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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------
FORM 10-Q
-----------
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1996
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NO. 0-2989
COMMERCE BANCSHARES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
MISSOURI 43-0889454
(STATE OF INCORPORATION) (I.R.S. EMPLOYER IDENTIFICATION
NO.)
1000 WALNUT, KANSAS CITY, MO 64106
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES AND ZIP CODE)
(816) 234-2000
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
X
Yes------- No -------
As of November 1, 1996, the registrant had outstanding 35,652,693 shares of
its $5 par value common stock, registrant's only class of common stock.
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PART I: FINANCIAL INFORMATION
In the opinion of management, the consolidated financial statements of
Commerce Bancshares, Inc. and Subsidiaries as of September 30, 1996 and
December 31, 1995 and the related notes include all material adjustments which
were regularly recurring in nature and necessary for fair presentation of the
financial condition and the results of operations for the periods shown.
The consolidated financial statements of Commerce Bancshares, Inc. and
Subsidiaries and management's discussion and analysis of financial condition
and results of operations are presented in the schedules as follows:
Schedule 1: Comparison of Key Ratios
Schedule 2: Consolidated Balance Sheets
Schedule 3: Consolidated Statements of Income
Schedule 4: Statements of Changes in Stockholders' Equity
Schedule 5: Consolidated Statements of Cash Flows
Schedule 6: Notes to Consolidated Financial Statements
Schedule 7: Management's Discussion and Analysis of Financial Condition
and Results of Operations
PART II: OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
(10) Material Contracts:
(a) Commerce Bancshares, Inc. Incentive Stock Option Plan amended and
restated as of October 4, 1996
(b) Commerce Bancshares, Inc. 1987 Non-Qualified Stock Option Plan
amended and restated as of October 4, 1996
(c) Commerce Bancshares, Inc. 1996 Incentive Stock Option Plan
amended and restated as of October 4, 1996
(d) Commerce Bancshares, Inc. Restricted Stock Plan amended and
restated as of October 4, 1996
(e) Commerce Bancshares, Inc. Stock Purchase Plan for Non-Employee
Directors amended and restated October 4, 1996
(f) Commerce Bancshares, Inc. Executive Incentive Compensation Plan
amended and restated October 4, 1996
(g) Form of Severance Agreement between Commerce Bancshares, Inc. and
certain of its executive officers entered into as of October 4, 1996
(27) Financial Data Schedule
(b) No reports on Form 8-K were filed during the quarter ended September 30,
1996.
1
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
COMMERCE BANCSHARES, INC.
/s/ J. Daniel Stinnett
By __________________________________
J. Daniel Stinnett
Vice President & Secretary
Date: November 8, 1996
/s/ Jeffery D. Aberdeen
By __________________________________
Jeffery D. Aberdeen
Controller
(Chief Accounting Officer)
Date: November 8, 1996
2
SCHEDULE 1
COMMERCE BANCSHARES, INC. AND SUBSIDIARIES
COMPARISON OF KEY RATIOS
(UNAUDITED)
1996 1995
----- -----
RATIOS--THREE MONTHS ENDED SEPTEMBER 30:
(Based on average balance sheets):
Loans to deposits............................................... 67.15% 69.04%
Non-interest bearing deposits to total deposits................. 19.71 19.96
Equity to loans................................................. 16.59 16.38
Equity to deposits.............................................. 11.14 11.31
Equity to total assets.......................................... 9.48 9.56
Return on total assets.......................................... 1.32 1.19
Return on realized stockholders' equity......................... 13.95 12.58
Return on total stockholders' equity............................ 13.95 12.40
RATIOS--NINE MONTHS ENDED SEPTEMBER 30:
(Based on average balance sheets):
Loans to deposits............................................... 66.85% 68.33%
Non-interest bearing deposits to total deposits................. 19.38 19.77
Equity to loans................................................. 16.75 16.31
Equity to deposits.............................................. 11.20 11.15
Equity to total assets.......................................... 9.49 9.44
Return on total assets.......................................... 1.24 1.21
Return on realized stockholders' equity......................... 13.30 12.53
Return on total stockholders' equity............................ 13.09 12.78
(Based on end-of-period data):
Tier I capital ratio............................................ 13.37 12.69
Total capital ratio............................................. 14.52 13.90
Leverage ratio.................................................. 8.69 8.50
Efficiency ratio................................................ 61.75 62.99
3
SCHEDULE 2
COMMERCE BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30 DECEMBER 31
1996 1995
------------ -----------
(UNAUDITED)
(IN THOUSANDS)
ASSETS
Loans, net of unearned income......................... $5,390,915 $5,317,813
Allowance for loan losses............................. (98,366) (98,537)
---------- ----------
NET LOANS......................................... 5,292,549 5,219,276
---------- ----------
Investment securities:
Available for sale.................................. 2,621,282 2,552,264
Trading account..................................... 5,255 9,369
Other non-marketable................................ 39,383 33,120
---------- ----------
TOTAL INVESTMENT SECURITIES....................... 2,665,920 2,594,753
---------- ----------
Federal funds sold and securities purchased under
agreements to resell................................. 343,090 523,302
Cash and due from banks............................... 700,632 774,852
Land, buildings and equipment--net.................... 208,342 210,033
Goodwill and core deposit premium--net................ 90,774 101,184
Customers' acceptance liability....................... 2,332 9,435
Other assets.......................................... 110,470 141,116
---------- ----------
TOTAL ASSETS...................................... $9,414,109 $9,573,951
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Non-interest bearing demand......................... $1,727,129 $1,828,950
Savings and interest bearing demand................. 3,941,168 3,891,801
Time open and C.D.'s of less than $100,000.......... 2,160,900 2,253,390
Time open and C.D.'s of $100,000 and over........... 210,665 218,951
---------- ----------
TOTAL DEPOSITS.................................... 8,039,862 8,193,092
Federal funds purchased and securities sold under
agreements to repurchase............................. 414,855 362,903
Long-term debt and other borrowings................... 14,233 14,562
Accrued interest, taxes and other liabilities......... 53,891 110,176
Acceptances outstanding............................... 2,332 9,435
---------- ----------
TOTAL LIABILITIES................................. 8,525,173 8,690,168
---------- ----------
Stockholders' equity:
Preferred stock, $1 par value.
