Commerce Bancshares, Inc. (NASDAQ: CBSH) announced earnings of $.96 per common share for the three months ended June 30, 2019, compared to $.96 per share in the same quarter last year and $.85 per share in the prior quarter. Net income attributable to Commerce Bancshares, Inc. for the second quarter of 2019 amounted to $108.0 million, compared to $110.3 million in the second quarter of 2018 and $97.1 million in the prior quarter. For the quarter, the return on average assets was 1.73%, the return on average common equity was 14.5% and the efficiency ratio was 55.9%.
For the six months ended June 30, 2019, earnings per common share totaled $1.81 compared to $1.84 for the first six months of 2018. Net income attributable to Commerce Bancshares, Inc. amounted to $205.1 million for the six months ended June 30, 2019 compared to $211.3 million in the comparable period last year. Year to date, the return on average assets was 1.66% and the return on average common equity was 14.1%.
In announcing these results, John Kemper, Chief Executive Officer, said, “We are pleased to report strong earnings this quarter, driven by the performance of our diversified, fee-based businesses, focus on credit quality, and prudent expense management. Fee income totaled $127.3 million this quarter and represented 38% of our total revenue. The growth in our fee-based businesses reflects our commitment to delivering innovative solutions and building well rounded banking relationships. Average loan growth was modest this quarter due to softening demand for consumer card and auto loans, offset by higher loan demand from commercial customers. We saw a surge in demand for residential mortgage loans this quarter, but we sell most of our production, which generates fee income instead of increasing our loan balances. Compared to the prior quarter, net interest income grew but included inflation income from our inflation-protected securities. Adjusted for this income, our net yield on earning assets decreased slightly, resulting mainly from a decline in commercial loan yields and slight growth in deposit costs, partly offset by increasing consumer loan yields. After significant margin growth beginning in 2017, the recent drop in forward rate expectations is putting downward pressure on net interest income and creating a significant headwind for banks like Commerce.”
Mr. Kemper continued, “This quarter net loan charge-offs totaled $11.3 million, compared to $11.7 million in the prior quarter and $10.0 million in the second quarter of 2018, as the overall credit environment remained favorable. In the current quarter, the ratio of annualized net loan charge-offs to average loans was .32%, compared to .34% in the previous quarter, and .29% in the second quarter of last year. Net loan charge-offs on commercial loans totaled $169 thousand this quarter and remained exceptionally low, while net loan charge-offs on personal banking loans decreased $182 thousand to $11.1 million. During the current quarter, the provision for loan losses exceeded net loan charge-offs by $500 thousand and totaled $11.8 million. The allowance for loan losses amounted to $161.2 million at June 30, 2019, or 1.13% of period end loans. Non-performing assets totaled $12.0 million this quarter and remained at very low levels.”
Total assets at June 30, 2019 were $25.8 billion, total loans were $14.3 billion, and total deposits were $19.8 billion. During the quarter, the Company paid a common cash dividend of $.26 per share, representing a 16.1% increase over the rate paid in 2018, and paid a 6% cash dividend on its preferred stock. The Company purchased 779,726 of its common shares this quarter.
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 banking facilities in nine key markets including St. Louis, Kansas City, Springfield, Central Missouri, Central Illinois, Wichita, Tulsa, Oklahoma City and Denver. The Company also maintains commercial offices in Dallas, Houston, Cincinnati, Nashville, Des Moines, Indianapolis, and Grand Rapids.
This financial news release, including management's discussion of second quarter results, is posted to the Company's web site at www.commercebank.com.
* * * * * * * * * * * * * * *
For additional information, contact
Matthew Burkemper, Investor Relations
at 8000 Forsyth, Mailstop: CBIR-1
Clayton, MO 63105
or by telephone at (314) 746-7485
Web Site: http://www.commercebank.com
Email: matthew.burkemper@commercebank.com
COMMERCE BANCSHARES, INC. and SUBSIDIARIES | ||||||||||||||||||||||||||
FINANCIAL HIGHLIGHTS | ||||||||||||||||||||||||||
For the Three Months Ended | For the Six Months Ended | |||||||||||||||||||||||||
(Unaudited)
| June 30,
|
March 31,
|
June 30,
| June 30,
|
June 30,
| |||||||||||||||||||||
FINANCIAL SUMMARY | ||||||||||||||||||||||||||
Net interest income | $ | 211,634 | $ | 203,488 | $ | 210,959 | $ | 415,122 | $ | 403,851 | ||||||||||||||||
Non-interest income | 127,259 | 121,240 | 124,850 | 248,499 | 244,540 | |||||||||||||||||||||
