Commerce Bancshares, Inc. (NASDAQ:CBSH) announced earnings of $.65 per common share for the three months ended March 31, 2016 compared to $.63 per share in the prior quarter and $.58 per share in the first quarter of 2015. Net income attributable to Commerce Bancshares, Inc. for the first quarter amounted to $65.4 million, compared to $63.7 million in the prior quarter and $61.1 million in the same quarter last year. For the quarter, the return on average assets was 1.07%, the return on average common equity was 11.2% and the efficiency ratio was 62.62%.
In announcing these results, David W. Kemper, Chairman and CEO, said, “This quarter we are pleased to report solid top line revenue growth of 6% annualized along with continued strong average loan growth. Average total loans increased by $313.1 million, or 10% annualized, this quarter compared to the previous quarter, with most of this growth occurring in business, construction and business real estate lending. Average deposits also grew by $499.8 million, an annualized increase of 10%. This quarter our net interest income grew by $1.3 million over the prior quarter and increased $17.6 million, or 12%, over the same period last year. Non-interest income grew $3.0 million over the prior quarter and increased $12.5 million, or 12%, over the first quarter last year. Growth in fee income over the prior year was spread throughout a number of business lines but mainly resulted from higher deposit, bank card, trust, swap, tax credit and mortgage banking fees.Non-interest expense grew by $1.7 million over the previous quarter.”
Mr. Kemper continued, “Net loan charge-offs for the current quarter totaled $8.8 million, compared to $9.2 million in the previous quarter and $7.4 million in the first quarter of 2015. The decrease in net loan charge-offs compared to the previous quarter was mainly due to lower personal real estate and consumer credit card net loan losses but offset by slightly higher commercial loan charge-offs. During the current quarter, the provision for loan losses totaled $9.4 million, or $600 thousand higher than net loan charge-offs. The allowance for loan losses amounted to $152.1 million at March 31, 2016, or 1.20% of period end loans, and was 5.2 times non-performing loans. Total non-performing assets increased $2.0 million over the previous quarter to $31.4 million this quarter.”
Total assets at March 31, 2016 were $24.5 billion, total loans were $12.7 billion, and total deposits were $20.7 billion. During the quarter, the Company paid a common cash dividend of $.225 per share, representing a 5% increase over the rate paid in 2015 and also paid a 6% cash dividend on its preferred stock.
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 350 locations in Missouri, Illinois, Kansas, Oklahoma and Colorado. The Company also has operating subsidiaries involved in mortgage banking, credit related insurance, and private equity activities.
This financial news release, including management's discussion of first quarter results, is posted to the Company's web site at www.commercebank.com.
COMMERCE BANCSHARES, INC. and SUBSIDIARIES | |||||||||
| For the Three Months Ended | |||||||||
(Unaudited) | March 31, 2016 |
December 31, 2015 |
March 31, 2015 | ||||||
| FINANCIAL SUMMARY | |||||||||
| Net interest income | $163,775 | $162,487 | $146,138 | ||||||
| Non-interest income | 119,024 | 116,042 | 106,574 | ||||||
| Total revenue | 282,799 | 278,529 | 252,712 | ||||||
| Investment securities gains (losses), net | (995 | ) | (1,480 | ) | 6,035 | ||||
| Provision for loan losses | 9,439 | 9,186 | 4,420 | ||||||
| Non-interest expense | 177,473 | 175,777 | 163,845 | ||||||
| Income before taxes | 94,892 | 92,086 | 90,482 | ||||||
| Income taxes | 29,370 | 27,661 | 28,468 | ||||||
| Non-controlling interest expense | 148 | 715 | 959 | ||||||
| Net income attributable to Commerce Bancshares, Inc. | 65,374 | 63,710 | 61,055 | ||||||
| Preferred stock dividends | 2,250 | 2,250 | 2,250 | ||||||
| Net income available to common shareholders | $63,124 | $61,460 | $58,805 | ||||||
| Earnings per common share: | |||||||||
