Commerce Bancshares, Inc. Announces Third Quarter Earnings Per Common Share of $.72

KANSAS CITY, Mo.--()--Commerce Bancshares, Inc. (NASDAQ: CBSH) announced earnings of $.72 per common share for the three months ended September 30, 2014 compared to $.71 per share in the third quarter of 2013 and $.70 per share in the previous quarter. Net income attributable to Commerce Bancshares, Inc. (net income) for the third quarter amounted to $68.2 million, compared to $66.5 million last quarter and $68.2 million in the same quarter last year. For the current quarter, the return on average assets totaled 1.20%, the return on average common equity was 12.3%, and the efficiency ratio was 60.6%.

For the nine months ended September 30, 2014, earnings per common share totaled $2.09 compared to $2.03 in the first nine months of 2013. Net income amounted to $199.0 million for the first nine months of 2014 compared to $195.0 million for the same period last year. The return on average assets for the first nine months of 2014 was 1.18% and the return on average common equity was 11.9%.

In announcing these results, David W. Kemper, Chairman and CEO, said, “This quarter average loans grew by 4% annualized compared to the previous quarter, driven mainly by consumer loan demand. Total fee income this quarter grew to $112.3 million from continued growth in both trust and bankcard fees and amounted to 42% of total revenues. Net interest income declined by $5.8 million mainly due to a decline in interest on our inflation-protected securities. Non-interest expense has been mostly flat over the last four quarters and remains well controlled.”

Mr. Kemper continued, “Credit quality remained solid this quarter as total net loan charge-offs totaled just .27% of average loans. Net loan charge-offs for the current quarter totaled $7.7 million, compared to $7.6 million in the previous quarter. During the current quarter, the provision for loan losses totaled $7.7 million and matched net loan charge-offs. The allowance for loan losses amounted to $161.5 million this quarter, or 1.41% of period end loans, and was 3.5 times non-performing loans. Non-performing assets totaled $53.0 million this quarter.”

Total assets at September 30, 2014 were $22.7 billion, total loans were $11.4 billion, and total deposits were $18.6 billion. During the quarter the Company sold three retail branches in Missouri with total loans and deposits of $13 million and $60 million, respectively. The Company also paid a cash dividend of $.225 per common share, an increase of 5% over the rate paid in 2013.

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 over 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.

Summary of Non-Performing Assets and Past Due Loans

             
(Dollars in thousands)   6/30/2014   9/30/2014   9/30/2013
Non-Accrual Loans   $ 43,260   $ 45,800   $ 37,846
Foreclosed Real Estate   $ 8,445     $ 7,168     $ 6,961  
Total Non-Performing Assets   $ 51,705     $ 52,968     $ 44,807  
Non-Performing Assets to Loans   .45 %   .46 %   .41 %
Non-Performing Assets to Total Assets   .22 %   .23 %   .20 %
Loans 90 Days & Over Past Due — Still Accruing   $ 11,629     $ 12,399     $ 11,515  
 

This financial news release, including management's discussion of third quarter results, is posted to the Company's web site at www.commercebank.com.

For additional information, contact
Jeffery Aberdeen, Controller
at 1000 Walnut Street, Suite 700
Kansas City, MO 64106
or by telephone at (816) 234-2081
Web Site: http://www.commercebank.com
Email: mymoney@commercebank.com

 

COMMERCE BANCSHARES, INC. and SUBSIDIARIES
FINANCIAL HIGHLIGHTS

                     
  For the Three Months Ended   For the Nine Months Ended
(Unaudited)  

June 30,
2014

 

September 30,
2014

 

September 30,
2013

 

September 30,
2014

 