Total revenue | 338,893 | 324,728 | 335,809 | 663,621 | 648,391 | |||||||||||||||||||||
Investment securities gains (losses), net | (110 | ) | (925 | ) | (3,075 | ) | (1,035 | ) | 2,335 | |||||||||||||||||
Provision for loan losses | 11,806 | 12,463 | 10,043 | 24,269 | 20,439 | |||||||||||||||||||||
Non-interest expense | 189,779 | 191,425 | 181,860 | 381,204 | 364,137 | |||||||||||||||||||||
Income before taxes | 137,198 | 119,915 | 140,831 | 257,113 | 266,150 | |||||||||||||||||||||
Income taxes | 28,899 | 22,860 | 29,507 | 51,759 | 52,765 | |||||||||||||||||||||
Non-controlling interest expense (income) | 328 | (83 | ) | 994 | 245 | 2,071 | ||||||||||||||||||||
Net income attributable to Commerce Bancshares, Inc. | 107,971 | 97,138 | 110,330 | 205,109 | 211,314 | |||||||||||||||||||||
Preferred stock dividends | 2,250 | 2,250 | 2,250 | 4,500 | 4,500 | |||||||||||||||||||||
Net income available to common shareholders | $ | 105,721 | $ | 94,888 | $ | 108,080 | $ | 200,609 | $ | 206,814 | ||||||||||||||||
Earnings per common share: | ||||||||||||||||||||||||||
Net income — basic | $ | .96 | $ | .85 | $ | .96 | $ | 1.81 | $ | 1.84 | ||||||||||||||||
Net income — diluted | $ | .96 | $ | .85 | $ | .96 | $ | 1.81 | $ | 1.84 | ||||||||||||||||
Effective tax rate | 21.11 | % | 19.05 | % | 21.10 | % | 20.15 | % | 19.98 | % | ||||||||||||||||
Tax equivalent net interest income | $ | 215,203 | $ | 207,104 | $ | 215,775 | $ | 422,307 | $ | 412,413 | ||||||||||||||||
Average total interest earning assets (1) | $ | 23,939,495 | $ | 23,874,861 | $ | 23,683,587 | $ | 23,907,357 | $ | 23,688,441 | ||||||||||||||||
Diluted wtd. average shares outstanding | 109,752,238 | 110,300,988 | 111,330,889 | 110,025,097 | 111,297,697 | |||||||||||||||||||||
RATIOS | ||||||||||||||||||||||||||
Average loans to deposits (2) | 70.97 | % | 70.96 | % | 68.85 | % | 70.96 | % | 68.97 | % | ||||||||||||||||
Return on total average assets | 1.73 | 1.58 | 1.80 | 1.66 | 1.73 | |||||||||||||||||||||
Return on average common equity (3) | 14.46 | 13.64 | 16.78 | 14.06 | 16.19 | |||||||||||||||||||||
Non-interest income to total revenue | 37.55 | 37.34 | 37.18 | 37.45 | 37.71 | |||||||||||||||||||||
Efficiency ratio (4) | 55.88 | 58.76 | 54.06 | 57.29 | 56.06 | |||||||||||||||||||||
Net yield on interest earning assets | 3.61 | 3.52 | 3.65 | 3.56 | 3.51 | |||||||||||||||||||||
EQUITY SUMMARY | ||||||||||||||||||||||||||
Cash dividends per common share | $ | .260 | $ | .260 | $ | .224 | $ | .520 | $ | .448 | ||||||||||||||||
Cash dividends on common stock | $ | 28,682 | $ | 28,858 | $ | 25,096 | $ | 57,540 | $ | 50,202 | ||||||||||||||||
Cash dividends on preferred stock | $ | 2,250 | $ | 2,250 | $ | 2,250 | $ | 4,500 | $ | 4,500 | ||||||||||||||||
Book value per common share (5) | $ | 27.53 | $ | 26.18 | $ | 23.47 | ||||||||||||||||||||
Market value per common share (5) | $ | 59.66 | $ | 58.06 | $ | 61.63 | ||||||||||||||||||||
High market value per common share | $ | 61.96 | $ | 64.02 | $ | 64.21 | ||||||||||||||||||||
Low market value per common share | $ | 56.63 | $ | 55.62 | $ | 55.11 | ||||||||||||||||||||
Common shares outstanding (5) | 109,927,645 | 110,696,250 | 111,944,745 | |||||||||||||||||||||||
Tangible common equity to tangible assets (6) | 11.25 | % | 11.06 | % | 10.18 | % | ||||||||||||||||||||
Tier I leverage ratio | 11.75 | % | 11.67 | % | 11.18 | % | ||||||||||||||||||||
OTHER QTD INFORMATION | ||||||||||||||||||||||||||
Number of bank/ATM locations | 319 | 319 | 322 | |||||||||||||||||||||||
Full-time equivalent employees | 4,857 | 4,841 | 4,797 | |||||||||||||||||||||||
(1) | Excludes allowance for loan losses and unrealized gains/(losses) on available for sale debt securities. |
(2) | Includes loans held for sale. |
(3) | Annualized net income available to common shareholders divided by average total equity less preferred stock. |
(4) | The efficiency ratio is calculated as non-interest expense (excluding intangibles amortization) as a percent of revenue. |
(5) | As of period end. |
(6) | The tangible common equity ratio is calculated as stockholders’ equity reduced by preferred stock, goodwill and other intangible assets (excluding mortgage servicing rights) divided by total assets reduced by goodwill and other intangible assets (excluding mortgage servicing rights). |
| All share and per share amounts have been restated to reflect the 5% stock dividend distributed in December 2018. | |
COMMERCE BANCSHARES, INC. and SUBSIDIARIES | |||||||||||||||||||||
CONSOLIDATED STATEMENTS OF INCOME | |||||||||||||||||||||
For the Three Months Ended | For the Six Months Ended | ||||||||||||||||||||
(Unaudited)
| June 30,
|
March 31,
|
December 31,
|
September 30,
|
June 30,
| June 30,
|
June 30,
| ||||||||||||||
Interest income | $ | 238,412 | $ | 227,865 | $ | 232,832 | $ | 224,751 | $ | 225,623 | $ | 466,277 | $ | 431,618 | |||||||
Interest expense | 26,778 | 24,377 | 20,612 | 16,997 | 14,664 | 51,155 | 27,767 | ||||||||||||||
Net interest income | 211,634 | 203,488 | 212,220 | 207,754 | 210,959 | 415,122 | 403,851 | ||||||||||||||
