Commerce Bancshares Inc. Reports Operating Results (10-Q)
Commerce Bancshares, Inc. has a market cap of $3.34 billion; its shares were traded at around $38.46 with a P/E ratio of 12.6 and P/S ratio of 3.1. The dividend yield of Commerce Bancshares, Inc. stocks is 2.4%. Commerce Bancshares, Inc. had an annual average earning growth of 4.4% over the past 10 years.
Highlight of Business Operations:Net income for the first nine months of 2012 was $202.5 million, an increase of $7.7 million, or 4.0%, over the same period last year and included a decline of $20.4 million, or 51.8%, in the provision for loan losses. Diluted earnings per share was $2.29, an increase of 7.5% compared to $2.13 per share in the same period last year. For the first nine months of 2012, the annualized return on average assets was 1.32%, the annualized return on average equity was 12.13%, and the efficiency ratio was 59.14%. Net interest income decreased $5.7 million, or 1.2%, due to lower earnings on the Company's loan and investment security portfolios, partly offset by lower expense incurred on deposits. Non-interest income decreased $2.6 million, or .9%, mainly due to a decline of $19.7 million in debit card interchange fees (the effect of new debit card fee regulations effective late in 2011). The decline in debit card fees was partly offset by increases of $10.8 million in merchant and corporate card fees, $4.1 million in trust fees and $1.7 million in capital market fees. Net securities gains increased $2.7 million, mainly due to fair value adjustments and sales of private equity investments. Non-interest expense decreased $1.0 million, or .2%, compared to the same period last year and included a decline in FDIC insurance costs, offset by higher salaries and benefits and data processing costs. The decline in non-interest expense also included a $5.2 million accrual in 2012 for anticipated costs resulting from Visa debit card interchange litigation, offset by $10.9 million expense recorded during the first nine months of 2011 for debit card overdraft litigation costs. Both of these lawsuits are further discussed in Note 14 of the consolidated financial statements.
For the third quarter of 2012, total non-interest income amounted to $100.9 million compared with $101.6 million in the same quarter last year, which was a decrease of $710 thousand, or .7%. Bank card fees for the quarter declined $2.7 million, or 6.3%, from the third quarter of last year, as a result of a decline in debit card interchange fees of $6.8 million, or 43.8% (mainly the effect of new pricing limitations effective in late 2011), which was partly offset by growth in corporate card fees of $3.3 million, or 21.8%. Corporate card and debit card fees for the current quarter totaled $18.5 million and $8.7 million, respectively. Merchant fees grew by 8.1% due to higher transaction volumes, and totaled $6.5 million for the quarter, while credit card fees grew 6.2% and totaled $5.8 million. Trust fees for the quarter increased $1.6 million, or 7.1%, over the same quarter last year, resulting mainly from growth in personal, institutional and corporate trust fees. Deposit account fees declined $2.1 million, or 9.4%, compared to last year as overdraft fees declined by $2.9 million, but were partly offset by growth in various other deposit fees of $759 thousand, or 29.2%. Capital market fees for the current quarter decreased $446 thousand, to $5.1 million, while consumer brokerage services revenue increased $108 thousand, or 4.6%. Loan fees and sales revenue was down $676 thousand, or 33.2%, from the same period last year mainly due to a decline in mortgage banking revenue (mainly because the Company is retaining first mortgage loan originations in the current year). Other non-interest income for the current quarter increased $3.5 million over the same quarter last year and included higher leasing revenue, letter of credit fees, and tax credit sales income. Also, in the third quarter of 2011, the Company wrote down the value of certain banking properties held for sale by $1.7 million.
Non-interest income for the first nine months of 2012 was $296.3 million compared to $298.9 million in the first nine months of 2011, resulting in a decrease of $2.6 million, or .9%. Bank card fees decreased $8.3 million, or 6.8%, as a result of a $19.7 million, or 43.3%, decline in debit card interchange fees, partly offset by growth in corporate card and merchant fees of 21.4% and 9.4%, respectively. Trust fee income increased $4.1 million, or 6.2%, as a result of growth in personal and institutional trust fees. Deposit account fees decreased $2.8 million, or 4.6%, mainly due to a decline in overdraft and return item fees of $5.4 million, while various other deposit fees increased $2.4 million. Capital market fees increased $1.7 million, or 11.4%, resulting from growth in sales of mainly fixed income securities to correspondent banks and other commercial customers. Consumer brokerage services revenue decreased by $333 thousand, or 4.2%, mainly due to a decline in annuity and life insurance fee income, partly offset by growth in advisory fees. Loan fees and sales decreased $1.3 million, or 22.0%, due to a decline in mortgage banking revenue. Other non-interest income increased by $4.3 million, or 21.0%, mainly due to higher tax credit sales income, lease-related fees and letter of credit fees, in addition to the write-downs on banking properties in 2011, as mentioned above.
The cash flows from the operating, investing and financing activities of the Company resulted in a net increase in cash and cash equivalents of $51.8 million during the first nine months of 2012, as reported in the consolidated statements of cash flows in this report. Operating activities, consisting mainly of net income adjusted for certain non-cash items, provided cash flow of $295.4 million and has historically been a stable source of funds. Investing activities, which occur mainly in the loan and investment securities portfolios, used cash of $186.8 million. These activities included a net increase in loans of $489.6 million and $2.0 billion in purchases of investment securities, offset by $2.4 billion in sales, maturities and pay downs of investment securities. Financing activities used cash of $56.8 million, resulting mainly from purchases of treasury stock of $75.5 million and cash dividends paid on common stock of $60.8 million, which were partly offset by a net increase of $74.8 million in deposit accounts. Future short-term liquidity needs arising from daily operations are not expected to vary significantly, and the Company believes it will be able to meet these cash flow needs.
Wealth segment pre-tax profitability for the nine months ended September 30, 2012 increased $3.4 million, or 8.8%, over the same period in the previous year. Net interest income increased $130 thousand, or .4%, and was impacted by a $1.4 million decline in deposit interest expense, partly offset by a $901 thousand decrease in net allocated funding credits. Non-interest income increased $3.8 million, or 4.9%, over the prior year due to higher personal and institutional trust fees. Non-interest expense increased $370 thousand, or .6%, mainly due to higher salary and benefit costs, partly offset by lower fraud losses and legal and professional expenses.
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