September 30,
2013

FINANCIAL SUMMARY (In thousands, except per share data)
Net interest income $ 160,493   $ 154,716   $ 154,706 $ 468,275   $ 464,507
Taxable equivalent net interest income 167,889 161,827 161,074 489,477 483,724
Non-interest income 108,763 112,286 106,311 323,676 308,864
Investment securities gains (losses), net (2,558 ) 2,995 650 10,474 (3,083 )
Provision for loan losses 7,555 7,652 4,146 24,867 14,810
Non-interest expense 162,931 162,186 156,312 487,457 468,315
Net income attributable to Commerce Bancshares, Inc. 66,531 68,185 68,224 199,029 195,046
Net income available to common shareholders 66,531 66,385 68,224 197,229 195,046
Earnings per common share:
Net income — basic $ .70 $ .72 $ .71 $ 2.09 $ 2.04
Net income — diluted $ .70 $ .72 $ .71 $ 2.09 $ 2.03
Cash dividends $ .225 $ .225 $ .214 $ .675 $ .643
Cash dividends on common stock 21,331 20,654 20,670 63,575 61,536
Cash dividends on preferred stock 1,800 1,800
Diluted wtd. average shares o/s     93,913       90,968       94,975       93,343       94,869  
RATIOS
Average loans to deposits (1) 59.71 % 60.72 % 58.33 % 59.93 % 56.56 %
Return on total average assets 1.18 % 1.20 % 1.26 % 1.18 % 1.20 %
Return on average common equity (2) 11.79 % 12.30 % 12.69 % 11.88 % 12.05 %
Non-interest income to revenue (3) 40.39 % 42.05 % 40.73 % 40.87 % 39.94 %
Efficiency ratio (4)     60.30 %     60.56 %     59.72 %     61.35 %     60.38 %
NET LOAN CHARGE-OFFS (RECOVERIES)
Net total loan charge-offs (recoveries) 7,555 7,652 6,646 24,867 23,810
Business 381 (145 ) (654 ) 130 (791 )
Real estate — construction and land (978 ) (477 ) (1,635 ) (1,400 ) (2,911 )
Real estate — business

36

(123 ) 58 339 1,207
Consumer credit card 6,291 5,898 6,028 18,636 19,011
Consumer 1,689 2,054 2,068 6,248 5,229
Revolving home equity (351 ) 150 95 (88 ) 390
Real estate — personal 176 153 324 335 869
Overdraft     311       142       362       667       806  
AT PERIOD END
Book value per common share $ 23.11 $ 23.38 $ 22.77
Market value per share $ 46.50 $ 44.64 $ 41.72
Allowance for loan losses as a percentage of loans 1.41 % 1.41 % 1.51 %
Tier I leverage ratio 9.12 % 9.37 % 9.43 %
Tangible common equity to assets ratio (5) 8.61 % 8.85 % 9.10 %
Common shares outstanding 91,609,363 91,686,978 95,822,840
Number of bank/ATM locations 354 351 359
Full-time equivalent employees     4,733       4,740       4,728  
OTHER QTD INFORMATION
High market value per share $ 47.45 $ 47.65 $ 45.26
Low market value per share   $ 42.09     $ 44.34     $ 40.04  

(1)

 

Includes loans held for sale.

(2)

Annualized net income available to common shareholders divided by average total equity less preferred stock.

(3)

Revenue includes net interest income and non-interest income.

(4)

The efficiency ratio is calculated as non-interest expense (excluding intangibles amortization) as a percent of revenue.

(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
CONSOLIDATED STATEMENTS OF INCOME

         
  For the Three Months Ended   For the Nine Months Ended

(Unaudited)
(In thousands, except per share data)

 