Authorized and unissued 2,000,000 shares........... -- --
Common stock, $5 par value.
Authorized 80,000,000 shares; issued 37,565,369
shares............................................ 187,827 187,827
Capital surplus..................................... 81,260 84,415
Retained earnings................................... 684,756 618,388
Treasury stock of 1,810,202 shares in 1996 and
861,951 shares in 1995, at cost.................... (66,026) (32,980)
Unearned employee benefits.......................... (802) (716)
Unrealized securities gain--net of tax.............. 1,921 26,849
---------- ----------
TOTAL STOCKHOLDERS' EQUITY........................ 888,936 883,783
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY........ $9,414,109 $9,573,951
========== ==========
See accompanying notes to financial statements.
4
SCHEDULE 3
COMMERCE BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS FOR THE NINE MONTHS
ENDED SEPTEMBER 30 ENDED SEPTEMBER 30
--------------------- -------------------
1996 1995 1996 1995
---------- ---------- --------- ---------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
INTEREST INCOME
Interest and fees on loans.......... $ 115,074 $ 120,608 $ 344,500 $ 337,723
Interest on investment securities... 40,827 39,089 119,235 121,897
Interest on federal funds sold and
securities purchased under
agreements to resell............... 5,246 4,394 19,192 6,711
---------- ---------- --------- ---------
TOTAL INTEREST INCOME........... 161,147 164,091 482,927 466,331
---------- ---------- --------- ---------
INTEREST EXPENSE
Interest on deposits:
Savings and interest bearing
demand........................... 32,025 31,891 96,161 88,081
Time open and C.D.'s of less than
$100,000......................... 29,411 32,072 90,277 86,427
Time open and C.D.'s of $100,000
and over......................... 2,848 3,121 8,893 8,267
Interest on federal funds purchased
and securities sold under
agreements to repurchase........... 5,102 6,235 15,950 18,039
Interest on long-term debt and other
borrowings......................... 232 271 688 841
---------- ---------- --------- ---------
TOTAL INTEREST EXPENSE.......... 69,618 73,590 211,969 201,655
---------- ---------- --------- ---------
NET INTEREST INCOME............. 91,529 90,501 270,958 264,676
Provision for loan losses........... 6,082 3,927 17,063 8,690
---------- ---------- --------- ---------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES...... 85,447 86,574 253,895 255,986
---------- ---------- --------- ---------
NON-INTEREST INCOME
Trust income........................ 9,328 8,638 27,266 24,341
Deposit account charges and other
fees............................... 14,409 11,807 40,621 33,053
Trading account profits and
commissions........................ 1,316 1,134 4,474 3,848
Net gains on securities
transactions....................... 90 243 2,004 670
Credit card transaction fees........ 6,312 5,725 18,358 15,990
Other income........................ 8,994 6,647 23,182 18,779
---------- ---------- --------- ---------
TOTAL NON-INTEREST INCOME....... 40,449 34,194 115,905 96,681
---------- ---------- --------- ---------
OTHER EXPENSE
Salaries and employee benefits...... 40,971 41,156 123,282 117,952
Net occupancy expense on bank
premises........................... 5,619 5,369 16,272 15,257
Equipment expense................... 3,648 3,579 11,086 10,286
Supplies and communication expense.. 6,274 6,304 18,607 17,614
Data processing expense............. 5,227 5,360 15,394 15,206
Federal deposit insurance expense... 1,661 (339) 2,097 7,907
Marketing expense................... 3,415 3,718 9,469 8,119
Other operating expense............. 13,262 11,858 41,443 34,858
---------- ---------- --------- ---------
TOTAL OTHER EXPENSE............. 80,077 77,005 237,650 227,199
---------- ---------- --------- ---------
Income before income taxes.......... 45,819 43,763 132,150 125,468
Less income taxes................... 14,964 16,153 45,094 46,076
---------- ---------- --------- ---------
NET INCOME...................... $ 30,855 $ 27,610 $ 87,056 $ 79,392
========== ========== ========= =========
Net income per common and common
equivalent share................... $ .85 $ .72 $ 2.38 $ 2.10
========== ========== ========= =========
Weighted average common and common
equivalent shares outstanding...... 36,313 38,276 36,641 37,765
========== ========== ========= =========
Cash dividends per common share..... $ .190 $ .171 $ .570 $ .514
========== ========== ========= =========
See accompanying notes to financial statements.
5
SCHEDULE 4
COMMERCE BANCSHARES, INC. AND SUBSIDIARIES
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
NET
NUMBER OF UNEARNED UNREALIZED
SHARES COMMON CAPITAL RETAINED TREASURY EMPLOYEE GAIN
ISSUED STOCK SURPLUS EARNINGS STOCK BENEFITS (LOSS) TOTAL
---------- -------- ------- -------- -------- -------- ---------- --------
(UNAUDITED)
(DOLLARS IN THOUSANDS)
BALANCE JANUARY 1, 1996. 37,565,369 $187,827 $84,415 $618,388 $(32,980) $(716) $ 26,849 $883,783
Net income............. 87,056 87,056
Year-to-date change in
fair value of
investment securities. (24,928) (24,928)
Purchase of treasury
stock................. (39,746) 24 (39,722)
Sales under option and
benefit plans......... (3,138) 6,426 3,288
Issuance of stock under
restricted stock award
plan.................. (17) 274 (257) --
Restricted stock award
amortization.......... 147 147
Cash dividends paid
($.570 per share)..... (20,688) (20,688)
---------- -------- ------- -------- -------- ----- -------- --------
BALANCE SEPTEMBER 30,
1996................... 37,565,369 $187,827 $81,260 $684,756 $(66,026) $(802) $ 1,921 $888,936
========== ======== ======= ======== ======== ===== ======== ========
Balance January 1, 1995. 33,970,106 $169,851 $54,575 $576,331 $(12,148) $(295) $(60,116) $728,198
Net income............. 79,392 79,392
Year-to-date change in
fair value of
investment securities. 72,400 72,400
Purchase of treasury
stock................. (29,081) 7 (29,074)
Sales under option and
benefit plans......... (2,156) 5,430 3,274
Purchase acquisitions.. (435) 5,315 4,880
Pooling acquisition,
net................... 2,674,299 13,371 (4,872) 32,360 7,625 38 48,522
Issuance of stock under
restricted stock award
plan.................. 4 627 (631) --
Restricted stock award
amortization.......... 101 101
Cash dividends paid
($.514 per share)..... (19,593) (19,593)
---------- -------- ------- -------- -------- ----- -------- --------
Balance September 30,
1995................... 36,644,405 $183,222 $47,116 $668,490 $(22,232) $(818) $ 12,322 $888,100
========== ======== ======= ======== ======== ===== ======== ========
See accompanying notes to financial statements.