Provision for loan losses | 11,806 | 12,463 | 12,256 | 9,999 | 10,043 | 24,269 | 20,439 | ||||||||||||||
Net interest income after provision for loan losses | 199,828 | 191,025 | 199,964 | 197,755 | 200,916 | 390,853 | 383,412 | ||||||||||||||
NON-INTEREST INCOME | |||||||||||||||||||||
Bank card transaction fees | 42,646 | 39,644 | 44,481 | 42,427 | 43,215 | 82,290 | 84,668 | ||||||||||||||
Trust fees | 38,375 | 37,256 | 37,466 | 37,400 | 37,036 | 75,631 | 73,098 | ||||||||||||||
Deposit account charges and other fees | 23,959 | 23,018 | 23,887 | 23,755 | 23,893 | 46,977 | 46,875 | ||||||||||||||
Capital market fees | 1,944 | 1,879 | 1,843 | 1,595 | 1,992 | 3,823 | 4,283 | ||||||||||||||
Consumer brokerage services | 3,888 | 3,747 | 4,184 | 3,884 | 3,971 | 7,635 | 7,739 | ||||||||||||||
Loan fees and sales | 4,238 | 3,309 | 3,053 | 3,579 | 3,229 | 7,547 | 6,091 | ||||||||||||||
Other | 12,209 | 12,387 | 18,173 | 11,074 | 11,514 | 24,596 | 21,786 | ||||||||||||||
Total non-interest income | 127,259 | 121,240 | 133,087 | 123,714 | 124,850 | 248,499 | 244,540 | ||||||||||||||
INVESTMENT SECURITIES GAINS (LOSSES), NET | (110 | ) | (925 | ) | (7,129 | ) | 4,306 | (3,075 | ) | (1,035 | ) | 2,335 | |||||||||
NON-INTEREST EXPENSE | |||||||||||||||||||||
Salaries and employee benefits | 120,062 | 122,128 | 120,517 | 116,194 | 115,589 | 242,190 | 231,483 | ||||||||||||||
Net occupancy | 11,145 | 11,501 | 11,711 | 11,631 | 11,118 | 22,646 | 22,702 | ||||||||||||||
Equipment | 4,790 | 4,471 | 4,508 | 4,592 | 4,594 | 9,261 | 9,025 | ||||||||||||||
Supplies and communication | 5,275 | 5,162 | 5,095 | 5,103 | 5,126 | 10,437 | 10,439 | ||||||||||||||
Data processing and software | 23,248 | 22,260 | 22,216 | 22,056 | 21,016 | 45,508 | 41,706 | ||||||||||||||
Marketing | 6,015 | 5,900 | 5,602 | 4,999 | 5,142 | 11,915 | 9,947 | ||||||||||||||
Deposit insurance | 1,693 | 1,710 | 1,796 | 3,167 | 3,126 | 3,403 | 6,583 | ||||||||||||||
Community service | 641 | 803 | 480 | 580 | 656 | 1,444 | 1,385 | ||||||||||||||
Other | 16,910 | 17,490 | 16,700 | 16,737 | 15,493 | 34,400 | 30,867 | ||||||||||||||
Total non-interest expense | 189,779 | 191,425 | 188,625 | 185,059 | 181,860 | 381,204 | 364,137 | ||||||||||||||
Income before income taxes | 137,198 | 119,915 | 137,297 | 140,716 | 140,831 | 257,113 | 266,150 | ||||||||||||||
Less income taxes | 28,899 | 22,860 | 26,537 | 26,647 | 29,507 | 51,759 | 52,765 | ||||||||||||||
Net income | 108,299 | 97,055 | 110,760 | 114,069 | 111,324 | 205,354 | 213,385 | ||||||||||||||
Less non-controlling interest expense (income) | 328 | (83 | ) | 1,108 | 1,493 | 994 | 245 | 2,071 | |||||||||||||
Net income attributable to Commerce Bancshares, Inc. | 107,971 | 97,138 | 109,652 | 112,576 | 110,330 | 205,109 | 211,314 | ||||||||||||||
Less preferred stock dividends | 2,250 | 2,250 | 2,250 | 2,250 | 2,250 | 4,500 | 4,500 | ||||||||||||||
Net income available to common shareholders | $ | 105,721 | $ | 94,888 | $ | 107,402 | $ | 110,326 | $ | 108,080 | $ | 200,609 | $ | 206,814 | |||||||
Net income per common share — basic | $ | .96 | $ | .85 | $ | .96 | $ | .99 | $ | .96 | $ | 1.81 | $ | 1.84 | |||||||
Net income per common share — diluted | $ | .96 | $ | .85 | $ | .96 | $ | .98 | $ | .96 | $ | 1.81 | $ | 1.84 | |||||||
OTHER INFORMATION | |||||||||||||||||||||
Return on total average assets | 1.73 | % | 1.58 | % | 1.75 | % | 1.81 | % | 1.80 | % | 1.66 | % | 1.73 | % | |||||||
Return on average common equity (1) | 14.46 | 13.64 | 15.85 | 16.43 | 16.78 | 14.06 | 16.19 | ||||||||||||||
Efficiency ratio (2) | 55.88 | 58.76 | 54.53 | 55.73 | 54.06 | 57.29 | 56.06 | ||||||||||||||
Effective tax rate | 21.11 | 19.05 | 19.49 | 19.14 | 21.10 | 20.15 | 19.98 | ||||||||||||||
Net yield on interest earning assets | 3.61 | 3.52 | 3.58 | 3.52 | 3.65 | 3.56 | 3.51 | ||||||||||||||
Tax equivalent net interest income | $ | 215,203 | $ | 207,104 | $ | 216,281 | $ | 211,368 | $ | 215,775 | $ | 422,307 | $ | 412,413 | |||||||
| (1) | Annualized net income available to common shareholders divided by average total equity less preferred stock. |
| (2) | The efficiency ratio is calculated as non-interest expense (excluding intangibles amortization) as a percent of revenue. |
COMMERCE BANCSHARES, INC. and SUBSIDIARIES | |||||||||||||
CONSOLIDATED BALANCE SHEETS - PERIOD END | |||||||||||||
(Unaudited)
| June 30,
|
March 31,
|
June 30,
| ||||||||||
ASSETS | |||||||||||||
Loans | |||||||||||||
Business | $ | 5,257,682 | $ | 5,175,541 | $ | 4,990,298 | |||||||
Real estate — construction and land | 909,784 | 925,269 | 967,151 | ||||||||||
Real estate — business | 2,867,831 | 2,859,614 | 2,727,580 | ||||||||||
Real estate — personal | 2,160,515 | 2,125,087 | 2,102,586 | ||||||||||
Consumer | 1,927,623 | 1,893,212 | 2,012,644 | ||||||||||
Revolving home equity | 357,406 | 364,010 | 374,557 | ||||||||||
Consumer credit card | 776,333 | 772,396 | 775,214 | ||||||||||
Overdrafts | 3,074 | 5,593 | 4,081 | ||||||||||
Total loans | 14,260,248 | 14,120,722 | 13,954,111 | ||||||||||
