Exhibit 99.1
FOR IMMEDIATE RELEASE:
Tuesday, October 17, 2006
COMMERCE BANCSHARES, INC. REPORTS FIRST NINE
MONTHS EARNINGS PER SHARE GROWTH OF 3%
Commerce Bancshares, Inc. announced earnings of $2.41 per share for the nine months ended September 30, 2006, an increase of 3% compared to $2.35 per share during the same period in 2005. Net income for the first nine months of 2006 amounted to $162.8 million compared with $167.0 million in the same period last year. The return on average assets for the first nine months ended September 30, 2006 was 1.56%, and the return on average equity was 16.1%. The efficiency ratio was 61.1%.
For the three months ended September 30, 2006, earnings per share totaled $.81, a decrease of 9% compared with $.89 in the third quarter of 2005. Net income amounted to $54.5 million compared with $62.8 million in the same period last year, which included non-recurring tax benefits of $10.3 million or $.14 per share. The return on average assets for the three months ended September 30, 2006 was 1.50% and the return on average equity was 15.6%.
In making this announcement, David W. Kemper, Chairman and CEO, said, “Despite a difficult interest rate environment, total revenues grew 3% for the first nine months when compared to the same period last year. Over this same period, average loans grew by 9%. This growth enhanced our earning asset mix while offsetting pressure on our interest margin. For the first nine months, fee revenue, led by our payment systems business, increased 6%. These factors, as well as low levels of net loan charge-offs, generated net income growth of 4% year over year, exclusive of one-time tax benefits recognized in the third quarter last year. Excluding these tax benefits, earnings per share for the first nine months of 2006 has grown 9%.”
Mr. Kemper added, “Asset quality remained strong in the third quarter with annualized net loan charge-offs totaling .33% of average loans compared with .42% in the same quarter last year, as a result of lower losses in our credit card loan portfolio. Our allowance for loan losses totaled $131.8 million, or 1.34% of total outstanding loans, at the end of the third quarter.”
Total assets at September 30, 2006 were $15.2 billion, total loans were $9.8 billion, and total deposits were $11.6 billion. At September 30, 2006, non-performing loans totaled $18.8 million or .19% of total loans. During the quarter, the Company completed the merger of West Pointe Bancorp, Inc., Belleville, Illinois, a one bank holding company with assets of $460 million, loans of $255 million and deposits of $381 million. Also, the Company completed the purchase of the banking business of Boone National Savings and Loan Association, Columbia, Missouri which had total loans and deposits of $127 million and $101 million, respectively.
(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 360 locations in Missouri, Illinois, and Kansas. The Company also has operating subsidiaries involved in mortgage banking, credit related insurance, venture capital, and real estate activities.
Posted to the Company’s web site is management’s discussion of third quarter results. To see this information, please visit our web site atwww.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
| | | | | | | | | | | | | |
| (Amounts in thousands) | | 6/30/06 | | 9/30/06 | | 9/30/05 |
Non-Accrual Loans | | $ | 14,155 | | | $ | 18,845 | | | $ | 20,365 | |
Foreclosed Real Estate | | $ | 1,793 | | | $ | 1,379 | | | $ | 675 | |
Total Non-Performing Assets | | $ | 15,948 | | | $ | 20,224 | | | $ | 21,040 | |
Non-Performing Assets to Loans | | | .17 | % | | | .21 | % | | | .24 | % |
Non-Performing Assets to Total Assets | | | .11 | % | | | .13 | % | | | .15 | % |
Loans 90 Days & Over Past Due — Still Accruing | | $ | 15,186 | | | $ | 16,251 | | | $ | 15,388 | |
COMMERCE BANCSHARES, INC.
Management Discussion of Third Quarter Results
September 30, 2006
For the quarter ended September 30, 2006, net income amounted to $54.5 million, a decrease of 13.1% from the same quarter last year. Excluding non-recurring tax benefits of $10.3 million recorded in the 3rd quarter of 2005, net income in the current quarter increased 3.9% over the same period last year. For the current quarter, the return on average assets was 1.5%, the return on average equity was 15.6%, and the efficiency ratio was 61.2%. Compared to the 3rd quarter of last year, net interest income increased 2.3%, while non-interest income was up 4.3% and the provision for loan losses declined by 15.2%. Additionally, non-interest expense grew by 8.1% over the same period last year. During the quarter the Company completed its acquisition of West Pointe Bancorp Inc. and the purchase of the banking business of Boone National Savings and Loan Association.
