10-Q
SECURITIES
AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
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(Mark
One)
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þ
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2009 OR
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o
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TRANSITION REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
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For the transition period
from
to
Commission File
No. 0-2989
COMMERCE
BANCSHARES, INC.
(Exact name of registrant as
specified in its charter)
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Missouri
(State
of Incorporation)
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43-0889454
(IRS
Employer Identification No.)
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1000 Walnut,
Kansas City, MO
(Address
of principal executive offices)
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64106
(Zip
Code)
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(816) 234-2000
(Registrants
telephone number, including area code)
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Indicate by check mark whether the
registrant (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for
the past 90 days.
Yes þ No o
Indicate by check mark whether the
registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required
to be submitted and posted pursuant to Rule 405 of
Regulation S-T
(§ 232.405 of this chapter) during the preceding
12 months (or for such shorter period that the registrant
was required to submit and post such files).
Yes o No o
Indicate by check mark whether the
registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer, or a smaller reporting company. See the
definitions of large accelerated filer,
accelerated filer and smaller reporting
company in Rule
12b-2 of the
Exchange Act. (Check one):
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Large
accelerated
filer þ
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Accelerated
filer o
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Non-accelerated
filer o
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Smaller reporting
company o
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Indicate by check mark whether the
registrant is a shell company (as defined in
Rule 12b-2
of the Exchange Act).
Yes o No þ
As of April 30, 2009, the
registrant had outstanding 76,335,051 shares of its
$5 par value common stock, registrants only class of
common stock.
Commerce
Bancshares, Inc. and Subsidiaries
Form 10-Q
2
PART I:
FINANCIAL INFORMATION
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Item 1.
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FINANCIAL
STATEMENTS
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Commerce
Bancshares, Inc. and Subsidiaries
CONSOLIDATED
BALANCE SHEETS
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March 31
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December 31
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2009
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2008
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(Unaudited)
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(In thousands)
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ASSETS
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Loans
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$
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10,940,869
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$
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11,283,246
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Allowance for loan losses
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(180,868
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)
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(172,619
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Net loans
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10,760,001
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11,110,627
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Loans held for sale
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502,440
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361,298
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Investment securities:
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Available for sale ($535,826,000 and $525,993,000 pledged in
2009 and 2008, respectively, to secure structured repurchase
agreements)
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4,550,908
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3,630,753
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Trading
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15,808
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9,463
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Non-marketable
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140,077
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139,900
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Total investment securities
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4,706,793
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3,780,116
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Federal funds sold and securities purchased under agreements to
resell
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43,050
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169,475
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Interest earning deposits with banks
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592,162
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638,158
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Cash and due from banks
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374,748
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491,723
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Land, buildings and equipment, net
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407,064
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411,168
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Goodwill
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125,585
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125,585
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Other intangible assets, net
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16,339
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17,191
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Other assets
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419,275
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427,106
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Total assets
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$
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17,947,457
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$
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17,532,447
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LIABILITIES AND EQUITY
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Deposits:
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Non-interest bearing demand
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$
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1,507,168
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$
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1,375,000
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Savings, interest checking and money market
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8,128,465
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7,610,306
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Time open and C.D.s of less than $100,000
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2,119,252
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2,067,266
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Time open and C.D.s of $100,000 and over
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2,202,726
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1,842,161
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Total deposits
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13,957,611
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12,894,733
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Federal funds purchased and securities sold under agreements to
repurchase
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1,001,552
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1,026,537
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Other borrowings
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847,275
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1,747,781
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Other liabilities
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530,978
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283,929
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Total liabilities
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16,337,416
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15,952,980
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Commerce Bancshares, Inc. stockholders equity:
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Preferred stock, $1 par value
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Authorized and unissued 2,000,000 shares
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Common stock, $5 par value
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Authorized 100,000,000 shares; issued
76,110,061 shares in 2009 and 75,901,097 shares in 2008
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380,550
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379,505
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Capital surplus
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623,236
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621,458
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Retained earnings
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645,736
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633,159
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Treasury stock of 26,718 shares in 2009 and
18,789 shares in 2008, at cost
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(990
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(761
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Accumulated other comprehensive loss
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(40,920
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(56,729
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Total Commerce Bancshares, Inc. stockholders equity
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1,607,612
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1,576,632
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Non-controlling interest
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2,429
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2,835
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Total equity
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1,610,041
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1,579,467
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Total liabilities and equity
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$
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17,947,457
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$
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17,532,447
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See accompanying notes to consolidated financial
statements.
3
Commerce
Bancshares, Inc. and Subsidiaries
CONSOLIDATED
STATEMENTS OF INCOME
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For the Three Months
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Ended March 31
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(In thousands, except per share data)
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2009
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2008
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(Unaudited)
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INTEREST INCOME
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Interest and fees on loans
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$
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142,409
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$
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174,338
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Interest and fees on loans held for sale
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3,432
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3,917
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Interest on investment securities
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47,470
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40,897
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Interest on federal funds sold and securities purchased under
agreements to resell
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114
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3,401
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Interest on deposits with banks
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449
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Total interest income
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193,874
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222,553
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INTEREST EXPENSE
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Interest on deposits:
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Savings, interest checking and money market
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8,053
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20,614
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Time open and C.D.s of less than $100,000
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14,747
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25,259
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Time open and C.D.s of $100,000 and over
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11,300
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17,300
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Interest on federal funds purchased and securities sold under
agreements to repurchase
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1,230
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11,752
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Interest on other borrowings
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8,529
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7,521
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Total interest expense
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43,859
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82,446
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Net interest income
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150,015
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140,107
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Provision for loan losses
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43,168
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20,000
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Net interest income after provision for loan losses
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106,847
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120,107
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NON-INTEREST INCOME
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Deposit account charges and other fees
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25,592
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27,075
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Bank card transaction fees
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27,168
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26,308
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Trust fees
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18,873
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20,113
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Trading account profits and commissions
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5,396
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4,164
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Consumer brokerage services
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3,308
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3,409
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Loan fees and sales
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2,961
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2,140
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Other
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9,133
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8,951
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Total non-interest income
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92,431
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92,160
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INVESTMENT SECURITIES GAINS (LOSSES), NET
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Impairment losses on securities
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(21,885
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)
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Less noncredit-related losses on securities not expected to be
sold
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21,332
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Net impairment losses
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(553
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)
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Realized gains (losses) on sales and fair value adjustments
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(1,619
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)
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23,323
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Investment securities gains (losses), net
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(2,172
|
)
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|
23,323
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NON-INTEREST EXPENSE
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Salaries and employee benefits
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86,753
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83,010
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Net occupancy
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11,812
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12,069
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Equipment
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6,322
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5,907
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Supplies and communication
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8,684
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8,724
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Data processing and software
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14,347
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13,563
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Marketing
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|
4,347
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5,287
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Indemnification obligation
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(8,808
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)
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Other
|
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20,621
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20,429
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Total non-interest expense
|
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152,886
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140,181
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Income before income taxes
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44,220
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95,409
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Less income taxes
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13,592
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|
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30,668
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Net income before non-controlling interest
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30,628
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64,741
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Less non-controlling interest expense (income)
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(208
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)
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574
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Net income attributable to Commerce Bancshares, Inc.
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$
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30,836
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$
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64,167
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Less earnings allocated to unvested restricted stockholders
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134
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|
210
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Net income allocated to common stockholders
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$
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30,702
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$
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63,957
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Net income per common share basic
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$
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.41
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$
|
.85
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Net income per common share diluted
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$
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.40
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$
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.84
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See accompanying notes to consolidated financial
statements.
4
Commerce
Bancshares, Inc. and Subsidiaries
CONSOLIDATED
STATEMENTS OF CHANGES IN EQUITY
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Commerce Bancshares, Inc. Shareholders
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Accumulated
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Other
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Non-
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(In thousands,
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Common
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Capital
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Retained
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Treasury
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Comprehensive
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Controlling
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except per share data)
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Stock
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Surplus
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Earnings
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Stock
|
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Income (Loss)
|
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Interest
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Total
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|
|
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(Unaudited)
|
|
|
Balance January 1, 2009
|
|
$
|
379,505
|
|
|
$
|
621,458
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|
|
$
|
633,159
|
|
|
$
|
(761
|
)
|
|
$
|
(56,729
|
)
|
|
$
|
2,835
|
|
|
$
|
1,579,467
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
30,836
|
|
|
|
|
|
|
|
|
|
|
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(208
|
)
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|
|
30,628
|
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Change in unrealized gain (loss) related to available for sale
securities for which a portion of an other-than-temporary
impairment has been recorded in earnings, net of tax
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
483
|
|
|
|
|
|
|
|
483
|
|
Change in unrealized gain (loss) on all other available for sale
securities, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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14,901
|
|
|
|
|
|
|
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14,901
|
|
Amortization of pension loss, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
425
|
|
|
|
|
|
|
|
425
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Total comprehensive income
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
46,437
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Distributions to non-controlling interest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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(198
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)
|
|
|
(198
|
)
|
Purchase of treasury stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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(357
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)
|
|
|
|
|
|
|
|
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|
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(357
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)
|
Issuance of stock under open market sale program
|
|
|
15
|
|
|
|
(9
|
)
|
|
|
|
|
|
|
|
|
|
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|
|
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6
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Issuance of stock under purchase and equity compensation plans
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266
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|
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|
1,001
|
|
|
|
|
|
|
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(42
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)
|
|
|
|
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|
|
|
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1,225
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Net tax benefit related to equity compensation plans
|
|
|
|
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|
80
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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80
|
|
Stock-based compensation
|
|
|
|
|
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1,640
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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1,640
|
|
Issuance of nonvested stock awards
|
|
|
764
|
|
|
|
(934
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)
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|
|
|
|
|
|
170
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends paid ($.240 per share)
|
|
|
|
|
|
|
|
|
|
|
(18,259
|
)
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
(18,259
|
)
|
|
|
Balance March 31, 2009
|
|
$
|
380,550
|
|
|
$
|
623,236
|
|
|
$
|
645,736
|
|
|
$
|
(990
|
)
|
|
$
|
(40,920
|
)
|
|
$
|
2,429
|
|
|
$
|
1,610,041
|
|
|
|
Balance January 1, 2008
|
|
$
|
359,694
|
|
|
$
|
475,220
|
|
|
$
|
669,142
|
|
|
$
|
(2,477
|
)
|
|
$
|
26,107
|
|
|
$
|
2,470
|
|
|
$
|
1,530,156
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
64,167
|
|
|
|
|
|
|
|
|
|
|
|
574
|
|
|
|
64,741
|
|
Change in unrealized gain (loss) on available for sale
securities, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,984
|
|
|
|
|
|
|
|
2,984
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
67,725
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributions to non-controlling interest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(197
|
)
|
|
|
(197
|
)
|
Purchase of treasury stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5,017
|
)
|
|
|
|
|
|
|
|
|
|
|
(5,017
|
)
|
Issuance of stock under purchase and equity compensation plans
|
|
|
|
|
|
|
(2,114
|
)
|
|
|
|
|
|
|
6,149
|
|
|
|
|
|
|
|
|
|
|
|
4,035
|
|
Net tax benefit related to equity compensation plans
|
|
|
|
|
|
|
307
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
307
|
|
Stock-based compensation
|
|
|
|
|
|
|
1,757
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,757
|
|
Issuance of nonvested stock awards
|
|
|
88
|
|
|
|
(760
|
)
|
|
|
|
|
|
|
672
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends paid ($.238 per share)
|
|
|
|
|
|
|
|
|
|
|
(17,985
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(17,985
|
)
|
Adoption of SFAS 157
|
|
|
|
|
|
|
|
|
|
|
903
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
903
|
|
Adoption of EITF
06-4
|
|
|
|
|
|
|
|
|
|
|
(716
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(716
|
)
|
|
|
Balance March 31, 2008
|
|
$
|
359,782
|
|
|
$
|
474,410
|
|
|
$
|
715,511
|
|
|
$
|
(673
|
)
|
|
$
|
29,091
|
|
|
$
|
2,847
|
|
|
$
|
1,580,968
|
|
|
|
See accompanying notes to
consolidated financial statements.
5
Commerce
Bancshares, Inc. and Subsidiaries
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months
|
|
|
|
Ended March 31
|
|
(In thousands)
|
|
2009
|
|
|
2008
|
|
|
|
|
|
(Unaudited)
|
|
|
OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Net income attributable to Commerce Bancshares, Inc.
|
|
$
|
30,836
|
|
|
$
|
64,167
|
|
Adjustments to reconcile net income to net cash provided by
operating activities:
|
|
|
|
|
|
|
|
|
Provision for loan losses
|
|
|
43,168
|
|
|
|
20,000
|
|
Provision for depreciation and amortization
|
|
|
12,659
|
|
|
|
12,880
|
|
Amortization (accretion) of investment security
premiums/discounts, net
|
|
|
(300
|
)
|
|
|
1,444
|
|
Investment securities (gains) losses, net(A)
|
|
|
2,172
|
|
|
|
(23,323
|
)
|
Gain on sale of branch
|
|
|
(644
|
)
|
|
|
|
|
Net gains on sales of loans held for sale
|
|
|
(760
|
)
|
|
|
(1,169
|
)
|
Originations of loans held for sale
|
|
|
(188,954
|
)
|
|
|
(145,311
|
)
|
Proceeds from sales of loans held for sale
|
|
|
49,770
|
|
|
|
54,187
|
|
Net (increase) decrease in trading securities
|
|
|
(23,835
|
)
|
|
|
13,990
|
|
Stock-based compensation
|
|
|
1,640
|
|
|
|
1,757
|
|
(Increase) decrease in interest receivable
|
|
|
(634
|
)
|
|
|
7,861
|
|
Increase (decrease) in interest payable
|
|
|
3,394
|
|
|
|
(10,505
|
)
|
Increase in income taxes payable
|
|
|
13,430
|
|
|
|
32,622
|
|
Net tax benefit related to equity compensation plans
|
|
|
(80
|
)
|
|
|
(307
|
)
|
Other changes, net
|
|
|
(11,366
|
)
|
|
|
16,456
|
|
|
|
Net cash provided by (used in) operating activities
|
|
|
(69,504
|
)
|
|
|
44,749
|
|
|
|
INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Cash paid in branch sale
|
|
|
(3,494
|
)
|
|
|
|
|
Proceeds from sales of investment securities(A)
|
|
|
2,032
|
|
|
|
116,436
|
|
Proceeds from maturities/pay downs of investment securities(A)
|
|
|
235,716
|
|
|
|
292,521
|
|
Purchases of investment securities(A)
|
|
|
(855,915
|
)
|
|
|
(632,836
|
)
|
Net (increase) decrease in loans
|
|
|
307,458
|
|
|
|
(339,959
|
)
|
Purchases of land, buildings and equipment
|
|
|
(5,684
|
)
|
|
|
(11,974
|
)
|
Sales of land, buildings and equipment
|
|
|
41
|
|
|
|
145
|
|
|
|
Net cash used in investing activities
|
|
|
(319,846
|
)
|
|
|
(575,667
|
)
|
|
|
FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Net increase in non-interest bearing demand, savings, interest
checking and money market deposits
|
|
|
628,446
|
|
|
|
137,751
|
|
Net increase (decrease) in time open and C.D.s
|
|
|
414,304
|
|
|
|
(122,830
|
)
|
Net increase (decrease) in federal funds purchased and
securities sold under agreements to repurchase
|
|
|
(24,985
|
)
|
|
|
218,017
|
|
Repayment of long-term borrowings
|
|
|
(100,506
|
)
|
|
|
(1,775
|
)
|
Additional long-term borrowings
|
|
|
|
|
|
|
200,000
|
|
Net decrease in short-term borrowings
|
|
|
(800,000
|
)
|
|
|
|
|
Purchases of treasury stock
|
|
|
(357
|
)
|
|
|
(5,017
|
)
|
Issuance of stock under open market stock sale program, stock
purchase and equity compensation plans
|
|
|
1,231
|
|
|
|
4,035
|
|
Net tax benefit related to equity compensation plans
|
|
|
80
|
|
|
|
307
|
|
Cash dividends paid on common stock
|
|
|
(18,259
|
)
|
|
|
(17,985
|
)
|
|
|
Net cash provided by financing activities
|
|
|
99,954
|
|
|
|
412,503
|
|
|
|
Decrease in cash and cash equivalents
|
|
|
(289,396
|
)
|
|
|
(118,415
|
)
|
Cash and cash equivalents at beginning of year
|
|
|
1,299,356
|
|
|
|
1,328,246
|
|
|
|
Cash and cash equivalents at March 31
|
|
$
|
1,009,960
|
|
|
$
|
1,209,831
|
|
|
|
(A) Available for sale and non-marketable securities
|
|
|
|
|
|
|
|
|
|
|
Income tax net payments (refunds)
|
|
$
|
90
|
|
|
$
|
(783
|
)
|
Interest paid on deposits and borrowings
|
|
$
|
40,458
|
|
|
$
|
92,944
|
|
|
|
See accompanying notes to
consolidated financial statements.
