Commerce Bancshares, Inc. Reports Fourth Quarter Earnings Per Share of $.93

KANSAS CITY, Mo.--()--Commerce Bancshares, Inc. (NASDAQ: CBSH) announced earnings of $.93 per common share for the three months ended December 31, 2019, compared to $.91 per share in the same quarter last year and $.93 per share in the prior quarter. Net income attributable to Commerce Bancshares, Inc. for the fourth quarter of 2019 amounted to $106.9 million, compared to $109.7 million in the fourth quarter of 2018 and $109.2 million in the prior quarter. For the quarter, the return on average assets was 1.65%, the return on average common equity was 13.9% and the efficiency ratio was 56.3%.

For the year ended December 31, 2019, earnings per common share totaled $3.58 compared to $3.60 in 2018. Net income attributable to Commerce Bancshares, Inc. amounted to $421.2 million in 2019 compared to $433.5 million last year. For the current year, the return on average assets was 1.67%, and the return on average common equity was 14.1%.

In announcing these results, John Kemper, Chief Executive Officer, said, “Commerce had a strong quarter, benefiting from continuing strength in the economy and in financial markets. We experienced 4% annualized average loan growth this quarter resulting from demand for business loans, primarily commercial and industrial loans, and residential mortgage loans. Fee income totaled $143.5 million this quarter, and included a one-time gain on the sale of our corporate trust business. The corporate trust divestiture will allow Commerce Trust Company to focus on the higher growth core businesses of wealth, investment management, and financial planning services for individual and institutional clients. Excluding the corporate trust business, trust fees grew 8.7% in the fourth quarter of 2019 compared to the same quarter last year. Net interest income contracted slightly in the fourth quarter of 2019 compared to the prior quarter, as yields on our loans followed the decline in interest rates, while loan growth and improved funding costs helped to offset the decline in loan rates.”

Mr. Kemper continued, “This quarter net loan charge-offs totaled $15.2 million, compared to $11.5 million in the prior quarter and $12.1 million in the fourth quarter of 2018, as the overall credit environment remained favorable. The ratio of annualized net loan charge-offs to average loans was .42% in the current quarter, compared to .32% in the previous quarter, and .34% in the fourth quarter of last year. Net loan charge-offs on commercial loans totaled $3.1 million this quarter, mostly the result of a single commercial leasing customer, while net loan charge-offs on personal banking loans increased slightly to $12.1 million. During the current quarter, the provision for loan losses equaled net loan charge-offs, and the allowance for loan losses amounted to $160.7 million at December 31, 2019, or 1.09% of period end loans. Non-performing assets totaled $10.6 million this quarter and remained at very low levels.”

Total assets at December 31, 2019 were $26.1 billion, total loans were $14.8 billion, and total deposits were $20.5 billion. During the fourth quarter of 2019, the Company distributed a 5% stock dividend on its common stock. The Company also paid an annualized 6% cash dividend on its preferred stock and a cash dividend of $.248 per common share, as restated for the 5% stock dividend.

Commerce Bancshares, Inc. is a regional bank holding company offering a full line of banking services, including payment solutions, investment management and securities brokerage. Commerce Bank, a subsidiary of Commerce Bancshares, Inc., leverages more than 150 years of proven strength and experience to help individuals and businesses solve financial challenges. In addition to offering payment solutions across the U.S., Commerce Bank currently operates full service banking facilities across the Midwest including the St. Louis and Kansas City metropolitan areas, Springfield, Central Missouri, Central Illinois, Wichita, Tulsa, Oklahoma City, and Denver. It also maintains commercial offices in Dallas, Houston, Cincinnati, Nashville, Des Moines, Indianapolis, and Grand Rapids. Commerce delivers high-touch service and sophisticated financial solutions at regional branches, commercial offices, ATMs, online, mobile and through a 24/7 customer service line.

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

COMMERCE BANCSHARES, INC. and SUBSIDIARIES

FINANCIAL HIGHLIGHTS

 

 

 

For the Three Months Ended

For the Year Ended

(Unaudited)
(Dollars in thousands, except per share data)

 

December 31,
2019

September 30,
2019

December 31,
2018

December 31,
2019

December 31,
2018

FINANCIAL SUMMARY

 

 

Net interest income

 

$202,659

 

$203,512

 

$212,220

 

$821,293

 

$823,825

 

Non-interest income

 

143,461

 

132,743

 

133,087

 

524,703

 

501,341

 

Total revenue

 

346,120

 

336,255

 

345,307

 

1,345,996

 

1,325,166

 

Investment securities gains (losses), net

 

(248

)

4,909

 

(7,129

)

3,626

 

(488

)

Provision for loan losses

 

15,206

 

10,963

 

12,256

 

50,438

 

42,694

 

Non-interest expense

 

195,174

 

191,020

 

188,625

 

767,398

 

737,821

 

Income before taxes

 

135,492

 

139,181

 

137,297

 

531,786

 

544,163

 

Income taxes

 

28,214

 

29,101

 

26,537

 

109,074

 

105,949

 

Non-controlling interest expense

 

398

 

838

 

1,108

 

1,481

 

4,672

 

Net income attributable to Commerce Bancshares, Inc.