| Net income — basic | $.65 | $.63 | $.58 | ||||||
| Net income — diluted | $.65 | $.63 | $.58 | ||||||
| Effective tax rate | 31.00 | % | 30.27 | % | 31.80 | % | |||
| Taxable equivalent net interest income | $171,425 | $170,141 | $153,348 | ||||||
| Diluted wtd. average shares outstanding | 95,782,109 | 96,486,100 | 100,367,348 | ||||||
| RATIOS | |||||||||
| Average loans to deposits (1) | 62.81 | % | 62.80 | % | 59.71 | % | |||
| Return on total average assets | 1.07 | 1.05 | 1.05 | ||||||
| Return on average common equity (2) | 11.20 | 10.88 | 10.69 | ||||||
| Non-interest income to total revenue | 42.09 | 41.66 | 42.17 | ||||||
| Efficiency ratio (3) | 62.62 | 62.97 | 64.65 | ||||||
| Net yield on interest earning assets | 2.95 | 2.94 | 2.76 | ||||||
| EQUITY SUMMARY | |||||||||
| Cash dividends per share | $.225 | $.214 | $.214 | ||||||
| Cash dividends on common stock | $21,760 | $20,920 | $21,752 | ||||||
| Cash dividends on preferred stock | $2,250 | $2,250 | $2,250 | ||||||
| Book value per common share (4) | $23.85 | $22.86 | $22.30 | ||||||
| Market value per common share (4) | $44.95 | $42.54 | $40.30 | ||||||
| High market value per common share | $45.96 | $47.10 | $41.86 | ||||||
| Low market value per common share | $37.44 | $41.40 | $37.65 | ||||||
| Common shares outstanding (4) | 96,537,955 | 97,226,000 | 101,368,889 | ||||||
| Tangible common equity to tangible assets (5) | 8.84 | % | 8.48 | % | 8.83 | % | |||
| Tier I leverage ratio | 9.11 | % | 9.23 | % | 9.31 | % | |||
| OTHER QTD INFORMATION | |||||||||
| Number of bank/ATM locations | 346 | 346 | 353 | ||||||
| Full-time equivalent employees | 4,765 | 4,770 | 4,769 | ||||||
(1) | Includes loans held for sale. | |
(2) | Annualized net income available to common shareholders divided by average total equity less preferred stock. | |
(3) | The efficiency ratio is calculated as non-interest expense (excluding intangibles amortization) as a percent of revenue. | |
(4) | As of period end. | |
(5) | 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 | ||||||||||||||||
| For the Three Months Ended | ||||||||||||||||
| (Unaudited) (In thousands, except per share data) | March 31, 2016 |
December 31, 2015 |
September 30, 2015 |
June 30, 2015 |
March 31, 2015 | |||||||||||
| Interest income | $172,128 | $169,742 | $169,115 | $170,577 | $152,982 | |||||||||||
| Interest expense | 8,353 | 7,255 | 7,077 | 6,920 | 6,844 | |||||||||||
| Net interest income | 163,775 | 162,487 | 162,038 | 163,657 | 146,138 | |||||||||||
| Provision for loan losses | 9,439 | 9,186 | 8,364 | 6,757 | 4,420 | |||||||||||
| Net interest income after provision for loan losses | 154,336 | 153,301 | 153,674 | 156,900 | 141,718 | |||||||||||
| NON-INTEREST INCOME | ||||||||||||||||
| Bank card transaction fees | 44,470 | 46,320 | 44,635 | 45,672 | 42,299 | |||||||||||
| Trust fees | 30,370 | 30,054 | 29,630 | 30,531 | 29,586 | |||||||||||
| Deposit account charges and other fees | 20,691 | 21,606 | 20,674 | 19,637 | 18,499 | |||||||||||
| Capital market fees | 2,725 | 3,116 | 2,620 | 2,738 | 3,002 | |||||||||||
| Consumer brokerage services | 3,509 | 3,254 | 3,687 | 3,507 | 3,336 | |||||||||||
| Loan fees and sales | 2,510 | 2,101 | 1,855 | 2,183 | 2,089 | |||||||||||
| Other | 14,749 | 9,591 | 8,187 | 9,967 | 7,763 | |||||||||||
| Total non-interest income | 119,024 | 116,042 | 111,288 | 114,235 | 106,574 | |||||||||||
| INVESTMENT SECURITIES GAINS (LOSSES), NET | (995 | ) | (1,480 | ) | (378 | ) | 2,143 | 6,035 | ||||||||
| NON-INTEREST EXPENSE | ||||||||||||||||
| Salaries and employee benefits | 106,859 | 102,098 | 100,874 | 99,655 | 98,074 | |||||||||||
| Net occupancy | 11,303 | 10,981 | 11,247 | 10,999 | 11,561 | |||||||||||
| Equipment | 4,634 | 4,915 | 4,789 | 4,679 | 4,703 | |||||||||||
| Supplies and communication | 6,829 | 6,554 | 5,609 | 5,226 | 5,581 | |||||||||||
| Data processing and software | 22,899 | 22,274 | 21,119 | 21,045 | 19,506 | |||||||||||
| Marketing | 3,813 | 3,539 | 4,343 | 4,307 | 3,918 | |||||||||||
| Deposit insurance | 3,165 | 3,145 | 2,981 | 3,019 | 3,001 | |||||||||||
| Other | 17,971 | 22,271 | 20,440 | 16,533 | 17,501 | |||||||||||
