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Commerce Bancshares, Inc. Reports Fourth Quarter Earnings Per Share of $.96

KANSAS CITY, Mo.--(BUSINESS WIRE)--

Commerce Bancshares, Inc. (CBSH) announced earnings of $.96 per common share for the three months ended December 31, 2018 compared to $.82 per share in the same quarter last year and $.98 per share in the prior quarter. Net income attributable to Commerce Bancshares, Inc. for the fourth quarter of 2018 amounted to $109.7 million, compared to $94.4 million in the fourth quarter of 2017 and $112.6 million in the prior quarter. For the current quarter, the return on average assets was 1.75%, the return on average common equity was 15.9%, and the efficiency ratio was 54.5%.

For the year ended December 31, 2018, earnings per common share totaled $3.78 compared to $2.76 in 2017, or an increase of 37%. Net income attributable to Commerce Bancshares, Inc. for the year ended December 31, 2018 increased 36% to $433.5 million compared to $319.4 million last year. For the current year, the return on average assets was 1.76% and the return on average common equity was 16.2%.

In making this announcement, John Kemper, Chief Executive Officer, said, “This quarter we continued to see strong earnings performance as revenue increased $13.8 million, while expenses and credit costs were well controlled. Compared to the prior quarter, net interest income increased $4.5 million, while our net interest margin increased six basis points to 3.58%. The yield on our loan portfolio grew 13 basis points, while funding costs increased only modestly. The diversity of our fee businesses drove growth in non-interest income, which increased $9.4 million this quarter. This growth came from higher bank card, brokerage, swap, and tax credit fees. It also included net gains on branch sales of $7.7 million. Demand for business and business real estate loans improved this quarter and as a result, we experienced growth in new loans and increased line utilization, while seasonal paydowns on some lines of credit partially offset this growth. Average deposits declined slightly.”

Mr. Kemper added, “Overall the economy appears solid and the credit environment remains favorable. Capital and liquidity levels continue to remain very strong. Net loan charge-offs this quarter totaled $12.1 million compared to $9.8 million in the prior quarter and $11.0 million in the same quarter last year. The increase in net loan charge-offs over the prior quarter was mainly due to increased losses of $1.4 million on business loans and higher net loan charge-offs on the Company’s consumer loan portfolio. Credit card net charge-offs remained stable and declined as a percentage of loans this quarter. The ratio of annualized net loan charge-offs to average loans was .34% this quarter compared to .28% last quarter. Non-performing assets increased this quarter to $13.9 million, and the provision for loan losses totaled $12.3 million. At December 31, 2018, the allowance for loan losses amounted to $159.9 million, or 1.13% of period end loans.”

Total assets at December 31, 2018 were $25.5 billion, total loans were $14.2 billion, and total deposits were $20.3 billion. During the fourth quarter, 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 $.224 per common share, as restated for the 5% stock dividend.

Commerce Bancshares, Inc. is a registered bank holding company offering a full line of banking services, including investment management and securities brokerage. The Company currently operates banking facilities in nine key markets including St. Louis, Kansas City, Springfield, Central Missouri, Central Illinois, Wichita, Tulsa, Oklahoma City and Denver. The Company also maintains commercial offices in Dallas, Houston, Cincinnati, Nashville, Des Moines, Indianapolis, and Grand Rapids.

This financial news release, including management's discussion of 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,
2018
  September 30,
2018
  December 31,
2017
December 31,
2018
  December 31,
2017
FINANCIAL SUMMARY      
Net interest income $212,220 $207,754 $190,008 $823,825 $733,679
Non-interest income 133,087     123,714     119,383   501,341     461,263  
Total revenue 345,307 331,468 309,391 1,325,166 1,194,942
Investment securities gains (losses), net (7,129 ) 4,306 27,209 (488 ) 25,051
Provision for loan losses 12,256 9,999 12,654 42,694 45,244
Non-interest expense 188,625     185,059     208,859   737,821     744,343  
Income before taxes 137,297 140,716 115,087 544,163 430,406
Income taxes 26,537 26,647 20,104 105,949 110,506
Non-controlling interest expense 1,108     1,493     628   4,672     517  
Net income attributable to Commerce Bancshares, Inc. 109,652 112,576 94,355 433,542 319,383
Preferred stock dividends 2,250     2,250     2,250   9,000     9,000  
Net income available to common shareholders $107,402     $110,326     $92,105   $424,542     $310,383  
Earnings per common share:
Net income — basic $.96 $.99 $.82 $3.79 $2.77
Net income — diluted $.96 $.98 $.82 $3.78 $2.76
Effective tax rate 19.49 % 19.14 % 17.56 % 19.64 % 25.71 %
Tax equivalent net interest income $216,281 $211,368 $197,917 $840,062 $766,601
Average total interest earning assets (1) $ 23,974,108 $ 23,826,980 $ 23,926,315 $ 23,795,364 $ 24,011,034
Diluted wtd. average shares outstanding   110,770,084     111,260,225     111,275,222   111,155,264     111,223,563  
 