June 30,
2014

  September 30,
2014
  September 30,
2013
  September 30,
2014
  September 30,
2013
Interest income $ 167,567   $ 161,811   $ 162,144 $ 489,376   $ 488,144
Interest expense   7,074     7,095     7,438     21,101     23,637  
Net interest income 160,493 154,716 154,706 468,275 464,507
Provision for loan losses   7,555     7,652     4,146     24,867     14,810  
Net interest income after provision for loan losses   152,938     147,064     150,560     443,408     449,697  
NON-INTEREST INCOME
Bank card transaction fees 44,444 44,802 43,891 130,963 123,141
Trust fees 27,765 28,560 25,318 82,898 76,221
Deposit account charges and other fees 19,709 20,161 20,197 58,460 58,511
Capital market fees 3,246 2,783 3,242 9,899 10,938
Consumer brokerage services 2,972 3,098 2,871 8,817 8,410
Loan fees and sales 1,211 1,367 1,553 3,787 4,340
Other   9,416     11,515     9,239     28,852     27,303  
Total non-interest income   108,763     112,286     106,311     323,676     308,864  
INVESTMENT SECURITIES GAINS (LOSSES), NET
Change in fair value of other-than-temporarily impaired securities (785 ) (770 ) (588 ) (1,618 ) 508
Portion recognized in other comprehensive income   154     399     258     270     (1,768 )
Net impairment losses recognized in earnings (631 ) (371 ) (330 ) (1,348 ) (1,260 )
Realized gains (losses) on sales and fair value adjustments   (1,927 )   3,366     980     11,822     (1,823 )
Investment securities gains (losses), net   (2,558 )   2,995     650     10,474     (3,083 )
NON-INTEREST EXPENSE
Salaries and employee benefits 94,849 95,462 91,405 284,574 271,855
Net occupancy 11,151 11,585 11,332 34,352 33,801
Equipment 4,525 4,593 4,465 13,622 13,828
Supplies and communication 5,486 5,302 5,449 16,487 16,835
Data processing and software 19,578 19,968 19,987 58,633 58,522
Marketing 3,949 4,074 3,848 11,704 11,255
Deposit insurance 2,892 2,899 2,796 8,685 8,353
Other   20,501     18,303     17,030     59,400     53,866  
Total non-interest expense   162,931     162,186     156,312     487,457     468,315  
Income before income taxes 96,212 100,159 101,209 290,101 287,163
Less income taxes   30,312     31,138     32,764     91,059     91,871  
Net income 65,900 69,021 68,445 199,042 195,292
Less non-controlling interest expense (income)   (631 )   836     221     13     246  
Net income attributable to Commerce Bancshares, Inc. 66,531 68,185 68,224 199,029 195,046
Less preferred stock dividends       1,800         1,800      
Net income available to common shareholders $ 66,531   $ 66,385   $ 68,224   $ 197,229   $ 195,046  
Net income per common share — basic $ .70   $ .72   $ .71   $ 2.09   $ 2.04  
Net income per common share — diluted   $ .70     $ .72     $ .71     $ 2.09     $ 2.03  
 

COMMERCE BANCSHARES, INC. and SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

             

(Unaudited)
(In thousands)

  June 30,
2014
  September 30,
2014
  September 30,
2013
ASSETS      
Loans $ 11,460,039 $ 11,445,715 $ 10,823,654
Allowance for loan losses (161,532 ) (161,532 ) (163,532 )
Net loans 11,298,507   11,284,183   10,660,122  
Investment securities:
Available for sale 9,282,640 8,878,414 8,577,282
Trading 15,684 16,510 18,295
Non-marketable 93,748   101,705   114,520  
Total investment securities 9,392,072   8,996,629   8,710,097  
Short-term federal funds sold and securities purchased under agreements to resell 29,490 37,760 87,167
Long-term securities purchased under agreements to resell 950,000 900,000 1,150,000
Interest earning deposits with banks 18,877 239,429 267,548
Cash and due from banks 516,509 445,268 594,309
Land, buildings and equipment — net 346,363 357,122 353,473
Goodwill 138,921 138,921 138,676
Other intangible assets — net 8,249 7,771 9,050
Other assets 306,191   294,462   481,855  
Total assets $ 23,005,179   $ 22,701,545   $ 22,452,297  
LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits:
Non-interest bearing $ 6,413,161 $ 6,446,704 $ 6,185,098
Savings, interest checking and money market 10,085,460 9,977,055 9,680,816
Time open and C.D.’s of less than $100,000 942,233 909,246 1,013,598
Time open and C.D.’s of $100,000 and over 1,498,982   1,253,633   1,338,252  
Total deposits 18,939,836 18,586,638 18,217,764
Federal funds purchased and securities sold under agreements to repurchase 1,154,323 1,395,160 1,760,393
Other borrowings 105,096 105,077 105,928
Other liabilities 543,771   325,801   186,726  
Total liabilities 20,743,026   20,412,676   20,270,811  
Stockholders’ equity:
Preferred stock 144,816 144,784
Common stock 481,224 481,224 459,647
Capital surplus 1,214,836 1,215,732 1,104,669
Retained earnings 537,759 583,490 610,720
Treasury stock (203,174 ) (199,630 ) (23,528 )
Accumulated other comprehensive income 84,314   60,231   26,025  
Total stockholders’ equity 2,259,775 2,285,831 2,177,533
Non-controlling interest 2,378   3,038   3,953  
Total equity 2,262,153   2,288,869   2,181,486  
Total liabilities and equity   $ 23,005,179     $ 22,701,545     $ 22,452,297  
 