Balance Sheet Review
During the 3rd quarter of 2006, average loans increased $318.7 million, or 3.5%, compared to the previous quarter, representing annualized growth of 13.8%. Average loans also increased $938.3 million, or 10.9%, compared to the same period last year. As part of the acquisition of both West Pointe and Boone, the Company added loans with a combined quarterly average balance of $178.6 million comprised mainly of business, business real estate and personal real estate loans. Compared to the 2nd quarter of 2006 and excluding these acquired loans, average loans grew by $140.1 million, or 6.1%, on an annualized basis. This internal growth was from increased construction, personal real estate, consumer banking and credit card lending, which grew $53.3 million, $35.3 million, $34.5 million, and $22.4 million respectively. Business loans declined on average by $14.9 million, while home equity loans declined by $5.4 million.
Available for sale investment securities, excluding fair value adjustments, increased on average by $43.1 million, or 1.3%, this quarter compared with the previous quarter. As part of the West Pointe acquisition, $46.8 million was added to the overall investment portfolio quarterly average balances. During the quarter, the Company sold securities comprised mainly of asset-backed securities with a par value of $145.2 million and recorded a pre-tax loss of $2.1 million. Also in the current quarter, the Company purchased investments of approximately $433 million, mainly consisting of CMO’s and municipal securities.
Total average deposits increased by $234.0 million, or 2.1%, during the 3rd quarter compared to the previous quarter and included the acquisition of West Pointe and Boone average deposits of approximately $198.6 million. Excluding these acquired balances, average deposits grew by $35.4 million over the previous quarter mainly due to growth in certificates of deposit ($135.5 million) and premium money market accounts ($19.7 million), partially offset by a decline in interest checking and other money market type deposits. The average loans to deposits ratio for the quarter amounted to 85.4%.
Average borrowings increased $324.8 million in the current quarter compared to the prior quarter mainly due to an increase of $324.0 million in repurchase agreement liabilities. This growth is partly due to increased customer activity, but also the result of the Company acquiring $288.0 million in structured repurchase agreements to mitigate interest rate risk. The increase in repurchase agreement borrowings reduced overnight Federal Funds purchases.
Net Interest Income
Net interest income in the 3rd quarter of 2006 amounted to $128.8 million, an increase of $2.3 million, or 1.8%, compared with the previous quarter and an increase of $2.9 million, or 2.3%, compared to the 3rd quarter of last year. During the 3rd quarter of 2006, the net yield on earning assets (tax-equivalent) was 3.84%, compared with 3.98% in the previous quarter and 3.86% in the same period last year.
The increase of $2.3 million in net interest income in the 3rd quarter of 2006 over the previous quarter was mainly the result of growth in loan interest income of approximately $12.2 million due to increases in both rates and average balances, coupled with an increase in interest income on both investment securities and reverse repurchase agreement assets, which also earned higher rates on increased balances. Offsetting this increase in interest income was higher interest expense of $8.9 million on interest-bearing deposits due to higher rates on most deposit products and growth in balances in various certificate of deposit products. Also, interest expense increased on other borrowings $5.9 million due to higher balances and rates on both Federal funds and repurchase agreement borrowings.
During the current quarter, the overall tax equivalent yield on interest earning assets increased 17 basis points to 6.42%, while the overall cost of interest bearing liabilities increased 34 basis points to 2.83%.
Non-Interest Income
For the 3rd quarter of 2006, total non-interest income amounted to $90.7 million, an increase of 4.3% compared to $86.9 million in the same period last year, and decreased slightly from $91.5 million in the previous quarter. Compared with the same period last year, this growth was mainly the result of higher bank card and trust fee income and higher gains on venture capital investments, partially offset by lower deposit account fees and lower gains on sales of student loans. Bank card fees for the quarter increased 10.0% over the same period last year, mainly from continued growth in fees earned on debit and corporate card transactions, which grew by 21.7% and 18.9%, respectively. Trust fees for the quarter increased 2.6%
COMMERCE BANCSHARES, INC.
Management Discussion of Third Quarter Results
September 30, 2006
over the same quarter last year as a result of higher fees on personal and corporate trust accounts. Deposit account fees decreased $1.5 million, or 4.8%, compared with the 3rd quarter of 2005, due to lower fees earned on overdrafts, which were down $1.3 million as a result of lower overdraft volumes.
During the current quarter, gains on sales of student loans totaled $900 thousand, compared with $1.1 million in the same period last year and $1.8 million in the previous quarter. Other non-interest income increased $563 thousand over the same period last year as a result of increased income on leasing activities, higher sweep, ATM, and check sale fees. The ratio of non-interest income to total revenue, excluding net securities gains, was 40.4% in the 3rd quarter of 2006.