6
SCHEDULE 5
COMMERCE BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS
ENDED SEPTEMBER 30
--------------------
1996 1995
--------- ---------
(UNAUDITED)
(IN THOUSANDS)
OPERATING ACTIVITIES:
Net income............................................... $ 87,056 $ 79,392
Adjustments to reconcile net income to net cash provided
by operating activities:
Provision for loan losses.............................. 17,063 8,690
Provision for depreciation and amortization............ 23,085 23,012
Accretion of investment security discounts............. (4,327) (4,346)
Amortization of investment security premiums........... 17,162 19,845
Net gains on sales of investment securities (A)........ (2,004) (670)
Net (increase) decrease in trading account
securities............................................ 4,791 (2,586)
Decrease in interest receivable........................ 7,431 1,214
Increase (decrease) in interest payable................ (1,874) 8,802
Other changes, net..................................... 12,452 4,592
--------- ---------
Net cash provided by operating activities............ 160,835 137,945
--------- ---------
INVESTING ACTIVITIES:
Net cash paid in acquisitions............................ -- (33,226)
Cash paid in sale of branches............................ (38,134) --
Proceeds from sales of investment securities (A)......... 546,664 585,688
Proceeds from maturities of investment securities (A).... 292,541 407,470
Purchases of investment securities (A)................... (964,682) (460,174)
Net (increase) decrease in federal funds sold and
securities purchased under agreements to resell......... 180,212 (95,325)
Net increase in loans.................................... (99,820) (365,305)
Purchases of premises and equipment...................... (19,512) (17,549)
Sales of premises and equipment.......................... 6,529 6,386
--------- ---------
Net cash provided (used) by investing activities..... (96,202) 27,965
--------- ---------
FINANCING ACTIVITIES:
Net decrease in non-interest bearing demand, savings
and interest bearing demand deposits.................... (21,902) (285,801)
Net increase (decrease) in time open and C.D.'s.......... (80,182) 97,049
Net increase in federal funds purchased and securities
sold under
agreements to repurchase................................ 51,952 78,913
Repayment of long-term debt.............................. (369) (7,691)
Purchases of treasury stock.............................. (70,325) (28,923)
Exercise of stock options by employees................... 2,661 2,922
Cash dividends paid on common stock...................... (20,688) (19,593)
--------- ---------
Net cash used by financing activities................ (138,853) (163,124)
--------- ---------
Increase (decrease) in cash and cash equivalents..... (74,220) 2,786
Cash and cash equivalents at beginning of year........... 774,852 565,805
--------- ---------
Cash and cash equivalents at September 30............ $ 700,632 $ 568,591
========= =========
- --------
(A) Available for sale and other non-marketable securities, excluding trading
account securities.
Cash payments of income taxes for the nine month period were $50,398,000 in
1996 and $27,295,000 in 1995. Interest paid on deposits and borrowings for the
nine month period was $213,614,000 in 1996 and $192,967,000 in 1995.
See accompanying notes to financial statements.
7
SCHEDULE 6
COMMERCE BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
(UNAUDITED)
1. PRINCIPLES OF CONSOLIDATION AND PRESENTATION
The accompanying consolidated financial statements include the accounts of
Commerce Bancshares, Inc. and all majority-owned subsidiaries (the Company).
All significant intercompany accounts and transactions have been eliminated.
Certain reclassifications were made to 1995 data to conform to current year
presentation.
The significant accounting policies followed in the preparation of the
quarterly financial statements are the same as those disclosed in the 1995
Annual Report to stockholders to which reference is made.
2. ALLOWANCE FOR LOAN LOSSES
The following is a summary of the allowance for loan losses (in thousands):
FOR THE FOR THE
THREE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30 SEPTEMBER 30
--------------- ---------------
1996 1995 1996 1995
------- ------- ------- -------
Balance, beginning of period............ $98,667 $99,221 $98,537 $87,179
------- ------- ------- -------
Additions:
Provision for loan losses.............. 6,082 3,927 17,063 8,690
Allowance for loan losses of acquired
banks................................. -- -- -- 12,932
------- ------- ------- -------
Total additions...................... 6,082 3,927 17,063 21,622
------- ------- ------- -------
Deductions:
Loan losses............................ 8,032 6,653 22,629 15,826
Less recoveries on loans............... 1,649 1,800 5,395 5,320
------- ------- ------- -------
Net loan losses...................... 6,383 4,853 17,234 10,506
------- ------- ------- -------
Balance, September 30................... $98,366 $98,295 $98,366 $98,295
======= ======= ======= =======
At September 30, 1996, interest income was not being recognized on an
accrual basis for loans with an outstanding balance of $11,829,000.
3. INVESTMENT SECURITIES
Investment securities, at fair value, consist of the following at September
30, 1996 and December 31, 1995 (in thousands):
SEPTEMBER 30 DECEMBER 31
1996 1995
------------ -----------
Available for sale:
U.S. government and federal agency
obligations.................................. $1,765,849 $1,707,111
State and municipal obligations............... 113,725 128,043
CMO's and asset-backed securities............. 652,668 670,522
Other debt securities......................... 46,359 10,982
Equity securities............................. 42,681 35,606
Trading account securities..................... 5,255 9,369
Other non-marketable securities................ 39,383 33,120
---------- ----------
Total investment securities................. $2,665,920 $2,594,753
========== ==========
4. INCOME PER COMMON SHARE
Income per share data is based on the weighted average number of common
shares and common equivalent shares outstanding during the interim periods.
All per share data in this report has been restated to reflect the 5% stock
dividend distributed on December 15, 1995.
8
SCHEDULE 7
COMMERCE BANCSHARES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SEPTEMBER 30, 1996
(UNAUDITED)
The following discussion and analysis should be read in conjunction with the
consolidated financial statements and related notes and with the statistical
information and financial data appearing in this report as well as the
Company's 1995 Annual Report on Form 10-K. Results of operations for the nine
month period ended September 30, 1996 are not necessarily indicative of
results to be attained for any other period.