Allowance for loan losses | (161,182 | ) | (160,682 | ) | (159,532 | ) | |||||||
Net loans | 14,099,066 | 13,960,040 | 13,794,579 | ||||||||||
Loans held for sale | 20,067 | 20,085 | 20,352 | ||||||||||
Investment securities: | |||||||||||||
Available for sale debt securities | 8,682,303 | 8,627,890 | 8,412,376 | ||||||||||
Trading debt securities | 36,508 | 30,427 | 31,156 | ||||||||||
Equity securities | 4,744 | 4,694 | 4,444 | ||||||||||
Other securities | 130,038 | 129,504 | 112,309 | ||||||||||
Total investment securities | 8,853,593 | 8,792,515 | 8,560,285 | ||||||||||
Federal funds sold and short-term securities purchased under agreements to resell | — | 250 | 31,500 | ||||||||||
Long-term securities purchased under agreements to resell | 700,000 | 700,000 | 700,000 | ||||||||||
Interest earning deposits with banks | 492,318 | 166,077 | 114,947 | ||||||||||
Cash and due from banks | 456,192 | 428,018 | 386,339 | ||||||||||
Premises and equipment — net | 363,554 | 362,679 | 331,782 | ||||||||||
Goodwill | 138,921 | 138,921 | 138,921 | ||||||||||
Other intangible assets — net | 8,763 | 8,511 | 8,083 | ||||||||||
Other assets | 639,700 | 456,375 | 437,954 | ||||||||||
Total assets | $ | 25,772,174 | $ | 25,033,471 | $ | 24,524,742 | |||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||||
Deposits: | |||||||||||||
Non-interest bearing | $ | 6,274,838 | $ | 6,298,724 | $ | 6,876,756 | |||||||
Savings, interest checking and money market | 11,452,849 | 11,799,346 | 11,761,832 | ||||||||||
Certificates of deposit of less than $100,000 | 613,505 | 599,289 | 603,629 | ||||||||||
Certificates of deposit of $100,000 and over | 1,488,416 | 1,276,994 | 1,079,340 | ||||||||||
Total deposits | 19,829,608 | 19,974,353 | 20,321,557 | ||||||||||
Federal funds purchased and securities sold under agreements to repurchase | 2,394,294 | 1,722,751 | 1,166,759 | ||||||||||
Other borrowings | 4,510 | 2,022 | 9,291 | ||||||||||
Other liabilities | 372,399 | 291,132 | 255,752 | ||||||||||
Total liabilities | 22,600,811 | 21,990,258 | 21,753,359 | ||||||||||
Stockholders’ equity: | |||||||||||||
Preferred stock | 144,784 | 144,784 | 144,784 | ||||||||||
Common stock | 559,432 | 559,432 | 535,407 | ||||||||||
Capital surplus | 2,077,491 | 2,074,912 | 1,804,057 | ||||||||||
Retained earnings | 384,232 | 307,193 | 408,374 | ||||||||||
Treasury stock | (106,106 | ) | (60,547 | ) | (15,854 | ) | |||||||
Accumulated other comprehensive income (loss) | 108,898 | 11,981 | (108,781 | ) | |||||||||
Total stockholders’ equity | 3,168,731 | 3,037,755 | 2,767,987 | ||||||||||
Non-controlling interest | 2,632 | 5,458 | 3,396 | ||||||||||
Total equity | 3,171,363 | 3,043,213 | 2,771,383 | ||||||||||
Total liabilities and equity | $ | 25,772,174 | $ | 25,033,471 | $ | 24,524,742 | |||||||
COMMERCE BANCSHARES, INC. and SUBSIDIARIES | ||||||||||||||||||||
AVERAGE BALANCE SHEETS | ||||||||||||||||||||
(Unaudited)
| For the Three Months Ended | |||||||||||||||||||
June 30,
|
March 31,
|
December 31,
|
September 30,
|
June 30,
| ||||||||||||||||
ASSETS: | ||||||||||||||||||||
Loans: | ||||||||||||||||||||
Business | $ | 5,142,794 | $ | 5,084,920 | $ | 5,028,635 | $ | 4,926,063 | $ | 4,962,171 | ||||||||||
Real estate — construction and land | 908,777 | 907,062 | 953,166 | 992,045 | 971,854 | |||||||||||||||
Real estate — business | 2,868,503 | 2,864,177 | 2,757,595 | 2,732,968 | 2,726,697 | |||||||||||||||
Real estate — personal | 2,135,048 | 2,119,365 | 2,122,357 | 2,110,945 | 2,078,972 | |||||||||||||||
Consumer | 1,907,979 | 1,929,202 | 1,962,401 | 1,984,643 | 2,025,585 | |||||||||||||||
Revolving home equity | 361,673 | 370,962 | 374,216 | 373,819 | 378,366 | |||||||||||||||
Consumer credit card | 766,080 | 781,167 | 788,353 | 774,512 | 754,199 | |||||||||||||||
Overdrafts | 4,889 | 4,205 | 5,277 | 4,704 | 4,497 | |||||||||||||||
Total loans | 14,095,743 | 14,061,060 | 13,992,000 | 13,899,699 | 13,902,341 | |||||||||||||||
Allowance for loan losses | (161,403 | ) | (159,275 | ) | (158,880 | ) | (158,840 | ) | (158,664 | ) | ||||||||||
Net loans | 13,934,340 | 13,901,785 | 13,833,120 | 13,740,859 | 13,743,677 | |||||||||||||||
Loans held for sale | 20,731 | 18,350 | 18,475 | 18,201 | 22,202 | |||||||||||||||
Investment securities: | ||||||||||||||||||||
U.S. government and federal agency obligations | 843,974 | 909,466 | 923,545 | 923,557 | 923,183 | |||||||||||||||
Government-sponsored enterprise obligations | 199,506 | 199,480 | 214,913 | 261,938 | 354,156 | |||||||||||||||
State and municipal obligations | 1,222,008 | 1,283,349 | 1,361,079 | 1,375,768 | 1,394,766 | |||||||||||||||
Mortgage-backed securities | 4,614,703 | 4,360,428 | 4,379,805 | 4,434,119 | 4,067,152 | |||||||||||||||
Asset-backed securities | 1,412,452 | 1,525,623 | 1,518,706 | 1,427,041 | 1,407,300 | |||||||||||||||
Other debt securities | 331,459 | 335,612 | 339,841 | 339,952 | 340,246 | |||||||||||||||
Unrealized gain (loss) on debt securities | 42,009 | (48,925 | ) | (166,181 | ) | (119,319 | ) | (122,114 | ) | |||||||||||