Net securities gains amounted to $3.3 million for the 3rd quarter of 2006, which compared to $3.3 million in the previous quarter and $289 thousand in the 3rd quarter of 2005. Included in the 3rd quarter of 2006 was a gain of $2.2 million on the sale of MasterCard Inc. restricted shares the Company recently received, as well as realized gains and fair value adjustments of $3.3 million on certain private equity investments held by the Company’s venture capital subsidiaries. Minority interests related to the private equity gains totaled $507 thousand and was reported in other expense. Additionally, the Company sold certain asset-backed securities this quarter and recorded a pre-tax loss of $2.1 million.
Non-Interest Expense
Non-interest expense for the current quarter amounted to $132.3 million, an increase of $9.9 million, or 8.1%, compared with amounts recorded in the same period last year and was $2.8 million higher than amounts recorded in the prior quarter. Compared with the 3rd quarter of last year, salaries and benefits expense increased $5.5 million, or 8.2%, mainly as a result of higher full-time salaries (partly due to bank acquisitions in the 3rd quarter) and higher medical insurance costs, which were up $1.4 million over the same period last year. Full-time equivalent employees totaled 4,900 and 4,827 at September 30, 2006 and 2005, respectively.
Occupancy costs grew 7.1% over the same quarter last year, mainly a result of higher depreciation and outside rent expense. Equipment expense increased $1.3 million, or 21.8%, due in part to equipment moving costs associated with the relocation of a check processing function in the 3rd quarter. Data processing expenses increased 6.6% due to higher software amortization charges, while lower telephone and network costs resulted in a reduction in overall supplies and communication costs of 4.6%. The increase in other expense over the same quarter last year resulted mainly from higher costs for minority interests, operating lease depreciation and legal and professional costs.
Income Taxes
During the 3rd quarter of 2006, income tax expense amounted to $25.0 million, a decrease of $2.4 million from the previous quarter, but $6.4 million greater than the same quarter last year. The effective tax rate for the Company was 31.4% for the current quarter, compared with a rate of 33.1% in the previous quarter, and 22.9% in the 3rd quarter of 2005. The low effective tax rate in the 3rd quarter of 2005 resulted from the recognition of non-recurring tax benefits of $10.3 million mentioned above.
Credit Quality
Net loan charge-offs for the 3rd quarter of 2006 amounted to $7.9 million, compared with $5.7 million in the prior quarter and $9.1 million in the 3rd quarter of last year. The increase in net charge-offs in the 3rd quarter of 2006 compared to the previous quarter was the result of higher personal banking, credit card and overdraft charge-offs. Year-to-date, the ratio of net loan charge-offs to total average loans was .26% compared to .31% last year.
For the 3rd quarter of 2006, annualized net charge-offs on average credit card loans were 3.00%, compared with 4.19% in the same quarter last year and 3.01% in the 2nd quarter of 2006. The provision for loan losses for the quarter totaled $7.6 million, and was $1.9 million higher than the 2nd quarter 2006, but was $1.4 million lower than the 3rd quarter 2005 provision. The allowance for loan losses at September 30, 2006 amounted to $131.8 million, or 1.34%, of total loans.
Total non-performing assets amounted to $20.2 million, an increase of $4.3 million over the previous quarter and .21% of loans outstanding. Non-performing assets are comprised of non-accrual loans ($18.8 million) and foreclosed real estate ($1.4 million). Loans past due more than 90 days and still accruing interest totaled $16.3 million at September 30, 2006.
Other
The Company maintains a treasury stock buyback program. In October 2005, the Board of Directors approved the purchase of up to 5,000,000 shares of the Company’s common stock. During the quarter ended September 30, 2006, the Company purchased 82 thousand shares of treasury stock at an average cost of $50.25 per share.
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.