6
Commerce
Bancshares, Inc. and Subsidiaries
|
|
1.
|
Principles
of Consolidation and Presentation
|
The accompanying consolidated financial statements include the
accounts of Commerce Bancshares, Inc. and all majority-owned
subsidiaries (the Company). The consolidated financial
statements in this report have not been audited. All significant
intercompany accounts and transactions have been eliminated.
Certain reclassifications were made to 2008 data to conform to
current year presentation. In the opinion of management, all
adjustments necessary to present fairly the financial position
and the results of operations for the interim periods have been
made. All such adjustments are of a normal recurring nature. The
results of operations for the three month period ended
March 31, 2009 are not necessarily indicative of results to
be attained for the full year or any other interim periods.
The significant accounting policies followed in the preparation
of the quarterly financial statements are disclosed in the 2008
Annual Report on
Form 10-K.
|
|
2.
|
Acquisitions
and Dispositions
|
In February 2009, the Company sold its branch in Lakin, Kansas.
In this transaction, the Company sold the bank facility and
certain deposits totaling approximately $4.7 million and
recorded a gain of $644 thousand.
During the second quarter of 2008, the Company sold its banking
branch in Independence, Kansas. In this transaction,
approximately $23.3 million in loans, $85.0 million in
deposits, and various other assets and liabilities were sold,
and the Company recorded a gain of $6.9 million.
|
|
3.
|
Loans and
Allowance for Loan Losses
|
Major classifications within the Companys loan portfolio
at March 31, 2009 and December 31, 2008 are as follows.
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31
|
|
|
December 31
|
|
(In thousands)
|
|
2009
|
|
|
2008
|
|
|
|
|
Business
|
|
$
|
3,261,293
|
|
|
$
|
3,404,371
|
|
Real estate construction and land
|
|
|
756,770
|
|
|
|
837,369
|
|
Real estate business
|
|
|
2,184,050
|
|
|
|
2,137,822
|
|
Real estate personal
|
|
|
1,610,726
|
|
|
|
1,638,553
|
|
Consumer
|
|
|
1,550,642
|
|
|
|
1,615,455
|
|
Home equity
|
|
|
496,177
|
|
|
|
504,069
|
|
Student
|
|
|
350,758
|
|
|
|
358,049
|
|
Consumer credit card
|
|
|
725,752
|
|
|
|
779,709
|
|
Overdrafts
|
|
|
4,701
|
|
|
|
7,849
|
|
|
|
Total loans
|
|
$
|
10,940,869
|
|
|
$
|
11,283,246
|
|
|
|
Included in the table above are impaired loans amounting to
$110.0 million at March 31, 2009 and
$72.9 million at December 31, 2008. A loan is
considered to be impaired when, based on current information and
events, it is probable that all amounts due under the
contractual terms of the agreement will not be collected. Such
loans increased $37.1 million in the first quarter of 2009,
mainly because of higher levels of impaired construction and
land real estate loans. At March 31, 2009, approximately
10% of this construction portfolio was considered to be impaired.
7
The Companys portfolio of construction loans amounted to
6.9% of total loans outstanding at March 31, 2009. The
table below shows the Companys holdings of the major types
of construction loans.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31
|
|
|
|
|
|
December 31
|
|
|
|
|
(In thousands)
|
|
2009
|
|
|
% of Total
|
|
|
2008
|
|
|
% of Total
|
|
|
|
|
Residential land and land development
|
|
$
|
220,735
|
|
|
|
29.2
|
%
|
|
$
|
246,335
|
|
|
|
29.4
|
%
|
Residential construction
|
|
|
141,482
|
|
|
|
18.7
|
|
|
|
141,405
|
|
|
|
16.9
|
|
Commercial land and land development
|
|
|
136,620
|
|
|
|
18.0
|
|
|
|
139,726
|
|
|
|
16.7
|
|
Commercial construction
|
|
|
257,933
|
|
|
|
34.1
|
|
|
|
309,903
|
|
|
|
37.0
|
|
|
|
Total real estate-construction and land loans
|
|
$
|
756,770
|
|
|
|
100.0
|
%
|
|
$
|
837,369
|
|
|
|
100.0
|
%
|
|
|
Total business real estate loans were $2.2 billion at
March 31, 2009 and comprised 20.0% of the Companys
total loan portfolio. Approximately 42% of these loans were for
owner-occupied real estate properties, which present lower risk
profiles. These loans include properties such as manufacturing
and warehouse buildings, small office and medical buildings,
churches, hotels and motels, shopping centers, and other
commercial properties.
In addition to its basic portfolio, the Company originates other
loans which it intends to sell in secondary markets. Loans
classified as held for sale primarily consist of loans
originated to students while attending colleges and
universities. The Company maintains contracts with various
student loan agencies to sell student loans when the student
graduates and the loan enters into repayment status. Also
included as held for sale are certain fixed rate residential
mortgage loans which are sold in the secondary market, generally
within three months of origination. The following table presents
information about loans held for sale, including impairment
losses resulting from declines in fair value, which are further
discussed in Note 14 on Fair Value Measurements. Previously
recognized impairment losses amounting to $867 thousand were
reversed during the current quarter, as certain impaired loans
were sold in accordance with contractual terms.
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31
|
|
|
December 31
|
|
(In thousands)
|
|
2009
|
|
|
2008
|
|
|
|
|
Balance outstanding:
|
|
|
|
|
|
|
|
|
Student
|
|
$
|
483,967
|
|
|
$
|
358,556
|
|
Residential mortgage
|
|
|
18,473
|
|
|
|
2,742
|
|
|
|
Total loans held for sale balance
|
|
$
|
502,440
|
|
|
$
|
361,298
|
|
|
|
Decline in fair value below cost
|
|
$
|
(8,531
|
)
|
|
$
|
(9,398
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended March 31
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
Net gains on sales:
|
|
|
|
|
|
|
|
|
Student
|
|
$
|
221
|
|
|
$
|
946
|
|
Residential mortgage
|
|
|
539
|
|
|
|
223
|
|
|
|
Total gains on sales of loans held for sale, net
|
|
$
|
760
|
|
|
$
|
1,169
|
|
|
|
8
The following is a summary of the allowance for loan losses for
the three months ended March 31, 2009 and 2008.
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
2009
|
|
|
2008
|
|
|
|
|
Balance, January 1
|
|
$
|
172,619
|
|
|
$
|
133,586
|
|
|
|
Additions:
|
|
|
|
|
|
|
|
|
Provision for loan losses
|
|
|
43,168
|
|
|
|
20,000
|
|
|
|
Total additions
|
|
|
43,168
|
|
|
|
20,000
|
|
|
|
Deductions:
|
|
|
|
|
|
|
|
|
Loans charged off
|
|
|
38,420
|
|
|
|
16,980
|
|
Less recoveries on loans
|
|
|
3,501
|
|
|
|
5,083
|
|
|
|
Net loans charged off
|
|
|
34,919
|
|
|
|
11,897
|
|
|
|
Balance, March 31
|
|
$
|
180,868
|
|
|
$
|
141,689
|
|
|
|
Investment securities, at fair value, consisted of the following
at March 31, 2009 and December 31, 2008.
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31
|
|
|
December 31
|
|
(In thousands)
|
|
2009
|
|
|
2008
|
|
|
|
|
Available for sale:
|
|
|
|
|
|
|
|
|
U.S. government and federal agency obligations
|
|
$
|
11,997
|
|
|
$
|
11,594
|
|
Government-sponsored enterprise obligations
|
|
|
153,031
|
|
|
|
141,957
|
|
State and municipal obligations
|
|
|
856,699
|
|
|
|
719,752
|
|
Agency mortgage-backed securities
|
|
|
2,321,134
|
|
|
|
1,711,404
|
|
Non-agency mortgage-backed securities
|
|
|
593,900
|
|
|
|
620,479
|
|
Other asset-backed securities
|
|
|
374,946
|
|
|
|
253,756
|
|
Other debt securities
|
|
|
192,328
|
|
|
|
121,861
|
|
Equity securities
|
|
|
46,873
|
|
|
|
49,950
|
|
|
|
Total available for sale
|
|
|
4,550,908
|
|
|
|
3,630,753
|
|
|
|
Trading
|
|
|
15,808
|
|
|
|
9,463
|
|
Non-marketable
|
|
|
140,077
|
|
|
|
139,900
|
|
|
|
Total investment securities
|
|
$
|
4,706,793
|
|
|
$
|
3,780,116
|
|
|
|
Most of the Companys investment securities are classified
as available for sale, and this portfolio is discussed in more
detail below. Securities which are classified as non-marketable
include Federal Home Loan Bank (FHLB) stock and Federal Reserve
Bank (FRB) stock held for debt and regulatory purposes, which
totaled $85.8 million and $84.4 million at
March 31, 2009 and December 31, 2008, respectively.
Investment in FRB stock is based on the capital structure of the
investing bank, and investment in FHLB stock is tied to the
level of borrowings from the FHLB. Non-marketable securities
also include private equity investments, which amounted to
$54.2 million and $55.4 million at March 31, 2009
and December 31, 2008, respectively.
9
A summary of the available for sale investment securities by
maturity groupings as of March 31, 2009 is shown below. The
investment portfolio includes agency mortgage-backed securities,
which are guaranteed by government-sponsored agencies such as
the FHLMC, FNMA and GNMA, and non-agency mortgage-backed
securities which have no guarantee. Also included are certain
other asset-backed securities, which are primarily
collateralized by credit cards, automobiles, and commercial
loans. These securities differ from traditional debt securities
primarily in that they may have uncertain maturity dates and are
priced based on estimated prepayment rates on the underlying
collateral. The Company does not have exposure to subprime
originated mortgage-backed or collateralized debt obligation
instruments.
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortized
|
|
|
Fair
|
|
(Dollars in thousands)
|
|
Cost
|
|
|
Value
|
|
|
|
|
U.S. government and federal agency obligations:
|
|
|
|
|
|
|
|
|
Within 1 year
|
|
$
|
700
|
|
|
$
|
707
|
|
After 1 but within 5 years
|
|
|
10,351
|
|
|
|
11,290
|
|
|
|
Total U.S. government and federal agency obligations
|
|
|
11,051
|
|
|
|
11,997
|
|
|
|
Government-sponsored enterprise obligations:
|
|
|
|
|
|
|
|
|
Within 1 year
|
|
|
17,852
|
|
|
|
18,009
|
|
After 1 but within 5 years
|
|
|
131,392
|
|
|
|
135,022
|
|
|
|
Total government-sponsored enterprise obligations
|
|
|
149,244
|
|
|
|
153,031
|
|
|
|
State and municipal obligations:
|
|
|
|
|
|
|
|
|
Within 1 year
|
|
|
120,399
|
|
|
|
121,667
|
|
After 1 but within 5 years
|
|
|
355,283
|
|
|
|
366,508
|
|
After 5 but within 10 years
|
|
|
125,704
|
|
|
|
126,437
|
|
After 10 years
|
|
|
242,754
|
|
|
|
242,087
|
|
|
|
Total state and municipal obligations
|
|
|
844,140
|
|
|
|
856,699
|
|
|
|
Mortgage and asset-backed securities:
|
|
|
|
|
|
|
|
|
Agency mortgage-backed securities
|
|
|
2,277,200
|
|
|
|
2,321,134
|
|
Non-agency mortgage-backed securities
|
|
|
712,568
|
|
|
|
593,900
|
|
Other asset-backed securities
|
|
|
394,399
|
|
|
|
374,946
|
|
|
|
Total mortgage and asset-backed securities
|
|
|
3,384,167
|
|
|
|
3,289,980
|
|
|
|
Other debt securities:
|
|
|
|
|
|
|
|
|
After 1 but within 5 years
|
|
|
176,519
|
|
|
|
183,867
|
|
After 5 but within 10 years
|
|
|
8,699
|
|
|
|
8,461
|
|
|
|
Total other debt securities
|
|
|
185,218
|
|
|
|
192,328
|
|
|
|
Equity securities
|
|
|
11,005
|
|
|
|
46,873
|
|
|
|
Total available for sale investment securities
|
|
$
|
4,584,825
|
|
|
$
|
4,550,908
|
|
|
|
Included in state and municipal obligations are
$171.4 million, at fair value, of auction rate securities
(ARS), which were purchased from bank customers in the third
quarter of 2008. These bonds are normally traded in a
competitive bidding process at weekly/monthly auctions. These
auctions have not performed since early 2008, and this market
has not recovered. Interest is currently being paid at the
maximum failed auction rates. Included in equity securities is
common stock held by the holding company, Commerce Bancshares,
Inc. (the Parent), with a fair value of $40.6 million at
March 31, 2009.
10
For securities classified as available for sale, the following
table shows the unrealized gains and losses (pre-tax) in
accumulated other comprehensive income, by security type.
Included in gross unrealized losses are other-than-temporary
impairment (OTTI) losses of $21.3 million relating to
certain non-agency mortgage-backed securities, which represent
the noncredit-related portion of the overall impairment amount.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
|
|
|
Gross
|
|
|
|
|
|
|
Amortized
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
Fair
|
|
(In thousands)
|
|
Cost
|
|
|
Gains
|
|
|
Losses
|
|
|
Value
|
|
|
|
|
March 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. government and federal agency obligations
|
|
$
|
11,051
|
|
|
$
|
948
|
|
|
$
|
(2
|
)
|
|
$
|
11,997
|
|
Government-sponsored enterprise obligations
|
|
|
149,244
|
|
|
|
3,787
|
|
|
|
|
|
|
|
153,031
|
|
State and municipal obligations
|
|
|
844,140
|
|
|
|
15,733
|
|
|
|
(3,174
|
)
|
|
|
856,699
|
|
Mortgage and asset-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agency mortgage-backed securities
|
|
|
2,277,200
|
|
|
|
45,565
|
|
|
|
(1,631
|
)
|
|
|
2,321,134
|
|
Non-agency mortgage-backed securities
|
|
|
712,568
|
|
|
|
1,417
|
|
|
|
(120,085
|
)
|
|
|
593,900
|
|
Other asset-backed securities
|
|
|
394,399
|
|
|
|
1,293
|
|
|
|
(20,746
|
)
|
|
|
374,946
|
|
|
|
Total mortgage and asset-backed securities
|
|
|
3,384,167
|
|
|
|
48,275
|
|
|
|
(142,462
|
)
|
|
|
3,289,980
|
|
|
|
Other debt securities
|
|
|
185,218
|
|
|
|
7,849
|
|
|
|
(739
|
)
|
|
|
192,328
|
|
Equity securities
|
|
|
11,005
|
|
|
|
35,868
|
|
|
|
|
|
|
|
46,873
|
|
|
|
Total
|
|
$
|
4,584,825
|
|
|
$
|
112,460
|
|
|
$
|
(146,377
|
)
|
|
$
|
4,550,908
|
|
|
|
December 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. government and federal agency obligations
|
|
$
|
10,478
|
|
|
$
|
1,116
|
|
|
$
|
|
|
|
$
|
11,594
|
|
Government-sponsored enterprise obligations
|
|
|
135,825
|
|
|
|
6,132
|
|
|
|
|
|
|
|
141,957
|
|
State and municipal obligations
|
|
|
715,421
|
|
|
|
10,794
|
|
|
|
(6,463
|
)
|
|
|
719,752
|
|
Mortgage and asset-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agency mortgage-backed securities
|
|
|
1,685,821
|
|
|
|
26,609
|
|
|
|
(1,026
|
)
|
|
|
1,711,404
|
|
Non-agency mortgage-backed securities
|
|
|
742,090
|
|
|
|
816
|
|
|
|
(122,427
|
)
|
|
|
620,479
|
|
Other asset-backed securities
|
|
|
275,641
|
|
|
|
113
|
|
|
|
(21,998
|
)
|
|
|
253,756
|
|
|
|
Total mortgage and asset-backed securities
|
|
|
2,703,552
|
|
|
|
27,538
|
|
|
|
(145,451
|
)
|
|
|
2,585,639
|
|
|
|
Other debt securities
|
|
|
116,527
|
|
|
|
5,404
|
|
|
|
(70
|
)
|
|
|
121,861
|
|
Equity securities
|
|
|
7,680
|
|
|
|
42,270
|
|
|
|
|
|
|
|
49,950
|
|
|
|
Total
|
|
$
|
3,689,483
|
|
|
$
|
93,254
|
|
|
$
|
(151,984
|
)
|
|
$
|
3,630,753
|
|
|
|
The Company conducts periodic reviews to identify and evaluate
each investment that has an unrealized loss, in accordance with
FASB Staff Position (FSP)
No. FAS 115-1,
The Meaning of Other-Than-Temporary Impairment and its
Application to Certain Investments. In March 2009, the
Company adopted FSP
No. FAS 115-2
and
FAS 124-2,
Recognition and Presentation of Other-Than-Temporary
Impairments, which changed the accounting requirements for
OTTI for debt securities, and, in certain prescribed
circumstances, separated the amount of total impairment into
credit and noncredit-related amounts.