| Total non-interest expense | 177,473 | 175,777 | 171,402 | 165,463 | 163,845 | |||||||||||
| Income before income taxes | 94,892 | 92,086 | 93,182 | 107,815 | 90,482 | |||||||||||
| Less income taxes | 29,370 | 27,661 | 27,969 | 32,492 | 28,468 | |||||||||||
| Net income | 65,522 | 64,425 | 65,213 | 75,323 | 62,014 | |||||||||||
| Less non-controlling interest expense | 148 | 715 | 601 | 970 | 959 | |||||||||||
| Net income attributable to Commerce Bancshares, Inc. | 65,374 | 63,710 | 64,612 | 74,353 | 61,055 | |||||||||||
| Less preferred stock dividends | 2,250 | 2,250 | 2,250 | 2,250 | 2,250 | |||||||||||
| Net income available to common shareholders | $63,124 | $61,460 | $62,362 | $72,103 | $58,805 | |||||||||||
| Net income per common share — basic | $.65 | $.63 | $.63 | $.72 | $.58 | |||||||||||
| Net income per common share — diluted | $.65 | $.63 | $.63 | $.72 | $.58 | |||||||||||
| OTHER INFORMATION | ||||||||||||||||
| Return on total average assets | 1.07 | % | 1.05 | % | 1.09 | % | 1.26 | % | 1.05 | % | ||||||
| Return on average common equity (1) | 11.20 | 10.88 | 11.25 | 12.91 | 10.69 | |||||||||||
| Efficiency ratio (2) | 62.62 | 62.97 | 62.55 | 59.39 | 64.65 | |||||||||||
| Effective tax rate | 31.00 | 30.27 | 30.21 | 30.41 | 31.80 | |||||||||||
| Net yield on interest earning assets | 2.95 | 2.94 | 3.00 | 3.04 | 2.76 | |||||||||||
| Net interest income (T/E) | $171,425 | $170,141 | $169,512 | $171,037 | $153,348 | |||||||||||
(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 | ||||||||||||
(Unaudited) | March 31, 2016 |
December 31, 2015 |
March 31, 2015 | |||||||||
| ASSETS | ||||||||||||
| Loans | ||||||||||||
| Business | $ | 4,575,081 | $ | 4,397,893 | $ | 4,183,977 | ||||||
| Real estate — construction and land | 745,369 | 624,070 | 423,928 | |||||||||
| Real estate — business | 2,395,933 | 2,355,544 | 2,282,988 | |||||||||
| Real estate — personal | 1,903,969 | 1,915,953 | 1,887,557 | |||||||||
| Consumer | 1,904,320 | 1,924,365 | 1,766,888 | |||||||||
| Revolving home equity | 423,005 | 432,981 | 426,964 | |||||||||
| Consumer credit card | 744,364 | 779,744 | 739,543 | |||||||||
| Overdrafts | 5,829 | 6,142 | 10,115 | |||||||||
| Total loans | 12,697,870 | 12,436,692 | 11,721,960 | |||||||||
| Allowance for loan losses | (152,132 | ) | (151,532 | ) | (153,532 | ) | ||||||
| Net loans | 12,545,738 | 12,285,160 | 11,568,428 | |||||||||
| Loans held for sale | 60,078 | 7,607 | 2,770 | |||||||||
| Investment securities: | ||||||||||||
| Available for sale | 9,552,179 | 9,777,004 | 9,917,242 | |||||||||
| Trading | 23,130 | 11,890 | 15,501 | |||||||||
| Non-marketable | 117,259 | 112,786 | 110,560 | |||||||||
| Total investment securities | 9,692,568 | 9,901,680 | 10,043,303 | |||||||||
Federal funds sold and short-term securities purchased | 9,075 | 14,505 | 12,450 | |||||||||
| Long-term securities purchased under agreements to resell | 825,000 | 875,000 | 1,050,000 | |||||||||
| Interest earning deposits with banks | 171,651 | 23,803 | 123,712 | |||||||||
| Cash and due from banks | 375,481 | 464,411 | 416,109 | |||||||||
| Land, buildings and equipment — net | 350,423 | 352,581 | 356,309 | |||||||||
| Goodwill | 138,921 | 138,921 | 138,921 | |||||||||
| Other intangible assets — net | 6,539 | 6,669 | 7,143 | |||||||||
| Other assets | 331,478 | 534,625 | 330,338 | |||||||||
| Total assets | $ | 24,506,952 | $ | 24,604,962 | $ | 24,049,483 | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||
| Deposits: | ||||||||||||
| Non-interest bearing | $ | 7,065,066 | $ | 7,146,398 | $ | 6,785,221 | ||||||
| Savings, interest checking and money market | 11,205,357 | 10,834,746 | 10,656,139 | |||||||||
| Time open and C.D.’s of less than $100,000 | 766,810 | 785,191 | 853,842 | |||||||||
| Time open and C.D.’s of $100,000 and over | 1,649,076 | 1,212,518 | 1,281,297 | |||||||||
| Total deposits | 20,686,309 | 19,978,853 | 19,576,499 | |||||||||
Federal funds purchased and securities sold under | 957,388 | 1,963,552 | 1,610,463 | |||||||||
| Other borrowings | 103,806 | 103,818 | 103,854 | |||||||||
| Other liabilities | 312,167 | 191,321 | 353,260 | |||||||||