106,880

 

109,242

 

109,652

 

421,231

 

433,542

 

Preferred stock dividends

 

2,250

 

2,250

 

2,250

 

9,000

 

9,000

 

Net income available to common shareholders

$104,630

 

$106,992

 

$107,402

 

$412,231

 

$424,542

 

Earnings per common share:

 

 

 

 

 

 

Net income — basic

 

$.94

 

$.93

 

$.92

 

$3.59

 

$3.61

 

Net income — diluted

 

$.93

 

$.93

 

$.91

 

$3.58

 

$3.60

 

Effective tax rate

 

20.88

%

21.04

%

19.49

%

20.57

%

19.64

%

Tax equivalent net interest income

 

$206,156

 

$206,958

 

$216,281

 

$835,421

 

$840,062

 

Average total interest earning assets (1)

 

$

24,372,575

 

$

23,947,084

 

$

23,974,108

 

$

24,034,631

 

$

23,795,364

 

Diluted wtd. average shares outstanding

 

112,011,108

 

113,249,070

 

116,308,588

 

114,066,318

 

116,713,028

 

 

 

 

 

 

 

 

RATIOS

 

 

 

 

 

 

Average loans to deposits (2)

 

71.73

%

72.48

%

69.87

%

71.54

%

69.27

%

Return on total average assets

 

1.65

 

1.72

 

1.75

 

1.67

 

1.76

 

Return on average common equity (3)

 

13.90

 

14.21

 

15.85

 

14.06

 

16.16

 

Non-interest income to total revenue

 

41.45

 

39.48

 

38.54

 

38.98

 

37.83

 

Efficiency ratio (4)

 

56.29

 

56.66

 

54.53

 

56.87

 

55.58

 

Net yield on interest earning assets

 

3.36

 

3.43

 

3.58

 

3.48

 

3.53

 

 

 

 

 

 

 

 

EQUITY SUMMARY

 

 

 

 

 

 

Cash dividends per common share

 

$.248

 

$.248

 

$.213

 

$.990

 

$.853

 

Cash dividends on common stock

 

$27,933

 

$27,993

 

$24,997

 

$113,466

 

$100,238

 

Cash dividends on preferred stock

 

$2,250

 

$2,250

 

$2,250

 

$9,000

 

$9,000

 

Book value per common share (5)

 

$26.70

 

$26.27

 

$23.93

 

 

 

Market value per common share (5)

 

$67.94

 

$57.76

 

$53.69

 

 

 

High market value per common share

 

$68.65

 

$58.90

 

$61.62

 

 

 

Low market value per common share

 

$54.56

 

$52.05

 

$50.86

 

 

 

Common shares outstanding (5)

 

112,131,549

 

112,732,983

 

116,684,959

 

 

 

Tangible common equity to tangible assets (6)

 

10.99

%

10.95

%

10.45

%

 

 

Tier I leverage ratio

 

11.38

%

11.32

%

11.52

%

 

 

 

 

 

 

 

 

 

OTHER QTD INFORMATION

 

 

 

 

 

 

Number of bank/ATM locations

 

316

 

316

 

320

 

 

 

Full-time equivalent employees

 

4,858

 

4,873

 

4,795

 

 

 

(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 2019.

 

COMMERCE BANCSHARES, INC. and SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

 

 

For the Three Months Ended

For the Year Ended

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

 

December 31,
2019

September 30,
2019

June 30,
2019

March 31,
2019

December 31,
2018

December 31,
2019

December 31,
2018

Interest income

 

$226,665

 

$231,743

 

$238,412

 

$227,865

 

$232,832

 

$924,685

 

$889,201

 

Interest expense

 

24,006

 

28,231

 

26,778

 

24,377

 

20,612

 

103,392

 

65,376

 

Net interest income

 

202,659

 

203,512

 

211,634

 

203,488

 

212,220

 

821,293

 

823,825

 

Provision for loan losses

 

15,206

 

10,963

 

11,806

 

12,463

 

12,256

 

50,438

 

42,694

 

Net interest income after provision for loan losses

187,453

 

192,549

 

199,828

 

191,025

 

199,964

 

770,855

 

781,131

 

NON-INTEREST INCOME

 

 

 

 

 

 

 

 

Bank card transaction fees

 

41,079

 

44,510

 

42,646

 

39,644

 

44,481

 

167,879

 

171,576

 

Trust fees

 

40,405

 

39,592

 

38,375

 

37,256

 

37,466

 

155,628

 

147,964

 

Deposit account charges and other fees

24,974

 

24,032

 

23,959

 

23,018

 

23,887

 

95,983

 

94,517

 

Capital market fees

 

2,536

 

1,787

 

1,944

 

1,879

 

1,843

 

8,146

 

7,721

 

Consumer brokerage services

 

4,139

 

4,030

 

3,888

 

3,747

 

4,184

 

15,804

 

15,807

 

Loan fees and sales

 

3,465

 

4,755

 

4,238

 

3,309

 

3,053

 

15,767

 

12,723

 

Other

 

26,863

 

14,037

 

12,209

 

12,387

 

18,173

 

65,496

 

51,033

 

Total non-interest income

 

143,461

 

132,743

 

127,259

 

121,240

 

133,087

 

524,703

 

501,341

 

INVESTMENT SECURITIES GAINS (LOSSES), NET

(248

)

4,909

 

(110

)

(925

)

(7,129

)

3,626

 

(488

)

NON-INTEREST EXPENSE

 

 

 

 

 

 

 

 

Salaries and employee benefits

 

126,901

 

123,836

 

120,062

 

122,128

 

120,517

 

492,927

 

468,194

 

Net occupancy

 

12,218

 