RATIOS
Average loans to deposits (2) 69.87 % 69.28 % 68.15 % 69.27 % 66.18 %
Return on total average assets 1.75 1.81 1.50 1.76 1.28
Return on average common equity (3) 15.85 16.43 14.17 16.16 12.46
Non-interest income to total revenue 38.54 37.32 38.59 37.83 38.60
Efficiency ratio (4) 54.53 55.73 67.40 55.58 62.18
Net yield on interest earning assets   3.58     3.52     3.29   3.53     3.19  
 
EQUITY SUMMARY
Cash dividends per common share $.224 $.224 $.204 $.895 $.816
Cash dividends on common stock $24,997 $25,059 $22,897 $100,238 $91,619
Cash dividends on preferred stock $2,250 $2,250 $2,250 $9,000     $9,000  
Book value per common share (5) $25.13 $23.84 $22.99
Market value per common share (5) $56.37 $62.88 $53.18
High market value per common share $64.70 $69.10 $55.15
Low market value per common share $53.40 $61.26 $49.59
Common shares outstanding (5) 111,331,350 111,691,094 111,945,795
Tangible common equity to tangible assets (6) 10.45 % 10.10 % 9.84 %
Tier I leverage ratio   11.52 %   11.38 %   10.39 %
 
OTHER QTD INFORMATION
Number of bank/ATM locations 320 322 327
Full-time equivalent employees   4,795     4,797     4,800  

(1)

 

Excludes allowance for loan losses and unrealized gains/(losses) on available for sale debt securities.

(2)

Includes loans held for sale.

(3)

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

(4)

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

(5)

As of period end.

(6)

The tangible common equity ratio is calculated as stockholders’ equity reduced by preferred stock, goodwill and other intangible assets (excluding mortgage servicing rights) divided by total assets reduced by goodwill and other intangible assets (excluding mortgage servicing rights).

 

All share and per share amounts have been restated to reflect the 5% stock dividend distributed in December 2018.

 
COMMERCE BANCSHARES, INC. and SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

 
    For the Three Months Ended     For the Year Ended

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

    December 31,
2018
  September 30,
2018
  June 30,
2018
  March 31,
2018
  December 31,
2017
December 31,
2018
  December 31,
2017
Interest income $232,832   $224,751   $225,623   $205,995   $201,572 $889,201   $777,407
Interest expense 20,612     16,997     14,664     13,103     11,564   65,376     43,728  
Net interest income 212,220 207,754 210,959 192,892 190,008 823,825 733,679
Provision for loan losses 12,256     9,999     10,043     10,396     12,654   42,694     45,244  
Net interest income after provision for loan losses 199,964     197,755     200,916     182,496     177,354   781,131     688,435  
NON-INTEREST INCOME
Bank card transaction fees 44,481 42,427 43,215 41,453 42,888 171,576 155,100
Trust fees 37,466 37,400 37,036 36,062 35,405 147,964 135,159
Deposit account charges and other fees 23,887 23,755 23,893 22,982 22,598 94,517 90,060
Capital market fees 1,843 1,595 1,992 2,291 1,743 7,721 7,996
Consumer brokerage services 4,184 3,884 3,971 3,768 3,576 15,807 14,630
Loan fees and sales 3,053 3,579 3,229 2,862 3,099 12,723 13,948
Other 18,173     11,074     11,514     10,272     10,074   51,033     44,370  
Total non-interest income 133,087     123,714     124,850     119,690     119,383   501,341     461,263  
INVESTMENT SECURITIES GAINS (LOSSES), NET (7,129 ) 4,306 (3,075 ) 5,410 27,209 (488 ) 25,051
NON-INTEREST EXPENSE
Salaries and employee benefits 120,517 116,194 115,589 115,894 115,741 468,194 448,321
Net occupancy 11,711 11,631 11,118 11,584 11,280 46,044 45,612
Equipment 4,508 4,592 4,594 4,431 4,692 18,125 18,568
Supplies and communication 5,095 5,103 5,126 5,313 6,118 20,637 22,790
Data processing and software 22,216 22,056 21,016 20,690 21,090 85,978 80,998
Marketing 5,602 4,999 5,142 4,805 3,937 20,548 16,325
Deposit insurance 1,796 3,167 3,126 3,457 3,444 11,546 13,986
Community service 480 580 656 729 25,511 2,445 34,377
Other 16,700     16,737     15,493     15,374     17,046   64,304     63,366  
Total non-interest expense 188,625     185,059     181,860     182,277     208,859   737,821     744,343  
Income before income taxes 137,297 140,716 140,831 125,319 115,087 544,163 430,406
Less income taxes 26,537     26,647     29,507     23,258     20,104   105,949     110,506  
Net income 110,760 114,069 111,324 102,061 94,983 438,214 319,900
Less non-controlling interest expense 1,108     1,493     994     1,077     628   4,672     517  
Net income attributable to Commerce Bancshares, Inc. 109,652 112,576 110,330 100,984 94,355 433,542 319,383
Less preferred stock dividends 2,250     2,250     2,250     2,250     2,250   9,000     9,000  
Net income available to common shareholders $107,402     $110,326     $108,080     $98,734     $92,105   $424,542     $310,383  
Net income per common share — basic $.96     $.99     $.96     $.88     $.82   $3.79     $2.77  
Net income per common share — diluted     $.96     $.98     $.96     $.88     $.82   $3.78     $2.76  
 