Total available for sale debt securities | 8,666,111 | 8,565,033 | 8,571,708 | 8,643,056 | 8,364,689 | |||||||||||||||
Trading debt securities | 30,169 | 25,411 | 26,322 | 24,490 | 26,101 | |||||||||||||||
Equity securities | 4,717 | 4,568 | 4,432 | 4,466 | 47,179 | |||||||||||||||
Other securities | 130,433 | 130,057 | 127,634 | 120,206 | 108,563 | |||||||||||||||
Total investment securities | 8,831,430 | 8,725,069 | 8,730,096 | 8,792,218 | 8,546,532 | |||||||||||||||
Federal funds sold and short-term securities purchased under agreements to resell | 1,601 | 4,797 | 14,415 | 13,042 | 36,791 | |||||||||||||||
Long-term securities purchased under agreements to resell | 700,000 | 700,000 | 699,999 | 685,869 | 700,000 | |||||||||||||||
Interest earning deposits with banks | 331,999 | 316,660 | 352,942 | 298,632 | 353,607 | |||||||||||||||
Other assets | 1,251,555 | 1,197,261 | 1,158,816 | 1,147,250 | 1,119,454 | |||||||||||||||
Total assets | $ | 25,071,656 | $ | 24,863,922 | $ | 24,807,863 | $ | 24,696,071 | $ | 24,522,263 | ||||||||||
LIABILITIES AND EQUITY: | ||||||||||||||||||||
Non-interest bearing deposits | $ | 6,335,620 | $ | 6,324,738 | $ | 6,666,715 | $ | 6,677,665 | $ | 6,749,104 | ||||||||||
Savings | 929,974 | 896,378 | 870,844 | 877,347 | 881,045 | |||||||||||||||
Interest checking and money market | 10,642,648 | 10,762,550 | 10,840,048 | 10,839,310 | 10,850,123 | |||||||||||||||
Certificates of deposit of less than $100,000 | 605,440 | 590,200 | 584,828 | 593,936 | 609,011 | |||||||||||||||
Certificates of deposit of $100,000 and over | 1,378,402 | 1,267,517 | 1,090,546 | 1,100,299 | 1,134,900 | |||||||||||||||
Total deposits | 19,892,084 | 19,841,383 | 20,052,981 | 20,088,557 | 20,224,183 | |||||||||||||||
Borrowings: | ||||||||||||||||||||
Federal funds purchased and securities sold under agreements to repurchase | 1,793,526 | 1,771,534 | 1,655,997 | 1,499,837 | 1,339,278 | |||||||||||||||
Other borrowings | 1,318 | 1,248 | 1,335 | 1,833 | 1,913 | |||||||||||||||
Total borrowings | 1,794,844 | 1,772,782 | 1,657,332 | 1,501,670 | 1,341,191 | |||||||||||||||
Other liabilities | 307,433 | 284,018 | 264,449 | 296,884 | 229,080 | |||||||||||||||
Total liabilities | 21,994,361 | 21,898,183 | 21,974,762 | 21,887,111 | 21,794,454 | |||||||||||||||
Equity | 3,077,295 | 2,965,739 | 2,833,101 | 2,808,960 | 2,727,809 | |||||||||||||||
Total liabilities and equity | $ | 25,071,656 | $ | 24,863,922 | $ | 24,807,863 | $ | 24,696,071 | $ | 24,522,263 | ||||||||||
COMMERCE BANCSHARES, INC. and SUBSIDIARIES | ||||||||||
AVERAGE RATES | ||||||||||
(Unaudited) | For the Three Months Ended | |||||||||
June 30,
|
March 31,
|
December 31,
|
September 30,
|
June 30,
| ||||||
ASSETS: | ||||||||||
Loans: | ||||||||||
Business (1) | 4.02 | % | 4.07 | % | 3.93 | % | 3.80 | % | 3.69 | % |
Real estate — construction and land | 5.63 | 5.73 | 5.47 | 5.21 | 5.06 | |||||
Real estate — business | 4.60 | 4.61 | 4.53 | 4.35 | 4.22 | |||||
Real estate — personal | 3.97 | 4.00 | 3.87 | 3.83 | 3.84 | |||||
Consumer | 4.77 | 4.73 | 4.62 | 4.46 | 4.39 | |||||
Revolving home equity | 5.20 | 5.17 | 4.98 | 4.72 | 4.51 | |||||
Consumer credit card | 12.33 | 12.18 | 11.91 | 11.99 | 12.05 | |||||
Overdrafts | — | — | — | — | — | |||||
Total loans | 4.82 | 4.85 | 4.72 | 4.59 | 4.49 | |||||
Loans held for sale | 6.98 | 7.38 | 6.59 | 6.87 | 6.72 | |||||
Investment securities: | ||||||||||
U.S. government and federal agency obligations | 4.66 | .78 | 1.90 | 2.23 | 3.18 | |||||
Government-sponsored enterprise obligations | 2.32 | 2.35 | 2.24 | 2.10 | 1.88 | |||||
State and municipal obligations (1) | 3.18 | 3.19 | 3.06 | 2.98 | 3.06 | |||||
Mortgage-backed securities | 2.70 | 2.76 | 2.75 | 2.65 | 2.60 | |||||
Asset-backed securities | 2.79 | 2.70 | 2.55 | 2.42 | 2.32 | |||||
Other debt securities | 2.68 | 2.69 | 2.60 | 2.59 | 2.63 | |||||
Total available for sale debt securities | 2.97 | 2.59 | 2.65 | 2.60 | 2.66 | |||||
Trading debt securities (1) | 3.14 | 3.24 | 3.21 | 3.13 | 3.15 | |||||
Equity securities (1) | 35.97 | 37.55 | 39.92 | 32.69 | 89.68 | |||||
Other securities (1) | 6.69 | 5.73 | 15.51 | 13.00 | 6.68 | |||||
Total investment securities | 3.04 | 2.66 | 2.86 | 2.76 | 3.19 | |||||
Federal funds sold and short-term securities purchased under agreements to resell | 2.76 | 2.79 | 2.56 | 2.10 | 1.93 | |||||
Long-term securities purchased under agreements to resell | 2.11 | 2.18 | 2.31 | 2.26 | 2.17 | |||||
Interest earning deposits with banks | 2.40 | 2.42 | 2.28 | 1.96 | 1.80 | |||||
Total interest earning assets | 4.05 | 3.93 | 3.92 | 3.80 | 3.90 | |||||
LIABILITIES AND EQUITY: | ||||||||||
Interest bearing deposits: | ||||||||||
Savings | .11 | .11 | .11 | .11 | .11 | |||||
Interest checking and money market | .38 | .35 | .30 | .26 | .23 | |||||
Certificates of deposit of less than $100,000 | 1.01 | .87 | .70 | .56 | .46 | |||||
Certificates of deposit of $100,000 and over | 2.02 | 1.92 | 1.61 | 1.41 | 1.23 | |||||
Total interest bearing deposits | .55 | .51 | .41 | .35 | .32 | |||||