SUMMARY
The Company's consolidated net income for the first nine months of 1996
totaled $87.1 million; a $7.7 million or 9.7% increase over the same period in
1995. Earnings per share increased 13.3% to $2.38 in the first nine months of
1996 compared to $2.10 in the first nine months of 1995. Net interest income
increased $6.3 million and non-interest income increased $19.2 million,
partially offset by increases of $10.5 million in other expense and $8.4
million in the provision for loan losses. When the effects of the four banks
acquired in March through May of 1995 are excluded, non-interest income
increased by 18.3%, while other expense, excluding intangible amortization and
F.D.I.C. insurance reductions, increased only 4.6%.
Return on average assets for the first nine months of 1996 was 1.24%
compared to 1.21% in the first nine months of 1995. Return on average
stockholders' equity for the first nine months of 1996 was 13.09% compared to
12.78% for the first nine months of 1995. The Company's efficiency ratio
(other expense/net interest income plus non-interest income excluding net
gains on securities transactions) was 61.75% for the first nine months of 1996
compared to 62.99% for the first nine months of 1995.
Consolidated net income increased $3.2 million over the third quarter of
1995 mainly due to a $6.3 million increase in non-interest income partially
offset by a $3.1 million increase in other expense and a $2.2 million increase
in the provision for loan losses. Net income increased $1.9 million over the
second quarter of 1996 mainly due to increases of $1.6 million in net interest
income and $1.8 million in non-interest income, partially offset by an
increase of $1.1 million in other expense. Earnings per share was $.85 in the
third quarter of 1996, an 18.1% increase over the third quarter of 1995 and a
7.6% increase over the second quarter of 1996.
In the second quarter of 1996, ten affiliate banks in Missouri, Kansas and
Illinois were merged to form two banks. The effects of these mergers will
enable the Company to reduce overhead costs while expanding services to
customers. Additionally, customers will gain access to additional banking
facilities in portions of Missouri, Kansas and Illinois.
The Company sold an Illinois branch in March 1996 and a Missouri branch in
August 1996. These sales did not have a material effect on the financial
statements of the Company.
INTEREST INCOME AND EARNING ASSETS
Total interest income increased $16.6 million, or 3.6%, compared to the
first nine months of 1995 mainly due to an increase of $477.5 million in
average earning asset balances, (which caused an increase of $29.0 million in
tax equivalent interest income), partly offset by a decrease of 19 basis
points in average tax equivalent rates earned. Excluding banks acquired in
1995, total interest income increased .4% in the first nine months of 1996
over the same period in 1995. The average tax equivalent yield was 7.75% for
the first nine months of 1996 and 7.94% for the first nine months of 1995.
9
Loans were 63% of average earning assets and yielded an average tax
equivalent rate of 8.71% for the first nine months of 1996. Loan interest
income increased $6.8 million, or 2.0%, over the first nine months of 1995.
This increase was mainly due to an increase of $97.2 million in average credit
card loan balances, partially offset by a decline of 46 basis points in average
tax equivalent rates earned on business loans. Interest income on investment
securities decreased $2.7 million from the first nine months of 1995 mainly due
to a decrease of $84.7 million in average balances invested in CMO's and asset-
backed securities. Interest income on federal funds sold and securities
purchased under agreements to resell increased $12.5 million over the first
nine months of 1995 mainly due to an increase of $321.1 million in average
balances invested.
The average tax equivalent yield was 7.73% in the third quarter of 1996
compared to 7.96% in the third quarter of 1995 and 7.72% in the second quarter
of 1996. Total interest income decreased $2.9 million from the third quarter of
1995 mainly due to both lower average tax equivalent yields earned and lower
average balances invested in loans. Total interest income increased $1.4
million over the second quarter of 1996 due to higher average tax equivalent
rates earned, mainly in loans, partially offset by lower average balances
invested, mainly in federal funds sold and resell agreements.
Summaries of average earning assets and liabilities and the corresponding
average rates earned/paid appear on pages 14 through 17.
INTEREST EXPENSE AND RELATED LIABILITIES
Total interest expense (net of capitalized interest) increased $10.3 million,
or 5.1%, compared to the first nine months of 1995 due mainly to higher average
interest-bearing liabilities. The average cost of funds was 4.13% for the first
nine months of 1996 and 4.19% for the first nine months of 1995. Excluding
banks acquired in 1995, total interest expense increased 1.2% in the first nine
months of 1996 compared to the first nine months of 1995.
Average core deposits (deposits excluding short-term certificates of deposit
over $100,000) for the first nine months of 1996 were $7.85 billion, an
increase of 6.8% over the same period last year. Core deposits supported 94% of
average earning assets in 1996. Interest on deposits increased $12.6 million
over the first nine months of 1995. Interest expense on the Company's Premium
Money Market deposits and long-term C.D.'s of less than $100,000 increased
$13.1 million and $6.9 million, respectively, due mainly to higher average
balances. Interest expense on federal funds purchased and securities sold under
agreements to repurchase decreased $2.1 million from the first nine months of
1995 due to a decrease in average rates paid.
Total interest expense in the third quarter of 1996 was $4.0 million lower
than the third quarter of 1995, as rate decreases were partially offset by
increases in average deposits. Interest expense was $173 thousand lower than
the second quarter of 1996 due to lower average deposits and borrowings and
lower average rates paid on deposits. The average cost of funds was 4.09% for
the second and third quarters of 1996 compared to 4.34% for the third quarter
of 1995.
RISK ELEMENTS OF LOAN PORTFOLIO
Non-performing assets include impaired loans (non-accrual loans and loans 90
days delinquent and still accruing interest) and foreclosed real estate. Loans
are placed on non-accrual status when management does not expect to collect
payments consistent with acceptable and agreed upon terms of repayment
(generally, loans that are 90 days past due as to principal and/or interest
payments). These loans were made primarily to borrowers in Missouri, Kansas and
Illinois. The following table presents non-performing assets for the periods
indicated.