COMMERCE BANCSHARES, INC. and SUBSIDIARIES
FINANCIAL HIGHLIGHTS
| | | | | | | | | | | | | | | | | | | | | | |
| | | For the Three Months Ended | | | | For the Nine Months Ended | |
| | | June 30 | | | Sept. | | | Sept. | | | | Sept. 30 | | | Sept. 30 | |
| (Unaudited) | | 2006 | | | 2006 | | | 2005 | | | | 2006 | | | 2005 | |
| | | | |
| FINANCIAL SUMMARY(In thousands, except per share data) | | | | | | | | | | | | | |
| Net interest income | | $ | 126,479 | | | $ | 128,753 | | | $ | 125,832 | | | | $ | 378,967 | | | $ | 374,696 | |
| Taxable equivalent net interest income | | | 128,009 | | | | 130,621 | | | | 126,914 | | | | | 383,718 | | | | 376,952 | |
| Non-interest income | | | 91,463 | | | | 90,656 | | | | 86,895 | | | | | 271,567 | | | | 252,566 | |
| Provision for loan losses | | | 5,672 | | | | 7,575 | | | | 8,934 | | | | | 17,679 | | | | 16,805 | |
| Non-interest expense | | | 129,550 | | | | 132,304 | | | | 122,387 | | | | | 391,815 | | | | 369,321 | |
| Net income | | | 55,333 | | | | 54,548 | | | | 62,791 | | | | | 162,825 | | | | 167,005 | |
| Cash dividends | | | 16,311 | | | | 16,605 | | | | 15,761 | | | | | 49,295 | | | | 47,864 | |
| Net total loan charge-offs | | | 5,694 | | | | 7,875 | | | | 9,056 | | | | | 17,980 | | | | 19,893 | |
| Net business charge-offs (recov) | | | 259 | | | | 125 | | | | 133 | | | | | (697 | ) | | | (2,536 | ) |
| Net credit card charge-offs | | | 4,387 | | | | 4,588 | | | | 5,879 | | | | | 12,723 | | | | 15,906 | |
| Net personal banking charge-offs* | | | 446 | | | | 1,924 | | | | 1,837 | | | | | 4,019 | | | | 5,259 | |
| Net real estate charge-offs | | | 80 | | | | 175 | | | | 492 | | | | | — | | | | 267 | |
| Net overdraft charge-offs | | | 522 | | | | 1,063 | | | | 715 | | | | | 1,935 | | | | 997 | |
| Per share: | | | | | | | | | | | | | | | | | | | | | |
| Net income — basic | | $ | 0.83 | | | $ | 0.82 | | | $ | 0.90 | | | | $ | 2.44 | | | $ | 2.38 | |
| Net income — diluted | | $ | 0.82 | | | $ | 0.81 | | | $ | 0.89 | | | | $ | 2.41 | | | $ | 2.35 | |
| Cash dividends | | $ | 0.245 | | | $ | 0.245 | | | $ | 0.229 | | | | $ | 0.735 | | | $ | 0.686 | |
| Diluted wtd. average shares o/s | | | 67,460 | | | | 67,581 | | | | 70,194 | | | | | 67,655 | | | | 71,074 | |
| | | | |
RATIOS | | | | | | | | | | | | | | | | | | | | | |
| Average loans to deposits | | | 84.27 | % | | | 85.36 | % | | | 82.67 | % | | | | 84.34 | % | | | 80.49 | % |
| Return on total average assets | | | 1.61 | % | | | 1.50 | % | | | 1.78 | % | | | | 1.56 | % | | | 1.59 | % |
| Return on total average stockholders’ equity | | | 16.59 | % | | | 15.64 | % | | | 18.12 | % | | | | 16.12 | % | | | 16.09 | % |
| Non-interest income to revenue** | | | 41.08 | % | | | 40.42 | % | | | 40.77 | % | | | | 40.93 | % | | | 39.76 | % |
| Efficiency ratio*** | | | 60.35 | % | | | 61.16 | % | | | 57.61 | % | | | | 61.05 | % | | | 59.30 | % |
| | | | |
AT PERIOD END | | | | | | | | | | | | | | | | | | | | | |
| Book value per share based on total stockholders’ equity | | $ | 20.08 | | | $ | 21.58 | | | $ | 19.85 | | | | | | | | | | |
| Market value per share | | $ | 50.05 | | | $ | 50.57 | | | $ | 49.03 | | | | | | | | | | |
| Allowance for loan losses as a percentage of loans | | | 1.37 | % | | | 1.34 | % | | | 1.48 | % | | | | | | | | | |
| Tier I leverage ratio | | | 9.47 | % | | | 9.47 | % | | | 9.44 | % | | | | | | | | | |
| Common shares outstanding | | | 66,314,415 | | | | 67,649,822 | | | | 68,701,822 | | | | | | | | | | |
| Shareholders of record | | | 4,430 | | | | 4,721 | | | | 4,510 | | | | | | | | | | |