OTHER INFORMATION
Return on total average assets 1.75 % 1.81 % 1.80 % 1.66 % 1.50 % 1.76 % 1.28 %
Return on average common equity (1) 15.85 16.43 16.78 15.58 14.17 16.16 12.46
Efficiency ratio (2) 54.53 55.73 54.06 58.21 67.40 55.58 62.18
Effective tax rate 19.49 19.14 21.10 18.72 17.56 19.64 25.71
Net yield on interest earning assets 3.58 3.52 3.65 3.37 3.29 3.53 3.19
Tax equivalent net interest income     $216,281     $211,368     $215,775     $196,638     $197,917   $840,062     $766,601  

(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,
2018
    September 30,
2018
    December 31,
2017
ASSETS            
Loans
Business $ 5,106,427 $ 4,966,722 $ 4,958,554
Real estate — construction and land 869,659 999,691 968,820
Real estate — business 2,875,788 2,726,042 2,697,452
Real estate — personal 2,127,083 2,120,672 2,062,787
Consumer 1,955,572 1,967,465 2,104,487
Revolving home equity 376,399 375,322 400,587
Consumer credit card 814,134 788,111 783,864
Overdrafts 15,236       11,534       7,123  
Total loans 14,140,298       13,955,559       13,983,674  
Allowance for loan losses (159,932 )     (159,732 )     (159,532 )
Net loans 13,980,366       13,795,827       13,824,142  
Loans held for sale 20,694 16,890 21,398
Investment securities:
Available for sale debt securities 8,538,041 8,674,986 8,725,442
Trading debt securities 27,059 19,676 18,269
Equity securities 4,409 4,467 50,591
Other securities 129,157       127,120       99,005  
Total investment securities 8,698,666       8,826,249       8,893,307  
Federal funds sold and short-term securities purchased under agreements to resell 3,320 14,375 42,775
Long-term securities purchased under agreements to resell 700,000 700,000 700,000
Interest earning deposits with banks 689,876 334,752 30,631
Cash and due from banks 507,892 443,004 438,439
Land, buildings and equipment — net 333,119 331,869 335,110
Goodwill 138,921 138,921 138,921
Other intangible assets — net 8,794 8,470 7,618
Other assets 382,194       452,035       401,074  
Total assets $ 25,463,842       $ 25,062,392       $ 24,833,415  
LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits:
Non-interest bearing $ 6,980,298 $ 6,728,605 $ 7,158,962
Savings, interest checking and money market 11,685,239 11,733,057 11,499,620
Certificates of deposit of less than $100,000 586,091 585,765 634,646
Certificates of deposit of $100,000 and over 1,072,031       1,086,193       1,132,218  
Total deposits 20,323,659       20,133,620       20,425,446  
Federal funds purchased and securities sold under agreements to repurchase 1,956,389 1,862,117 1,507,138
Other borrowings 8,702 1,534 1,758
Other liabilities 237,943       257,311       180,889  
Total liabilities 22,526,693       22,254,582       22,115,231  
Stockholders’ equity:
Preferred stock 144,784 144,784 144,784
Common stock 559,432 535,407 535,407
Capital surplus 2,084,824 1,804,031 1,815,360
Retained earnings 241,163 493,641 221,374
Treasury stock (34,236 ) (33,174 ) (14,473 )
Accumulated other comprehensive income (loss) (64,669 )     (141,596 )     14,108  
Total stockholders’ equity 2,931,298 2,803,093 2,716,560
Non-controlling interest 5,851       4,717       1,624  
Total equity 2,937,149       2,807,810       2,718,184  
Total liabilities and equity     $ 25,463,842       $ 25,062,392       $ 24,833,415  
 
null
COMMERCE BANCSHARES, INC. and SUBSIDIARIES

AVERAGE BALANCE SHEETS

 

(Unaudited)
(In thousands)

    For the Three Months Ended
   

December 31,
2018

 

September 30,
2018

 

June 30,
2018

 

March 31,
2018

 

December 31,
2017

ASSETS:        
Loans:
Business $ 5,028,635 $ 4,926,063 $ 4,962,171 $ 4,934,621 $ 4,818,419
Real estate — construction and land 953,166 992,045 971,854 951,930 948,043
Real estate — business 2,757,595 2,732,968 2,726,697 2,733,812 2,720,356
Real estate — personal 2,122,357 2,110,945 2,078,972 2,062,083 2,044,651
Consumer 1,962,401 1,984,643 2,025,585 2,072,168 2,100,762
Revolving home equity 374,216 373,819 378,366 392,727 394,231
Consumer credit card 788,353 774,512 754,199 757,692 756,544
Overdrafts 5,277     4,704     4,497     4,628     5,295  
Total loans 13,992,000     13,899,699     13,902,341     13,909,661     13,788,301  
Allowance for loan losses (158,880 )   (158,840 )   (158,664 )   (158,779 )   (157,026 )
Net loans