COMMERCE BANCSHARES, INC. and SUBSIDIARIES
AVERAGE BALANCE SHEETS — AVERAGE RATES AND YIELDS

     

(Unaudited)
(Dollars in thousands)

  For the Three Months Ended
June 30, 2014   September 30, 2014   September 30, 2013

Average
Balance

 

Avg. Rates
Earned/Paid

Average
Balance

 

Avg. Rates
Earned/Paid

Average
Balance

 

Avg. Rates
Earned/Paid

ASSETS:      
Loans:
Business (A) $ 3,941,572 2.85 % $ 3,964,115 2.81 % $ 3,415,069 2.96 %
Real estate — construction and land 431,819 3.76 422,241 3.78 398,684 4.07
Real estate — business 2,292,919 3.86 2,285,520 3.80 2,256,556 4.12
Real estate — personal 1,790,678 3.80 1,834,502 3.77 1,729,473 3.83
Consumer 1,602,136 4.24 1,645,434 4.16 1,472,521 4.53
Revolving home equity 419,581 3.93 428,928 3.77 422,173 3.94
Consumer credit card 746,485 11.42 755,289 11.47 752,977 11.33
Overdrafts 4,669       4,412       5,587      
Total loans (B) 11,229,859     4.05   11,340,441     4.01   10,453,040     4.26  
Investment securities:
U.S. government and federal agency obligations 493,880 6.55 498,926 3.10 401,708 3.04
Government-sponsored enterprise obligations 789,575 1.66 763,621 1.63 427,258 1.74
State and municipal obligations (A) 1,665,275 3.41 1,787,463 3.42 1,605,096 3.54
Mortgage-backed securities 3,080,464 2.69 2,953,762 2.68 3,027,358 2.86
Asset-backed securities 2,860,083 .89 2,804,362 .89 3,000,250 .87
Other marketable securities (A) 149,736     2.42   147,832     2.43   180,016     2.92  
Total available for sale securities (B) 9,039,013 2.37 8,955,966 2.20 8,641,686 2.25
Trading securities (A) 18,920 2.14 19,736 2.35 15,941 2.41
Non-marketable securities (A) 110,338     18.12   94,759     7.74   114,096     7.10  
Total investment securities 9,168,271     2.56   9,070,461     2.25   8,771,723     2.31  
Short-term federal funds sold and securities purchased under agreements to resell 23,947 .40 36,804 .32 31,822 .44
Long-term securities purchased under agreements to resell 968,680 1.22 923,912 1.15 1,170,381 1.73
Interest earning deposits with banks 140,917     .25   113,964     .25   115,448     .24  
Total interest earning assets 21,531,674   3.26   21,485,582   3.12   20,542,414   3.25  
Non-interest earning assets (B) 1,064,336   1,096,008   1,009,272  
Total assets $ 22,596,010   $ 22,581,590   $ 21,551,686  
LIABILITIES AND EQUITY:
Interest bearing deposits:
Savings $ 685,134 .12 $ 675,276 .14 $ 630,555 .14
Interest checking and money market 9,488,405 .13 9,355,788 .13 8,964,018 .15
Time open & C.D.’s of less than $100,000 953,789 .45 923,250 .43 1,021,242 .54
Time open & C.D.’s of $100,000 and over 1,450,069     .42   1,427,499     .42   1,431,991     .43  
Total interest bearing deposits 12,577,397     .19   12,381,813     .19   12,047,806     .21  
Borrowings:
Federal funds purchased and securities sold under agreements to repurchase 1,169,322 .09 1,329,397 .09 1,247,906 .05
Other borrowings 105,101     3.34   105,085     3.32   103,793     3.27  
Total borrowings 1,274,423     .36   1,434,482     .32   1,351,699     .30  
Total interest bearing liabilities 13,851,820   .20 % 13,816,295   .20 % 13,399,505   .22 %
Non-interest bearing deposits 6,231,003 6,293,402 5,873,013
Other liabilities 230,497 185,329 145,430
Equity 2,282,690   2,286,564   2,133,738  
Total liabilities and equity $ 22,596,010   $ 22,581,590   $ 21,551,686  
Net interest income (T/E) $ 167,889   $ 161,827   $ 161,074  
Net yield on interest earning assets         3.13 %         2.99 %         3.11 %