Borrowings: | ||||||||||
Federal funds purchased and securities sold under agreements to repurchase | 1.80 | 1.72 | 1.60 | 1.33 | 1.18 | |||||
Other borrowings | 1.52 | 1.62 | 2.67 | 2.60 | 2.52 | |||||
Total borrowings | 1.80 | 1.72 | 1.60 | 1.33 | 1.19 | |||||
Total interest bearing liabilities | .70 | % | .65 | % | .54 | % | .45 | % | .40 | % |
Net yield on interest earning assets | 3.61 | % | 3.52 | % | 3.58 | % | 3.52 | % | 3.65 | % |
(1) | Stated on a tax equivalent basis using a federal income tax rate of 21%. |
COMMERCE BANCSHARES, INC. and SUBSIDIARIES | ||||||||||||||||||||||||||||
CREDIT QUALITY | ||||||||||||||||||||||||||||
For the Three Months Ended | For the Six Months Ended | |||||||||||||||||||||||||||
(Unaudited)
| June 30,
|
March 31,
|
December 31,
|
September 30,
|
June 30,
| June 30,
|
June 30,
| |||||||||||||||||||||
ALLOWANCE FOR LOAN LOSSES | ||||||||||||||||||||||||||||
Balance at beginning of period | $ | 160,682 | $ | 159,932 | $ | 159,732 | $ | 159,532 | $ | 159,532 | $ | 159,932 | $ | 159,532 | ||||||||||||||
Provision for losses | 11,806 | 12,463 | 12,256 | 9,999 | 10,043 | 24,269 | 20,439 | |||||||||||||||||||||
Net charge-offs (recoveries): | ||||||||||||||||||||||||||||
Commercial portfolio: | ||||||||||||||||||||||||||||
Business | 284 | 447 | 1,748 | 332 | 36 | 731 | 22 | |||||||||||||||||||||
Real estate — construction and land | (101 | ) | (16 | ) | (183 | ) | (119 | ) | (297 | ) | (117 | ) | (333 | ) | ||||||||||||||
Real estate — business | (14 | ) | (37 | ) | (91 | ) | (42 | ) | (40 | ) | (51 | ) | (245 | ) | ||||||||||||||
169 | 394 | 1,474 | 171 | (301 | ) | 563 | (556 | ) | ||||||||||||||||||||
Personal banking portfolio: | ||||||||||||||||||||||||||||
Consumer credit card | 9,066 | 8,958 | 7,421 | 7,340 | 8,251 | 18,024 | 15,817 | |||||||||||||||||||||
Consumer | 1,723 | 1,924 | 2,805 | 2,091 | 1,862 | 3,647 | 4,390 | |||||||||||||||||||||
Overdraft | 253 | 317 | 500 | 351 | 326 | 570 | 770 | |||||||||||||||||||||
Real estate — personal | (21 | ) | 101 | (144 | ) | (153 | ) | (95 | ) | 80 | (38 | ) | ||||||||||||||||
Revolving home equity | 116 | 19 | — | (1 | ) | — | 135 | 56 | ||||||||||||||||||||
11,137 | 11,319 | 10,582 | 9,628 | 10,344 | 22,456 | 20,995 | ||||||||||||||||||||||
Total net loan charge-offs | 11,306 | 11,713 | 12,056 | 9,799 | 10,043 | 23,019 | 20,439 | |||||||||||||||||||||
Balance at end of period | $ | 161,182 | $ | 160,682 | $ | 159,932 | $ | 159,732 | $ | 159,532 | $ | 161,182 | $ | 159,532 | ||||||||||||||
NET CHARGE-OFF RATIOS* | ||||||||||||||||||||||||||||
Commercial portfolio: | ||||||||||||||||||||||||||||
Business | .02 | % | .04 | % | .14 | % | .03 | % | — | % | .03 | % | — | % | ||||||||||||||
Real estate — construction and land | (.04 | ) | (.01 | ) | (.08 | ) | (.05 | ) | (.12 | ) | (.03 | ) | (.07 | ) | ||||||||||||||
Real estate — business | — | (.01 | ) | (.01 | ) | (.01 | ) | (.01 | ) | — | (.02 | ) | ||||||||||||||||
.01 | .02 | .07 | .01 | (.01 | ) | .01 | (.01 | ) | ||||||||||||||||||||
Personal banking portfolio: | ||||||||||||||||||||||||||||
Consumer credit card | 4.75 | 4.65 | 3.73 | 3.76 | 4.39 | 4.70 | 4.22 | |||||||||||||||||||||
Consumer | .36 | .40 | .57 | .42 | .37 | .38 | .43 | |||||||||||||||||||||
Overdraft | 20.76 | 30.57 | 37.59 | 29.60 | 29.08 | 25.27 | 34.04 | |||||||||||||||||||||
Real estate — personal | — | .02 | (.03 | ) | (.03 | ) | (.02 | ) | .01 | — | ||||||||||||||||||
Revolving home equity | .13 | .02 | — | — | — | .07 | .03 | |||||||||||||||||||||
.86 | .88 | .80 | .73 | .79 | .87 | .80 | ||||||||||||||||||||||
Total | .32 | % | .34 | % | .34 | % | .28 | % | .29 | % | .33 | % | .30 | % | ||||||||||||||
CREDIT QUALITY RATIOS | ||||||||||||||||||||||||||||
Non-performing assets to total loans | .08 | % | .09 | % | .10 | % | .07 | % | .08 | % | ||||||||||||||||||
Non-performing assets to total assets | .05 | .05 | .05 | .04 | .04 | |||||||||||||||||||||||
Allowance for loan losses to total loans | 1.13 | 1.14 | 1.13 | 1.14 | 1.14 | |||||||||||||||||||||||
NON-PERFORMING ASSETS | ||||||||||||||||||||||||||||
Non-accrual loans: | ||||||||||||||||||||||||||||
Business | $ | 8,428 | $ | 8,569 | $ | 8,985 | $ | 5,131 | $ | 5,114 | ||||||||||||||||||
Real estate — construction and land | 3 | 4 | 4 | 4 | 5 | |||||||||||||||||||||||
Real estate — business | 950 | 1,746 | 1,715 | 1,467 | 2,465 | |||||||||||||||||||||||
Real estate — personal | 1,752 | 1,848 | 1,832 | 1,767 | 1,888 | |||||||||||||||||||||||
Total | 11,133 | 12,167 | 12,536 | 8,369 | 9,472 | |||||||||||||||||||||||
Foreclosed real estate | 897 | 737 | 1,413 | 1,181 | 1,039 | |||||||||||||||||||||||
Total non-performing assets | $ | 12,030 | $ | 12,904 | $ | 13,949 | $ | 9,550 | $ | 10,511 | ||||||||||||||||||
Loans past due 90 days and still accruing interest | $ | 16,532 | $ | 16,655 | $ | 16,658 | $ | 13,991 | $ | 13,453 | ||||||||||||||||||
*as a percentage of average loans (excluding loans held for sale) | ||||||||||||||||||||||||||||
COMMERCE BANCSHARES, INC.