The Companys impairment policy requires a review of all
securities for which fair value is less than amortized cost.
Special emphasis and analysis is placed on securities whose
credit rating has fallen below A3/A-, whose fair values have
fallen more than 20% below purchase price for an extended period
of time, or have been identified based on managements
judgment. These securities are placed on a watch list, and for
all
11
such securities, detailed cash flow models are prepared which
use inputs specific to each security. Inputs to these models
include factors such as cash flow received, contractual payments
required, and various other information related to the
underlying collateral (including current delinquencies),
collateral loss severity rates (including loan to values),
expected delinquency rates, credit support from other tranches,
and prepayment speeds. Stress tests are performed at varying
levels of delinquency rates, prepayment speeds and loss
severities in order to gauge probable ranges of credit loss.
Prior to March 2009, the Company had not incurred OTTI on its
debt securities.
In March 2009, the Company recorded OTTI on four non-agency
mortgage-backed securities, having an aggregate par value of
$66.6 million. The credit portion of the impairment totaled
$553 thousand and was recorded in current earnings. The
noncredit-related portion of the impairment totaled
$21.3 million on a pre-tax basis, and has been recognized
in other comprehensive income. The Company does not intend to
sell these securities and believes it is not more likely than
not that it will be required to sell the securities before the
recovery of their amortized cost.
The credit portion of the loss on these four securities was
based on the cash flows projected to be received over the
estimated life of the securities, discounted at present value,
and compared to the current amortized cost bases of the
securities. Significant inputs to the cash flow models used to
calculate the credit losses on these securities included the
following:
|
|
|
|
Significant Inputs
|
|
Range
|
|
|
Average collateral loan to value
|
|
48% - 74%
|
% of loans delinquent greater than 60 days
|
|
.53% - 13.9%
|
Credit support
|
|
3.9% - 13.4%
|
Lowest credit rating per bond
|
|
B - Caa1
|
|
|
Additional OTTI on these and other securities may arise in
future periods due to further deterioration in the general
economy and national housing markets, which contribute to
changing cash flows, loss severities and delinquency levels of
the securities underlying collateral, which would
negatively affect the Companys financial results.
Securities with unrealized losses recorded in accumulated other
comprehensive income are shown in the table below, along with
the length of the impairment period. The table includes the four
securities for which a portion of an other-than-temporary
impairment has been recognized in other comprehensive income.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than 12 months
|
|
|
12 months or longer
|
|
|
Total
|
|
|
|
|
|
|
Unrealized
|
|
|
|
|
|
Unrealized
|
|
|
|
|
|
Unrealized
|
|
(In thousands)
|
|
Fair Value
|
|
|
Losses
|
|
|
Fair Value
|
|
|
Losses
|
|
|
Fair Value
|
|
|
Losses
|
|
|
|
|
At March 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. government and federal agency obligations
|
|
$
|
1,508
|
|
|
$
|
2
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
1,508
|
|
|
$
|
2
|
|
State and municipal obligations
|
|
|
236,197
|
|
|
|
3,151
|
|
|
|
406
|
|
|
|
23
|
|
|
|
236,603
|
|
|
|
3,174
|
|
Mortgage and asset-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agency mortgage-backed securities
|
|
|
167,746
|
|
|
|
1,630
|
|
|
|
102
|
|
|
|
1
|
|
|
|
167,848
|
|
|
|
1,631
|
|
Non-agency mortgage-backed securities
|
|
|
258,296
|
|
|
|
53,821
|
|
|
|
277,229
|
|
|
|
66,264
|
|
|
|
535,525
|
|
|
|
120,085
|
|
Other asset-backed securities
|
|
|
209,531
|
|
|
|
12,318
|
|
|
|
19,278
|
|
|
|
8,428
|
|
|
|
228,809
|
|
|
|
20,746
|
|
|
|
Total mortgage and asset-backed securities
|
|
|
635,573
|
|
|
|
67,769
|
|
|
|
296,609
|
|
|
|
74,693
|
|
|
|
932,182
|
|
|
|
142,462
|
|
|
|
Other debt securities
|
|
|
19,624
|
|
|
|
739
|
|
|
|
|
|
|
|
|
|
|
|
19,624
|
|
|
|
739
|
|
|
|
Total
|
|
$
|
892,902
|
|
|
$
|
71,661
|
|
|
$
|
297,015
|
|
|
$
|
74,716
|
|
|
$
|
1,189,917
|
|
|
$
|
146,377
|
|
|
|
12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than 12 months
|
|
|
12 months or longer
|
|
|
Total
|
|
|
|
|
|
|
Unrealized
|
|
|
|
|
|
Unrealized
|
|
|
|
|
|
Unrealized
|
|
(In thousands)
|
|
Fair Value
|
|
|
Losses
|
|
|
Fair Value
|
|
|
Losses
|
|
|
Fair Value
|
|
|
Losses
|
|
|
|
|
At December 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
State and municipal obligations
|
|
$
|
175,770
|
|
|
$
|
6,457
|
|
|
$
|
369
|
|
|
$
|
6
|
|
|
$
|
176,139
|
|
|
$
|
6,463
|
|
Mortgage and asset-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agency mortgage-backed securities
|
|
|
183,577
|
|
|
|
1,003
|
|
|
|
4,664
|
|
|
|
23
|
|
|
|
188,241
|
|
|
|
1,026
|
|
Non-agency mortgage-backed securities
|
|
|
412,002
|
|
|
|
95,153
|
|
|
|
176,013
|
|
|
|
27,274
|
|
|
|
588,015
|
|
|
|
122,427
|
|
Other asset-backed securities
|
|
|
216,187
|
|
|
|
16,696
|
|
|
|
22,514
|
|
|
|
5,302
|
|
|
|
238,701
|
|
|
|
21,998
|
|
|
|
Total mortgage and asset-backed securities
|
|
|
811,766
|
|
|
|
112,852
|
|
|
|
203,191
|
|
|
|
32,599
|
|
|
|
1,014,957
|
|
|
|
145,451
|
|
|
|
Other debt securities
|
|
|
2,691
|
|
|
|
70
|
|
|
|
|
|
|
|
|
|
|
|
2,691
|
|
|
|
70
|
|
|
|
Total
|
|
$
|
990,227
|
|
|
$
|
119,379
|
|
|
$
|
203,560
|
|
|
$
|
32,605
|
|
|
$
|
1,193,787
|
|
|
$
|
151,984
|
|
|
|
Out of the total available for sale portfolio, consisting of
approximately 1,000 individual securities at March 31,
2009, 253 securities were temporarily impaired, of which 43
securities, or 7% of the portfolio value, have been in a loss
position for 12 months or longer.
The unrealized losses on the Companys investments, as
shown in the preceding tables, are largely contained in the
portfolio of non-agency mortgage-backed securities. These
securities are not guaranteed by an outside agency and are
dependent on payments received from the underlying mortgage
collateral. While all of these securities, at purchase date,
were comprised of senior tranches and were highly rated by
various rating agencies, the adverse housing market, liquidity
pressures and overall economic climate has resulted in low fair
values for these securities. Also, as mentioned above, the
Company maintains a watch list comprised mostly of these
securities, and has recorded OTTI losses on four of these
securities. The Company continues to closely monitor the
performance of these securities. State and municipal obligations
and agency mortgage-backed securities have smaller unrealized
losses, due to the nature of the bonds and the guarantee
provided to agency mortgage-backed securities, while the fair
values of other asset-backed securities have been depressed to
some degree by the current economic recession and its impact to
the consumer. Most of the ARS held by the Company, which are
included in state and municipal obligations, have Moodys
credit ratings of A3 or higher and Fitch ratings of A or higher.
Gross unrealized losses on ARS were approximately $921 thousand
at March 31, 2009, or 29% of the overall gross unrealized
loss on state and municipal obligations, and related mainly to
bonds secured by government guaranteed student loans.
The Company does not intend to sell these investments and it is
not more likely than not that the Company will be required to
sell the investments before recovery of their amortized cost
bases, which may be maturity.
The following table presents proceeds from sales of securities
and the components of investment securities gains and losses
which have been recognized in earnings.
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three
|
|
|
|
Months Ended
|
|
|
|
March 31
|
|
(In thousands)
|
|
2009
|
|
|
2008
|
|
|
|
|
Proceeds from sales of available for sale securities
|
|
$
|
2,032
|
|
|
$
|
94,240
|
|
Proceeds from sales/redemption of non-marketable securities
|
|
|
|
|
|
|
22,196
|
|
|
|
Total proceeds
|
|
$
|
2,032
|
|
|
$
|
116,436
|
|
|
|
Available for sale:
|
|
|
|
|
|
|
|
|
Gains realized on sales
|
|
$
|
8
|
|
|
$
|
461
|
|
Losses realized on sales
|
|
|
|
|
|
|
(744
|
)
|
Other-than-temporary impairment recognized
|
|
|
(553
|
)
|
|
|
(1,939
|
)
|
Non-marketable:
|
|
|
|
|
|
|
|
|
Gains realized on sales/redemption
|
|
|
|
|
|
|
22,196
|
|
Fair value adjustments
|
|
|
(1,627
|
)
|
|
|
3,349
|
|
|
|
Investment securities gains (losses), net
|
|
$
|
(2,172
|
)
|
|
$
|
23,323
|
|
|
|
At March 31, 2009, securities carried at $2.7 billion
were pledged to secure public fund deposits, securities sold
under agreements to repurchase, trust funds, and borrowing
capacity at the Federal Reserve Bank. Securities pledged
13
under agreements pursuant to which the collateral may be sold or
re-pledged by the secured parties approximated
$535.8 million, while securities pledged under agreements
pursuant to which the secured parties may not sell or re-pledge
the collateral approximated $2.1 billion at March 31,
2009.
|
|
5.
|
Goodwill
and Other Intangible Assets
|
The following table presents information about the
Companys intangible assets which have estimable useful
lives.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2009
|
|
|
December 31, 2008
|
|
|
|
Gross
|
|
|
|
|
|
|
|
|
|
|
|
Gross
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying
|
|
|
Accumulated
|
|
|
Valuation
|
|
|
Net
|
|
|
Carrying
|
|
|
Accumulated
|
|
|
Valuation
|
|
|
Net
|
|
(In thousands)
|
|
Amount
|
|
|
Amortization
|
|
|
Allowance
|
|
|
Amount
|
|
|
Amount
|
|
|
Amortization
|
|
|
Allowance
|
|
|
Amount
|
|
|
|
|
Amortizable intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Core deposit premium
|
|
$
|
25,720
|
|
|
$
|
(10,285
|
)
|
|
$
|
|
|
|
$
|
15,435
|
|
|
$
|
25,720
|
|
|
$
|
(9,324
|
)
|
|
$
|
|
|
|
$
|
16,396
|
|
Mortgage servicing rights
|
|
|
2,119
|
|
|
|
(925
|
)
|
|
|
(290
|
)
|
|
|
904
|
|
|
|
1,816
|
|
|
|
(871
|
)
|
|
|
(150
|
)
|
|
|
795
|
|
|
|
Total
|
|
$
|
27,839
|
|
|
$
|
(11,210
|
)
|
|
$
|
(290
|
)
|
|
$
|
16,339
|
|
|
$
|
27,536
|
|
|
$
|
(10,195
|
)
|
|
$
|
(150
|
)
|
|
$
|
17,191
|
|
|
|
Aggregate amortization expense on intangible assets was
$1.2 million and $1.1 million, respectively, for the
three month periods ended March 31, 2009 and 2008. The
following table shows the estimated annual amortization expense
for the next five fiscal years. This expense is based on
existing asset balances and the interest rate environment as of
March 31, 2009. The Companys actual amortization
expense in any given period may be different from the estimated
amounts depending upon the acquisition of intangible assets,
changes in mortgage interest rates, prepayment rates and other
market conditions.
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
2009
|
|
$
|
3,878
|
|
2010
|
|
|
3,338
|
|
2011
|
|
|
2,800
|
|
2012
|
|
|
2,283
|
|
2013
|
|
|
1,705
|
|
|
|
Changes in the carrying amount of goodwill and net other
intangible assets for the three month period ended
March 31, 2009 is as follows.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage
|
|
|
|
|
|
|
Core Deposit
|
|
|
Servicing
|
|
(In thousands)
|
|
Goodwill
|
|
|
Premium
|
|
|
Rights
|
|
|
|
|
Balance at January 1, 2009
|
|
$
|
125,585
|
|
|
$
|
16,396
|
|
|
$
|
795
|
|
Originations
|
|
|
|
|
|
|
|
|
|
|
303
|
|
Amortization
|
|
|
|
|
|
|
(961
|
)
|
|
|
(54
|
)
|
Impairment
|
|
|
|
|
|
|
|
|
|
|
(140
|
)
|
|
|
Balance at March 31, 2009
|
|
$
|
125,585
|
|
|
$
|
15,435
|
|
|
$
|
904
|
|
|
|
Goodwill allocated to the Companys operating segments at
March 31, 2009 and December 31, 2008 is shown below.
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
Consumer segment
|
|
$
|
67,765
|
|
Commercial segment
|
|
|
57,074
|
|
Money Management segment
|
|
|
746
|
|
|
|
Total goodwill
|
|
$
|
125,585
|
|
|
|
14
The Company, as a provider of financial services, routinely
issues financial guarantees in the form of financial and
performance standby letters of credit. Standby letters of credit
are contingent commitments issued by the Company generally to
guarantee the payment or performance obligation of a customer to
a third party. While these represent a potential outlay by the
Company, a significant amount of the commitments may expire
without being drawn upon. The Company has recourse against the
customer for any amount it is required to pay to a third party
under a standby letter of credit. The letters of credit are
subject to the same credit policies, underwriting standards and
approval process as loans made by the Company. Most of the
standby letters of credit are secured and in the event of
nonperformance by the customers, the Company has rights to the
underlying collateral, which could include commercial real
estate, physical plant and property, inventory, receivables,
cash and marketable securities.
Upon issuance of standby letters of credit, the Company
recognizes a liability for the fair value of the obligation
undertaken, which is estimated to be equivalent to the amount of
fees received from the customer over the life of the agreement.
At March 31, 2009 that net liability was $3.3 million,
which will be accreted into income over the remaining life of
the respective commitments. The contractual amount of these
letters of credit, which represents the maximum potential future
payments guaranteed by the Company, was $396.5 million at
March 31, 2009.
The Company guarantees payments to holders of certain trust
preferred securities issued by two wholly owned grantor trusts.
Preferred securities issued by Breckenridge Capital
Trust I, amounting to $4.0 million are due in 2030 and
may be redeemed beginning in 2010. These securities have a
10.875% interest rate throughout their term. Securities issued
by West Pointe Statutory Trust I, amounting to
$10.0 million, are due in 2034 and may be redeemed
beginning in 2009. These securities have a variable interest
rate, which was 3.57% at March 31, 2009. The rate is based
on LIBOR, and resets on a quarterly basis. The maximum potential
future payments guaranteed by the Company, which includes future
interest and principal payments through maturity, was estimated
to be approximately $32.4 million at March 31, 2009.
At March 31, 2009, the Company had a recorded liability of
$14.1 million in principal and accrued interest to date,
representing amounts owed to the security holders.
The Company periodically enters into risk participation
agreements (RPAs) as a guarantor to other financial
institutions, in order to mitigate those institutions
credit risk associated with interest rate swaps with third
parties. The RPA stipulates that, in the event of default by the
third party on the interest rate swap, the Company will
reimburse a portion of the loss borne by the financial
institution. These interest rate swaps are normally
collateralized (generally with real property, inventories and
equipment) by the third party, which limits the credit risk
associated with the Companys RPAs. The third parties
usually have other borrowing relationships with the Company. The
Company monitors overall borrower collateral, and at
March 31, 2009, believes sufficient collateral is available
to cover potential swap losses. The Company receives a fee from
the institution at the inception of the contract, which is
recorded as a liability representing the fair value of the RPA.
