CBSH

COMMERCE BANCSHARES INC

Financial Services | Mid Cap

$1.05

EPS Forecast

$414.8

Revenue Forecast

The company already released most recent quarter's earnings. We will publish our AI's next quarter's forecast around 2024-12-31
EX-99.1 2 cbsh12312019ex991.htm EXHIBIT 99.1 Exhibit
Exhibit 99.1

Exhibit 99.1
commercebancshares914a01a05.jpg
CBSH
                   1000 Walnut Street / Suite 700 / Kansas City, Missouri 64106 / 816.234.2000
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FOR IMMEDIATE RELEASE:
Wednesday, January 22, 2020

COMMERCE BANCSHARES, INC. REPORTS FOURTH
QUARTER EARNINGS PER SHARE OF $.93

Commerce Bancshares, Inc. 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.”



Exhibit 99.1

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.
* * * * * * * * * * * * * * *
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











Exhibit 99.1

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.



Exhibit 99.1

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.




Exhibit 99.1

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




Exhibit 99.1

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




Exhibit 99.1

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%.










Exhibit 99.1

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)



Exhibit 99.1
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



COMMERCE BANCSHARES, INC.                                Exhibit 99.1
Management Discussion of Fourth Quarter Results
December 31, 2019


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.