| Number of bank/ATM locations | | | 347 | | | | 360 | | | | 340 | | | | | | | | | | |
| Number of bank charters | | | 3 | | | | 3 | | | | 3 | | | | | | | | | | |
| Full-time equivalent employees | | | 4,868 | | | | 4,900 | | | | 4,827 | | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | Sept. 30 | | Sept. 30 | | | | | | | | | |
OTHER YTD INFORMATION | | | | | | | 2006 | | | | 2005 | | | | | | | | | | |
| | | | | | | | | | |
| High market value per share | | | | | | $ | 53.20 | | | $ | 52.11 | | | | | | | | | | |
| Low market value per share | | | | | | $ | 48.61 | | | $ | 43.94 | | | | | | | | | | |
| | | | | | | | | | |
| | |
| * | | Includes consumer, student and home equity loans |
| |
| ** | | Revenue includes net interest income and non-interest income, excluding net securities gains/losses. |
| |
| *** | | The efficiency ratio is calculated as non-interest expense (excluding intangibles amortization) as a percent of net interest income and non-interest income (excluding net securities gains/losses). |
COMMERCE BANCSHARES, INC. and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
| | | | | | | | | | | | | | | | | | | | | | |
| | | For the Three Months Ended | | | | For the Nine Months Ended | |
| (Unaudited) | | June 30 | | | Sept. 30 | | | Sept. 30 | | | | Sept. 30 | | | Sept. 30 | |
| (In thousands, except per share data) | | 2006 | | | 2006 | | | 2005 | | | | 2006 | | | 2005 | |
| | | | |
INTEREST INCOME | | | | | | | | | | | | | | | | | | | | | |
| Interest and fees on loans | | $ | 161,188 | | | $ | 173,400 | | | $ | 134,653 | | | | $ | 484,462 | | | $ | 378,418 | |
| Interest on investment securities | | | 36,261 | | | | 37,791 | | | | 42,722 | | | | | 111,182 | | | | 130,862 | |
| Interest on federal funds sold and securities purchased under agreements to resell | | | 1,801 | | | | 5,079 | | | | 1,195 | | | | | 8,503 | | | | 2,943 | |
| | | | | | | | | | | | | | | | | |
| Total interest income | | | 199,250 | | | | 216,270 | | | | 178,570 | | | | | 604,147 | | | | 512,223 | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
INTEREST EXPENSE | | | | | | | | | | | | | | | | | | | | | |
| Interest on deposits: | | | | | | | | | | | | | | | | | | | | | |
| Savings, interest checking and money market | | | 23,002 | | | | 26,301 | | | | 14,461 | | | | | 68,910 | | | | 37,110 | |
| Time open and C.D.’s of less than $100,000 | | | 19,448 | | | | 23,238 | | | | 13,351 | | | | | 59,417 | | | | 35,794 | |
| Time open and C.D.’s of $100,000 and over | | | 13,906 | | | | 15,706 | | | | 7,409 | | | | | 42,799 | | | | 21,734 | |
| Interest on other borrowings | | | 16,415 | | | | 22,272 | | | | 17,517 | | | | | 54,054 | | | | 42,889 | |
| | | | | | | | | | | | | | | | | |
| Total interest expense | | | 72,771 | | | | 87,517 | | | | 52,738 | | | | | 225,180 | | | | 137,527 | |
| | | | | | | | | | | | | | | | | |
| Net interest income | | | 126,479 | | | | 128,753 | | | | 125,832 | | | | | 378,967 | | | | 374,696 | |
| Provision for loan losses | | | 5,672 | | | | 7,575 | | | | 8,934 | | | | | 17,679 | | | | 16,805 | |
| | | | | | | | | | | | | | | | | |
| Net interest income after provision for loan losses | | | 120,807 | | | | 121,178 | | | | 116,898 | | | | | 361,288 | | | | 357,891 | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
NON-INTEREST INCOME | | | | | | | | | | | | | | | | | | | | | |
| Deposit account charges and other fees | | | 28,910 | | | | 29,723 | | | | 31,117 | | | | | 86,130 | | | | 82,894 | |
| Bank card transaction fees | | | 23,558 | | | | 24,187 | | | | 21,981 | | | | | 69,453 | | | | 62,783 | |