Any future changes in fair value, including those due to a
change in the third partys creditworthiness, are recorded
in current earnings. The terms of the RPAs, which correspond to
the terms of the underlying swaps, range from 5 to
10 years. At March 31, 2009, the liability recorded
for guarantor RPAs was $273 thousand, and the notional amount of
the underlying swaps was $35.8 million. The maximum
potential future payment guaranteed by the Company cannot be
readily estimated, but is dependent upon the fair value of the
interest rate swaps at the time of default. If an event of
default on all contracts had occurred at March 31, 2009,
the Company would have been required to make payments of
approximately $4.0 million.
At March 31, 2009 the Company had recorded a liability of
$11.3 million representing its obligation to share certain
estimated litigation costs of Visa, Inc. (Visa). This obligation
resulted from revisions in October 2007 to Visas by-laws
affecting all member banks, as part of an overall reorganization
in which the member banks indemnified Visa on certain covered
litigation. The covered litigation related mainly to American
Express and Discover suits, which are now settled, and other
interchange litigation, which has not yet been settled. As part
of the reorganization, Visa held an initial public offering in
March 2008. An escrow account was established in conjunction
with the offering, and is being used to fund actual litigation
settlements as
15
they occur. The escrow account was funded initially with
proceeds from the offering, and subsequently with contributions
by Visa. The Companys indemnification obligation is
periodically adjusted to reflect changes in estimates of
litigation costs, and is reduced as funding occurs in the escrow
account. The Company currently anticipates that its proportional
share of eventual escrow funding will more than offset its
liability related to the Visa litigation.
The amount of net pension cost (income) for the three months
ended March 31, 2009 and 2008 is as follows.
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended
|
|
|
|
March 31
|
|
(In thousands)
|
|
2009
|
|
|
2008
|
|
|
|
|
Service cost benefits earned during the period
|
|
$
|
268
|
|
|
$
|
253
|
|
Interest cost on projected benefit obligation
|
|
|
1,363
|
|
|
|
1,294
|
|
Expected return on plan assets
|
|
|
(1,598
|
)
|
|
|
(2,000
|
)
|
Amortization of unrecognized net loss
|
|
|
675
|
|
|
|
|
|
|
|
Net periodic pension cost (income)
|
|
$
|
708
|
|
|
$
|
(453
|
)
|
|
|
Substantially all benefits under the Companys defined
benefit pension plan were frozen effective January 1, 2005.
During the first three months of 2009, the Company made no
funding contributions to its defined benefit pension plan, and
made minimal funding contributions to a supplemental executive
retirement plan (the CERP), which carries no segregated assets.
The Company has no plans to make any further contributions,
other than those related to the CERP, during the remainder of
2009. The Company recognized expense for the defined benefit
pension plan for the first three months of 2009 compared to
income in prior periods. This occurred because of lower fair
values of plan assets at the measurement date, a decline in the
anticipated rate of return on plan assets in 2009, and
amortization of prior year differences between actual and
anticipated returns on plan assets. The Company expects to
recognize additional expense during the remainder of 2009.
Statement of Financial Accounting Standards No. 158, which
the Company adopted on December 31, 2006, required
measurement of plan assets and benefit obligations as of fiscal
year end, beginning in 2008. According, the Company changed its
2008 measurement date from September 30 to December 31. It
recorded an adjustment to reflect this change on
December 31, 2008, which reduced the accrued benefit
liability and increased retained earnings by $561 thousand on a
pre-tax basis.
16
Presented below is a summary of the components used to calculate
basic and diluted earnings per share. The Company adopted FSP
No. EITF 03-6-1,
Determining Whether Instruments Granted in Share-Based
Payment Transactions Are Participating Securities, on
January 1, 2009, which requires application of the
two-class method of computing earnings per share. Under this
pronouncement, unvested share-based awards that contain
nonforfeitable rights to dividends are considered securities
which participate in undistributed earnings with common stock.
The two-class method requires the calculation of separate
earnings per share amounts for the unvested share-based awards
and for common stock. Earnings per share attributable to common
stock is shown in the table below. Prior period earnings per
share data has been retroactively adjusted to conform to the
pronouncement. Unvested share-based awards are further discussed
in Note 13 below.
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three
|
|
|
|
Months Ended
|
|
|
|
March 31
|
|
(In thousands, except per share data)
|
|
2009
|
|
|
2008
|
|
|
|
|
Basic earnings per common share:
|
|
|
|
|
|
|
|
|
Net income attributable to Commerce Bancshares, Inc.
|
|
$
|
30,836
|
|
|
$
|
64,167
|
|
Less earnings allocated to unvested restricted stockholders
|
|
|
134
|
|
|
|
212
|
|
|
|
Net income available to common stockholders
|
|
$
|
30,702
|
|
|
$
|
63,955
|
|
|
|
Distributed earnings
|
|
$
|
18,174
|
|
|
$
|
17,926
|
|
Undistributed earnings
|
|
$
|
12,528
|
|
|
$
|
46,029
|
|
|
|
Weighted average common shares outstanding
|
|
|
75,702
|
|
|
|
75,264
|
|
|
|
Distributed earnings per share
|
|
$
|
.24
|
|
|
$
|
.24
|
|
Undistributed earnings per share
|
|
|
.17
|
|
|
|
.61
|
|
|
|
Basic earnings per common share
|
|
$
|
.41
|
|
|
$
|
.85
|
|
|
|
Diluted earnings per common share:
|
|
|
|
|
|
|
|
|
Net income attributable to Commerce Bancshares, Inc.
|
|
$
|
30,836
|
|
|
$
|
64,167
|
|
Less earnings allocated to unvested restricted stockholders
|
|
|
134
|
|
|
|
210
|
|
|
|
Net income available to common stockholders
|
|
$
|
30,702
|
|
|
$
|
63,957
|
|
|
|
Distributed earnings
|
|
$
|
18,174
|
|
|
$
|
17,926
|
|
Undistributed earnings
|
|
$
|
12,528
|
|
|
$
|
46,031
|
|
|
|
Weighted average common shares outstanding
|
|
|
75,702
|
|
|
|
75,264
|
|
Net effect of the assumed exercise of stock-based
awards based on the treasury stock method using the
average market price for the respective periods
|
|
|
305
|
|
|
|
643
|
|
|
|
Weighted average diluted common shares outstanding
|
|
|
76,007
|
|
|
|
75,907
|
|
|
|
Distributed earnings per share
|
|
$
|
.24
|
|
|
$
|
.23
|
|
Undistributed earnings per share
|
|
|
.16
|
|
|
|
.61
|
|
|
|
Diluted earnings per common share
|
|
$
|
.40
|
|
|
$
|
.84
|
|
|
|
On February 27, 2009, the Company initiated an
at-the-market offering of its common stock. Pursuant to this
offering, the Company may, from time to time, offer and sell
shares of its common stock having aggregate gross sales proceeds
of up to $200 million. The proceeds of this offering will
be used for general corporate purposes. During the first quarter
of 2009, the Company issued 2,900 shares.
17
|
|
9.
|
Other
Comprehensive Income (Loss)
|
As mentioned in Note 4 on Investment Securities, the
Company adopted FSP
FAS 115-2
and
FAS 124-2,
Recognition and Presentation of Other-Than-Temporary
Impairments, in March 2009. Under its provisions,
credit-related losses on debt securities with
other-than-temporary impairment are recorded in current
earnings, while the noncredit-related portion of the overall
loss in fair value is recorded in other comprehensive income
(loss). The Company recorded other-than-temporary impairments on
certain debt securities in March 2009. Subsequent changes in the
fair value of these securities through March 31, 2009 are
shown separately in the table below.
The Companys other components of other comprehensive
income (loss) consist of the unrealized holding gains and losses
on available for sale investment securities for which an
other-than-temporary impairment has not been recorded (including
the holding gains and losses on certain securities prior to the
recognition of other-than-temporary impairment), and the
amortization of accumulated pension loss which has been
recognized in net periodic benefit cost.
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three
|
|
|
|
Months Ended
|
|
|
|
March 31
|
|
(In thousands)
|
|
2009
|
|
|
2008
|
|
|
|
|
Available for sale securities for which a portion of an
other-than-temporary impairment has been recorded in
earnings:
|
|
|
|
|
|
|
|
|
Unrealized holding gains
|
|
$
|
778
|
|
|
$
|
|
|
Income tax expense
|
|
|
295
|
|
|
|
|
|
|
|
Holding gains
|
|
|
483
|
|
|
|
|
|
|
|
Other available for sale investment securities:
|
|
|
|
|
|
|
|
|
Unrealized holding gains
|
|
|
24,043
|
|
|
|
2,591
|
|
Reclassification adjustment for (gains) losses included in net
income
|
|
|
(8
|
)
|
|
|
2,222
|
|
|
|
Net unrealized gains on securities
|
|
|
24,035
|
|
|
|
4,813
|
|
Income tax expense
|
|
|
9,134
|
|
|
|
1,829
|
|
|
|
Holding gains
|
|
|
14,901
|
|
|
|
2,984
|
|
|
|
Prepaid pension cost:
|
|
|
|
|
|
|
|
|
Amortization of accumulated pension loss
|
|
|
675
|
|
|
|
|
|
Income tax benefit
|
|
|
(250
|
)
|
|
|
|
|
|
|
Accumulated pension loss
|
|
|
425
|
|
|
|
|
|
|
|
Other comprehensive income
|
|
$
|
15,809
|
|
|
$
|
2,984
|
|
|
|
At March 31, 2009, accumulated other comprehensive loss was
$40.9 million, net of tax. It was comprised of
$12.7 million in unrealized holding losses on available for
sale securities for which a portion of other-than-temporary
impairment has been recorded in earnings, $8.3 million in
unrealized holding losses on other available for sale
securities, and $19.9 million in accumulated pension loss.
The Company segregates financial information for use in
assessing its performance and allocating resources among three
operating segments: Commercial, Consumer and Money Management.
The Consumer segment includes the consumer portion of the retail
branch network (loans, deposits, and other personal banking
services), indirect and other consumer financing, consumer debit
and credit bank cards, and student lending. The Commercial
segment provides corporate lending (including the Small Business
Banking product line within the branch network), leasing,
international services, and business, government deposit, and
related commercial cash management services, as well as Merchant
and Commercial bank card products. The Money Management segment
provides traditional trust and estate tax planning, advisory and
discretionary investment management, as well as discount
brokerage services, and the Private Banking product portfolio.
18
As products or business units grow or diminish, or processing
channels are refined, or as periodic changes in organizational
structure are made, management may decide that associated
business activities should also be rearranged between reporting
segments. In the first quarter of 2009, selected business units
were realigned between reporting segments so that discount
brokerage services and Private Banking accounts were moved from
Consumer to Money Management, while portions of indirect lending
were moved from Commercial to the Consumer segment. The figures
presented below for 2008 have been revised to incorporate these
changes in order to provide comparable data.
The following table presents selected financial information by
segment and reconciliations of combined segment totals to
consolidated totals. There were no material intersegment
revenues among the three segments. Management periodically makes
changes to methods of assigning costs and income to its business
segments to better reflect operating results. If appropriate,
these changes are reflected in prior year information presented
below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money
|
|
|
Segment
|
|
|
Other/
|
|
|
Consolidated
|
|
(In thousands)
|
|
Consumer
|
|
|
Commercial
|
|
|
Management
|
|
|
Totals
|
|
|
Elimination
|
|
|
Totals
|
|
|
|
|
Three Months Ended March 31,
2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
$
|
87,816
|
|
|
$
|
56,145
|
|
|
$
|
9,978
|
|
|
$
|
153,939
|
|
|
$
|
(3,924
|
)
|
|
$
|
150,015
|
|
Provision for loan losses
|
|
|
(20,619
|
)
|
|
|
(14,173
|
)
|
|
|
(271
|
)
|
|
|
(35,063
|
)
|
|
|
(8,105
|
)
|
|
|
(43,168
|
)
|
Non-interest income
|
|
|
35,424
|
|
|
|
26,539
|
|
|
|
28,924
|
|
|
|
90,887
|
|
|
|
1,544
|
|
|
|
92,431
|
|
Investment securities losses, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,172
|
)
|
|
|
(2,172
|
)
|
Non-interest expense
|
|
|
(72,812
|
)
|
|
|
(47,098
|
)
|
|
|
(26,195
|
)
|
|
|
(146,105
|
)
|
|
|
(6,781
|
)
|
|
|
(152,886
|
)
|
|
|
Income before income taxes
|
|
$
|
29,809
|
|
|
$
|
21,413
|
|
|
$
|
12,436
|
|
|
$
|
63,658
|
|
|
$
|
(19,438
|
)
|
|
$
|
44,220
|
|
|
|
Three Months Ended March 31, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
$
|
80,096
|
|
|
$
|
48,734
|
|
|
$
|
9,267
|
|
|
$
|
138,097
|
|
|
$
|
2,010
|
|
|
$
|
140,107
|
|
Provision for loan losses
|
|
|
(10,970
|
)
|
|
|
(1,211
|
)
|
|
|
(7
|
)
|
|
|
(12,188
|
)
|
|
|
(7,812
|
)
|
|
|
(20,000
|
)
|
Non-interest income
|
|
|
37,565
|
|
|
|
25,754
|
|
|
|
29,342
|
|
|
|
92,661
|
|
|
|
(501
|
)
|
|
|
92,160
|
|
Investment securities gains, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23,323
|
|
|
|
23,323
|
|
Non-interest expense
|
|
|
(70,188
|
)
|
|
|
(44,973
|
)
|
|
|
(24,589
|
)
|
|
|
(139,750
|
)
|
|
|
(431
|
)
|
|
|
(140,181
|
)
|
|
|
Income before income taxes
|
|
$
|
36,503
|
|
|
$
|
28,304
|
|
|
$
|
14,013
|
|
|
$
|
78,820
|
|
|
$
|
16,589
|
|
|
$
|
95,409
|
|
|
|
The information presented above was derived from the internal
profitability reporting system used by management to monitor and
manage the financial performance of the Company. This
information is based on internal management accounting policies,
which have been developed to reflect the underlying economics of
the businesses. The policies address the methodologies applied
in connection with funds transfer pricing and assignment of
overhead costs among segments. Funds transfer pricing was used
in the determination of net interest income by assigning a
standard cost (credit) for funds used (provided) by assets and
liabilities based on their maturity, prepayment
and/or
repricing characteristics.
The segment activity, as shown above, includes both direct and
allocated items. Amounts in the Other/Elimination
column include activity not related to the segments, such as
that relating to administrative functions, the investment
securities portfolio, and the effect of certain expense
allocations to the segments. The provision for loan losses in
this category contains the difference between loan charge-offs
and recoveries assigned directly to the segments and the
recorded provision for loan loss expense. Included in this
categorys net interest income are earnings of the
investment portfolio, which are not allocated to a segment.
Investment securities gains and non-interest expense for this
category during the first three months of 2008 included stock
redemption gains and litigation accrual adjustments related to
the bank subsidiarys membership in Visa.
The performance measurement of the operating segments is based
on the management structure of the Company and is not
necessarily comparable with similar information for any other
financial institution. The information is also not necessarily
indicative of the segments financial condition and results
of operations if they were independent entities.
19
|
|
11.
|
Derivative
Instruments
|
The notional amounts of the Companys derivative
instruments are shown in the table below. These contractual
amounts, along with other terms of the derivative, are used to
determine amounts to be exchanged between counterparties, and
are not a measure of loss exposure. The largest group of
notional amounts relate to interest rate swaps, which are
discussed in more detail below. Through its International
Department, the Company enters into foreign exchange contracts
consisting mainly of contracts to purchase or deliver foreign
currencies for customers at specific future dates. Also,
mortgage loan commitments and forward sales contracts result
from the Companys mortgage banking operation, in which
fixed rate personal real estate loans are originated and sold to
other institutions. The Company also contracts with other
financial institutions, as a guarantor or beneficiary, to share
credit risk associated with certain interest rate swaps. The
Companys risks and responsibilities as guarantor are
further discussed in Note 6 on Guarantees.