12,293

 

11,145

 

11,501

 

11,711

 

47,157

 

46,044

 

Equipment

 

4,859

 

4,941

 

4,790

 

4,471

 

4,508

 

19,061

 

18,125

 

Supplies and communication

 

4,851

 

5,106

 

5,275

 

5,162

 

5,095

 

20,394

 

20,637

 

Data processing and software

 

23,934

 

23,457

 

23,248

 

22,260

 

22,216

 

92,899

 

85,978

 

Marketing

 

3,951

 

6,048

 

6,015

 

5,900

 

5,602

 

21,914

 

20,548

 

Deposit insurance

 

1,652

 

1,621

 

1,693

 

1,710

 

1,796

 

6,676

 

11,546

 

Community service

 

438

 

564

 

641

 

803

 

480

 

2,446

 

2,445

 

Other

 

16,370

 

13,154

 

16,910

 

17,490

 

16,700

 

63,924

 

64,304

 

Total non-interest expense

 

195,174

 

191,020

 

189,779

 

191,425

 

188,625

 

767,398

 

737,821

 

Income before income taxes

 

135,492

 

139,181

 

137,198

 

119,915

 

137,297

 

531,786

 

544,163

 

Less income taxes

 

28,214

 

29,101

 

28,899

 

22,860

 

26,537

 

109,074

 

105,949

 

Net income

 

107,278

 

110,080

 

108,299

 

97,055

 

110,760

 

422,712

 

438,214

 

Less non-controlling interest expense (income)

398

 

838

 

328

 

(83

)

1,108

 

1,481

 

4,672

 

Net income attributable to Commerce Bancshares, Inc.

106,880

 

109,242

 

107,971

 

97,138

 

109,652

 

421,231

 

433,542

 

Less preferred stock dividends

 

2,250

 

2,250

 

2,250

 

2,250

 

2,250

 

9,000

 

9,000

 

Net income available to common shareholders

$104,630

 

$106,992

 

$105,721

 

$94,888

 

$107,402

 

$412,231

 

$424,542

 

Net income per common share — basic

$.94

 

$.93

 

$.91

 

$.81

 

$.92

 

$3.59

 

$3.61

 

Net income per common share — diluted

$.93

 

$.93

 

$.91

 

$.81

 

$.91

 

$3.58

 

$3.60

 

 

 

 

 

 

 

 

 

 

OTHER INFORMATION

 

 

 

 

 

 

 

 

Return on total average assets

 

1.65

%

1.72

%

1.73

%

1.58

%

1.75

%

1.67

%

1.76

%

Return on average common equity (1)

13.90

 

14.21

 

14.46

 

13.64

 

15.85

 

14.06

 

16.16

 

Efficiency ratio (2)

 

56.29

 

56.66

 

55.88

 

58.76

 

54.53

 

56.87

 

55.58

 

Effective tax rate

 

20.88

 

21.04

 

21.11

 

19.05

 

19.49

 

20.57

 

19.64

 

Net yield on interest earning assets

3.36

 

3.43

 

3.61

 

3.52

 

3.58

 

3.48

 

3.53

 

Tax equivalent net interest income

 

$206,156

 

$206,958

 

$215,203

 

$207,104

 

$216,281

 

$835,421

 

$840,062

 

(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)
(In thousands)

 

December 31,
2019

September 30,
2019

December 31,
2018

ASSETS

 

 

 

 

Loans

 

 

 

 

Business

 

$

5,565,449

 

$

5,393,268

 

$

5,106,427

 

Real estate — construction and land

 

899,377

 

932,737

 

869,659

 

Real estate — business

 

2,833,554

 

2,833,146

 

2,875,788

 

Real estate — personal

 

2,354,760

 

2,226,663

 

2,127,083

 

Consumer

 

1,964,145

 

1,953,690

 

1,955,572

 

Revolving home equity

 

349,251

 

349,111

 

376,399

 

Consumer credit card

 

764,977

 

766,743

 

814,134

 

Overdrafts

 

6,304

 

7,236

 

15,236

 

Total loans

 

14,737,817

 

14,462,594

 

14,140,298

 

Allowance for loan losses

 

(160,682

)

(160,682

)

(159,932

)

Net loans

 

14,577,135

 

14,301,912

 

13,980,366

 

Loans held for sale

 

13,809

 

20,064

 

20,694

 

Investment securities:

 

 

 

 

Available for sale debt securities

 

8,571,626

 

8,660,419

 

8,538,041

 

Trading debt securities

 

28,161

 

35,918

 

27,059

 

Equity securities

 

4,209

 

4,186

 

4,409

 

Other securities

 

137,892

 

147,211

 

129,157

 

Total investment securities

 

8,741,888

 

8,847,734

 

8,698,666

 

Federal funds sold and short-term securities purchased under agreements to resell

 

 

2,850

 

3,320

 

Long-term securities purchased under agreements to resell

 

850,000

 

850,000

 

700,000

 

Interest earning deposits with banks

 

395,850

 

344,129

 

689,876

 

Cash and due from banks

 

491,615

 

512,254

 

507,892

 

Premises and equipment — net

 

370,637

 

365,949

 

333,119

 

Goodwill

 

138,921

 

138,921

 

138,921

 

Other intangible assets — net

 

9,534

 

9,139

 

8,794

 

Other assets

 

476,400

 

483,527

 

382,194

 

Total assets

 

$

26,065,789

 

$

25,876,479

 