| Trust fees | | | 17,992 | | | | 17,805 | | | | 17,353 | | | | | 53,616 | | | | 50,787 | |
| Trading account profits and commissions | | | 2,010 | | | | 1,639 | | | | 2,335 | | | | | 6,214 | | | | 7,399 | |
| Consumer brokerage services | | | 2,771 | | | | 2,476 | | | | 2,440 | | | | | 7,636 | | | | 7,603 | |
| Loan fees and sales | | | 2,745 | | | | 1,956 | | | | 2,397 | | | | | 8,444 | | | | 10,642 | |
| Investment securities gains, net | | | 3,284 | | | | 3,324 | | | | 289 | | | | | 9,011 | | | | 5,273 | |
| Other | | | 10,193 | | | | 9,546 | | | | 8,983 | | | | | 31,063 | | | | 25,185 | |
| | | | | | | | | | | | | | | | | |
| Total non-interest income | | | 91,463 | | | | 90,656 | | | | 86,895 | | | | | 271,567 | | | | 252,566 | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
NON-INTEREST EXPENSE | | | | | | | | | | | | | | | | | | | | | |
| Salaries and employee benefits | | | 71,239 | | | | 72,169 | | | | 66,682 | | | | | 215,133 | | | | 204,447 | |
| Net occupancy | | | 10,230 | | | | 11,009 | | | | 10,277 | | | | | 32,216 | | | | 29,582 | |
| Equipment | | | 6,071 | | | | 7,109 | | | | 5,838 | | | | | 19,129 | | | | 17,230 | |
| Supplies and communication | | | 7,872 | | | | 8,073 | | | | 8,458 | | | | | 24,338 | | | | 24,928 | |
| Data processing and software | | | 12,631 | | | | 12,904 | | | | 12,108 | | | | | 37,928 | | | | 35,632 | |
| Marketing | | | 4,657 | | | | 4,397 | | | | 4,486 | | | | | 13,372 | | | | 13,035 | |
| Other | | | 16,850 | | | | 16,643 | | | | 14,538 | | | | | 49,699 | | | | 44,467 | |
| | | | | | | | | | | | | | | | | |
| Total non-interest expense | | | 129,550 | | | | 132,304 | | | | 122,387 | | | | | 391,815 | | | | 369,321 | |
| | | | | | | | | | | | | | | | | |
| Income before income taxes | | | 82,720 | | | | 79,530 | | | | 81,406 | | | | | 241,040 | | | | 241,136 | |
| Less income taxes | | | 27,387 | | | | 24,982 | | | | 18,615 | | | | | 78,215 | | | | 74,131 | |
| | | | | | | | | | | | | | | | | |
NET INCOME | | $ | 55,333 | | | $ | 54,548 | | | $ | 62,791 | | | | $ | 162,825 | | | $ | 167,005 | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
| Net income per share — basic | | $ | 0.83 | | | $ | 0.82 | | | $ | 0.90 | | | | $ | 2.44 | | | $ | 2.38 | |
| | | | | | | | | | | | | | | | | |
| Net income per share — diluted | | $ | 0.82 | | | $ | 0.81 | | | $ | 0.89 | | | | $ | 2.41 | | | $ | 2.35 | |
| | | | | | | | | | | | | | | | | |
| Cash dividends per common share | | $ | 0.245 | | | $ | 0.245 | | | $ | 0.229 | | | | $ | 0.735 | | | $ | 0.686 | |
| | | | | | | | | | | | | | | | | |
COMMERCE BANCSHARES, INC. and SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
| | | | | | | | | | | | | |
| (Unaudited) | | June 30 | | | Sept. 30 | | | Sept. 30 | |
| (In thousands) | | 2006 | | | 2006 | | | 2005 | |
| |
ASSETS | | | | | | | | | | | | |
| Loans, net of unearned income | | $ | 9,379,893 | | | $ | 9,833,190 | | | $ | 8,742,832 | |
| Allowance for loan losses | | | (128,446 | ) | | | (131,834 | ) | | | (129,306 | ) |
| | | | | | | | | | |
Net loans | | | 9,251,447 | | | | 9,701,356 | | | | 8,613,526 | |
| | | | | | | | | | |
| Investment securities: | | | | | | | | | | | | |
| Available for sale | | | 3,337,477 | | | | 3,533,073 | | | | 4,024,992 | |
| Trading | | | 17,001 | | | | 7,770 | | | | 6,019 | |
| Non-marketable | | | 81,401 | | | | 87,301 | | | | 79,181 | |
| | | | | | | | | | |
Total investment securities | | | 3,435,879 | | | | 3,628,144 | | | | 4,110,192 | |
| | | | | | | | | | |