(A)

 

Stated on a tax equivalent basis using a federal income tax rate of 35%.

(B)

The allowance for loan losses and unrealized gains/(losses) on available for sale securities are included in non-interest earning assets.

 

COMMERCE BANCSHARES, INC.
Management Discussion of Third Quarter Results
September 30, 2014

For the quarter ended September 30, 2014, net income attributable to Commerce Bancshares, Inc. (net income) amounted to $68.2 million, an increase of $1.7 million compared to the previous quarter, and a slight decline from the same quarter last year. The increase in net income over the previous quarter resulted mainly from growth in non-interest income of $3.5 million, lower non-interest expense and gains on the Company’s private equity investments of $3.4 million. Net interest income declined $5.8 million from the previous quarter as a result of lower inflation income on the Company’s inflation-protected securities and one-time dividends received on certain private equity investments in the 2nd quarter of 2014. For the current quarter, the return on average assets was 1.20%, the return on average common equity was 12.30%, and the efficiency ratio was 60.6%.

Balance Sheet Review

During the 3rd quarter of 2014, average outstanding loans increased $110.6 million, or 4.0% annualized, compared to the previous quarter and increased $887.4 million, or 8.5%, compared to the same period last year. Compared to the previous quarter, the increase in average loans resulted from growth in personal real estate (up $43.8 million), business loans (up $22.5 million) and consumer loans (up $43.3 million, mainly in automobile and other consumer loans). Combined business real estate and construction loans declined $17.0 million from the previous quarter. The increase in personal real estate loans resulted from continued seasonal consumer demand, while demand for auto and other consumer-related loans remained solid. The balance of marine and RV loans, included in the consumer loan portfolio, continued to run off this quarter by $16.2 million.

Total available for sale investment securities, at fair value, averaged $9.1 billion this quarter, which was a decrease of $54.8 million when compared to the previous quarter. Purchases of new securities, totaling $99.5 million in the 3rd quarter of 2014, were offset by maturities and pay downs of $464.3 million. At September 30, 2014, the duration of the investment portfolio was 2.7 years, and maturities and pay downs of approximately $1.6 billion are expected to occur during the next 12 months.