| Total liabilities | 22,059,670 | 22,237,544 | 21,644,076 | |||||||||
| Total stockholders’ equity | 2,442,028 | 2,361,990 | 2,400,614 | |||||||||
| Non-controlling interest | 5,254 | 5,428 | 4,793 | |||||||||
| Total equity | 2,447,282 | 2,367,418 | 2,405,407 | |||||||||
| Total liabilities and equity | $ | 24,506,952 | $ | 24,604,962 | $ | 24,049,483 | ||||||
COMMERCE BANCSHARES, INC. and SUBSIDIARIES | ||||||||||||||||||||
(Unaudited) | For the Three Months Ended | |||||||||||||||||||
March 31, |
December 31, |
September 30, |
June 30, |
March 31, | ||||||||||||||||
| ASSETS: | ||||||||||||||||||||
| Loans: | ||||||||||||||||||||
| Business | $ | 4,491,556 | $ | 4,351,756 | $ | 4,221,478 | $ | 4,135,362 | $ | 4,031,904 | ||||||||||
| Real estate — construction and land | 682,557 | 584,185 | 476,331 | 432,008 | 414,908 | |||||||||||||||
| Real estate — business | 2,382,094 | 2,320,439 | 2,284,928 | 2,287,885 | 2,281,777 | |||||||||||||||
| Real estate — personal | 1,909,532 | 1,916,219 | 1,911,469 | 1,891,109 | 1,877,580 | |||||||||||||||
| Consumer | 1,934,577 | 1,908,540 | 1,861,636 | 1,815,699 | 1,731,146 | |||||||||||||||
| Revolving home equity | 429,682 | 429,582 | 434,355 | 429,644 | 430,525 | |||||||||||||||
| Consumer credit card | 752,098 | 756,743 | 746,066 | 734,289 | 748,831 | |||||||||||||||
| Overdrafts | 4,772 | 6,303 | 5,233 | 4,510 | 5,612 | |||||||||||||||
| Total loans | 12,586,868 | 12,273,767 | 11,941,496 | 11,730,506 | 11,522,283 | |||||||||||||||
| Allowance for loan losses | (151,308 | ) | (150,856 | ) | (150,890 | ) | (152,994 | ) | (156,097 | ) | ||||||||||
| Net loans | 12,435,560 | 12,122,911 | 11,790,606 | 11,577,512 | 11,366,186 | |||||||||||||||
| Loans held for sale | 9,360 | 6,118 | 4,471 | 3,969 | 1,851 | |||||||||||||||
| Investment securities: | ||||||||||||||||||||
| U.S. government and federal agency obligations | 703,212 | 580,816 | 402,591 | 424,823 | 455,633 | |||||||||||||||
| Government-sponsored enterprise obligations | 776,488 | 824,066 | 887,631 | 988,120 | 1,057,666 | |||||||||||||||
| State and municipal obligations | 1,718,587 | 1,779,704 | 1,805,931 | 1,799,355 | 1,759,511 | |||||||||||||||
| Mortgage-backed securities | 3,424,716 | 3,335,627 | 3,217,589 | 3,161,050 | 2,938,575 | |||||||||||||||
| Asset-backed securities | 2,537,472 | 2,574,426 | 2,546,982 | 2,839,483 | 3,140,086 | |||||||||||||||
| Other marketable securities | 342,382 | 337,340 | 302,323 | 249,075 | 160,634 | |||||||||||||||
| Unrealized gain on investment securities | 149,319 | 130,231 | 118,404 | 170,039 | 169,486 | |||||||||||||||
| Total available for sale securities | 9,652,176 | 9,562,210 | 9,281,451 | 9,631,945 | 9,681,591 | |||||||||||||||
| Trading securities | 18,190 | 23,217 | 22,283 | 19,758 | 16,719 | |||||||||||||||
| Non-marketable securities | 127,769 | 114,321 | 114,062 | 109,522 | 107,511 | |||||||||||||||
| Total investment securities | 9,798,135 | 9,699,748 | 9,417,796 | 9,761,225 | 9,805,821 | |||||||||||||||
| Federal funds sold and short-term securities purchased under agreements to resell | 17,378 | 18,694 | 21,012 | 12,812 | 12,092 | |||||||||||||||
Long-term securities purchased under agreements to | 850,275 | 902,174 | 1,007,606 | 1,049,999 | 1,049,998 | |||||||||||||||
| Interest earning deposits with banks | 219,636 | 178,486 | 160,687 | 198,407 | 288,589 | |||||||||||||||
| Other assets | 1,172,916 | 1,119,602 | 1,106,739 | 1,135,601 | 1,127,864 | |||||||||||||||
| Total assets | $ | 24,503,260 | $ | 24,047,733 | $ | 23,508,917 | $ | 23,739,525 | $ | 23,652,401 | ||||||||||
| LIABILITIES AND EQUITY: | ||||||||||||||||||||
| Non-interest bearing deposits | $ | 6,905,673 | $ | 6,995,666 | $ | 6,781,592 | $ | 6,744,536 | $ | 6,621,110 | ||||||||||
| Savings | 761,020 | 736,824 | 739,172 | 738,769 | 701,987 | |||||||||||||||
| Interest checking and money market | 10,128,543 | 9,805,457 | 9,619,621 | 9,759,608 | 9,828,203 | |||||||||||||||
| Time open & C.D.’s of less than $100,000 | 775,221 | 796,639 | 820,792 | 844,675 | 868,179 | |||||||||||||||
| Time open & C.D.’s of $100,000 and over | 1,483,700 | 1,219,803 | 1,171,617 | 1,227,322 | 1,280,110 | |||||||||||||||