| Federal funds sold and securities purchased under agreements to resell | | | 237,072 | | | | 495,262 | | | | 115,900 | |
| Cash and due from banks | | | 662,790 | | | | 479,963 | | | | 481,176 | |
| Land, buildings and equipment — net | | | 367,954 | | | | 388,337 | | | | 376,999 | |
| Goodwill | | | 48,522 | | | | 100,933 | | | | 48,522 | |
| Other intangible assets — net | | | 43 | | | | 13,325 | | | | 50 | |
| Other assets | | | 269,690 | | | | 344,292 | | | | 201,712 | |
| | | | | | | | | | |
Total assets | | $ | 14,273,397 | | | $ | 15,151,612 | | | $ | 13,948,077 | |
| | | | | | | | | | |
| | | | | | | | | | | | | |
LIABILITIES AND STOCKHOLDERS’ EQUITY | | | | | | | | | | | | |
| Deposits: | | | | | | | | | | | | |
| Non-interest bearing demand | | $ | 1,326,787 | | | $ | 1,205,193 | | | $ | 1,281,470 | |
| Savings, interest checking and money market | | | 6,439,068 | | | | 6,704,679 | | | | 6,457,502 | |
| Time open and C.D.’s of less than $100,000 | | | 2,028,700 | | | | 2,286,426 | | | | 1,771,156 | |
| Time open and C.D.’s of $100,000 and over | | | 1,247,790 | | | | 1,368,140 | | | | 840,700 | |
| | | | | | | | | | |
Total deposits | | | 11,042,345 | | | | 11,564,438 | | | | 10,350,828 | |
| Federal funds purchased and securities sold under agreements to repurchase | | | 1,586,511 | | | | 1,768,899 | | | | 1,768,721 | |
| Other borrowings | | | 144,919 | | | | 166,372 | | | | 370,729 | |
| Other liabilities | | | 168,227 | | | | 192,116 | | | | 93,761 | |
| | | | | | | | | | |
Total liabilities | | | 12,942,002 | | | | 13,691,825 | | | | 12,584,039 | |
| | | | | | | | | | |
| Stockholders’ equity: | | | | | | | | | | | | |
| Preferred stock | | | — | | | | — | | | | — | |
| Common stock | | | 347,049 | | | | 347,049 | | | | 347,049 | |
| Capital surplus | | | 385,358 | | | | 384,343 | | | | 381,433 | |
| Retained earnings | | | 768,608 | | | | 806,551 | | | | 822,434 | |
| Treasury stock | | | (152,189 | ) | | | (84,616 | ) | | | (192,924 | ) |
| Accumulated other comprehensive income (loss) | | | (17,431 | ) | | | 6,460 | | | | 6,046 | |
| | | | | | | | | | |
Total stockholders’ equity | | | 1,331,395 | | | | 1,459,787 | | | | 1,364,038 | |
| | | | | | | | | | |
Total liabilities and stockholders’ equity | | $ | 14,273,397 | | | $ | 15,151,612 | | | $ | 13,948,077 | |
| | | | | | | | | | |
COMMERCE BANCSHARES, INC. and SUBSIDIARIES
AVERAGE BALANCES
| | | | | | | | | | | | | | | | | | | | | | |
| | | For the Three Months Ended | | | | For the Nine Months Ended | |
| (Unaudited) | | June 30 | | | Sept. 30 | | | Sept. 30 | | | | Sept. 30 | | | Sept. 30 | |
| (Dollars in thousands) | | 2006 | | | 2006 | | | 2005 | | | | 2006 | | | 2005 | |
| | | | |
Loans: | | | | | | | | | | | | | | | | | | | | | |
| Business | | $ | 2,694,246 | | | $ | 2,709,096 | | | $ | 2,356,938 | | | | $ | 2,649,218 | | | $ | 2,303,147 | |
| Real estate — construction | | | 508,127 | | | | 582,542 | | | | 518,638 | | | | | 511,236 | | | | 480,207 | |
| Real estate — business | | | 1,997,502 | | | | 2,082,020 | | | | 1,775,132 | | | | | 2,017,312 | | | | 1,766,452 | |
| Real estate — personal | | | 1,373,444 | | | | 1,461,996 | | | | 1,366,817 | | | | | 1,398,341 | | | | 1,348,798 | |
| Consumer | | | 1,333,105 | | | | 1,373,127 | | | | 1,267,466 | | | | | 1,331,847 | | | | 1,228,911 | |
| Home equity | | | 446,094 | | | | 444,979 | | | | 437,359 | | | | | 446,079 | | | | 424,209 | |
| Student | | | 285,540 | | | | 278,960 | | | | 321,283 | | | | | 307,857 | | | | 368,168 | |
| Credit card | | | 584,508 | | | | 606,882 | | | | 556,235 | | | | | 589,750 | | | | 552,416 | |