Total average deposits declined $133.2 million during the 3rd quarter of 2014 compared to the previous quarter. The decrease in average deposits resulted mainly from a decline in interest checking accounts (decrease of $92.3 million), certificates of deposit (decrease of $53.1 million), personal demand (decline of $41.6 million) and money market accounts (decrease of $40.3 million). Business demand deposits, however, increased this quarter by $127.4 million. Compared to the previous quarter, total average commercial deposits increased $92.2 million, while consumer and private banking deposits declined on average by $173.0 million and $23.3 million, respectively. The average loans to deposits ratio in the current quarter was 60.7%, compared to 59.7% in the previous quarter.

During the current quarter, the Company’s average borrowings increased $160.1 million compared to the previous quarter, mainly due to growth in balances of federal funds purchased.

Net Interest Income

Net interest income (tax equivalent) in the 3rd quarter of 2014 amounted to $161.8 million compared with $167.9 million in the previous quarter, or a decrease of $6.1 million. Net interest income (tax equivalent) for the current quarter was slightly higher than in the 3rd quarter of last year. During the 3rd quarter of 2014, the net yield on earning assets (tax equivalent) was 2.99%, compared with 3.13% in the previous quarter and 3.11% in the same period last year.

The decrease in net interest income (tax equivalent) in the 3rd quarter of 2014 compared to the previous quarter was due mainly to a decline in inflation income of $4.0 million on inflation-protected securities as a result of a lower Consumer Price Index published this quarter. Additionally, in the 2nd quarter the Company received a special dividend of $1.9 million related to the sale of a private equity investment which did not reoccur in the 3rd quarter. During the quarter, premium amortization expense was reduced by $423 thousand due to prepayment speed adjustments on various mortgage-backed securities.

Compared to the previous quarter, interest on loans increased $1.2 million (tax-equivalent) as a result of higher volumes on consumer, personal real estate, consumer credit card and business loans, which were partly offset by lower rates earned overall. The average yield on the loan portfolio declined 4 basis points this quarter, while in the previous quarter the average loan yield declined 7 basis points. The average rate earned on the investment securities portfolio decreased 31 basis points to 2.25% this quarter, largely due to lower rates earned on inflation-protected securities and the special dividend mentioned above.

Interest expense on deposits declined slightly in the 3rd quarter of 2014 compared with the previous quarter as deposit costs remained steady, amounting to .19% in both quarters.

Non-Interest Income

In the 3rd quarter of 2014, total non-interest income amounted to $112.3 million, an increase of $6.0 million, or 5.6%, compared to the same period last year. Also, current quarter non-interest income increased $3.5 million 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 growth in both trust and bank card fees, coupled with a gain of $2.1 million on the sale of three retail branches with loans and deposits of $13 million and $60 million, respectively.

Total bank card fees in the current quarter increased $911 thousand, or 2.1%, over the same period last year. Corporate card fees increased 4.0%, or $867 thousand, while debit and credit card fees increased slightly. Trust fees for the quarter increased $3.2 million, or 12.8%, compared to the same period last year, resulting mainly from continued solid growth in both private client and institutional trust fees.

In the current quarter, deposit account fees declined slightly from the same period last year. Corporate cash management fees totaled $8.3 million and grew 2.5%, while overdraft fees totaled $7.9 million and declined 2.3% from the same period last year. Capital market fees declined $459 thousand compared to the same quarter last year due to continued weak demand, while consumer brokerage fees grew by 7.9%.

Investment Securities Gains and Losses

The Company recorded net securities gains of $3.0 million this quarter compared with net gains of $650 thousand in the 3rd quarter of last year. The Company recorded net securities losses of $2.6 million in the previous quarter. Net securities gains this quarter were comprised mainly of $3.4 million in gains on the private equity portfolio. Also during the current quarter, credit-related impairment losses recorded on non-agency guaranteed mortgage-backed securities which have been identified as other-than-temporarily impaired totaled $371 thousand. The cumulative credit-related impairment on these bonds totaled $13.7 million at quarter end. At September 30, 2014, the fair value of non-agency guaranteed mortgage-backed securities identified as other-than-temporarily impaired totaled $58.6 million, compared to $77.4 million at September 30, 2013.