10
SEPTEMBER 30, DECEMBER 31,
1996 1995
------------- ------------
(IN THOUSANDS)
Non-accrual loans.............................. $11,829 $16,234
Past due 90 days and still accruing interest... 24,593 15,690
------- -------
Total impaired loans........................... 36,422 31,924
Foreclosed real estate......................... 985 1,955
------- -------
Total non-performing assets.................. $37,407 $33,879
======= =======
Non-performing assets to total loans........... .69% .64%
Non-performing assets to total assets.......... .40% .35%
Non-accrual loans at September 30, 1996 are comprised of both secured and
unsecured loans to businesses and individuals. Loans past due 90 days but
still accruing interest are comprised of $9.2 million in business loans, $792
thousand in construction and development loans, $1.4 million in business real
estate loans, $2.4 million in personal real estate loans, $4.8 million in
personal banking loans and $5.9 million in credit card loans. Foreclosed
properties at September 30, 1996 are mainly comprised of individual family
dwellings and are not considered a significant risk element to the balance
sheet.
The subsidiary banks issue Visa and MasterCard credit cards, and the balance
of these consumer loans was $527.6 million at September 30, 1996. During 1996
the banking industry has experienced increasing credit losses on these loans
primarily due to easing of bankruptcy laws and general economic conditions,
and net charge-offs at major banks this year have ranged from 3.5% to over 5%
of credit card loans. The Company has also experienced an increase in credit
losses on credit card loans due to these same factors, however, net charge-off
experience through the first nine months has averaged 2.78% of outstanding
credit card loans, which is significantly lower than industry averages.
Because credit card loans traditionally have a higher than average ratio of
net charge-offs to loans outstanding, management requires that a specific
allowance for losses on credit card loans be maintained, which was $12.3
million, or 2.3% of credit card loans at September 30, 1996. The risk
presented by the above loans and foreclosed real estate is not considered by
management to be materially adverse in relation to normal credit risks
generally taken by lenders.
ALLOWANCE FOR LOAN LOSSES
Management records the provision for loan losses, on an individual bank
basis, in amounts that result in an allowance for loan losses sufficient to
cover all potential net charge-offs and risks believed to be inherent in the
loan portfolio of each bank. Management's evaluation includes such factors as
past loan loss experience as related to current loan portfolio mix, evaluation
of actual and potential losses in the loan portfolio, prevailing regional and
national economic conditions that might have an impact on the portfolio,
regular reviews and examinations of the loan portfolio conducted by internal
loan reviewers supervised by Commerce Bancshares, Inc. (the Parent), reviews
and examinations by bank regulatory authorities, and other factors that
management believes deserve current recognition. As a result of these factors,
the provision for loan losses increased $8.4 million compared to the first
nine months of 1995, increased $2.2 million over the third quarter of 1995 and
increased $654 thousand compared to the second quarter of 1996. The allowance
for loan losses as a percentage of loans outstanding was 1.82% at September
30, 1996, compared to 1.85% at year-end 1995 and 1.80% at September 30, 1995.
Net charge-offs on loans totaled $17.2 million for the first nine months of
1996 compared to $10.5 million for the first nine months of 1995. Net charge-
offs were $6.4 million for the third quarter of 1996 compared to $4.9 million
for the third quarter of 1995 and $5.4 million for the second quarter of 1996.
Management believes that the allowance for loan losses, which is a general
reserve, is adequate to cover actual and potential losses in the loan
portfolio under current conditions. Other than as previously noted, management
is not aware of any significant risks in the current loan portfolio due to
concentrations of loans within any particular industry, nor of any separate
types of loans within a particular category of non-performing loans that are
unusually significant as to possible loan losses when compared to the entire
loan portfolio.
11
NON-INTEREST INCOME
INCREASE (DECREASE)
-------------------------------------------
QUARTER QUARTER
ENDED ENDED
NINE MONTHS 9/30/96 9/30/96
ENDED 9/30/96 COMPARED TO COMPARED
COMPARED TO QUARTER QUARTER
NINE MONTHS ENDED ENDED
ENDED 9/30/95 9/30/95 6/30/96
------------- ------------- -------------
(IN THOUSANDS)
Trust income...................... $ 2,925 12.0% $ 690 8.0% $ 483 5.5%
Deposit account charges and other
fees............................. 7,568 22.9 2,602 22.0 609 4.4
Trading account profits and
commissions...................... 626 16.3 182 16.0 (116) (8.1)
Net gains on securities
transactions..................... 1,334 199.1 (153) (63.0) (600) (87.0)
Credit card transaction fees...... 2,368 14.8 587 10.3 33 .5
Other income...................... 4,403 23.5 2,347 35.3 1,380 18.1
------- ------ ------
Total non-interest income......... $19,224 19.9% $6,255 18.3% $1,789 4.6%
======= ====== ======
The increase in deposit account charges and other fees in the first nine
months of 1996 compared with 1995 was partially due to fee restructuring and
added cash management fees. Income on trust fees was reflective of increased
new business coupled with improvement in market value on assets upon which
some fees are based. Credit card fees are reflective of increased merchant and
cardholder sales upon which transaction fee income is based. Included in the
other income category was an increase in gains on sales of branches and fixed
assets of $2.6 million. The quarterly comparisons to the third quarter of 1995
and the second quarter of 1996 also include increases in gains on sales of
branches and fixed assets of $1.6 million and $1.7 million, respectively.
Excluding banks acquired in 1995, total non-interest income (excluding
securities gains) increased $15.4 million, or 17.0%, in the first nine months
of 1996 compared to the first nine months of 1995.
OTHER EXPENSE
Other expense increased $10.5 million in the first nine months of 1996
compared to the first nine months of 1995. Salaries and benefits increased
$5.3 million in this comparison partly as a result of staff at banks acquired
in 1995. Excluding employees at banks acquired in 1995, full-time equivalent
employees decreased 1.9% in the first nine months of 1996 compared to the
first nine months of 1995. In addition, marketing expense increased $1.4
million, occupancy expense on bank premises increased $1.0 million, and
expense on foreclosed real estate increased $2.2 million. These effects were
partially offset by a $5.8 million decrease in F.D.I.C. insurance expense due
to a decrease in the assessment rate. In the third quarter of 1996, the
Company accrued $1.3 million for a one time charge in connection with the
recapitalization of the SAIF fund. Excluding the expenses of banks acquired in
1995, total other expense increased only $565 thousand in the first nine
months of 1996 compared to the same period in 1995.