$

25,463,842

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

Deposits:

 

 

 

 

Non-interest bearing

 

$

6,890,687

 

$

6,816,527

 

$

6,980,298

 

Savings, interest checking and money market

 

11,621,716

 

11,424,404

 

11,685,239

 

Certificates of deposit of less than $100,000

 

626,157

 

627,630

 

586,091

 

Certificates of deposit of $100,000 and over

 

1,381,855

 

1,441,590

 

1,072,031

 

Total deposits

 

20,520,415

 

20,310,151

 

20,323,659

 

Federal funds purchased and securities sold under agreements to repurchase

 

1,850,772

 

1,641,274

 

1,956,389

 

Other borrowings

 

2,418

 

257,383

 

8,702

 

Other liabilities

 

553,712

 

561,657

 

237,943

 

Total liabilities

 

22,927,317

 

22,770,465

 

22,526,693

 

Stockholders’ equity:

 

 

 

 

Preferred stock

 

144,784

 

144,784

 

144,784

 

Common stock

 

563,978

 

559,432

 

559,432

 

Capital surplus

 

2,151,464

 

2,042,643

 

2,084,824

 

Retained earnings

 

201,562

 

463,231

 

241,163

 

Treasury stock

 

(37,548

)

(251,663

)

(34,236

)

Accumulated other comprehensive income (loss)

 

110,444

 

144,173

 

(64,669

)

Total stockholders’ equity

 

3,134,684

 

3,102,600

 

2,931,298

 

Non-controlling interest

 

3,788

 

3,414

 

5,851

 

Total equity

 

3,138,472

 

3,106,014

 

2,937,149

 

Total liabilities and equity

 

$

26,065,789

$

25,876,479

$

25,463,842

 

COMMERCE BANCSHARES, INC. and SUBSIDIARIES

AVERAGE BALANCE SHEETS

 

(Unaudited)
(In thousands)

For the Three Months Ended

December 31,
2019

September 30,
2019

June 30,
2019

March 31,
2019

December 31,
2018

ASSETS:

 

 

 

 

 

Loans:

 

 

 

 

 

Business

$

5,362,020

 

$

5,263,312

 

$

5,142,794

 

$

5,084,920

 

$

5,028,635

 

Real estate — construction and land

901,367

 

920,206

 

908,777

 

907,062

 

953,166

 

Real estate — business

2,820,189

 

2,883,379

 

2,868,503

 

2,864,177

 

2,757,595

 

Real estate — personal

2,283,530

 

2,175,156

 

2,135,048

 

2,119,365

 

2,122,357

 

Consumer

1,961,631

 

1,924,434

 

1,907,979

 

1,929,202

 

1,962,401

 

Revolving home equity

347,527

 

354,040

 

361,673

 

370,962

 

374,216

 

Consumer credit card

749,056

 

763,377

 

766,080

 

781,167

 

788,353

 

Overdrafts

18,322

 

9,240

 

4,889

 

4,205

 

5,277

 

Total loans

14,443,642

 

14,293,144

 

14,095,743

 

14,061,060

 

13,992,000

 

Allowance for loan losses

(159,776

)

(160,387

)

(161,403

)

(159,275

)

(158,880

)

Net loans

14,283,866

 

14,132,757

 

13,934,340

 

13,901,785

 

13,833,120

 

Loans held for sale

15,363

 

19,882

 

20,731

 

18,350

 

18,475

 

Investment securities:

 

 

 

 

 

U.S. government and federal agency obligations

826,702

 

825,544

 

843,974

 

909,466

 

923,545

 

Government-sponsored enterprise obligations

184,973

 

181,929

 

199,506

 

199,480

 

214,913

 

State and municipal obligations

1,207,584

 

1,172,259

 

1,222,008

 

1,283,349

 

1,361,079

 

Mortgage-backed securities

4,685,794

 

4,712,508

 

4,614,703

 

4,360,428

 

4,379,805

 

Asset-backed securities

1,258,297

 

1,297,685

 

1,412,452

 

1,525,623

 

1,518,706

 

Other debt securities

331,167

 

334,218

 

331,459

 

335,612

 

339,841

 

Unrealized gain (loss) on debt securities

149,591

 

152,706

 

42,009

 

(48,925

)

(166,181

)

Total available for sale debt securities

8,644,108

 

8,676,849

 

8,666,111

 

8,565,033

 

8,571,708

 

Trading debt securities

32,518

 

29,622

 

30,169

 

25,411

 

26,322

 

Equity securities

4,200

 

4,705

 

4,717

 

4,568

 

4,432

 

Other securities

141,501

 

134,896

 

130,433

 

130,057

 

127,634

 

Total investment securities

8,822,327

 

8,846,072

 

8,831,430

 

8,725,069

 

8,730,096

 

Federal funds sold and short-term securities purchased under agreements to resell

714

 

1,080

 

1,601

 

4,797

 

14,415

 

Long-term securities purchased under agreements to resell

849,986

 

713,030

 

700,000

 

700,000

 

699,999

 

Interest earning deposits with banks

390,134

 

226,582

 

331,999

 

316,660

 

352,942

 

Other assets

1,315,395

 

1,292,191

 

1,251,555

 

1,197,261

 

1,158,816

 

Total assets

$

25,677,785

 

$

25,231,594

 

$

25,071,656

 

$

24,863,922

 

$

24,807,863

 

 

 

 

 

 

 

LIABILITIES AND EQUITY:

 

 

 

 

 

Non-interest bearing deposits

$

6,552,862

 

$

6,290,036

 

$

6,335,620

 

$

6,324,738

 

$

6,666,715

 

Savings

924,282

 

924,581

 

929,974

 

896,378

 

870,844

 

Interest checking and money market

10,618,347

 

10,409,111

 

10,642,648

 

10,762,550

 

10,840,048

 

Certificates of deposit of less than $100,000

626,944

 

620,138

 

605,440

 

590,200

 

584,828

 

Certificates of deposit of $100,000 and over

1,434,309

 

1,503,805

 

1,378,402

 

1,267,517

 

1,090,546

 

Total deposits

20,156,744

 

19,747,671

 

19,892,084

 

19,841,383

 

20,052,981

 

Borrowings:

 

 

 

 

 

Federal funds purchased and securities sold under agreements to repurchase

1,836,982

 

1,884,939

 

1,793,526

 

1,771,534

 

1,655,997

 

Other borrowings

94,471

 

77,248

 

1,318

 

1,248

 

1,335

 

Total borrowings

1,931,453

 

1,962,187

 

1,794,844

 

1,772,782

 

1,657,332

 

Other liabilities

458,094

 

390,560

 

307,433

 

284,018

 

264,449

 

Total liabilities

22,546,291

 

22,100,418

 

21,994,361

 

21,898,183

 

21,974,762

 

Equity

3,131,494

 

3,131,176

 

3,077,295

 

2,965,739

 

2,833,101

 

Total liabilities and equity

$

25,677,785

 

$

25,231,594

 

$

25,071,656

$

24,863,922

 

$

24,807,863

 

COMMERCE BANCSHARES, INC. and SUBSIDIARIES

AVERAGE RATES

(Unaudited)

For the Three Months Ended

 

December 31,
2019

September 30,
2019

June 30,
2019

March 31,
2019

December 31,
2018

 

ASSETS:

 

 

 

 

 

 

Loans:

 

 

 

 

 

 

Business (1)

3.59

%

3.85

%

4.02

%

4.07

%

3.93

%

 

Real estate — construction and land

5.05

 

5.46

 

5.63

 

5.73

 

5.47

 

 

Real estate — business

4.22

 

4.42

 

4.60

 

4.61

 

4.53

 

 

Real estate — personal

3.85

 

3.91

 

3.97

 

4.00

 

3.87

 

 

Consumer

4.76

 

4.88

 

4.77

 

4.73

 

4.62

 

 

Revolving home equity

4.76

 

5.17

 

5.20

 

5.17

 

4.98

 

 

Consumer credit card

12.11

 

12.42

 

12.33

 

12.18

 

11.91

 

 

Overdrafts

 

 

 

 

 

Total loans

4.47

 

4.71

 

4.82

 

4.85

 

4.72

 

 

Loans held for sale

5.32

 

6.15

 

6.98

 

7.38

 

6.59

 

 

Investment securities:

 

 

 

 

 

 

U.S. government and federal agency obligations

2.16

 

2.36

 

4.66

 

.78

 

1.90

 

 

Government-sponsored enterprise obligations

2.17

 

2.69

 

2.32

 

2.35

 

2.24

 

 

State and municipal obligations (1)

3.05

 

3.14

 

3.18

 

3.19

 

3.06

 

 

Mortgage-backed securities

2.72

 

2.61

 

2.70

 

2.76

 

2.75

 

 

Asset-backed securities

2.62

 

2.80

 

2.79

 

2.70

 

2.55

 

 

Other debt securities

2.82

 

2.63

 

2.68

 

2.69

 

2.60

 

 

Total available for sale debt securities

2.69

 

2.69

 

2.97

 

2.59

 

2.65

 

 

Trading debt securities (1)

2.81

 

2.91

 

3.14

 

3.24

 

3.21

 

 

Equity securities (1)

49.40

 

35.67

 

35.97

 

37.55

 

39.92

 

 

Other securities (1)

6.58

 

6.19

 

6.69

 

5.73

 

15.51

 

 

Total investment securities

2.78

 

2.76

 

3.04

 

2.66

 

2.86

 

 

Federal funds sold and short-term securities purchased under agreements to resell

2.22

 

2.57

 

2.76

 

2.79

 

2.56

 

 

Long-term securities purchased under agreements to resell

2.26

 

2.01

 

2.11

 

2.18

 

2.31

 

 

Interest earning deposits with banks

1.61

 

2.17

 

2.40

 

2.42

 

2.28

 

 

Total interest earning assets

3.75

 

3.90

 

4.05

 

3.93

 

3.92

 

 

 

 

 

 

 

 

 

LIABILITIES AND EQUITY:

 

 

 

 

 

 

Interest bearing deposits:

 

 

 

 

 

 

Savings

.11

 

.11

 

.11

 

.11

 

.11

 

 

Interest checking and money market

.35

 

.38

 

.38

 

.35

 

.30

 

 

Certificates of deposit of less than $100,000

1.16

 

1.11

 

1.01

 

.87

 

.70

 

 

Certificates of deposit of $100,000 and over

1.79

 

1.99

 

2.02

 

1.92

 

1.61

 

 

Total interest bearing deposits

.52

 

.58

 

.55

 

.51

 

.41

 

 

Borrowings:

 

 

 

 

 

 

Federal funds purchased and securities sold under agreements to repurchase

1.20

 

1.74

 

1.80

 