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31
|
|
|
December 31
|
|
(In thousands)
|
|
2009
|
|
|
2008
|
|
|
|
|
Interest rate swaps
|
|
$
|
502,648
|
|
|
$
|
492,111
|
|
Credit risk participation agreements
|
|
|
55,361
|
|
|
|
47,750
|
|
Foreign exchange contracts:
|
|
|
|
|
|
|
|
|
Forward contracts
|
|
|
6,436
|
|
|
|
6,226
|
|
Option contracts
|
|
|
8,340
|
|
|
|
3,300
|
|
Mortgage loan commitments
|
|
|
26,559
|
|
|
|
23,784
|
|
Mortgage loan forward sale contracts
|
|
|
46,360
|
|
|
|
26,996
|
|
|
|
Total notional amount
|
|
$
|
645,704
|
|
|
$
|
600,167
|
|
|
|
The Companys interest rate risk management strategy
includes the ability to modify the repricing characteristics of
certain assets and liabilities so that changes in interest rate
do not adversely affect the net interest margin and cash flows.
Interest rate swaps are used on a limited basis as part of this
strategy. At March 31, 2009, the Company had entered into
three interest rate swaps with a notional amount of
$17.7 million, which are designated as fair value hedges of
certain fixed rate loans. Gains and losses on these derivative
instruments, as well as the offsetting loss or gain on the
hedged loans attributable to the hedged risk, are recognized in
current earnings. These gains and losses are reported in
interest and fees on loans in the accompanying statements of
income. The table below shows gains and losses related to fair
value hedges.
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three
|
|
|
|
Months Ended
|
|
|
|
March 31
|
|
(In thousands)
|
|
2009
|
|
|
2008
|
|
|
|
|
Gain (loss) on interest rate swaps
|
|
$
|
75
|
|
|
$
|
(468
|
)
|
Gain (loss) on loans
|
|
|
(95
|
)
|
|
|
468
|
|
|
|
Amount of hedge ineffectiveness
|
|
$
|
(20
|
)
|
|
$
|
|
|
|
|
The Companys other derivative instruments are accounted
for as free-standing derivatives, and changes in their fair
value are recorded in current earnings. These instruments
include interest rate swap contracts sold to customers who wish
to modify their interest rate sensitivity. These swaps are
offset by matching contracts purchased by the Company from other
financial institutions. Because of the matching terms of the
offsetting contracts, in addition to collateral provisions which
mitigate the impact of non-performance risk, changes in fair
value subsequent to initial recognition have a minimal effect on
earnings. The notional amount of these types of swaps at
March 31, 2009 was $484.9 million. The Company is
party to master netting arrangements with its institutional
counterparties; however, the effect of offsetting assets and
liabilities under these arrangements is not significant.
Collateral exchanges typically involve marketable securities.
The Companys interest rate swap arrangements with other
financial institutions contain contingent features relating to
debt ratings or capitalization levels. Under these provisions,
if the Companys debt rating falls below investment grade
or if the Company ceases to be well-capitalized
under risk-based capital guidelines, the counterparties can
request immediate and ongoing collateralization on
20
derivative instruments in net liability positions. The aggregate
fair value of interest rate swap contracts with credit
risk-related contingent features that were in a liability
position on March 31, 2009 was $25.0 million, for
which the Company had posted collateral of $18.7 million.
If the credit risk-related contingent features underlying these
agreements were triggered on March 31, 2009, the Company
would be required to post an additional $8.3 million of
collateral to its counterparties. The banking customer
counterparties are engaged in a variety of businesses, including
real estate, building materials, communications, consumer
products, and manufacturing. The manufacturing group is the
largest, with a combined notional amount of 36.2% of the total
customer swap portfolio. If this group of manufacturing
counterparties failed to perform, and if the underlying
collateral proved to be of no value, the Company would incur a
loss of $6.7 million, based on amounts at March 31,
2009.
Effective January 1, 2008, the Company adopted Statement of
Financial Accounting Standards (SFAS) No. 157, Fair
Value Measurements. This Statement modified the accounting
for initial recognition of fair value for certain interest rate
swap contracts held by the Company. Former accounting guidance
precluded immediate recognition in earnings of an unrealized
gain or loss, measured as the difference between the transaction
price and fair value of these instruments at initial
recognition. This former guidance was nullified by
SFAS No. 157, which states that the immediate
recognition of a gain or loss is appropriate under certain
circumstances. In accordance with the new recognition
requirements, the Company increased equity by $903 thousand on
January 1, 2008 to reflect the swaps at fair value as
defined by SFAS No. 157.
The fair values of the Companys derivative instruments are
shown in the table below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset Derivatives
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31
|
|
|
Dec. 31
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liability Derivatives
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31
|
|
|
Dec. 31
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
|
|
|
|
|
|
|
|
Balance
|
|
|
|
|
|
|
|
|
Sheet
|
|
|
|
|
|
|
|
Sheet
|
|
|
|
|
|
|
(In thousands)
|
|
Location
|
|
Fair Value
|
|
|
Location
|
|
Fair Value
|
|
|
|
|
Derivatives designated as hedging instruments under Statement
133:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps
|
|
Other assets
|
|
$
|
|
|
|
$
|
|
|
|
Other liabilities
|
|
$
|
(1,352
|
)
|
|
$
|
(1,413
|
)
|
|
|
Total derivatives designated as hedging instruments under
Statement 133
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
$
|
(1,352
|
)
|
|
$
|
(1,413
|
)
|
|
|
Derivatives not designated as hedging instruments under
Statement 133:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps
|
|
Other assets
|
|
$
|
24,008
|
|
|
$
|
25,274
|
|
|
Other liabilities
|
|
$
|
(23,676
|
)
|
|
$
|
(25,155
|
)
|
Credit risk participation agreements
|
|
Other assets
|
|
|
112
|
|
|
|
117
|
|
|
Other liabilities
|
|
|
(273
|
)
|
|
|
(178
|
)
|
Foreign exchange contracts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forward contracts
|
|
Other assets
|
|
|
88
|
|
|
|
207
|
|
|
Other liabilities
|
|
|
(139
|
)
|
|
|
(217
|
)
|
Option contracts
|
|
Other assets
|
|
|
13
|
|
|
|
18
|
|
|
Other liabilities
|
|
|
(13
|
)
|
|
|
(18
|
)
|
Mortgage loan commitments
|
|
Other assets
|
|
|
494
|
|
|
|
198
|
|
|
Other liabilities
|
|
|
(2
|
)
|
|
|
(6
|
)
|
Mortgage loan forward sale contracts
|
|
Other assets
|
|
|
6
|
|
|
|
21
|
|
|
Other liabilities
|
|
|
(279
|
)
|
|
|
(88
|
)
|
|
|
Total derivatives not designated as hedging instruments under
Statement 133
|
|
|
|
$
|
24,721
|
|
|
$
|
25,835
|
|
|
|
|
$
|
(24,382
|
)
|
|
$
|
(25,662
|
)
|
|
|
Total derivatives
|
|
|
|
$
|
24,721
|
|
|
$
|
25,835
|
|
|
|
|
$
|
(25,734
|
)
|
|
$
|
(27,075
|
)
|
|
|
21
The effects of derivative instruments on the consolidated
statements of income are shown in the table below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Location of Gain or (Loss)
|
|
Amount of Gain or (Loss)
|
|
|
|
Recognized in Income on
|
|
Recognized in Income on
|
|
|
|
Derivative
|
|
Derivative
|
|
|
|
|
|
|
|
|
|
For the Three Months
|
|
|
|
|
|
Ended March 31
|
|
(In thousands)
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
Derivatives in Statement 133 fair value hedging relationships:
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps
|
|
Interest and fees on loans
|
|
$
|
75
|
|
|
$
|
(468
|
)
|
|
|
Total
|
|
|
|
$
|
75
|
|
|
$
|
(468
|
)
|
|
|
Derivatives not designated as hedging instruments under
Statement 133:
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps
|
|
Other non-interest income
|
|
$
|
212
|
|
|
$
|
216
|
|
Credit risk participation agreements
|
|
Other non-interest income
|
|
|
5
|
|
|
|
7
|
|
Foreign exchange contracts:
|
|
|
|
|
|
|
|
|
|
|
Forward contracts
|
|
Other non-interest income
|
|
|
(41
|
)
|
|
|
83
|
|
Option contracts
|
|
Other non-interest income
|
|
|
|
|
|
|
|
|
Mortgage loan commitments
|
|
Loan fees and sales
|
|
|
300
|
|
|
|
59
|
|
Mortgage loan forward sale contracts
|
|
Loan fees and sales
|
|
|
(206
|
)
|
|
|
51
|
|
|
|
Total
|
|
|
|
$
|
270
|
|
|
$
|
416
|
|
|
|
For the first quarter of 2009, income tax expense amounted to
$13.6 million, compared to $30.7 million in the first
quarter of 2008. The effective income tax rate for the Company,
including the effect of non-controlling interest, was 30.6% in
the current quarter compared to 32.3% in the same quarter last
year.
|
|
13.
|
Stock-Based
Compensation
|
The Company normally issues most of its annual stock-based
compensation during the first quarter. In recent years,
stock-based compensation has been issued in the form of both
stock appreciation rights (SARs) and nonvested stock. During the
first quarter of 2009, stock-based compensation was issued
solely in the form of nonvested stock awards. The stock-based
compensation expense that has been charged against income was
$1.6 million in the first three months of 2009 and
$1.8 million in the first three months of 2008.
22
The 2009 stock awards vest in 5 to 7 years and contain
restrictions as to transferability, sale, pledging, or
assigning, among others, prior to the end of the vesting period.
Dividend and voting rights are conferred upon grant. A summary
of the status of the Companys nonvested share awards, as
of March 31, 2009, and changes during the three month
period then ended is presented below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
Grant Date
|
|
|
|
Shares
|
|
|
Fair Value
|
|
|
|
|
Nonvested at January 1, 2009
|
|
|
227,986
|
|
|
$
|
41.81
|
|
|
|
Granted
|
|
|
157,024
|
|
|
|
35.87
|
|
Vested
|
|
|
(28,820
|
)
|
|
|
39.09
|
|
Forfeited
|
|
|
|
|
|
|
|
|
|
|
Nonvested at March 31, 2009
|
|
|
356,190
|
|
|
$
|
39.41
|
|
|
|
SARs and stock options are granted with an exercise price equal
to the market price of the Companys stock at the date of
grant and have
10-year
contractual terms. SARs, which the Company granted in 2006, 2007
and 2008, vest on a graded basis over 4 years of continuous
service. All SARs must be settled in stock under provisions of
the plan. Stock options, which were granted in 2005 and previous
years, vest on a graded basis over 3 years of continuous
service. In determining compensation cost, the Black-Scholes
option-pricing model is used to estimate the fair value of SARs
and options on date of grant. The table below shows the fair
values of SARs granted during the first three months of 2008,
including the model assumptions for those grants. Information
for the first three months of 2009 has not been shown, as no
options or SARs were granted during that period.
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
|
Ended March 31
|
|
|
|
2008
|
|
|
|
|
Weighted per share average fair value at grant date
|
|
$
|
8.27
|
|
Assumptions:
|
|
|
|
|
Dividend yield
|
|
|
2.3
|
%
|
Volatility
|
|
|
18.4
|
%
|
Risk-free interest rate
|
|
|
3.5
|
%
|
Expected term
|
|
|
7.2 years
|
|
|
|
A summary of option activity during the first three months of
2009 is presented below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Remaining
|
|
|
Aggregate
|
|
|
|
|
|
|
Exercise
|
|
|
Contractual
|
|
|
Intrinsic
|
|
(Dollars in thousands, except per share data)
|
|
Shares
|
|
|
Price
|
|
|
Term
|
|
|
Value
|
|
|
|
|
Outstanding at January 1, 2009
|
|
|
2,395,333
|
|
|
$
|
32.05
|
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expired
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(53,240
|
)
|
|
|
23.81
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at March 31, 2009
|
|
|
2,342,093
|
|
|
$
|
32.24
|
|
|
|
3.9 years
|
|
|
$
|
12,224
|
|
|
|
23
A summary of SAR activity during the first three months of 2009
is presented below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Remaining
|
|
|
Aggregate
|
|
|
|
|
|
|
Exercise
|
|
|
Contractual
|
|
|
Intrinsic
|
|
(Dollars in thousands, except per share data)
|
|
Shares
|
|
|
Price
|
|
|
Term
|
|
|
Value
|
|
|
|
|
Outstanding at January 1, 2009
|
|
|
1,600,228
|
|
|
$
|
43.83
|
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
(700
|
)
|
|
|
42.79
|
|
|
|
|
|
|
|
|
|
Expired
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at March 31, 2009
|
|
|
1,599,528
|
|
|
$
|
43.83
|
|
|
|
7.9 years
|
|
|
$
|
|
|
|
|
|
|
14.
|
Fair
Value Measurements
|
The Company uses fair value measurements to record fair value
adjustments to certain financial and nonfinancial assets and
liabilities and to determine fair value disclosures. Various
financial instruments such as available for sale and trading
securities, certain non-marketable securities relating to
private equity activities, and derivatives are recorded at fair
value on a recurring basis. Additionally, from time to time, the
Company may be required to record at fair value other assets and
liabilities on a nonrecurring basis, such as loans held for
sale, mortgage servicing rights and certain other investment
securities. These nonrecurring fair value adjustments typically
involve lower of cost or market accounting, or write-downs of
individual assets.
SFAS No. 157, Fair Value Measurements,
defines fair value as the price that would be received to sell
an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date.
Depending on the nature of the asset or liability, the Company
uses various valuation techniques and assumptions when
estimating fair value, which are in accordance with
SFAS No. 157. SFAS No. 157 establishes a
three-level valuation hierarchy for disclosure of fair value
measurements. The valuation hierarchy is based upon the
transparency of inputs to the valuation of an asset or liability
as of the measurement date. The three levels are defined as
follows:
|
|
|
|
|
Level 1 inputs to the valuation methodology are
quoted prices for identical assets or liabilities in active
markets.
|
|
|
|
Level 2 inputs to the valuation methodology
include quoted prices for similar assets and liabilities in
active markets, quoted prices for identical or similar assets
and liabilities in markets that are not active, and inputs that
are observable for the assets or liabilities, either directly or
indirectly (such as interest rates, yield curves, and prepayment
speeds).
|
|
|
|
Level 3 inputs to the valuation methodology are
unobservable and significant to the fair value. These may be
internally developed, using the Companys best information
and assumptions that a market participant would consider.
|
When determining the fair value measurements for assets and
liabilities required or permitted to be recorded or disclosed at
fair value, the Company considers the principal or most
advantageous market in which it would transact and considers
assumptions that market participants would use when pricing the
asset or liability. When possible, the Company looks to active
and observable markets to price identical assets or liabilities.
When identical assets and liabilities are not traded in active
markets, the Company looks to market observable data for similar
assets and liabilities. Nevertheless, certain assets and
liabilities are not actively traded in observable markets and
the Company must use alternative valuation techniques to derive
an estimated fair value measurement. The Company adopted FSP
FAS 157-4
in March 2009 and has applied its guidance in estimating fair
values for securities where the market volume and level of
activity have significantly decreased. The application of the
FSP did not result in a change in valuation technique or related
inputs.
24
Valuation
methods for instruments measured at fair value on a recurring
basis
Following is a description of the Companys valuation
methodologies used for instruments measured at fair value on a
recurring basis:
Available
for sale investment securities
Available for sale securities are accounted for in accordance
with SFAS 115 and related guidance. Changes in fair value,
including that portion of other-than-temporary impairment
unrelated to credit loss, are recorded in other comprehensive
income. As mentioned in Note 4 on Investment Securities and
in accordance with FSP
FAS 115-2
and
FAS 124-2,
the Company records the credit-related portion of
other-than-temporary impairment in current earnings. This
portfolio comprises the majority of the assets which the Company
records at fair value. Most of the portfolio, which includes
government-sponsored enterprise, mortgage-backed and
asset-backed securities, are priced utilizing industry-standard
models that consider various assumptions, including time value,
yield curves, volatility factors, prepayment speeds, default
rates, loss severity, current market and contractual prices for
the underlying financial instruments, as well as other relevant
economic measures. Substantially all of these assumptions are
observable in the marketplace, can be derived from observable
data, or are supported by observable levels at which
transactions are executed in the marketplace. These measurements
are classified as Level 2 in the fair value hierarchy.
Where quoted prices are available in an active market, the
measurements are classified as Level 1. Most of the
Level 1 measurements apply to common stock and
U.S. treasury obligations.