Other expense increased $3.1 million compared to the third quarter of 1995
mainly due to increases of $1.8 million in foreclosed real estate expense and
$2.0 million in F.D.I.C. insurance expense. Compared to the second quarter of
1996, other expense increased $1.1 million partly due to increases of $1.4
million in F.D.I.C. insurance expense and $957 thousand in marketing expense.
LIQUIDITY AND CAPITAL RESOURCES
The liquid assets of the Parent consist primarily of short-term investments
and equity securities, most of which are readily marketable. The fair value of
these investments was $84.4 million at September 30, 1996 compared to $90.1
million at December 31, 1995. Included in the fair values were unrealized net
gains of $13.4 million at September 30, 1996 and $11.0 million at December 31,
1995. The Parent's liabilities totaled $63.3 million at September 30, 1996,
compared to $44.3 million at December 31, 1995. The 1995 liabilities included
a $31.0 million liability recorded at year end 1995 for a significant treasury
stock purchase settling in 1996. The 1996 liabilities included $51.1 million
advanced mainly from subsidiary bank holding companies in order to
12
combine resources for short-term investment in liquid assets. The Parent had
no short-term borrowings from affiliate banks or long-term debt during 1996.
The Parent's commercial paper, which management believes is readily
marketable, has a P1 rating from Moody's and an A1 rating from Standard &
Poor's. The Company is also rated A by Thomson BankWatch with a corresponding
short-term rating of TBW-1. This credit availability should provide adequate
funds to meet any outstanding or future commitments of the Parent.
The liquid assets held by bank subsidiaries include federal funds sold and
securities purchased under agreements to resell and available for sale
securities, which consist mainly of U.S. government and federal agency
securities and CMO's and asset-backed securities. These liquid assets had a
fair value of $2.87 billion at September 30, 1996 and $3.03 billion at
December 31, 1995. The available for sale bank portfolio included an
unrealized net loss in fair value of $16.9 million at September 30, 1996
compared to an unrealized net gain of $30.1 million at December 31, 1995.
In February 1996, the Board of Directors authorized the Company to purchase
up to 2,000,000 shares of common stock in either the open market or privately
negotiated transactions, to be used for employee benefit programs and stock
dividends. At September 30, 1996, the Company had acquired 1,099,063 shares
under this authorization.
The Company (on a consolidated basis) had an equity to asset ratio of 9.49%
based on 1996 average balances. As shown in the following table, the Company's
capital exceeded the minimum risk-based capital and leverage requirements of
the regulatory agencies.
SEPTEMBER 30, DECEMBER 31,
1996 1995
------------- ------------
(DOLLARS IN THOUSANDS)
Risk-Adjusted Assets........................... $5,976,262 $6,045,112
Tier I Capital................................. 798,846 756,452
Total Capital.................................. 867,729 829,784
Tier I Capital Ratio........................... 13.37% 12.51%
Total Capital Ratio............................ 14.52% 13.73%
Leverage Ratio................................. 8.69% 8.27%
The Company's cash and cash equivalents (defined as "Cash and due from
banks") were $700.6 million at September 30, 1996, a decrease of $74.2 million
from December 31, 1995. Contributing to the net cash outflow were a net
decrease of $102.1 million in deposits, $70.3 million in purchases of treasury
stock and $99.8 million in additional loans made, net of repayments. In
addition, purchases of investment securities were $964.7 million, partially
offset by $839.2 million in proceeds realized from sales and maturities.
Partially offsetting these net outflows were a $180.2 million net decrease in
short-term investments in federal funds sold and resell agreements and $160.8
million generated from operating activities. Total assets and core deposits
decreased slightly, $159.8 million and $150.6 million, respectively, compared
to December 31, 1995 balances.
The Company has various commitments and contingent liabilities which are
properly not reflected on the balance sheet. Loan commitments (excluding lines
of credit related to credit card loan agreements) totaled approximately $2.12
billion, standby letters of credit totaled $135.1 million, and commercial
letters of credit totaled $25.4 million at September 30, 1996. The Company has
little risk exposure in off-balance-sheet derivative contracts. The notional
value of these contracts (interest rate and foreign exchange rate contracts)
was $132.8 million at September 30, 1996. The current credit exposure (or
replacement cost) across all off-balance-sheet derivative contracts covered by
the risk-based capital standards was $4.4 million at September 30, 1996.
Management does not anticipate any material losses to arise from these
contingent items and believes there are no material commitments to extend
credit that represent risks of an unusual nature.
13
AVERAGE BALANCE SHEETS--AVERAGE RATES AND YIELDS
NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
NINE MONTHS 1996 NINE MONTHS 1995
------------------------------- -------------------------------
INTEREST AVG. RATES INTEREST AVG. RATES
AVERAGE INCOME/ EARNED/ AVERAGE INCOME/ EARNED/
BALANCE EXPENSE PAID BALANCE EXPENSE PAID
---------- -------- ---------- ---------- -------- ----------
(UNAUDITED)
(DOLLARS IN THOUSANDS)
ASSETS:
Loans:
Business (including
foreign) (A).......... $1,679,242 $ 99,356 7.90% $1,684,814 $105,286 8.36%
Construction and
development........... 168,404 11,027 8.75 127,554 9,015 9.45
Real estate--business.. 709,032 45,755 8.62 686,887 46,057 8.96
Real estate--personal.. 985,649 57,969 7.86 943,148 54,792 7.77
Personal banking....... 1,253,995 81,473 8.68 1,242,857 81,159 8.73
Credit card............ 504,691 49,968 13.23 407,452 42,495 13.94