1.72

 

1.60

 

 

Other borrowings

2.05

 

2.33

 

1.52

 

1.62

 

2.67

 

 

Total borrowings

1.25

 

1.76

 

1.80

 

1.72

 

1.60

 

 

Total interest bearing liabilities

.61

%

.73

%

.70

%

.65

%

.54

%

 

 

 

 

 

 

 

 

Net yield on interest earning assets

3.36

%

3.43

%

3.61

%

3.52

%

3.58

%

 

(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 Year Ended

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

 

December 31,
2019

September 30,
2019

June 30,
2019

March 31,
2019

December 31,
2018

December 31,
2019

December 31,
2018

ALLOWANCE FOR LOAN LOSSES

 

 

 

 

 

 

 

 

Balance at beginning of period

 

$

160,682

 

$

161,182

 

$

160,682

 

$

159,932

 

$

159,732

 

$

159,932

 

$

159,532

 

Provision for losses

 

15,206

 

10,963

 

11,806

 

12,463

 

12,256

 

50,438

 

42,694

 

Net charge-offs (recoveries):

 

 

 

 

 

 

 

 

Commercial portfolio:

 

 

 

 

 

 

 

 

Business

 

3,036

 

335

 

284

 

447

 

1,748

 

4,102

 

2,102

 

Real estate — construction and land

 

 

 

(101

)

(16

)

(183

)

(117

)

(635

)

Real estate — business

 

35

 

(44

)

(14

)

(37

)

(91

)

(60

)

(378

)

 

 

3,071

 

291

 

169

 

394

 

1,474

 

3,925

 

1,089

 

Personal banking portfolio:

 

 

 

 

 

 

 

 

Consumer credit card

 

8,829

 

8,568

 

9,066

 

8,958

 

7,421

 

35,421

 

30,578

 

Consumer

 

2,838

 

2,069

 

1,723

 

1,924

 

2,805

 

8,554

 

9,286

 

Overdraft

 

507

 

446

 

253

 

317

 

500

 

1,523

 

1,621

 

Real estate — personal

 

6

 

(30

)

(21

)

101

 

(144

)

56

 

(335

)

Revolving home equity

 

(45

)

119

 

116

 

19

 

 

209

 

55

 

 

 

12,135

 

11,172

 

11,137

 

11,319

 

10,582

 

45,763

 

41,205

 

Total net loan charge-offs

 

15,206

 

11,463

 

11,306

 

11,713

 

12,056

 

49,688

 

42,294

 

Balance at end of period

 

$

160,682

 

$

160,682

 

$

161,182

 

$

160,682

 

$

159,932

 

$

160,682

 

$

159,932

 

 

 

 

 

 

 

 

 

 

NET CHARGE-OFF RATIOS*

 

 

 

 

 

 

 

 

Commercial portfolio:

 

 

 

 

 

 

 

 

Business

 

.22

%

.03

%

.02

%

.04

%

.14

%

.08

%

.04

%

Real estate — construction and land

 

 

 

(.04

)

(.01

)

(.08

)

(.01

)

(.07

)

Real estate — business

 

 

(.01

)

 

(.01

)

(.01

)

 

(.01

)

 

 

.13

 

.01

 

.01

 

.02

 

.07

 

.04

 

.01

 

Personal banking portfolio:

 

 

 

 

 

 

 

 

Consumer credit card

 

4.68

 

4.45

 

4.75

 

4.65

 

3.73

 

4.63

 

3.98

 

Consumer

 

.57

 

.43

 

.36

 

.40

 

.57

 

.44

 

.46

 

Overdraft

 

10.98

 

19.15

 

20.76

 

30.57

 

37.59

 

16.55

 

33.93

 

Real estate — personal

 

 

(.01

)

 

.02

 

(.03

)

 

(.02

)

Revolving home equity

 

(.05

)

.13

 

.13

 

.02

 

 

.06

 

.01

 

 

 

.90

 

.85

 

.86

 

.88

 

.80

 

.87

 

.78

 

Total

 

.42

%

.32

%

.32

%

.34

%

.34

%

.35

%

.30

%

 

 

 

 

 

 

 

 

 

CREDIT QUALITY RATIOS

 

 

 

 

 

 

 

 

Non-performing assets to total loans

 

.07

%

.08

%

.08

%

.09

%

.10

%

 

 

Non-performing assets to total assets

 

.04

 

.05

 

.05

 

.05

 

.05

 

 

 

Allowance for loan losses to total loans

 

1.09

 

1.11

 

1.13

 

1.14

 

1.13

 

 

 

 

 

 

 

 

 

 

 

 

NON-PERFORMING ASSETS

 

 

 

 

 

 

 

 

Non-accrual loans:

 

 

 

 

 

 

 

 

Business

 

$

7,489

 

$

7,753

 

$

8,428

 

$

8,569

 

$

8,985

 

 

 

Real estate — construction and land

 

2

 

3

 

3

 

4

 

4

 

 

 

Real estate — business

 

1,030

 

2,359

 

950

 

1,746

 

1,715

 

 

 

Real estate — personal

 

1,699

 

1,618

 

1,752

 

1,848

 

1,832

 

 

 

Total

 

10,220

 

11,733

 

11,133

 

12,167

 

12,536

 

 

 

Foreclosed real estate

 

365

 

502

 

897

 

737

 

1,413

 

 

 

Total non-performing assets

 

$

10,585

 

$

12,235

 