| Total deposits | 20,054,157 | 19,554,389 | 19,132,794 | 19,314,910 | 19,299,589 | |||||||||||||||
| Borrowings: | ||||||||||||||||||||
Federal funds purchased and securities sold under agreements to | 1,404,754 | 1,707,430 | 1,677,322 | 1,674,682 | 1,558,118 | |||||||||||||||
| Other borrowings | 377,711 | 103,819 | 103,875 | 103,846 | 103,999 | |||||||||||||||
| Total borrowings | 1,782,465 | 1,811,249 | 1,781,197 | 1,778,528 | 1,662,117 | |||||||||||||||
| Other liabilities | 254,437 | 295,718 | 250,626 | 260,945 | 314,163 | |||||||||||||||
| Total liabilities | 22,091,059 | 21,661,356 | 21,164,617 | 21,354,383 | 21,275,869 | |||||||||||||||
| Equity | 2,412,201 | 2,386,377 | 2,344,300 | 2,385,142 | 2,376,532 | |||||||||||||||
| Total liabilities and equity | $ | 24,503,260 | $ | 24,047,733 | $ | 23,508,917 | $ | 23,739,525 | $ | 23,652,401 | ||||||||||
COMMERCE BANCSHARES, INC. and SUBSIDIARIES | ||||||||||||||||
| (Unaudited) (Dollars in thousands) | For the Three Months Ended | |||||||||||||||
| March 31, 2016 |
December 31, |
September 30, |
June 30,
2015 |
March 31,
2015 | ||||||||||||
| ASSETS: | ||||||||||||||||
| Loans: | ||||||||||||||||
| Business (1) | 2.87 | % | 2.78 | % | 2.73 | % | 2.79 | % | 2.82 | % | ||||||
| Real estate — construction and land | 3.51 | 3.41 | 3.52 | 3.65 | 3.81 | |||||||||||
| Real estate — business | 3.70 | 3.68 | 3.71 | 3.83 | 3.73 | |||||||||||
| Real estate — personal | 3.77 | 3.76 | 3.73 | 3.77 | 3.83 | |||||||||||
| Consumer | 3.87 | 3.91 | 4.00 | 3.92 | 4.05 | |||||||||||
| Revolving home equity | 3.52 | 3.44 | 3.50 | 3.60 | 3.63 | |||||||||||
| Consumer credit card | 11.42 | 11.23 | 11.59 | 11.74 | 11.62 | |||||||||||
| Overdrafts | — | — | — | — | — | |||||||||||
| Total loans | 3.89 | 3.85 | 3.89 | 3.95 | 3.99 | |||||||||||
| Loans held for sale | 5.80 | 5.40 | 4.26 | 3.94 | 4.65 | |||||||||||
| Investment securities: | ||||||||||||||||
| U.S. government and federal agency obligations | .40 | .17 | 4.39 | 6.09 | (5.32 | ) | (2) | |||||||||
| Government-sponsored enterprise obligations | 1.93 | 1.89 | 1.77 | 1.82 | 1.90 | |||||||||||
| State and municipal obligations (1) | 3.66 | 3.64 | 3.44 | 3.49 | 3.55 | |||||||||||
| Mortgage-backed securities | 2.45 | 2.54 | 2.47 | 2.61 | 2.62 | |||||||||||
| Asset-backed securities | 1.39 | 1.25 | 1.15 | 1.03 | .88 | |||||||||||
| Other marketable securities (1) | 2.79 | 2.83 | 2.65 | 2.61 | 2.50 | |||||||||||
Total available for sale securities | 2.20 | 2.20 | 2.32 | 2.38 | 1.76 | |||||||||||
| Trading securities (1) | 2.87 | 2.65 | 2.72 | 2.86 | 2.74 | |||||||||||
| Non-marketable securities (1) | 6.54 | 8.19 | 8.28 | 8.90 | 8.94 | |||||||||||
| Total investment securities | 2.26 | 2.27 | 2.39 | 2.45 | 1.84 | |||||||||||
| Federal funds sold and short-term securities purchased under agreements to resell | .56 | .32 | .40 | .47 | .30 | |||||||||||
| Long-term securities purchased under agreements to resell | 1.64 | 1.40 | 1.29 | 1.40 | 1.18 | |||||||||||
| Interest earning deposits with banks | .49 | .28 | .25 | .25 | .25 | |||||||||||
| Total interest earning assets | 3.10 | 3.07 | 3.12 | 3.16 | 2.89 | |||||||||||
| LIABILITIES AND EQUITY: | ||||||||||||||||
| Interest bearing deposits: | ||||||||||||||||
| Savings | .12 | .12 | .13 | .11 | .12 | |||||||||||
| Interest checking and money market | .13 | .13 | .13 | .13 | .13 | |||||||||||
| Time open & C.D.’s of less than $100,000 | .38 | .37 | .38 | .39 | .41 | |||||||||||
| Time open & C.D.’s of $100,000 and over | .54 | .51 | .53 | .49 | .45 | |||||||||||
| Total interest bearing deposits | .19 | .18 | .18 | .18 | .18 | |||||||||||
| Borrowings: | ||||||||||||||||
| Federal funds purchased and securities sold under agreements to repurchase | .25 | .14 | .11 | .10 | .10 | |||||||||||
| Other borrowings | 1.33 | 3.47 | 3.43 | 3.44 | 3.43 | |||||||||||
| Total borrowings | .48 | .33 | .31 | .30 | .30 | |||||||||||
| Total interest bearing liabilities | .23 | % | .20 | % | .20 | % | .19 | % | .19 | % | ||||||
| Net yield on interest earning assets | 2.95 | % | 2.94 | % | 3.00 | % | 3.04 | % | 2.76 | % | ||||||