Non-Interest Expense

Non-interest expense for the current quarter amounted to $162.2 million, an increase of $5.9 million, or 3.8%, over the same period last year, but a slight decline compared to the previous quarter. The increase over the previous year was mainly due to higher salaries expense coupled with an increase in medical costs.

Compared to the 3rd quarter of last year, salaries expense grew $3.4 million, or 4.3%, mainly due to higher full-time salaries expense and incentive costs. Exclusive of salaries costs of $830 thousand related to Summit Bancshares (acquired in September 2013), total salaries expense grew 3.7%. Benefits expense grew $688 thousand mainly due to higher medical costs, which the Company self-insures. Growth in salaries expense resulted partly from staffing additions in commercial banking, wealth, commercial card and IT departments. Full-time equivalent employees totaled 4,740 and 4,728 at September 30, 2014 and 2013, respectively.

Compared to the 3rd quarter of last year, occupancy costs increased 2.2%, while supplies and communication costs declined by 2.7%. Data processing costs changed only slightly from the previous year’s level, while equipment costs increased by 2.9%. Other non-interest expense included bank card fraud losses of $618 thousand related to the data breach at a large retail merchant during the quarter. Also, impairment losses on various branch properties held for sale totaled $306 thousand. In the 3rd quarter of last year, other expense included a $2.0 million reimbursement from the Company’s bank card processor offset by a litigation provision of $1.0 million, neither of which reoccurred in the current quarter. In the 3rd quarter of 2014, the Company recorded recoveries totaling $1.5 million from the settlement of previous litigation.

Income Taxes

The effective tax rate for the Company was 31.4% in the current quarter compared to 31.3% in the previous quarter and 32.4% in the 3rd quarter of 2013.

Credit Quality

Net loan charge-offs in the 3rd quarter of 2014 amounted to $7.7 million, compared with $7.6 million in the prior quarter and $6.6 million in the 3rd quarter of last year. The ratio of annualized net loan charge-offs to total average loans was .27% in both the current quarter and the previous quarter.

In the 3rd quarter of 2014, annualized net loan charge-offs on average consumer credit card loans were 3.10%, compared with 3.38% in the previous quarter and 3.18% in the same period last year. Consumer loan net charge-offs in the quarter were .50% of average consumer loans, compared to .42% in the previous quarter and .56% in the same quarter last year. The provision for loan losses in the current quarter totaled $7.7 million, which was a slight increase over the previous quarter and was $3.5 million higher than in the same period last year. The current quarter provision for loan losses matched net loan charge-offs, while in the 3rd quarter of 2013, the provision was $2.5 million less than net loan charge-offs. At September 30, 2014, the allowance was 1.41% of total loans and was 353% of total non-accrual loans.

At September 30, 2014, total non-performing assets amounted to $53.0 million, an increase of $1.3 million over the previous quarter. Non-performing assets are comprised of non-accrual loans ($45.8 million) and foreclosed real estate ($7.2 million). At September 30, 2014, the balance of non-accrual loans, which represented .40% of loans outstanding, included business real estate loans of $17.4 million, business loans of $11.2 million, and construction and land loans of $10.1 million. Loans more than 90 days past due and still accruing interest totaled $12.4 million at September 30, 2014.

Other

During the 3rd quarter, the Company declared and paid a $.225 per common share cash dividend, representing an increase of 5% over the rate paid in 2013. Additionally, the Company paid the first cash dividend of $1.8 million on its preferred stock, which was issued in June, 2014.

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.

Contacts

Commerce Bancshares, Inc.
Jeffery Aberdeen, 816-234-2081
Controller
http://www.commercebank.com
mymoney@commercebank.com

Contacts

Commerce Bancshares, Inc.
Jeffery Aberdeen, 816-234-2081
Controller
http://www.commercebank.com
mymoney@commercebank.com