$

12,030

 

$

12,904

 

$

13,949

 

 

 

Loans past due 90 days and still accruing interest

$

19,859

 

$

16,308

 

$

16,532

 

$

16,655

 

$

16,658

 

 

 

*as a percentage of average loans (excluding loans held for sale)

 

COMMERCE BANCSHARES, INC.
Management Discussion of Fourth Quarter Results
December 31, 2019

For the quarter ended December 31, 2019, net income attributable to Commerce Bancshares, Inc. (net income) amounted to $106.9 million, compared to $109.2 million in the previous quarter and $109.7 million in the same quarter last year. The decrease in net income from the previous quarter was primarily the result of net losses on investment securities coupled with higher loan loss provision and non-interest expense, partly offset by higher non-interest income. Non-interest income increased $10.7 million this quarter, and included a one-time gain of $11.5 million resulting from the sale of our corporate trust business. Net interest margin declined seven basis points to 3.36%, mainly due to lower rates on loans. Average loans increased $146.0 million over the previous quarter, while average deposits increased $409.1 million. For the quarter, the return on average assets was 1.65%, the return on average common equity was 13.9%, and the efficiency ratio was 56.3%.

Balance Sheet Review

During the 4th quarter of 2019, average loans totaled $14.5 billion and grew $448.5 million, or 3.2%, over the same quarter last year. Period-end loans grew $269.0 million over the prior quarter and $590.6 million over December 31, 2018. Compared to the previous quarter, average personal real estate loans grew $108.4 million and business loans grew $98.7 million. Average consumer loans also grew this quarter (growth of $37.2 million). This growth was partly offset by declines in average business real estate, construction, and consumer credit card lending activities. Growth in business loans was mostly the result of increased commercial and industrial lending activities. Personal real estate loans grew on higher loan originations during the 4th quarter of 2019 compared to the previous quarter. Growth in average consumer loans was driven by higher demand for auto, health services financing, and other consumer lending. During the current quarter, the Company sold certain fixed rate personal real estate loans totaling $61.5 million, compared to $71.5 million in the prior quarter.

Total average available for sale debt securities decreased $32.7 million from the previous quarter to $8.6 billion, at fair value. The decrease in investment securities was mainly the result of declines in average asset-backed securities and mortgage-backed securities, partially offset by growth in average state and municipal obligations. Purchases of securities during the quarter totaled $510.8 million, and sales, maturities and pay downs were $565.1 million. At December 31, 2019, the duration of the investment portfolio was 3.0 years, and maturities and pay downs of approximately $1.3 billion are expected to occur during the next 12 months.

Total average deposits increased $409.1 million this quarter compared to the previous quarter. The increase in average deposits mostly resulted from growth in business demand deposits ($263.1 million) and interest checking deposits ($113.4 million). These increases were partially offset by a decline in certificates of deposit ($62.7 million). Compared to the previous quarter, total average commercial, wealth (including private banking), and consumer deposits increased $232.9 million, $107.2 million, and $53.7 million, respectively. The average loans to deposits ratio was 71.7% in the current quarter and 72.5% in the prior quarter. The Company’s average borrowings, which includes customer repurchase agreements, were $1.9 billion in the 4th quarter of 2019 and $2.0 billion in the prior quarter.

Net Interest Income

Net interest income in the 4th quarter of 2019 amounted to $202.7 million compared to $203.5 million in the previous quarter, a decrease of $853 thousand. On a tax equivalent basis, net interest income for the current quarter decreased $802 thousand from the previous quarter to $206.2 million. Inflation income on inflation protected securities (TIPs) declined $419 thousand this quarter. Excluding changes in TIPs, net interest income decreased $383 thousand, while the adjusted net yield on earning assets (tax equivalent) decreased to 3.33%, compared to 3.40% in the prior quarter.

Compared to the previous quarter, interest income on loans (tax equivalent) decreased $6.7 million, mostly as a result of lower loan balances and yields on business real estate, construction, and consumer credit card loans, combined with lower yields on business loans. These decreases were partly offset by higher volume on personal real estate and business loans. The average tax equivalent yield on the loan portfolio declined 24 basis points this quarter to 4.47%, compared to 4.71% in the previous quarter, as yields contracted, more than offsetting the volume growth experienced this quarter.

Interest income on investment securities (tax equivalent) increased $213 thousand over the previous quarter, mainly due to a $1.1 million adjustment for slowing prepayment speeds for mortgage-backed and asset backed securities, partly offset by lower inflation income on TIPs, as noted above. The yield on total investment securities was 2.78% in the current quarter, up from 2.76% in the previous quarter.

Interest costs on deposits totaled 52 basis points in the 4th quarter of 2019, compared to 58 basis points in the prior quarter. Interest expense on deposits decreased $1.6 million this quarter compared to the previous quarter mainly due to lower rates and balances on certificates of deposit greater than $100,000 and lower rates on interest checking and money market deposit accounts. Borrowing costs decreased $2.7 million, or 51 basis points, to 1.25% this quarter due to lower rates paid on customer repurchase agreements and lower balances and rates on federal funds purchased. The overall rate paid on interest bearing liabilities was .61% in the current quarter, compared to .73% in the prior quarter.

Non-Interest Income

In the 4th quarter of 2019, total non-interest income amounted to $143.5 million, an increase of $10.4 million, or 7.8%, compared to the same period last year and increased $10.7 million, or 8.1%, compared to the prior quarter. The increase in non-interest income over the same period last year was due to the sale of our corporate trust business, growth in trust fees, deposit account fees, and swap fees, partly offset by lower net bank card fees.