(1) | Stated on a tax equivalent basis using a federal income tax rate of 35%. | |
(2) | Includes losses of $7.0 million in inflation interest on U.S. Treasury inflation-protected securities in the first quarter of 2015. | |
| COMMERCE BANCSHARES, INC. and SUBSIDIARIES | ||||||||||||||||||||
CREDIT QUALITY | ||||||||||||||||||||
For the Three Months Ended | ||||||||||||||||||||
(Unaudited) | March 31, 2016 |
December 31, |
September 30, |
June 30, | March 31, 2015 | |||||||||||||||
| ALLOWANCE FOR LOAN LOSSES | ||||||||||||||||||||
| Balance at beginning of period | $ | 151,532 | $ | 151,532 | $ | 151,532 | $ | 153,532 | $ | 156,532 | ||||||||||
| Provision for losses | 9,439 | 9,186 | 8,364 | 6,757 | 4,420 | |||||||||||||||
| Net charge-offs (recoveries): | ||||||||||||||||||||
| Commercial portfolio: | ||||||||||||||||||||
| Business | 463 | (133 | ) | (175 | ) | (239 | ) | 159 | ||||||||||||
| Real estate — construction and land | (11 | ) | 60 | (67 | ) | (309 | ) | (946 | ) | |||||||||||
| Real estate — business | (242 | ) | (626 | ) | (22 | ) | 764 | (249 | ) | |||||||||||
| 210 | (699 | ) | (264 | ) | 216 | (1,036 | ) | |||||||||||||
| Personal banking portfolio: | ||||||||||||||||||||
| Consumer credit card | 5,918 | 6,479 | 5,784 | 6,424 | 6,352 | |||||||||||||||
| Consumer | 2,599 | 2,251 | 2,435 | 1,849 | 1,743 | |||||||||||||||
| Overdraft | 219 | 487 | 429 | 212 | 222 | |||||||||||||||
| Real estate — personal | (195 | ) | 458 | (69 | ) | (47 | ) | 99 | ||||||||||||
| Revolving home equity | 88 | 210 | 49 | 103 | 40 | |||||||||||||||
| 8,629 | 9,885 | 8,628 | 8,541 | 8,456 | ||||||||||||||||
| Total net loan charge-offs | 8,839 | 9,186 | 8,364 | 8,757 | 7,420 | |||||||||||||||
| Balance at end of period | $ | 152,132 | $ | 151,532 | $ | 151,532 | $ | 151,532 | $ | 153,532 | ||||||||||
| NET CHARGE-OFF RATIOS* | ||||||||||||||||||||
| Commercial portfolio: | ||||||||||||||||||||
| Business | .04 | % | (.01 | )% | (.02 | )% | (.02 | )% | .02 | % | ||||||||||
| Real estate — construction and land | (.01 | ) | .04 | (.06 | ) | (.29 | ) | (.92 | ) | |||||||||||
| Real estate — business | (.04 | ) | (.11 | ) | — | .13 | (.04 | ) | ||||||||||||
| .01 | (.04 | ) | (.01 | ) | .01 | .06 | ||||||||||||||
| Personal banking portfolio: | ||||||||||||||||||||
| Consumer credit card | 3.16 | 3.40 | 3.08 | 3.51 | 3.44 | |||||||||||||||
| Consumer | .54 | .47 | .52 | .41 | .41 | |||||||||||||||
| Overdraft | 18.46 | 30.65 | 32.52 | 18.85 | 16.04 | |||||||||||||||
| Real estate — personal | (.04 | ) | .09 | (.01 | ) | (.01 | ) | .02 | ||||||||||||
| Revolving home equity | .08 | .19 | .04 | .10 | .04 | |||||||||||||||
| .69 | .78 | .69 | .70 | .72 | ||||||||||||||||
| Total | .28 | % | .30 | % | .28 | % | .30 | % | .26 | % | ||||||||||
| CREDIT QUALITY RATIOS | ||||||||||||||||||||
| Non-performing assets to total loans | .25 | % | .24 | % | .24 | % | .26 | % | .35 | % | ||||||||||
| Non-performing assets to total assets | .13 | .12 | .12 | .13 | .17 | |||||||||||||||
| Allowance for loan losses to total loans | 1.20 | 1.22 | 1.24 | 1.27 | 1.31 | |||||||||||||||
| NON-PERFORMING ASSETS | ||||||||||||||||||||
| Non-accrual loans: | ||||||||||||||||||||
| Business | $ | 16,098 | $ | 10,874 | $ | 11,699 | $ | 11,856 | $ | 9,961 | ||||||||||
| Real estate — construction and land | 2,710 | 3,090 | 4,046 | 3,600 | 4,488 | |||||||||||||||
| Real estate — business | 6,234 | 7,863 | 5,054 | 5,643 | 15,028 | |||||||||||||||
| Real estate — personal | 4,205 | 4,425 | 4,980 | 5,446 | 6,341 | |||||||||||||||
| Consumer | — | — | — | 100 | — | |||||||||||||||
| Revolving home equity | 120 | 323 | — | — | — | |||||||||||||||
| Total | 29,367 | 26,575 | 25,779 | 26,645 | 35,818 | |||||||||||||||
| Foreclosed real estate | 1,997 | 2,819 | 3,053 | 4,185 | 4,967 | |||||||||||||||
| Total non-performing assets | $ | 31,364 | $ | 29,394 | $ | 28,832 | $ | 30,830 | $ | 40,785 | ||||||||||
| Loans past due 90 days and still accruing interest | $ | 15,360 | $ | 16,467 | $ | 14,707 | $ | 14,218 | $ | 12,181 | ||||||||||
*as a percentage of average loans (excluding loans held for sale) | ||||||||||||||||||||
COMMERCE BANCSHARES, INC.