Valuation methods and inputs, by major security type:
|
|
|
|
|
U.S. government and federal agency obligations
These securities are valued using live data from active
market makers and inter-dealer brokers.
|
|
|
|
Government-sponsored enterprise obligations
Government-sponsored enterprise obligations are evaluated
using cash flow valuation models. Inputs used are live market
data, cash settlements, Treasury market yields, and floating
rate indices such as LIBOR, CMT, and Prime.
|
|
|
|
State and municipal obligations, excluding auction rate
securities
An internal yield curve is generated and applied to bond
sectors, and individual bond valuations are extrapolated. Inputs
used to generate the yield curve are bellwether issue levels,
established trading spreads between similar issuers or credits,
historical trading spreads over widely accepted market
benchmarks, new issue scales, and verified bid information. Bid
information is verified by corroborating the data against
external sources such as broker-dealers, trustees/paying agents,
issuers, or non-affiliated bondholders.
|
|
|
|
Mortgage and asset-backed securities
All mortgage-backed securities (agency and non-agency) and
other asset-backed securities are valued at the tranche level.
For each tranche valuation, the process generates predicted cash
flows for the tranche and determines a benchmark yield. The
final price is determined by inputting the predicted cash flows
into a model that will determine principal and interest payments
along with an average life. The yield from the model is used to
discount the predicted cash flows to generate an evaluated
price. Inputs for the model include swap curve or a Treasury
benchmark curve, as well as a spread that is generated based on
average life, type, volatility, ratings, collateral and
collateral performance.
|
|
|
|
Other debt securities
Other debt securities are valued using active markets and
inter-dealer brokers as well as bullet spread scales and option
adjusted spreads. The spreads and models use yield curves, terms
and conditions of the bonds, and any special features (i.e.,
call or put options, redemption features, etc.).
|
|
|
|
Equity securities
Equity securities are priced using the market prices for
each security from the major stock exchanges or other electronic
quotation systems.
|
25
At March 31, 2009, the Company held certain auction rate
securities (ARS) in its available for sale portfolio, totaling
$171.4 million. Nearly all of these securities were
purchased from customers during the third quarter of 2008. The
auction process by which the ARS are normally priced has failed
since the first quarter of 2008, and the fair value of these
securities cannot be based on observable market prices due to
the illiquidity in the market. The fair values of the ARS are
currently estimated using a discounted cash flows analysis. The
analysis compares the present value of cash flows based on
mandatory rates paid under failing auctions with the present
value of estimated cash flows for similar securities, after
adjustment for liquidity premium and nonperformance risk. The
cash flows were projected over an estimated market recovery
period, or in some cases, a shorter period if refinancing by
specific issuers is expected. The discount rate was based on the
published Treasury rate for the period commensurate with the
estimated holding period. In developing the inputs, discussions
were held with traders, both internal and external to the
Company, who are familiar with the ARS markets. Because many of
the inputs significant to the measurement are not observable,
these measurements are classified as Level 3 measurements.
Trading
securities
The securities in the Companys trading portfolio are
priced by averaging several broker quotes for identical
instruments, and are classified as Level 2 measurements.
Private
equity investments
These securities are held by the Companys venture capital
subsidiaries and are included in non-marketable investment
securities in the consolidated balance sheets. Valuation of
these nonpublic investments requires significant management
judgment due to the absence of quoted market prices. Each
quarter, valuations are performed utilizing available market
data and other factors. Market data includes published trading
multiples for private equity investments of similar size. The
multiples are considered in conjunction with current operating
performance, future expectations, financing and sales
transactions, and other investment-specific issues. The Company
applies its valuation methodology consistently from period to
period, and believes that its methodology is similar to that
used by other market participants. These fair value measurements
are classified as Level 3.
Derivatives
The Companys derivative instruments include interest rate
swaps, foreign exchange forward contracts, commitments and sales
contracts related to personal mortgage loan origination
activity, and certain credit risk guarantee agreements. When
appropriate, the impact of credit standing as well as any
potential credit enhancements, such as collateral, has been
considered in the fair value measurement.
|
|
|
|
|
Valuations for interest rate swaps are derived from proprietary
models whose significant inputs are readily observable market
parameters, primarily yield curves. The results of the models
are constantly validated through comparison to active trading in
the marketplace. These fair value measurements are classified as
Level 2.
|
|
|
|
Fair value measurements for foreign exchange contracts are
derived from a model whose primary inputs are quotations from
global market makers, and are classified as Level 2.
|
|
|
|
The fair values of mortgage loan commitments and forward sales
contracts on the associated loans are based on quoted prices for
similar loans in the secondary market. However, these prices are
adjusted by a factor which considers the likelihood that a
commitment will ultimately result in a closed loan. This
estimate is based on the Companys historical data and its
judgment about future economic trends. Based on the unobservable
nature of this adjustment, these measurements are classified as
Level 3.
|
|
|
|
The Companys contracts related to credit risk guarantees
are valued under an internally developed methodology which uses
significant unobservable inputs and assumptions about the
creditworthiness of the counterparty to the guaranteed interest
rate swap contract. Consequently, these measurements are
classified as Level 3.
|
26
Assets
held in trust
Assets held in an outside trust for the Companys deferred
compensation plan consist of investments in mutual funds. The
fair value measurements are based on quoted prices in active
markets and classified as Level 1. The Company has recorded
an asset representing the total investment amount. The Company
has also recorded a corresponding nonfinancial liability,
representing the Companys liability to the plan
participants.
The table below presents the March 31, 2009 carrying values
of assets and liabilities measured at fair value on a recurring
basis.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements Using
|
|
|
|
|
|
|
Quoted
|
|
|
|
|
|
|
|
|
|
|
|
|
Prices in
|
|
|
|
|
|
|
|
|
|
|
|
|
Active
|
|
|
|
|
|
|
|
|
|
|
|
|
Markets
|
|
|
Significant
|
|
|
|
|
|
|
|
|
|
for
|
|
|
Other
|
|
|
Significant
|
|
|
|
|
|
|
Identical
|
|
|
Observable
|
|
|
Unobservable
|
|
|
|
|
|
|
Assets
|
|
|
Inputs
|
|
|
Inputs
|
|
(In thousands)
|
|
3/31/09
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available for sale securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. government and federal agency obligations
|
|
$
|
11,997
|
|
|
$
|
11,997
|
|
|
$
|
|
|
|
$
|
|
|
Government-sponsored enterprise obligations
|
|
|
153,031
|
|
|
|
|
|
|
|
153,031
|
|
|
|
|
|
State and municipal obligations
|
|
|
856,699
|
|
|
|
|
|
|
|
685,286
|
|
|
|
171,413
|
|
Agency mortgage-backed securities
|
|
|
2,321,134
|
|
|
|
|
|
|
|
2,321,134
|
|
|
|
|
|
Non-agency mortgage-backed securities
|
|
|
593,900
|
|
|
|
|
|
|
|
593,900
|
|
|
|
|
|
Other asset-backed securities
|
|
|
374,946
|
|
|
|
|
|
|
|
374,946
|
|
|
|
|
|
Other debt securities
|
|
|
192,328
|
|
|
|
|
|
|
|
192,328
|
|
|
|
|
|
Equity securities
|
|
|
46,873
|
|
|
|
28,516
|
|
|
|
18,357
|
|
|
|
|
|
Trading securities
|
|
|
15,808
|
|
|
|
|
|
|
|
15,808
|
|
|
|
|
|
Private equity investments
|
|
|
48,284
|
|
|
|
|
|
|
|
|
|
|
|
48,284
|
|
Derivatives
|
|
|
24,721
|
|
|
|
|
|
|
|
24,109
|
|
|
|
612
|
|
Assets held in trust
|
|
|
2,566
|
|
|
|
2,566
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
|
4,642,287
|
|
|
|
43,079
|
|
|
|
4,378,899
|
|
|
|
220,309
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives
|
|
|
25,734
|
|
|
|
|
|
|
|
25,180
|
|
|
|
554
|
|
|
|
Total liabilities
|
|
$
|
25,734
|
|
|
$
|
|
|
|
$
|
25,180
|
|
|
$
|
554
|
|
|
|
27
The changes in Level 3 assets and liabilities measured at
fair value on a recurring basis are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements Using
|
|
|
|
Significant Unobservable Inputs
|
|
|
|
(Level 3)
|
|
|
|
State and
|
|
|
Private
|
|
|
|
|
|
|
|
|
|
Municipal
|
|
|
Equity
|
|
|
|
|
|
|
|
(In thousands)
|
|
Obligations
|
|
|
Investments
|
|
|
Derivatives
|
|
|
Total
|
|
|
|
|
For the three months ended March 31, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at January 1, 2009
|
|
$
|
167,996
|
|
|
$
|
49,494
|
|
|
$
|
64
|
|
|
$
|
217,554
|
|
Total gains or losses (realized /unrealized):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Included in earnings
|
|
|
|
|
|
|
(1,552
|
)
|
|
|
99
|
|
|
|
(1,453
|
)
|
Included in other comprehensive income
|
|
|
3,361
|
|
|
|
|
|
|
|
|
|
|
|
3,361
|
|
Purchases, issuances, and settlements, net
|
|
|
56
|
|
|
|
342
|
|
|
|
(105
|
)
|
|
|
293
|
|
|
|
Balance at March 31, 2009
|
|
$
|
171,413
|
|
|
$
|
48,284
|
|
|
$
|
58
|
|
|
$
|
219,755
|
|
|
|
Total gains or losses for the three months included in earnings
attributable to the change in unrealized gains or losses
relating to assets still held at March 31, 2009
|
|
$
|
|
|
|
$
|
(1,552
|
)
|
|
$
|
223
|
|
|
$
|
(1,329
|
)
|
|
|
Gains and losses on the Level 3 assets and liabilities in
the table above are reported in the following income categories:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities
|
|
|
|
|
|
|
|
|
|
Other Non-
|
|
|
Gains
|
|
|
|
|
|
|
Loan Fees
|
|
|
Interest
|
|
|
(Losses),
|
|
|
|
|
(In thousands)
|
|
and Sales
|
|
|
Income
|
|
|
Net
|
|
|
Total
|
|
|
|
|
For the three months ended March 31, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total gains or losses included in earnings
|
|
$
|
94
|
|
|
$
|
5
|
|
|
$
|
(1,552
|
)
|
|
$
|
(1,453
|
)
|
|
|
Change in unrealized gains or losses relating to assets still
held at March 31, 2009
|
|
$
|
218
|
|
|
$
|
5
|
|
|
$
|
(1,552
|
)
|
|
$
|
(1,329
|
)
|
|
|
Valuation
methods for instruments measured at fair value on a nonrecurring
basis
Following is a description of the Companys valuation
methodologies used for other financial instruments measured at
fair value on a nonrecurring basis.
Collateral
dependent impaired loans
While the overall loan portfolio is not carried at fair value,
adjustments are recorded on certain loans to reflect partial
write-downs that are based on the value of the underlying
collateral. In determining the value of real estate collateral,
the Company relies on external appraisals and assessment of
property values by its internal staff. In the case of non-real
estate collateral, reliance is placed on a variety of sources,
including external estimates of value and judgments based on the
experience and expertise of internal specialists. Because many
of these inputs are not observable, the measurements are
classified as Level 3. The carrying value of these impaired
loans was $35.2 million at March 31, 2009, and
charge-offs of $10.3 million related to these loans were
recorded during the first three months of 2009.
Loans
held for sale
Loans held for sale are carried at the lower of cost or market
value. The portfolio consists primarily of student loans, and to
a lesser extent, residential real estate loans. The
Companys student loans are
28
contracted for sale with various secondary market institutions.
Since 2008, the secondary market for student loans has been
disrupted by liquidity concerns. Consequently, several investors
are currently unable to consistently purchase loans under
existing contractual terms. Loans under contract to these
investors, in addition to other investors whose future liquidity
is of concern, have been identified for evaluation. Such loans
amounted to $187.9 million at March 31, 2009. They
were evaluated using a fair value measurement method based on a
discounted cash flows analysis, which was classified as
Level 3. Previously recorded impairment losses of $867
thousand were reversed during the current quarter, as certain of
the related loans were sold in accordance with their contract
terms. The measurement of fair value for the remaining student
loans is based on the specific prices mandated in the underlying
sale contracts, the estimated exit price, and is classified as
Level 2. Fair value measurements on mortgage loans held for
sale are based on quoted market prices for similar loans in the
secondary market and are classified as Level 2.
Private
equity investments and restricted stock
These assets are included in non-marketable investment
securities in the consolidated balance sheets. They include
private equity investments held by the Parent company which are
carried at cost, reduced by other-than-temporary impairment.
These investments are periodically evaluated for impairment
based on their estimated fair value. The valuation methodology
is described above under the recurring measurements for
Private equity investments. Also included is stock
issued by the Federal Reserve Bank and FHLB which is held by the
bank subsidiary as required for regulatory purposes. Generally,
there are restrictions on the sale
and/or
liquidation of these investments, and they are carried at cost.
Fair value measurements for these securities are classified as
Level 3.
Mortgage
servicing rights
The Company initially measures its mortgage servicing rights at
fair value, and amortizes them over the period of estimated net
servicing income. They are periodically assessed for impairment
based on fair value at the reporting date. Mortgage servicing
rights do not trade in an active market with readily observable
prices. Accordingly, the fair value is estimated based on a
valuation model which calculates the present value of estimated
future net servicing income. The model incorporates assumptions
that market participants use in estimating future net servicing
income, including estimates of prepayment speeds, market
discount rates, cost to service, float earnings rates, and other
ancillary income, including late fees. The fair value
measurements are classified as Level 3.
Goodwill
and core deposit premium
Valuation of goodwill to determine impairment is performed on an
annual basis, or more frequently if there is an event or
circumstance that would indicate impairment may have occurred.
The process involves calculations to determine the fair value of
each reporting unit on a stand-alone basis. A combination of
formulas using current market multiples, based on recent sales
of financial institutions within the Companys geographic
marketplace, is used to estimate the fair value of each
reporting unit. That fair value is compared to the carrying
amount of the reporting unit, including its recorded goodwill.
Impairment is considered to have occurred if the fair value of
the reporting unit is lower than the carrying amount of the
reporting unit.
Core deposit premiums are recognized at the time a portfolio of
deposits is acquired, using valuation techniques which calculate
the present value of the estimated net cost savings attributable
to the core deposit base, relative to alternative costs of funds
and tax benefits, if applicable, over the expected remaining
economic life of the depositors. Subsequent evaluations are made
when facts or circumstances indicate potential impairment may
have occurred. The Company uses estimates of discounted future
cash flows, comparisons with alternative sources for deposits,
consideration of income potential generated in other product
lines by current customers, geographic parameters, and other
demographics to estimate a current fair value of a specific
deposit base. If the calculated fair value is less than the
carrying value, impairment is considered to have occurred.
29
Foreclosed
assets
Foreclosed assets consist of loan collateral which has been
repossessed through foreclosure. This collateral is comprised of
commercial and residential real estate and other non-real estate
property, including auto, recreational and marine vehicles.
Foreclosed assets are recorded as held for sale initially at the
lower of the loan balance or fair value of the collateral less
estimated selling costs. Subsequent to foreclosure, valuations
are updated periodically, and the assets may be marked down
further, reflecting a new cost basis. Foreclosed assets which
have been subsequently adjusted during the current quarter
totaled $279 thousand at March 31, 2009. Fair value
measurements may be based upon appraisals or third-party price
opinions and, accordingly, those measurements are classified as
Level 2. Other fair value measurements may be based on
internally developed pricing methods, and those measurements are
classified as Level 3.
For assets measured at fair value on a nonrecurring basis during
the first quarter of 2009, and still held as of March 31,
2009, the following table provides the adjustments to fair value
recognized during the period, the level of valuation assumptions
used to determine each adjustment, and the carrying value of the
related individual assets or portfolios at March 31, 2009.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements Using
|
|
|
|
|
|
|
|
|
|
Quoted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prices in
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Active
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Markets
|
|
|
Significant
|
|
|
|
|
|
|
|
|
|
|
|
|
for
|
|
|
Other
|
|
|
Significant
|
|
|
|
|
|
|
|
|
|
Identical
|
|
|
Observable
|
|
|
Unobservable
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
Inputs
|
|
|
Inputs
|
|
|
Total Gains
|
|
(In thousands)
|
|
3/31/09
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
|
(Losses)
|
|
|
|
|
Loans
|
|
$
|
35,220
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
35,220
|
|
|
$
|
(10,296
|
)
|
Loans held for sale
|
|
|
187,852
|
|
|
|
|
|
|
|
|
|
|
|
187,852
|
|
|
|
867
|
|
Private equity investments
|
|
|
825
|
|
|
|
|
|
|
|
|
|
|
|
825
|
|
|
|
(75
|
)
|
Mortgage servicing rights
|
|
|
904
|
|
|
|
|
|
|
|
|
|
|
|
904
|
|
|
|
(140
|
)
|
Foreclosed assets
|
|
|
279
|
|
|
|
|
|
|
|
279
|
|
|
|
|
|
|
|
(324
|
)
|
|
|
|
|
15.
|
Fair
Value of Financial Instruments
|
The carrying amounts and estimated fair values of financial
instruments held by the Company, in addition to a discussion of
the methods used and assumptions made in computing those
estimates, are set forth below.