---------- -------- ----- ---------- -------- -----
Total loans.......... 5,301,013 345,548 8.71 5,092,712 338,804 8.89
---------- -------- ----- ---------- -------- -----
Investment securities:
U.S. government &
federal agency........ 1,766,554 81,207 6.14 1,717,948 79,266 6.17
State & municipal
obligations (A)....... 117,649 6,929 7.87 119,846 6,897 7.69
CMO's and asset-backed
securities............ 648,127 30,462 6.28 732,843 34,256 6.25
Trading account
securities (A)........ 6,125 208 4.54 3,549 163 6.15
Other marketable
securities (A)........ 45,299 2,252 6.64 73,005 3,315 6.07
Other non-marketable
securities............ 35,721 834 3.12 24,227 570 3.15
---------- -------- ----- ---------- -------- -----
Total investment
securities.......... 2,619,475 121,892 6.22 2,671,418 124,467 6.23
---------- -------- ----- ---------- -------- -----
Federal funds sold and
securities purchased
under agreements to
resell................. 472,554 19,192 5.42 151,419 6,711 5.93
---------- -------- ----- ---------- -------- -----
Total interest
earning assets...... 8,393,042 486,632 7.75 7,915,549 469,982 7.94
-------- ----- -------- -----
Less allowance for loan
losses................. (98,490) (95,202)
Unrealized gain (loss)
on investment
securities............. 22,239 (27,932)
Cash and due from banks. 632,272 595,039
Land, buildings and
equipment--net......... 208,819 204,251
Other assets............ 197,889 204,167
---------- ----------
Total assets......... $9,355,771 $8,795,872
========== ==========
LIABILITIES AND EQUITY:
Interest bearing
deposits:
Savings................ $ 302,599 5,415 2.39 $ 312,118 5,970 2.56
Interest bearing
demand................ 3,650,900 90,746 3.32 3,270,040 82,111 3.36
Time open & C.D.'s of
less than $100,000.... 2,211,055 90,277 5.45 2,188,292 86,427 5.28
Time open & C.D.'s of
$100,000 and over..... 228,950 8,893 5.19 208,684 8,267 5.30
---------- -------- ----- ---------- -------- -----
Total interest
bearing deposits.... 6,393,504 195,331 4.08 5,979,134 182,775 4.09
---------- -------- ----- ---------- -------- -----
Borrowings:
Federal funds
purchased and
securities sold under
agreements to
repurchase............ 445,091 15,950 4.79 446,388 18,039 5.40
Long-term debt and
other borrowings...... 14,764 792 7.16 16,694 871 6.98
---------- -------- ----- ---------- -------- -----
Total borrowings..... 459,855 16,742 4.86 463,082 18,910 5.46
---------- -------- ----- ---------- -------- -----
Total interest
bearing liabilities. 6,853,359 212,073 4.13% 6,442,216 201,685 4.19%
-------- ----- -------- -----
Non-interest bearing
demand deposits........ 1,536,578 1,473,457
Other liabilities ...... 77,752 49,512
Stockholders' equity.... 888,082 830,687
---------- ----------
Total liabilities and
equity.............. $9,355,771 $8,795,872
========== ==========
Net interest margin
(T/E).................. $274,559 $268,297
======== ========
Net yield on interest
earning assets......... 4.37% 4.53%
===== =====
- --------
(A) Stated on a tax equivalent basis using a federal income tax rate of 35%.
14
ANALYSIS OF VARIANCE IN NET INTEREST MARGIN (T/E) DUE TO VOLUMES AND RATES
NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
1996 VS 1995
-----------------------------
INCREASE OR
(DECREASE) DUE
TO CHANGE IN
----------------- TOTAL
AVERAGE AVERAGE INCREASE
VOLUME RATE (B) (DECREASE)
------- -------- ----------
(UNAUDITED)
(DOLLARS IN THOUSANDS)
VARIANCE IN INTEREST INCOME ON:
Loans:
Business (including foreign) (A)................ $ (286) $ (5,644) $(5,930)
Construction and development.................... 2,890 (878) 2,012
Real estate--business........................... 1,485 (1,787) (302)
Real estate--personal........................... 2,472 705 3,177
Personal banking................................ 728 (414) 314
Credit card..................................... 10,148 (2,675) 7,473
------- -------- -------
Total loans................................... 17,437 (10,693) 6,744
------- -------- -------
Investment securities:
U.S. government & federal agency................ 2,245 (304) 1,941
State & municipal obligations (A)............... (127) 159 32
CMO's and asset-backed securities............... (3,964) 170 (3,794)
Trading account securities (A).................. 119 (74) 45
Other marketable securities (A)................. (1,259) 196 (1,063)
Other non-marketable securities................. 271 (7) 264
------- -------- -------
Total investment securities................... (2,715) 140 (2,575)
------- -------- -------
Federal funds sold and securities purchased under
agreements to resell............................ 14,243 (1,762) 12,481
------- -------- -------
Total interest income......................... 28,965 (12,315) 16,650
------- -------- -------
VARIANCE IN INTEREST EXPENSE ON:
Interest bearing deposits:
Savings......................................... (182) (373) (555)
Interest bearing demand......................... 14,311 (5,676) 8,635
Time open & C.D.'s of less than $100,000........ 1,060 2,790 3,850
Time open & C.D.'s of $100,000 and over......... 805 (179) 626
------- -------- -------
Total interest bearing deposits............... 15,994 (3,438) 12,556
------- -------- -------
Borrowings:
Federal funds purchased and securities sold
under agreements to repurchase................. (416) (1,673) (2,089)
Long-term debt and other borrowings............. (101) 22 (79)
------- -------- -------
Total borrowings.............................. (517) (1,651) (2,168)
------- -------- -------
Total interest expense........................ 15,477 (5,089) 10,388
------- -------- -------
Change in net interest margin (T/E).............. $13,488 $ (7,226) $ 6,262
======= ======== =======
Percentage increase in net interest margin (T/E)
over the same period of the prior year.......... 2.33%
=======
- --------
(A) Stated on a tax equivalent basis
(B) Changes not solely due to volume or rate changes are allocated to rate.
Management believes this allocation method, applied on a consistent basis,
provides meaningful comparisons between the respective periods.