Management Discussion of First
Quarter Results
March 31, 2016
For the quarter ended March 31, 2016, net income attributable to Commerce Bancshares, Inc. (net income) amounted to $65.4 million, compared to $63.7 million in the previous quarter and $61.1 million in the same quarter last year. The increase in net income over the previous quarter resulted mainly from an increase in net interest income of $1.3 million coupled with higher non-interest income $3.0 million. The provision for loan losses increased by $253 thousand, while non-interest expense grew this quarter by $1.7 million compared to the previous quarter. For the current quarter, the return on total average assets was 1.07%, the return on average common equity was 11.2%, and the efficiency ratio was 62.6%.
Balance Sheet Review
During the 1st quarter of 2016, average total loans increased $313.1 million, or 10% annualized, compared to the previous quarter and increased $1.1 billion, or 9.2%, compared to the same period last year. Compared to the previous quarter, the increase in average loans resulted mainly from growth in business (up $139.8 million), construction (up $98.4 million), business real estate (up $61.7 million) and consumer loans (growth of $26.0 million). The increase in business loans came from continued growth in commercial and industrial, leasing and tax-free lending activities, while commercial construction projects continued to drive growth in construction loans. Average consumer loan growth was largely the result of continued demand for automobile and other consumer type loans, which grew $36.4 million, partly offset by a decline of $9.6 million in marine and RV loans. Average personal real estate loans declined $6.7 million this quarter; however, the Company also sold certain fixed rate loans totaling $22.0 million during the quarter, as part of an origination initiative that began in 2015. In March 2016, the Company identified certain automobile loans totaling $50.4 million which it intends to sell, and reclassified these loans as held for sale.
During the 1st quarter of 2016, total average available for sale investment securities increased $90.0 million to $9.7 billion. Purchases of new securities totaled $215.1 million in the 1st quarter of 2016 and were offset by sales, maturities and pay downs of $541.9 million. U.S. government and federal agency securities increased on average by $122.4 million, while mortgage-backed securities increased $89.1 million. At March 31, 2016, the duration of the investment portfolio was 2.8 years, and maturities and pay downs of approximately $1.6 billion are expected to occur during the next 12 months.
Total average deposits increased $499.8 million, or 2.6%, this quarter compared to the previous quarter. The increase in average deposits resulted mainly from increases in money market (increase of $324.6 million), savings (increase of $24.2 million), and short-term jumbo certificate of deposit (increase of $264.7 million) accounts. Business demand deposits declined $159.6 million this quarter. Compared to the previous quarter, total average commercial, consumer and private banking deposits increased $250.7 million, $172.4 million, and $80.7 million, respectively. The average loans to deposits ratio was 62.8% in both the current quarter and in the prior quarter.
The Company’s average borrowings declined $28.8 million to $1.8 billion as a result of a decline of $302.7 million in federal funds purchased and repurchase agreements, partly offset by an increase in FHLB debt of $272.5 million.
Net Interest Income
Net interest income (tax equivalent) in the 1st quarter of 2016 amounted to $171.4 million compared with $170.1 million in the previous quarter, an increase of $1.3 million. Net interest income (tax equivalent) for the current quarter increased $18.1 million compared to the 1st quarter of last year. During the 1st quarter of 2016, the net yield on earning assets (tax equivalent) was 2.95%, compared with 2.94% in the previous quarter and 2.76% in the same period last year.
The increase in net interest income (tax equivalent) in the current quarter compared to the prior period was due mainly to an increase in interest on loans of $2.5 million and higher earnings on U.S. Treasury and asset-backed securities of $1.2 million. Inflation income on inflation-protected securities amounted to negative $1.5 million, compared to negative $1.4 million in the prior quarter as a result of a slight decline in the Consumer Price Index published this quarter. Inflation income in the same period last year totaled negative $7.0 million. Excluding the effects of inflation income, the net yield on earning assets would have been 2.98% in the current quarter, 2.97% in the prior quarter, and 2.89% in the same period last year. During the current quarter, adjustments to premium amortization expense on certain mortgage-backed and asset-backed securities, due to increasing prepayment speed assumptions, decreased interest income by $147 thousand compared with an increase of $966 thousand in the prior quarter.
Compared to the previous quarter, interest income (tax-equivalent) on loans increased $2.5 million and was mainly due to higher average balances, especially in business, construction, business real estate, and consumer loans. However, these increases in interest income were partly offset by lower yields on consumer banking loans. Overall, the average yield on the loan portfolio increased 4 basis points this quarter to 3.89%. Total interest income (tax-equivalent) on investment securities declined $573 thousand from the previous quarter as a result of increasing prepayment speeds on mortgage-backed securities noted above, coupled with lower earnings on municipal securities due to lower average balances. The yield on investment securities totaled 2.26% in the current quarter compared to 2.27% in the prior quarter.
Interest expense on deposits increased $454 thousand this quarter compared with the previous quarter due to higher balances and slightly higher deposit rates. Borrowing costs increased $644 thousand due to higher average FHLB debt balances and higher rates paid on repurchase agreements.
Non-Interest Income
In the 1st quarter of 2016, total non-interest income amounted to $119.0 million, an increase of $12.5 million, or 11.7%, compared to the same period last year. Also, current quarter non-interest income increased $3.0 million, or 2.6%, when compared to amounts recorded in the previous quarter. The increase in non-interest income over the same period last year was mainly due to higher bank card, deposit, swap, trust, and tax credit fee income. Additionally a former branch property was sold for a pre-tax gain of $3.3 million, while in 2015, losses on sales or fair value adjustments of branch locations held for sale totaled $1.6 million.