| Overdrafts | | | 11,836 | | | | 13,548 | | | | 14,973 | | | | | 15,142 | | | | 14,302 | |
| | | | | | | | | | | | | | | | | |
Total loans | | | 9,234,402 | | | | 9,553,150 | | | | 8,614,841 | | | | | 9,266,782 | | | | 8,486,610 | |
| | | | | | | | | | | | | | | | | |
Investment securities (excluding unrealized gains and losses): | | | | | | | | | | | | | | | | | | | | | |
| Available for sale | | | 3,405,527 | | | | 3,448,592 | | | | 4,210,497 | | | | | 3,461,602 | | | | 4,352,305 | |
| Trading | | | 21,144 | | | | 14,223 | | | | 10,696 | | | | | 18,109 | | | | 9,974 | |
| Non-marketable | | | 86,658 | | | | 86,230 | | | | 80,613 | | | | | 85,640 | | | | 77,825 | |
| | | | | | | | | | | | | | | | | |
Total investment securities | | | 3,513,329 | | | | 3,549,045 | | | | 4,301,806 | | | | | 3,565,351 | | | | 4,440,104 | |
| | | | | | | | | | | | | | | | | |
| Federal funds sold and securities purchased under agreements to resell | | | 142,651 | | | | 378,404 | | | | 126,930 | | | | | 221,802 | | | | 119,171 | |
| | | | | | | | | | | | | | | | | |
Total interest earning assets | | | 12,890,382 | | | | 13,480,599 | | | | 13,043,577 | | | | | 13,053,935 | | | | 13,045,885 | |
| | | | | | | | | | | | | | | | | |
Total assets | | | 13,800,313 | | | | 14,431,791 | | | | 13,986,905 | | | | | 13,982,110 | | | | 14,026,873 | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
Deposits: | | | | | | | | | | | | | | | | | | | | | |
| Non-interest bearing deposits | | | 663,820 | | | | 644,103 | | | | 602,016 | | | | | 635,309 | | | | 668,827 | |
| Interest bearing deposits: | | | | | | | | | | | | | | | | | | | | | |
| Savings | | | 396,959 | | | | 393,732 | | | | 404,019 | | | | | 391,556 | | | | 408,308 | |
| Interest checking | | | 193,506 | | | | 164,082 | | | | 159,958 | | | | | 174,368 | | | | 199,037 | |
| Money market | | | 6,472,684 | | | | 6,514,270 | | | | 6,599,088 | | | | | 6,494,043 | | | | 6,561,766 | |
| Time open & C.D.’s of less than $100,000 | | | 1,973,722 | | | | 2,155,446 | | | | 1,752,749 | | | | | 2,004,486 | | | | 1,716,942 | |
| Time open & C.D.’s of $100,000 and over | | | 1,257,161 | | | | 1,320,235 | | | | 902,654 | | | | | 1,287,974 | | | | 988,865 | |
| | | | | | | | | | | | | | | | | |
| Total interest bearing deposits | | | 10,294,032 | | | | 10,547,765 | | | | 9,818,468 | | | | | 10,352,427 | | | | 9,874,918 | |
| | | | | | | | | | | | | | | | | |
Total deposits | | | 10,957,852 | | | | 11,191,868 | | | | 10,420,484 | | | | | 10,987,736 | | | | 10,543,745 | |
| | | | | | | | | | | | | | | | | |
Borrowings: | | | | | | | | | | | | | | | | | | | | | |
| Federal funds purchased and securities sold under agreements to repurchase | | | 1,213,925 | | | | 1,580,998 | | | | 1,724,082 | | | | | 1,341,879 | | | | 1,620,341 | |
| Other borrowings | | | 205,472 | | | | 163,152 | | | | 370,961 | | | | | 209,378 | | | | 379,860 | |
| | | | | | | | | | | | | | | | | |
Total borrowings | | | 1,419,397 | | | | 1,744,150 | | | | 2,095,043 | | | | | 1,551,257 | | | | 2,000,201 | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
| Total interest bearing liabilities | | | 11,713,429 | | | | 12,291,915 | | | | 11,913,511 | | | | | 11,903,684 | | | | 11,875,119 | |
| Total stockholders’ equity | | | 1,337,423 | | | | 1,383,584 | | | | 1,374,711 | | | | | 1,350,642 | | | | 1,388,105 | |
| | | | | | | | | | | | | | | | | | | | | | |
Net yield on interest earning assets (tax-equivalent basis) | | | 3.98 | % | | | 3.84 | % | | | 3.86 | % | | | | 3.93 | % | | | 3.86 | % |
