on sales of tax credits were strong this quarter and totaled $1.2 million, which was slightly higher than the same period last year. Non-interest income comprised 38.3% of the Company’s total revenue this quarter.
Investment Securities Gains and Losses
The Company recorded net securities gains of $5.4 million in the current quarter and $27.2 million in the prior quarter. Net securities losses of $772 thousand were recorded in the 1st quarter of 2017. Net securities gains in the current quarter resulted mainly from unrealized fair value gains of $4.3 million in the Company’s private equity investment portfolio and $947 thousand from other equity securities owned by the Company. The Company also sold $148.4 million in municipal securities and recorded a gain of $212 thousand this quarter.
Non-Interest Expense
Non-interest expense for the current quarter amounted to $182.3 million, compared to $179.4 million in the same period last year. The 1.6% increase in expense over the same period last year was mainly due to higher costs for salaries and benefits, offset by lower operating costs such as supplies and communication, charitable contributions, professional, and equipment.
Compared to the 1st quarter of last year, salaries and benefits expense increased $3.5 million, or 3.1%. Salaries expense grew $2.6 million, mainly due to higher full time salary costs, while benefits expense grew 4.8% as a result of seasonal growth in payroll taxes and 401(k) contributions. Full-time equivalent employees totaled 4,799 and 4,807 at March 31, 2018 and 2017, respectively.
Data processing costs increased $785 thousand, or 3.9%, mainly due to higher software costs, while other costs for supplies and communication, equipment, travel and entertainment, and professional fees declined a total of $1.2 million this quarter. Marketing costs were up $1.6 million partly due to new bank card initiatives which began this quarter.
Income Taxes
The effective tax rate for the Company was 18.7% in the current quarter, 17.6% in the previous quarter, and 25.8% in the 1st quarter of 2017. Tax benefits related to equity compensation totaled $2.9 million this quarter, compared to $4.5 million in the same period last year.
Credit Quality
Net loan charge-offs in the 1st quarter of 2018 amounted to $10.4 million, compared to $11.0 million in the prior quarter and $9.2 million in the same period last year. The ratio of annualized net loan charge-offs to total average loans was .30% in the current quarter, compared to .32% in the previous quarter and .28% in the 1st quarter of last year. During the 1st quarter of 2018, the Company recorded net loan recoveries on commercial loans of $255 thousand, compared to net loan charge-offs of $633 thousand in the prior quarter. Net loan charge-offs on personal banking loans totaled $10.7 million in the current quarter and $10.3 million in the previous quarter.
In the 1st quarter of 2018, annualized net loan charge-offs on average consumer credit card loans were 4.05% in both the current and previous quarters, and 3.88% in the same period last year. Consumer loan net charge-offs were .49% of average consumer loans in the current quarter, .41% in the prior quarter and .43% in the same quarter last year. This quarter, the provision for loan losses equaled net loan charge-offs, and at March 31, 2018, the allowance totaled $159.5 million, or 1.15% of total loans.
At March 31, 2018, total non-performing assets amounted to $11.6 million, a decrease of $1.1 million from the previous quarter. Non-performing assets are comprised of non-accrual loans and foreclosed real estate ($10.3 million and $1.3 million, respectively). At March 31, 2018, the balance of non-accrual loans, which represented .07% of loans outstanding, included business loans of $5.6 million, business real estate loans of $2.5 million, and personal real estate loans of $2.2 million. Loans more than 90 days past due and still accruing interest totaled $14.9 million at March 31, 2018.
Other
During the 1st quarter of 2018, the Company paid a cash dividend of $.235 per common share, representing a 9.8% increase over the prior quarter. The Company also paid an annualized 6% cash dividend on its preferred stock. The Company purchased 290,684 shares of treasury stock during the current quarter at an average price of $58.71.
COMMERCE BANCSHARES, INC.
Management Discussion of First Quarter Results
March 31, 2018
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.