Total bank card fees in the current quarter increased $2.2 million, or 5.1%, over the same period last year. The increase was mainly the result of growth in merchant, debit, and corporate card interchange fees of 16.8%, 5.3% and 2.0%, respectively. Credit card fees also increased 4.3% this quarter. Total bank card fees this quarter were comprised of fees on corporate card ($22.3 million), debit card ($9.4 million), merchant ($7.1 million) and credit card ($5.6 million) transactions.
In the current quarter, trust fees increased $784 thousand, or 2.6%, compared to the same period last year, resulting mainly from continued growth in both private client and institutional trust activities. Deposit account fees also increased $2.2 million, or 11.8%, compared to the same period last year as a result of higher deposit account service fees and growth of 7.5% in overdraft fees.
Capital market fees decreased $277 thousand, or 9.2%, from the same quarter last year on lower sales volumes from correspondent banks; while mortgage banking revenue increased $322 thousand, or 31.8%, due to sales of newly-originated residential mortgages, as the Company began a new program of selling longer-term fixed rate mortgages in 2015. Fees from sales of interest rate swaps (included in other non-interest income) totaled $2.2 million thousand this quarter, an increase of $1.0 million compared to the same period last year. Fees from sales of tax credits totaled $1.5 million in the current quarter, an increase of $678 thousand over the same quarter last year. Non-interest income comprised 42.1% of the Company’s total revenue this quarter.
Investment Securities Gains and Losses
The Company recorded net securities losses of $995 thousand this quarter, compared with net losses of $1.5 million last quarter and net gains of $6.0 million in the same period last year. These losses mainly resulted from unrealized fair value adjustments to the Company’s private equity investment portfolio.
Non-Interest Expense
Non-interest expense for the current quarter amounted to $177.5 million, an increase of $13.6 million, or 8.3%, over the same period last year, and was higher than the previous quarter’s total by $1.7 million, or 1.0%. The increase over the same period in the previous year was mainly due to higher costs for salaries and benefits (increase of $8.8 million), supplies and communication (increase of $1.2 million), data processing (increase of $3.4 million), and operating losses (increase of $815 thousand).
Compared to the 1st quarter of last year, salaries expense grew $6.1 million, or 7.5%, mainly due to higher full-time salaries and incentive compensation costs. Benefits expense increased $2.7 million mostly due to higher medical and payroll tax costs. Growth in salaries expense resulted partly from higher staffing costs in commercial card, trust, information technology and other support units. Full-time equivalent employees totaled 4,765 and 4,769 at March 31, 2016 and 2015, respectively.
Compared to the 1st quarter of last year, data processing costs increased $3.4 million this quarter, mainly due to higher bank card processing costs, software expense and outsourced lockbox costs, while supplies and communication costs increased $1.2 million, mainly due to higher reissuance costs for new chip cards distributed to customers. Operating losses totaled $1.5 million this quarter compared to $636 thousand in the 1st quarter of 2015, mainly due to a recovery of $468 thousand in litigation costs recorded in 2015 that did not reoccur. Costs for bank card related fraud (included in operating losses) totaled $845 thousand this quarter compared to $885 thousand in the same period last year and are down from $2.5 million in the prior quarter.
Income Taxes
The effective tax rate for the Company was 31.0% in the current quarter compared to 30.3% in the previous quarter and 31.8% in the 1st quarter of 2015.
Credit Quality
Net loan charge-offs in the 1st quarter of 2016 amounted to $8.8 million, compared with $9.2 million in the prior quarter and $7.4 million in the 1st quarter of last year. The ratio of annualized net loan charge-offs to total average loans was .28% in the current quarter compared to .30% in the previous quarter and .26% in the 1st quarter of last year.
In the 1st quarter of 2016, annualized net loan charge-offs on average consumer credit card loans were 3.16%, compared with 3.40% in the previous quarter and 3.44% in the same period last year. Consumer loan net charge-offs were .54% of average consumer loans in the current quarter, .47% in the prior quarter and .41% in the same quarter last year. The provision for loan losses in the current quarter totaled $9.4 million, compared to $9.2 million in the prior quarter and $4.4 million in the 1st quarter of last year. At March 31, 2016, the allowance totaled $152.1 million, was 1.20% of total loans, and was 518% of total non-accrual loans.
At March 31, 2016, total non-performing assets amounted to $31.4 million, an increase of $2.0 million over the previous quarter. Non-performing assets are comprised of non-accrual loans and foreclosed real estate ($29.4 million and $2.0 million, respectively, at March 31, 2016). At March 31, 2016, the balance of non-accrual loans, which represented .23% of loans outstanding, included business loans of $16.1 million, business real estate loans of $6.2 million, personal real estate loans of $4.2 million and construction and land loans of $2.7 million. Loans more than 90 days past due and still accruing interest totaled $15.4 million at March 31, 2016.
Other
During the 1st quarter of 2016, the Company paid a cash dividend of $.225 per common share, representing an increase of 5% over the rate paid in 2015. Also, a cash dividend of $2.3 million was paid on its preferred stock. Additionally, the Company purchased 900,929 shares of treasury stock this quarter at an average price of $40.44.
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.
View source version on businesswire.com: http://www.businesswire.com/news/home/20160413005417/en/
Contacts:
Jeffery Aberdeen, 816-234-2081
Controller
http://www.commercebank.com
mymoney@commercebank.com