Total net bank card fees in the current quarter declined $3.4 million, or 7.6%, from the same period last year, and decreased $3.4 million, or 7.7%, compared to the prior quarter. Net corporate card fees decreased $4.0 million, or 15.3%, from the same quarter last year mainly due to lower interchange income and higher rewards expense. Net credit card fees decreased $278 thousand, or 7.3%, mostly on higher rewards expense, while net debit card fees increased $198 thousand, or 1.9%, due to lower network expense. Net merchant income increased $672 thousand, or 15.4%, mainly due to higher interchange income and lower network expense. Total net bank card fees this quarter were comprised of fees on corporate card ($22.1 million), debit card ($10.4 million), merchant ($5.0 million) and credit card ($3.6 million) transactions.

In the current quarter, trust fees increased $2.9 million, or 7.8%, over the same period last year, resulting from continued growth in private client fee income. Compared to the same period last year, deposit account fees increased $1.1 million, or 4.6%, due to growth in corporate cash management fees, partially offset by lower overdraft fees.

During the 4th quarter of 2019, loan fees and sales increased $412 thousand, or 13.5%, over amounts recorded in the same quarter last year, mainly due to higher mortgage banking revenue. In addition, other non-interest income grew $8.7 million and included growth of $1.0 million in swap fees, $676 thousand in cash sweep fees, and the aforementioned $11.5 million gain on the sale of our corporate trust business. These increases were partially offset by lower tax credit sales of $1.2 million and a $7.7 million net gain on the disposition of branch properties recorded in the 4th quarter of last year. Excluding the gain on the sale of the corporate trust business, non-interest income comprised 39.4% of the Company’s total revenue this quarter.

Investment Securities Gains and Losses

The Company recorded net securities losses of $248 thousand in the current quarter, compared to gains of $4.9 million in the prior quarter and losses of $7.1 million in the 4th quarter of 2018. Net securities losses in the current quarter resulted mainly from sales of investment securities, partly offset by proceeds received on an equity investment and unrealized fair value gains in the Company’s private equity investment portfolio.

Non-Interest Expense

Non-interest expense for the current quarter amounted to $195.2 million, compared to $188.6 million in the same period last year and $191.0 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 employee benefits and data processing and software expense, partially offset by lower marketing expense.

Compared to the 4th quarter of last year, salaries and employee benefits expense increased $6.4 million, or 5.3%, driven mainly by growth in full-time salary costs and higher medical expense. Full-time equivalent employees totaled 4,858 and 4,795 at December 31, 2019 and 2018, respectively.

For the current quarter compared to the same quarter of last year, marketing costs decreased $1.7 million mainly due to increased marketing efforts in the prior year for consumer deposit customers. Data processing and software expense increased $1.7 million due to higher costs for service providers and bank card processing expense. Occupancy expense also increased $507 thousand.

Income Taxes

The effective tax rate for the Company was 20.9% in the current quarter, 21.0% in the previous quarter, and 19.5% in the 4th quarter of 2018.

Credit Quality

Net loan charge-offs in the 4th quarter of 2019 amounted to $15.2 million, compared to $11.5 million in the prior quarter and $12.1 million in the same period last year. The ratio of annualized net loan charge-offs to total average loans was .42% in the current quarter, compared to .32% in the previous quarter and .34% in the 4th quarter of last year. Compared to the prior quarter, net loan charge-offs on commercial loans increased $2.8 million to $3.1 million, while net loan charge-offs on personal banking loans increased $963 thousand to $12.1 million. The increase in commercial loan charge-offs this quarter was primarily the result of a single leasing customer.

In the 4th quarter of 2019, annualized net loan charge-offs on average consumer credit card loans were 4.68%, compared to 4.45% in the previous quarter, and 3.73% in the same quarter last year. Consumer loan net charge-offs were .57% of average consumer loans in the current quarter, .43% in the prior quarter and .57% in the same quarter last year. This quarter, the provision for loan losses equaled the net loan charge-offs, and at December 31, 2019, the allowance totaled $160.7 million, or 1.09% of total loans.

At December 31, 2019, total non-performing assets amounted to $10.6 million, a decrease of $1.7 million from the previous quarter. Non-performing assets are comprised of non-accrual loans and foreclosed real estate ($10.2 million and $365 thousand, respectively). At December 31, 2019, the balance of non-accrual loans, which represented .07% of loans outstanding, included business loans of $7.5 million, business real estate loans of $1.0 million, and personal real estate loans of $1.7 million. Loans more than 90 days past due and still accruing interest totaled $19.9 million at December 31, 2019.

Other

During the 4th quarter of 2019, the Company distributed a 5% stock dividend on its common stock and paid a cash dividend of $.248 per common share (as restated for the stock dividend), representing a 16% increase over the same period last year. The Company also paid an annualized 6% cash dividend on its preferred stock. In August 2019, the Company entered into an accelerated stock repurchase (ASR) program totaling $150.0 million and received approximately 75% of the total shares expected to be delivered in the overall ASR program. On December 26, 2019, the ASR program was completed according to its contract terms and the Company received an additional 438,009 shares, based on the average price of its common stock during the repurchase period. Additionally, the Company purchased 229,313 shares of treasury stock during the current quarter at an average price of $65.12.

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

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

Contacts

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