15
AVERAGE BALANCE SHEETS--AVERAGE RATES AND YIELDS
THREE MONTHS ENDED SEPTEMBER 30, 1996 AND JUNE 30, 1996
THIRD QUARTER 1996 SECOND QUARTER 1996
------------------------------- -------------------------------
INTEREST AVG. RATES INTEREST AVG. RATES
AVERAGE INCOME/ EARNED/ AVERAGE INCOME/ EARNED/
BALANCE EXPENSE PAID BALANCE EXPENSE PAID
---------- -------- ---------- ---------- -------- ----------
(UNAUDITED)
(DOLLARS IN THOUSANDS)
ASSETS:
Loans:
Business (including
foreign) (A).......... $1,669,718 $33,130 7.89% $1,686,451 $32,884 7.84%
Construction and
development........... 164,337 3,565 8.63 169,600 3,674 8.71
Real estate--business.. 723,412 15,607 8.58 702,606 15,107 8.65
Real estate--personal.. 985,396 19,152 7.73 990,822 19,287 7.83
Personal banking....... 1,243,795 26,934 8.61 1,253,783 27,076 8.69
Credit card............ 516,869 17,026 13.10 502,800 16,234 12.99
---------- ------- ----- ---------- ------- -----
Total loans.......... 5,303,527 115,414 8.66 5,306,062 114,262 8.66
---------- ------- ----- ---------- ------- -----
Investment securities:
U.S. government &
federal agency........ 1,796,376 27,663 6.13 1,789,272 27,311 6.14
State & municipal
obligations (A)....... 114,666 2,224 7.72 117,785 2,348 8.02
CMO's and asset-backed
securities............ 663,732 10,357 6.21 632,794 9,942 6.32
Trading account
securities (A)........ 3,624 7 .77 7,861 113 5.78
Other marketable
securities (A)........ 53,414 853 6.35 45,595 734 6.47
Other non-marketable
securities............ 38,773 580 5.95 33,940 173 2.05
---------- ------- ----- ---------- ------- -----
Total investment
securities.......... 2,670,585 41,684 6.21 2,627,247 40,621 6.22
---------- ------- ----- ---------- ------- -----
Federal funds sold and
securities purchased
under
agreements to resell... 385,594 5,246 5.41 453,629 6,064 5.38
---------- ------- ----- ---------- ------- -----
Total interest
earning assets...... 8,359,706 162,344 7.73 8,386,938 160,947 7.72
------- ----- ------- -----
Less allowance for loan
losses................. (98,197) (99,054)
Unrealized gain on
investment securities.. 350 14,220
Cash and due from banks. 623,676 615,730
Land, buildings and
equipment--net......... 208,241 208,242
Other assets............ 189,337 196,892
---------- ----------
Total assets......... $9,283,113 $9,322,968
========== ==========
LIABILITIES AND EQUITY:
Interest bearing
deposits:
Savings................ $ 296,312 1,792 2.41 $ 305,729 1,789 2.35
Interest bearing
demand................ 3,650,512 30,233 3.29 3,664,421 30,036 3.30
Time open & C.D.'s of
less than $100,000.... 2,174,378 29,411 5.38 2,213,390 29,682 5.39
Time open & C.D.'s of
$100,000 and over..... 220,355 2,848 5.14 234,170 2,984 5.13
---------- ------- ----- ---------- ------- -----
Total interest
bearing deposits.... 6,341,557 64,284 4.03 6,417,710 64,491 4.04
---------- ------- ----- ---------- ------- -----
Borrowings:
Federal funds
purchased and
securities sold under
agreements to
repurchase............ 424,679 5,102 4.78 429,469 5,067 4.75
Long-term debt and
other borrowings...... 15,059 271 7.16 14,470 263 7.32
---------- ------- ----- ---------- ------- -----
Total borrowings..... 439,738 5,373 4.86 443,939 5,330 4.83
---------- ------- ----- ---------- ------- -----
Total interest
bearing liabilities. 6,781,295 69,657 4.09% 6,861,649 69,821 4.09%
------- ----- ------- -----
Non-interest bearing
demand deposits........ 1,556,370 1,507,302
Other liabilities....... 65,481 71,369
Stockholders' equity.... 879,967 882,648
---------- ----------
Total liabilities and
equity.............. $9,283,113 $9,322,968
========== ==========
Net interest margin
(T/E).................. $92,687 $91,126
======= =======
Net yield on interest
earning assets......... 4.41% 4.37%
===== =====
- --------
(A) Stated on a tax equivalent basis using a federal income tax rate of 35%.
16
ANALYSIS OF VARIANCE IN NET INTEREST MARGIN (T/E) DUE TO VOLUMES AND RATES
THREE MONTHS ENDED SEPTEMBER 30, 1996 AND JUNE 30, 1996
CURRENT QUARTER VS
PRIOR QUARTER
---------------------------
INCREASE OR
(DECREASE) DUE
TO CHANGE IN
---------------- TOTAL
AVERAGE AVERAGE INCREASE
VOLUME RATE (B) (DECREASE)
------- -------- ---------- ---
(UNAUDITED)
(DOLLARS IN THOUSANDS)
VARIANCE IN INTEREST INCOME ON:
Loans:
Business (including foreign) (A).............. $(330) $ 576 $ 246
Construction and development.................. (115) 6 (109)
Real estate--business......................... 452 48 500
Real estate--personal......................... (107) (28) (135)
Personal banking.............................. (218) 76 (142)
Credit card................................... 459 333 792
----- ------ ------
Total loans................................. 141 1,011 1,152
----- ------ ------
Investment securities:
U.S. government & federal agency.............. 110 242 352
State & municipal obligations (A)............. (63) (61) (124)
CMO's and asset-backed securities............. 491 (76) 415
Trading account securities (A)................ (62) (44) (106)
Other marketable securities (A)............... 127 (8) 119
Other non-marketable securities............... 25 382 407
----- ------ ------
Total investment securities................. 628 435 1,063
----- ------ ------
Federal funds sold and securities purchased
under agreements to resell.................... (917) 99 (818)
----- ------ ------
Total interest income....................... (148) 1,545 1,397
----- ------ ------
VARIANCE IN INTEREST EXPENSE ON:
Interest bearing deposits:
Savings....................................... (56) 59 3
Interest bearing demand....................... 651 (454) 197
Time open & C.D.'s of less than $100,000...... (486) 215 (271)
Time open & C.D.'s of $100,000 and over....... (168) 32 (136)
----- ------ ------
Total interest bearing deposits............. (59) (148) (207)
----- ------ ------
Borrowings:
Federal funds purchased and securities sold
under agreements to repurchase............... (71) 106 35
Long-term debt and other borrowings........... 11 (3) 8
----- ------ ------
Total borrowings............................ (60) 103 43
----- ------ ------
Total interest expense...................... (119) (45) (164)
----- ------ ------
Change in net interest margin (T/E)............ $ (29) $1,590 $1,561
===== ====== ======
Percentage increase in net interest margin
(T/E) over the prior quarter.................. 1.71%
======
- --------
(A) Stated on a tax equivalent basis
(B) Changes not solely due to volume or rate changes are allocated to rate.
Management believes this allocation method, applied on a consistent basis,
provides meaningful comparisons between the respective periods.
17