Loans
Fair values are estimated for various groups of loans segregated
by 1) type of loan, 2) fixed/adjustable interest terms
and 3) performing/non-performing status. The fair value of
performing loans is calculated by discounting all simulated cash
flows. Cash flows include all principal and interest to be
received, taking embedded optionality such as the
customers right to prepay into account. Discount rates are
computed for each loan category using implied forward market
rates adjusted to recognize each loans approximate credit
risk. Fair value of impaired loans approximates their carrying
value because such loans are recorded at the appraised or
estimated recoverable value of the collateral or the underlying
cash flow.
Investment
Securities
A detailed description of the fair value measurement of the debt
and equity instruments in the available for sale and trading
sections of the investment security portfolio is provided in
Note 14 on Fair Value Measurements. In general, these fair
values are based on prices obtained from stock exchanges,
pricing models, or bid quotations received from securities
dealers. Fair values are estimated for those investments for
which a market source is not readily available.
30
A schedule of investment securities by category and maturity is
provided in Note 4 on Investment Securities. Fair value
estimates are based on the value of one unit without regard to
any premium or discount that may result from concentrations of
ownership, possible tax ramifications or estimated transaction
costs.
Federal
Funds Sold and Securities Purchased under Agreements to Resell,
Interest Earning Deposits With Banks and Cash and Due From
Banks
The carrying amounts of federal funds sold and securities
purchased under agreements to resell, interest earning deposits
with banks, and cash and due from banks approximate fair value.
Federal funds sold and securities purchased under agreements to
resell generally mature in 90 days or less.
Accrued
Interest Receivable/Payable
The carrying amounts of accrued interest receivable and accrued
interest payable approximate their fair values because of the
relatively short time period between the accrual period and the
expected receipt or payment due date.
Derivative
Instruments
A detailed description of the fair value measurement of
derivative instruments is provided in Note 14 on Fair Value
Measurements. Fair values are generally estimated using
observable market prices or pricing models.
Deposits
The fair value of deposits with no stated maturity is equal to
the amount payable on demand. Such deposits include savings and
interest and non-interest bearing demand deposits. These fair
value estimates do not recognize any benefit the Company
receives as a result of being able to administer, or control,
the pricing of these accounts. The fair value of certificates of
deposit is based on the discounted value of cash flows, taking
early withdrawal optionality into account. Discount rates are
based on the Companys approximate cost of obtaining
similar maturity funding in the market.
Borrowings
The fair value of short-term borrowings such as federal funds
purchased, securities sold under agreements to repurchase, and
borrowings under the Federal Reserves Term Auction
Facility, which mature or reprice within 90 days,
approximates their carrying value. The fair value of long-term
debt is estimated by discounting contractual maturities using an
estimate of the current market rate for similar instruments.
31
The estimated fair values of the Companys financial
instruments are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2009
|
|
|
|
Carrying
|
|
|
Estimated
|
|
(In thousands)
|
|
Amount
|
|
|
Fair Value
|
|
|
|
|
Financial Assets
|
|
|
|
|
|
|
|
|
Loans, including held for sale
|
|
$
|
11,443,309
|
|
|
$
|
11,721,856
|
|
Available for sale investment securities
|
|
|
4,550,908
|
|
|
|
4,550,908
|
|
Trading securities
|
|
|
15,808
|
|
|
|
15,808
|
|
Non-marketable securities
|
|
|
140,077
|
|
|
|
140,077
|
|
Federal funds sold and securities purchased under agreements to
resell
|
|
|
43,050
|
|
|
|
43,050
|
|
Accrued interest receivable
|
|
|
78,130
|
|
|
|
78,130
|
|
Derivative instruments
|
|
|
24,721
|
|
|
|
24,721
|
|
Cash and due from banks
|
|
|
374,748
|
|
|
|
374,748
|
|
Interest earning deposits with banks
|
|
|
592,162
|
|
|
|
592,162
|
|
|
|
Financial Liabilities
|
|
|
|
|
|
|
|
|
Non-interest bearing demand deposits
|
|
$
|
1,507,168
|
|
|
$
|
1,507,168
|
|
Savings, interest checking and money market deposits
|
|
|
8,128,465
|
|
|
|
8,128,465
|
|
Time open and C.D.s
|
|
|
4,321,978
|
|
|
|
4,396,350
|
|
Federal funds purchased and securities sold under agreements to
repurchase
|
|
|
1,001,552
|
|
|
|
996,856
|
|
Other borrowings
|
|
|
847,275
|
|
|
|
892,664
|
|
Accrued interest payable
|
|
|
43,538
|
|
|
|
43,538
|
|
Derivative instruments
|
|
|
25,734
|
|
|
|
25,734
|
|
|
|
Off-Balance
Sheet Financial Instruments
The fair value of letters of credit and commitments to extend
credit is based on the fees currently charged to enter into
similar agreements. The aggregate of these fees is not material.
Limitations
Fair value estimates are made at a specific point in time based
on relevant market information. They do not reflect any premium
or discount that could result from offering for sale at one time
the Companys entire holdings of a particular financial
instrument. Because no market exists for many of the
Companys financial instruments, fair value estimates are
based on judgments regarding future expected loss experience,
risk characteristics and economic conditions. These estimates
are subjective, involve uncertainties and cannot be determined
with precision. Changes in assumptions could significantly
affect the estimates.
Item 2. MANAGEMENTS
DISCUSSION AND ANALYSIS OF CONSOLIDATED FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis should be read in
conjunction with the consolidated financial statements and
related notes and with the statistical information and financial
data appearing in this report as well as the Companys 2008
Annual Report on
Form 10-K.
Results of operations for the three month period ended
March 31, 2009 are not necessarily indicative of results to
be attained for any other period.
Forward
Looking Information
This report may contain forward-looking statements
that are subject to risks and uncertainties and include
information about possible or assumed future results of
operations. Many possible events or factors
32
could affect the future financial results and performance of the
Company. This could cause results or performance to differ
materially from those expressed in the forward-looking
statements. Words such as expects,
anticipates, believes,
estimates, variations of such words and other
similar expressions are intended to identify such
forward-looking statements. These statements are not guarantees
of future performance and involve certain risks, uncertainties
and assumptions that are difficult to predict. Therefore, actual
outcomes and results may differ materially from what is
expressed or forecasted in, or implied by, such forward-looking
statements. Readers should not rely solely on the
forward-looking statements and should consider all uncertainties
and risks discussed throughout this report. Forward-looking
statements speak only as of the date they are made. The Company
does not undertake to update forward-looking statements to
reflect circumstances or events that occur after the date the
forward-looking statements are made or to reflect the occurrence
of unanticipated events. Such possible events or factors
include: changes in economic conditions in the Companys
market area, changes in policies by regulatory agencies,
governmental legislation and regulation, fluctuations in
interest rates, changes in liquidity requirements, demand for
loans in the Companys market area, and competition with
other entities that offer financial services.
Critical
Accounting Policies
The Companys consolidated financial statements are
prepared based on the application of certain accounting
policies, some of which require numerous estimates and strategic
or economic assumptions that may prove inaccurate or be subject
to variations which may significantly affect the Companys
reported results and financial position for the current period
or future periods. The use of estimates, assumptions, and
judgments are necessary when financial assets and liabilities
are required to be recorded at, or adjusted to reflect, fair
value. Current economic conditions may require the use of
additional estimates, and some estimates may be subject to a
greater degree of uncertainty due to the current instability of
the economy. The Company has identified several policies as
being critical because they require management to make
particularly difficult, subjective
and/or
complex judgments about matters that are inherently uncertain
and because of the likelihood that materially different amounts
would be reported under different conditions or using different
assumptions. These policies relate to the allowance for loan
losses, the valuation of investment securities, and accounting
for income taxes.
Allowance
for Loan Losses
The Company performs periodic and systematic detailed reviews of
its loan portfolio to assess overall collectability. The level
of the allowance for loan losses reflects the Companys
estimate of the losses inherent in the loan portfolio at any
point in time. While these estimates are based on substantive
methods for determining allowance requirements, actual outcomes
may differ significantly from estimated results, especially when
determining allowances for business, lease, construction and
business real estate loans. These loans are normally larger and
more complex, and their collection rates are harder to predict.
Personal loans, including personal mortgage, credit card and
consumer loans, are individually smaller and perform in a more
homogenous manner, making loss estimates more predictable.
Further discussion of the methodologies used in establishing the
allowance is provided in the Provision and Allowance for Loan
Losses section of this discussion.
Valuation
of Investment Securities
The Company carries its investment securities at fair value, and
in accordance with the requirements of Statement of Financial
Accounting Standards (SFAS) No. 157 and related guidance,
the Company employs valuation techniques which utilize
observable inputs when those inputs are available. These
observable inputs reflect assumptions market participants would
use in pricing the security, developed based on market data
obtained from sources independent of the Company. When such
information is not available, the Company employs valuation
techniques which utilize unobservable inputs, or those which
reflect the Companys own assumptions about market
participants, based on the best information available in the
circumstances. These valuation methods typically involve cash
flow and other financial modeling techniques. Changes in
underlying factors, assumptions, estimates, or other inputs to
the valuation techniques could
33
have a material impact on the Companys future financial
condition and results of operations. Assets and liabilities
carried at fair value inherently result in more financial
statement volatility. SFAS No. 157, which requires
fair value measurements to be classified as Level 1 (quoted
prices), Level 2 (based on observable inputs) or
Level 3 (based on unobservable, internally-derived inputs)
is discussed in more detail in Note 14 to the consolidated
financial statements. Most of the available for sale investment
portfolio is priced utilizing industry-standard models that
consider various assumptions which are observable in the
marketplace, or can be derived from observable data. Such
securities totaled approximately $4.3 billion, or 95.3% of
the available for sale portfolio at March 31, 2009, and
were classified as Level 2 measurements. The Company also
holds $171.4 million in auction rate securities. These were
classified as Level 3 measurements, as no market currently
exists for these securities, and fair values were derived from
internally generated cash flow valuation models which used
unobservable inputs which were significant to the overall
measurement.
In accordance with FASB Staff Position
No. FAS 115-2
and 124-2,
changes in the fair value of available for sale securities,
excluding credit losses relating to other-than-temporary
impairment, are reported in other comprehensive income. The
Company periodically evaluates the available for sale portfolio
for other-than-temporary impairment. Evaluation for
other-than-temporary impairment is based on the Companys
intent to sell the security and whether it is likely that it
will be required to sell the security before the anticipated
recovery of its amortized cost basis. If either of these
conditions is met, the entire loss (the amount by which the
amortized cost basis exceeds the fair value) must be recognized
in current earnings. If neither condition is met, but the
Company does not expect to recover the amortized cost basis, the
Company must determine whether a credit loss has occurred. This
credit loss is the amount by which the amortized cost basis
exceeds the present value of cash flows expected to be collected
from the security. The credit loss, if any, must be recognized
in current earnings, while the remainder of the loss, related to
all other factors, is recognized in other comprehensive income.
The estimation of whether a credit loss exists and the period
over which the security is expected to recover requires
significant judgment. The Company must consider available
information about the collectability of the security, including
information about past events, current conditions, and
reasonable forecasts, which includes payment structure,
prepayment speeds, expected defaults, and collateral values.
Changes in these factors could result in additional impairment,
recorded in current earnings, in future periods.
During the current quarter, non-agency guaranteed
mortgage-backed securities with a par value of
$66.6 million were identified as other than temporarily
impaired. The credit-related impairment loss on these securities
amounted to $553 thousand which was recorded in the consolidated
income statement in investment securities gains (losses), net.
The noncredit-related loss on these securities, which was
recorded in other comprehensive income, was $21.3 million
on a pre-tax basis.
The Company, through its direct holdings and its Small Business
Investment subsidiaries, has numerous private equity
investments, categorized as non-marketable securities in the
accompanying consolidated balance sheets. These investments are
reported at fair value, and totaled $54.2 million at
March 31, 2009. Changes in fair value are reflected in
current earnings, and reported in investment securities gains
(losses), net in the consolidated statements of income. Because
there is no observable market data for these securities, their
fair values are internally developed using available information
and managements judgment. Although management believes its
estimates of fair value reasonably reflect the fair value of
these securities, key assumptions regarding the projected
financial performance of these companies, the evaluation of the
investee companys management team, and other economic and
market factors may affect the amounts that will ultimately be
realized from these investments.
Accounting
for Income Taxes
The Company accounts for income taxes in accordance with
SFAS No. 109, Accounting for Income Taxes.
Accrued income taxes represent the net amount of current income
taxes which are expected to be paid attributable to operations
as of the balance sheet date. Deferred income taxes represent
the expected future tax consequences of events that have been
recognized in the financial statements or income tax returns.
Current and deferred income taxes are reported as either a
component of other assets or other liabilities in
34
the consolidated balance sheets, depending on whether the
balances are assets or liabilities. Judgment is required in
applying the principles of SFAS No. 109. The Company
regularly monitors taxing authorities for changes in laws and
regulations and their interpretations by the judicial systems.
The aforementioned changes, and changes that may result from the
resolution of income tax examinations by federal and state
taxing authorities, may impact the estimate of accrued income
taxes and could materially impact the Companys financial
position and results of operations.
Selected
Financial Data
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
March 31
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
Per Share Data
|
|
|
|
|
|
|
|
|
Net income per common share basic
|
|
$
|
.41
|
|
|
$
|
.85
|
|
Net income per common share diluted
|
|
|
.40
|
|
|
|
.84
|
|
Cash dividends
|
|
|
.240
|
|
|
|
.238
|
|
Book value
|
|
|
21.19
|
|
|
|
20.95
|
|
Market price
|
|
|
36.30
|
|
|
|
40.03
|
|
Selected Ratios
|
|
|
|
|
|
|
|
|
(Based on average balance sheets)
|
|
|
|
|
|
|
|
|
Loans to
deposits(1)
|
|
|
87.23
|
%
|
|
|
91.78
|
%
|
Non-interest bearing deposits to total deposits
|
|
|
5.82
|
|
|
|
5.45
|
|
Equity to
loans(1)
|
|
|
13.83
|
|
|
|
14.03
|
|
Equity to deposits
|
|
|
12.06
|
|
|
|
12.88
|
|
Equity to total assets
|
|
|
9.30
|
|
|
|
9.63
|
|
Return on total assets
|
|
|
.73
|
|
|
|
1.59
|
|
Return on total equity
|
|
|
7.82
|
|
|
|
16.52
|
|
(Based on end-of-period data)
|
|
|
|
|
|
|
|
|
Non-interest income to
revenue(2)
|
|
|
38.12
|
|
|
|
39.68
|
|
Efficiency
ratio(3)
|
|
|
62.58
|
|
|
|
59.87
|
|
Tier I risk-based capital ratio
|
|
|
11.05
|
|
|
|
10.45
|
|
Total risk-based capital ratio
|
|
|
12.42
|
|
|
|
11.66
|
|
Tangible equity to assets
ratio(4)
|
|
|
8.24
|
|
|
|
8.62
|
|
Tier I leverage ratio
|
|
|
8.93
|
|
|
|
8.88
|
|
|
|
|
|
(1)
|
Includes loans held for
sale.
|
(2)
|
Revenue includes net interest
income and non-interest income.
|
(3)
|
The efficiency ratio is
calculated as non-interest expense (excluding intangibles
amortization) as a percent of revenue.
|
(4)
|
The tangible equity ratio is
calculated as stockholders equity reduced by goodwill and
other intangible assets (excluding mortgage servicing rights)
divided by total assets reduced by goodwill and other intangible
assets (excluding mortgage servicing rights).
|
35
Results
of Operations
Summary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Increase
|
|
|
|
March 31
|
|
|
(Decrease)
|
|
(Dollars in thousands)
|
|
2009
|
|
|
2008
|
|
|
Amount
|
|
|
Percent
|
|
|
|
|
Net interest income
|
|
$
|
150,015
|
|
|
$
|
140,107
|
|
|
$
|
9,908
|
|
|
|
7.1
|
%
|
Provision for loan losses
|
|
|
(43,168
|
)
|
|
|
(20,000
|
)
|
|
|
23,168
|
|
|
|
115.8
|
|
Non-interest income
|
|
|
92,431
|
|
|
|
92,160
|
|
|
|
271
|
|
|
|
.3
|
|
Investment securities gains (losses), net
|
|
|
(2,172
|
)
|
|
|
23,323
|
|
|
|
(25,495
|
)
|
|
|
N.M.
|
|
Non-interest expense
|
|
|
(152,886
|
)
|
|
|
(140,181
|
)
|
|
|
12,705
|
|
|
|
9.1
|
|
Income taxes
|
|
|
(13,592
|
)
|
|
|
(30,668
|
)
|
|
|
(17,076
|
)
|
|
|
(55.7
|
)
|
Non-controlling interest (expense) income
|
|
|
208
|
|
|
|
(574
|
)
|
|
|
782
|
|
|
|
N.M.
|
|
|
|
Net income*
|
|
$
|
30,836
|
|
|
$
|
64,167
|
|
|
$
|
(33,331
|
)
|
|
|
(51.9
|
)%
|
|
|
|
|
|
* |
|
Net income shown in the table
above and mentioned throughout this discussion refers to Net
income attributable to Commerce Bancshares, Inc. as shown in the
accompanying statements of income. |
For the quarter ended March 31, 2009, net income amounted
to $30.8 million, a decrease of $33.3 million, or
51.9%, compared to the first quarter of the previous year. For
the current quarter, the annualized return on average assets was
.73%, the annualized return on average equity was 7.82%, and the
efficiency ratio was 62.58%. Diluted earnings per share was
$.40, a decrease of 52.4% compared to $.84 per share in the
first quarter of 2008. The first quarter of 2008 included a
$22.2 million pre-tax gain on the redemption of Visa, Inc.