Management Discussion of Second Quarter Results
June 30, 2019
For the quarter ended June 30, 2019, net income attributable to Commerce Bancshares, Inc. (net income) amounted to $108.0 million, compared to $97.1 million in the previous quarter and $110.3 million in the same quarter last year. The increase in net income over the previous quarter was primarily the result of higher net interest income and non-interest income coupled with lower non-interest expense. Excluding inflation income on the Company’s inflation protected securities (TIPs), the net interest margin declined five basis points to 3.50%, mainly due to a modest increase in deposit costs, while interest earning asset balances and rates were mostly flat. Non-interest income increased $6.0 million over the previous quarter. Average loans increased $37.1 million over the previous quarter, while average deposits increased $50.7 million. For the quarter, the return on average assets was 1.73%, the return on average common equity was 14.5%, and the efficiency ratio was 55.9%.
Balance Sheet Review
During the 2nd quarter of 2019, average loans totaled $14.1 billion, or an increase of $37.1 million over the prior quarter, and grew $191.9 million, or 1.4%, over the same quarter last year. Period-end loans grew $139.5 million over the prior quarter. Compared to the previous quarter, average business loans grew $57.9 million, and average personal real estate loans grew $15.7 million. This growth was partly offset by declines in average consumer (decline of $21.2 million) and consumer credit card (decline of $15.1 million) lending activities. Growth in business loans was the result of increased commercial and industrial, commercial credit card, and tax-free lending activities. Personal real estate loans grew on higher loan originations during the 2nd quarter of 2019 compared to the previous quarter. The decline in consumer loans resulted from lower auto, marine/RV, and fixed home equity lending. During the current quarter, the Company sold certain fixed rate personal real estate loans totaling $60.4 million, compared to $45.6 million in the prior quarter.
Total average available for sale debt securities increased $101.1 million over the previous quarter to $8.7 billion, at fair value. The increase in investment securities was mainly the result of growth in average mortgage-backed securities, partially offset by declines in average asset-backed, U.S. government and federal agency obligations, and state and municipal securities. Purchases of securities during the quarter totaled $511.8 million, and sales, maturities and pay downs were $556.8 million. At June 30, 2019, the duration of the investment portfolio was 2.8 years, and maturities and pay downs of approximately $1.2 billion are expected to occur during the next 12 months.
Total average deposits increased $50.7 million this quarter compared to the previous quarter. The increase in average deposits resulted from growth in certificates of deposit ($126.1 million), trust demand deposits ($97.2 million) and savings deposits ($33.6 million). These increases were mostly offset by declines of $119.9 million and $115.1 million in interest checking and money market and business demand average deposits, respectively. Compared to the previous quarter, total average consumer and wealth deposits (including private banking) increased $122.4 million and $77.9 million, respectively, while average commercial deposits declined $154.0 million this quarter. The average loans to deposits ratio was 71.0% in both the current and prior quarters. The Company’s average borrowings, which includes customer repurchase agreements, were $1.8 billion in the 2nd quarter of 2019, unchanged from the prior quarter’s balance.
Net Interest Income
Net interest income in the 2nd quarter of 2019 amounted to $211.6 million compared to $203.5 million in the previous quarter, an increase of $8.1 million. On a tax equivalent basis, net interest income for the current quarter increased $8.1 million over the previous quarter to $215.2 million. The growth in net interest income was mostly due to an $8.5 million increase this quarter in inflation income on the Company’s TIPs but was partially offset by a $1.1 million premium amortization expense adjustment on accelerating prepayment speeds for mortgage-backed and asset-backed securities. Excluding these items, net interest income increased $819 thousand, while the adjusted net yield on earning assets (tax equivalent) decreased to 3.52%, compared to 3.55% in the prior quarter.
Compared to the previous quarter, interest income on loans (tax equivalent) increased $1.3 million mostly as a result of higher loan yields on personal banking loans, combined with higher balances of business loans. The average tax-equivalent yield on the loan portfolio declined three basis points this quarter to 4.82%, compared to 4.85% in the previous quarter, as yields on commercial loans contracted slightly, offsetting yield growth on personal banking loans.
Interest income on investment securities (tax equivalent) increased $9.2 million over the previous quarter, mainly due to the higher inflation income on TIPs, as noted above. An increase in the Consumer Price Index this quarter resulted in inflation income of $6.5 million. The yield on total investment securities was 3.04% in the current quarter, up from 2.66% in the previous quarter.
Interest costs on deposits totaled 55 basis points in the 2nd quarter of 2019, compared to 51 basis points in the prior quarter. Interest expense on deposits increased $1.9 million this quarter compared to the previous quarter mainly due to higher rates on money market accounts and certificates of deposit (CD), coupled with growth in jumbo CD balances. Borrowing costs increased $548 thousand this quarter mainly due to higher balances of federal funds purchased. In the current quarter, the overall rate paid on interest bearing liabilities was .70%, compared to .65% in the prior quarter.
Non-Interest Income
In the 2nd quarter of 2019, total non-interest income amounted to $127.3 million, an increase of $2.4 million, or 1.9%, compared to the same period last year and increased $6.0 million, or 5.0%, compared to the prior quarter. The increase in non-interest income over the same period last year was mainly due to growth in trust, cash sweep, and loan fee income, coupled with gains on sales of assets. These increases to income were partly offset by lower swap, international, and net bank card fees.
Total net bank card fees in the current quarter decreased $569 thousand, or 1.3%, from the same period last year, but increased $3.0 million, or 7.6%, compared to the prior quarter. Net corporate card fees declined $1.1 million, or 4.4%, from the same quarter last year mainly due to higher rewards and network expense. Net debit card fees declined $223 thousand, or 2.2%, due to higher network expense, partly offset by higher interchange income. Overall net merchant income increased $355 thousand, or 7.3%, due to higher interchange fees, partly offset by higher network expense, while net credit card fees increased $372 thousand, or 10.6% on higher interchange revenue. Total net bank card fees this quarter were comprised of fees on corporate card ($23.5 million), debit card ($10.0 million), merchant ($5.2 million) and credit card ($3.9 million) transactions.
In the current quarter, trust fees increased $1.3 million, or 3.6%, over the same period last year, resulting from growth in private client fee income. Compared to the same period last year, deposit account fees increased slightly due to growth in corporate cash management fees, offset by lower overdraft and deposit account fees.
During the 2nd quarter of 2019, loan fees and sales increased $1.0 million, or 31.2%, over amounts recorded in the same quarter last year, mainly due to higher mortgage banking revenue. Cash sweep fees grew $556 thousand, or 24.4%, over the same period last year, while international fees declined $548 thousand. Swap fees declined $906 thousand compared to the same quarter last year as customer demand for this product has shifted due to expectations on future interest rates. Other non-interest income this quarter also included gains of $576 thousand on sales of leased assets to customers upon lease termination and sales of branch properties, compared to losses of $548 thousand on sales of branch properties and write downs on software costs in the 2nd quarter of 2018. Non-interest income comprised 37.6% of the Company’s total revenue this quarter.
Investment Securities Gains and Losses
The Company recorded net securities losses of $110 thousand in the current quarter, compared to losses of $925 thousand in the prior quarter and losses of $3.1 million in the 2nd quarter of 2018. Net securities losses in the current quarter resulted mainly from fair value net losses on the Company’s private equity investment portfolio.
Non-Interest Expense
Non-interest expense for the current quarter amounted to $189.8 million, compared to $181.9 million in the same period last year and $191.4 million in the prior quarter. The increase in non-interest expense compared to the same period last year was mainly due to higher salaries and benefits and data processing costs, partly offset by lower deposit insurance expense.
Compared to the 2nd quarter of last year, salaries and benefits expense increased $4.5 million, or 3.9%, driven by growth in full-time salary costs. Full-time equivalent employees totaled 4,857 and 4,797 at June 30, 2019 and 2018, respectively.
Marketing costs increased $873 thousand mainly due to increased marketing efforts for consumer deposit customers and healthcare banking initiatives. Data processing costs increased $2.2 million due to higher costs for service providers and software expense as the Company continues its efforts to implement a new core deposit system and various other technology-based initiatives. However, deposit insurance expense declined $1.4 million due to reduced FDIC insurance rates. Other non-interest expense increased over the prior quarter mainly due to higher professional fees, travel and entertainment and foreclosed property expense.
Income Taxes
The effective tax rate for the Company was 21.1% in the current quarter, 19.1% in the previous quarter, and 21.1% in the 2nd quarter of 2018.
Credit Quality
Net loan charge-offs in the 2nd quarter of 2019 amounted to $11.3 million, compared to $11.7 million in the prior quarter and $10.0 million in the same period last year. The ratio of annualized net loan charge-offs to total average loans was .32% in the current quarter, compared to .34% in the previous quarter and .29% in the 2nd quarter of last year. Compared to the prior quarter, net loan charge-offs on commercial loans declined $225 thousand to $169 thousand for the 2nd quarter of 2019, while net loan charge-offs on personal banking loans decreased $182 thousand to $11.1 million.
In the 2nd quarter of 2019, annualized net loan charge-offs on average consumer credit card loans were 4.75%, compared to 4.65% in the previous quarter, and 4.39% in the same quarter last year. Consumer loan net charge-offs were .36% of average consumer loans in the current quarter, .40% in the prior quarter and .37% in the same quarter last year. This quarter, the provision for loan losses totaled $11.8 million and exceeded net loan charge-offs by $500 thousand. At June 30, 2019, the allowance totaled $161.2 million, or 1.13% of total loans.
At June 30, 2019, total non-performing assets amounted to $12.0 million, a decrease of $874 thousand from the previous quarter. Non-performing assets are comprised of non-accrual loans and foreclosed real estate ($11.1 million and $897 thousand, respectively). At June 30, 2019, the balance of non-accrual loans, which represented .08% of loans outstanding, included business loans of $8.4 million, business real estate loans of $950 thousand, and personal real estate loans of $1.8 million. Loans more than 90 days past due and still accruing interest totaled $16.5 million at June 30, 2019.
Other
During the 2nd quarter of 2019, the Company paid a cash dividend of $.26 per common share, representing a 16.1% increase over the same period last year. The Company also paid an annualized 6% cash dividend on its preferred stock. The Company purchased 779,726 shares of treasury stock during the current quarter at an average price of $59.48.
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: https://www.businesswire.com/news/home/20190716005180/en/
Contacts:
(314) 746-7485
Web Site: http://www.commercebank.com
Email: matthew.burkemper@commercebank.com