(Visa) common stock and the reversal of certain Visa litigation
charges of $8.8 million on a pre-tax basis, which had the
effect of increasing earnings per share by $.26 in 2008.
Net income for the first quarter of 2009 compared to the same
period last year included growth of $9.9 million, or 7.1%,
in net interest income, coupled with slight growth in
non-interest income, which increased $271 thousand. Compared to
the same period last year, non-interest expense increased
$12.7 million, largely due to an $8.8 million
reduction in an indemnification obligation in the first quarter
of 2008 which did not reoccur in the first quarter of 2009, as
mentioned above. In addition, salaries and employee benefits
costs increased $3.7 million and data processing and
software expenses increased $784 thousand. The provision for
loan losses totaled $43.2 million for the current quarter,
representing an increase of $23.2 million over the first
quarter of 2008. Investment securities gains declined
$25.5 million due to the gain on the redemption of Visa
common stock in the first quarter of 2008, mentioned above,
coupled with a net unrealized loss in fair value on certain
private equity investments in the current quarter.
The Company continually evaluates the profitability of its
network of bank branches throughout its markets. As a result of
this evaluation process, the Company may periodically sell the
assets and liabilities of certain branches, or may sell the
premises of specific banking facilities. In February 2009, the
Company sold its branch in Lakin, Kansas. In this transaction,
the Company sold the bank facility and certain deposits of
approximately $4.7 million, and recorded a pre-tax gain of
$644 thousand. In May 2008, the Company sold its banking branch,
including the facility, in Independence, Kansas. In this
transaction, approximately $23.3 million in loans,
$85.0 million in deposits, and various other assets and
liabilities were sold, and the Company recorded a pre-tax gain
of $6.9 million.
36
Net
Interest Income
The following table summarizes the changes in net interest
income on a fully taxable equivalent basis, by major category of
interest earning assets and interest bearing liabilities,
identifying changes related to volumes and rates. Changes not
solely due to volume or rate changes are allocated to rate.
Analysis
of Changes in Net Interest Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
March 31, 2009 vs. 2008
|
|
|
|
Change due to
|
|
|
|
|
|
|
Average
|
|
|
Average
|
|
|
|
|
(In thousands)
|
|
Volume
|
|
|
Rate
|
|
|
Total
|
|
|
|
|
Interest income, fully taxable equivalent basis:
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans
|
|
$
|
1,737
|
|
|
$
|
(33,594
|
)
|
|
$
|
(31,857
|
)
|
Loans held for sale
|
|
|
1,876
|
|
|
|
(2,361
|
)
|
|
|
(485
|
)
|
Investment securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. government and federal agency securities
|
|
|
(1,727
|
)
|
|
|
(189
|
)
|
|
|
(1,916
|
)
|
State and municipal obligations
|
|
|
3,380
|
|
|
|
(1,053
|
)
|
|
|
2,327
|
|
Mortgage and asset-backed securities
|
|
|
5,613
|
|
|
|
952
|
|
|
|
6,565
|
|
Other securities
|
|
|
(146
|
)
|
|
|
8
|
|
|
|
(138
|
)
|
|
|
Total interest on investment securities
|
|
|
7,120
|
|
|
|
(282
|
)
|
|
|
6,838
|
|
|
|
Federal funds sold and securities purchased under agreements to
resell
|
|
|
(2,580
|
)
|
|
|
(707
|
)
|
|
|
(3,287
|
)
|
Interest earning deposits with banks
|
|
|
449
|
|
|
|
|
|
|
|
449
|
|
|
|
Total interest income
|
|
|
8,602
|
|
|
|
(36,944
|
)
|
|
|
(28,342
|
)
|
|
|
Interest expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits:
|
|
|
|
|
|
|
|
|
|
|
|
|
Savings
|
|
|
34
|
|
|
|
(239
|
)
|
|
|
(205
|
)
|
Interest checking and money market
|
|
|
932
|
|
|
|
(13,288
|
)
|
|
|
(12,356
|
)
|
Time open & C.D.s of less than $100,000
|
|
|
(2,638
|
)
|
|
|
(7,874
|
)
|
|
|
(10,512
|
)
|
Time open & C.D.s of $100,000 and over
|
|
|
5,504
|
|
|
|
(11,504
|
)
|
|
|
(6,000
|
)
|
|
|
Total interest on deposits
|
|
|
3,832
|
|
|
|
(32,905
|
)
|
|
|
(29,073
|
)
|
|
|
Federal funds purchased and securities sold under agreements to
repurchase
|
|
|
(4,837
|
)
|
|
|
(5,685
|
)
|
|
|
(10,522
|
)
|
Other borrowings
|
|
|
4,668
|
|
|
|
(3,660
|
)
|
|
|
1,008
|
|
|
|
Total interest expense
|
|
|
3,663
|
|
|
|
(42,250
|
)
|
|
|
(38,587
|
)
|
|
|
Net interest income, fully taxable equivalent basis
|
|
$
|
4,939
|
|
|
$
|
5,306
|
|
|
$
|
10,245
|
|
|
|
Net interest income for the first quarter of 2009 was
$150.0 million, a $9.9 million, or 7.1%, increase over
the first quarter of 2008. The increase in net interest income
was primarily the result of lower rates paid on interest bearing
deposits and borrowings and an increase in average investment
securities, partly offset by lower loan yields. The decline in
rates on interest earning assets and interest bearing
liabilities resulted from actions taken by the Federal Reserve
Bank to reduce interest rate levels, which caused the earning
assets and interest bearing liabilities to reprice downward. The
Companys net interest rate margin was 3.83% for the first
quarter of 2009, compared to 4.06% in the previous quarter and
3.83% in the first quarter of 2008.
Total interest income, on a tax equivalent basis (T/E),
decreased $28.3 million, or 12.5%, from the first quarter
of 2008. Interest income on loans (T/E) declined
$31.9 million, primarily the result of a 127 basis
point decrease in rates earned on the loan portfolio. Interest
income on investment securities (T/E) increased
37
$6.8 million, as average balances increased
$548.9 million, or 15.9%, while yields increased slightly.
Interest income on overnight investments in federal funds sold
and securities purchased under agreements to resell decreased
$3.3 million, primarily due to a decrease in average
balances of $381.3 million coupled with a decline of
236 basis points in rates earned. Beginning October 1,
2008, amounts held with the Federal Reserve Bank began earning
interest. This contributed $449 thousand to interest income in
the first quarter of 2009. The average tax equivalent yield on
total interest earning assets was 4.93% in the first quarter of
2009 compared to 6.03% in the first quarter of 2008.
Total interest expense decreased $38.6 million, or 46.8%,
compared to the first quarter of 2008, primarily due to a
$29.1 million decrease in interest expense paid on interest
bearing deposits, coupled with a $10.5 million decrease in
interest expense paid on federal funds purchased and securities
sold under agreements to repurchase. The decrease in interest
expense paid on deposits resulted from a 111 basis point
decrease in average rates, offset slightly by an increase in
average balances. Average rates paid on interest checking and
money market accounts decreased 72 basis points, while average
balances increased $703.6 million, or 9.8%, resulting in a
net decrease in interest expense of $12.4 million.
Additionally, interest expense paid on certificates of deposit
decreased $16.5 million as a result of a decrease in
average rates paid of 190 basis points, offset by an increase in
average balances of $277.5 million, or 7.1%. Interest
expense on federal funds purchased and securities sold under
agreements to repurchase decreased $10.5 million compared
to first quarter 2008 as a result of a decrease in average
balances of $633.4 million, or 38.9%, coupled with a
240 basis point decrease in average rates paid. Much of the
decrease in average balances occurred in federal funds
purchased, which was due to efforts to reduce inter-bank
borrowing exposure. The average balance of other borrowings
increased $477.6 million, or 65.4%, compared to first
quarter 2008 and included higher average advances from the
Federal Home Loan Bank and borrowings under the Federal
Reserves Term Auction Facility program. The impact of
these increases in average balances was partially offset by a
128 basis point decrease in average rates paid on other
borrowings. The overall average rate incurred on all interest
bearing liabilities decreased to 1.21% in the first quarter of
2009 compared to 2.40% in the first quarter of 2008.
Summaries of average assets and liabilities and the
corresponding average rates earned/paid appear on the last page
of this discussion.
Non-Interest
Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
Increase
|
|
|
|
Ended March 31
|
|
|
(Decrease)
|
|
(Dollars in thousands)
|
|
2009
|
|
|
2008
|
|
|
Amount
|
|
|
Percent
|
|
|
|
|
Deposit account charges and other fees
|
|
$
|
25,592
|
|
|
$
|
27,075
|
|
|
$
|
(1,483
|
)
|
|
|
(5.5
|
)%
|
Bank card transaction fees
|
|
|
27,168
|
|
|
|
26,308
|
|
|
|
860
|
|
|
|
3.3
|
|
Trust fees
|
|
|
18,873
|
|
|
|
20,113
|
|
|
|
(1,240
|
)
|
|
|
(6.2
|
)
|
Trading account profits and commissions
|
|
|
5,396
|
|
|
|
4,164
|
|
|
|
1,232
|
|
|
|
29.6
|
|
Consumer brokerage services
|
|
|
3,308
|
|
|
|
3,409
|
|
|
|
(101
|
)
|
|
|
(3.0
|
)
|
Loan fees and sales
|
|
|
2,961
|
|
|
|
2,140
|
|
|
|
821
|
|
|
|
38.4
|
|
Other
|
|
|
9,133
|
|
|
|
8,951
|
|
|
|
182
|
|
|
|
2.0
|
|
|
|
Total non-interest income
|
|
$
|
92,431
|
|
|
$
|
92,160
|
|
|
$
|
271
|
|
|
|
.3
|
%
|
|
|
Non-interest income as a % of total revenue*
|
|
|
38.1
|
%
|
|
|
39.7
|
%
|
|
|
|
|
|
|
|
|
Total revenue per full-time equivalent employee
|
|
$
|
46.4
|
|
|
$
|
45.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
Total revenue includes net
interest income and non-interest income. |
For the first quarter of 2009, total non-interest income
amounted to $92.4 million compared with $92.2 million
in the same quarter last year, which was an increase of $271
thousand, or .3%. The slight increase over last year resulted
mainly from increases in bond trading income, bank card fees,
and loan fees and sales, but was offset by reductions in deposit
and trust fees. Bank card fees for the quarter increased $860
thousand, or 3.3%, over the first quarter of last year,
primarily due to continued growth in transaction fees
38
earned on corporate cards and debit cards, which grew by 19.7%
and 3.0%, respectively, but were negatively impacted by lower
retail sales affecting both merchant and credit card fees. Trust
fees for the quarter decreased $1.2 million, or 6.2%, from
the same quarter last year and reflected the impact that lower
markets have had on trust asset values this quarter. Deposit
account fees declined $1.5 million, or 5.5%, from the same
period last year as a result of an 11.6% decline in overdraft
fee income, partly offset by growth in corporate cash management
fees of 10.3%. Bond trading income for the current quarter
totaled $5.4 million, an increase of $1.2 million, or
29.6%, due to strong sales to correspondent banks. Consumer
brokerage services revenue decreased slightly by $101 thousand,
or 3.0%, mainly due to lower mutual fund fees. Loan fees and
sales revenue increased $821 thousand, or 38.4%, as a result of
higher mortgage banking revenue due to refinancing activity and
increased gains on sales of student loans. Other non-interest
income for the current quarter increased $182 thousand, or 2.0%,
over the same quarter last year. Most of this increase was due
to a gain of $644 thousand recorded on the sale of the Lakin
branch, mentioned previously, and an impairment charge of
$1.1 million, recorded in the first quarter of 2008, on an
office building held for sale. Partly offsetting these increases
were declines in equipment rental income, cash sweep commissions
and tax credit sales income, in addition to losses on the
disposal of repossessed assets.
Investment
Securities Gains (Losses), Net
Net gains and losses on investment securities which were
recognized in earnings during the three months ended
March 31, 2009 and 2008 are shown in the table below. Net
securities losses amounted to $2.2 million in the first
quarter of 2009, compared to net gains of $23.3 million in
the same quarter last year. Most of the net gain in 2008
resulted from a $22.2 million gain on the redemption of
Visa common stock. During the current quarter, non-agency
guaranteed mortgage-backed securities with a par value of
$66.6 million were identified as other than temporarily
impaired. The credit-related impairment loss on these securities
amounted to $553 thousand, which was recorded in current
earnings and included in the table below. The noncredit-related
loss on these securities, which was recorded in other
comprehensive income, was $21.3 million. Also shown below
are net gains and losses relating to non-marketable private
equity investments, which are primarily held by the
Parents majority-owned venture capital subsidiaries. These
include fair value adjustments, in addition to gains and losses
realized upon disposition. The portion of this activity
attributable to minority interests is reported as
non-controlling interest in the consolidated income statement,
resulting in income of $332 thousand during the first quarter of
2009 and $490 thousand in expense for the same period last year.
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
|
Ended March 31
|
|
(In thousands)
|
|
2009
|
|
|
2008
|
|
|
|
|
Available for sale:
|
|
|
|
|
|
|
|
|
Preferred equity securities
|
|
$
|
|
|
|
$
|
(3,361
|
)
|
Other bonds
|
|
|
(545
|
)
|
|
|
1,139
|
|
Non-marketable:
|
|
|
|
|
|
|
|
|
Private equity investments
|
|
|
(1,627
|
)
|
|
|
3,349
|
|
Visa Class B stock
|
|
|
|
|
|
|
22,196
|
|
|
|
Total investment securities gains (losses), net
|
|
$
|
(2,172
|
)
|
|
$
|
23,323
|
|
|
|
39
Non-Interest
Expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
Increase
|
|
|
|
Ended March 31
|
|
|
(Decrease)
|
|
(Dollars in thousands)
|
|
2009
|
|
|
2008
|
|
|
Amount
|
|
|
Percent
|
|
|
|
|
Salaries and employee benefits
|
|
$
|
86,753
|
|
|
$
|
83,010
|
|
|
$
|
3,743
|
|
|
|
4.5
|
%
|
Net occupancy
|
|
|
11,812
|
|
|
|
12,069
|
|
|
|
(257
|
)
|
|
|
(2.1
|
)
|
Equipment
|
|
|
6,322
|
|
|
|
5,907
|
|
|
|
415
|
|
|
|
7.0
|
|
Supplies and communication
|
|
|
8,684
|
|
|
|
8,724
|
|
|
|
(40
|
)
|
|
|
(.5
|
)
|
Data processing and software
|
|
|
14,347
|
|
|
|
13,563
|
|
|
|
784
|
|
|
|
5.8
|
|
Marketing
|
|
|
4,347
|
|
|
|
5,287
|
|
|
|
(940
|
)
|
|
|
(17.8
|
)
|
Indemnification obligation
|
|
|
|
|
|
|
(8,808
|
)
|
|
|
8,808
|
|
|
|
N.M.
|
|
Other
|
|
|
20,621
|
|
|
|
20,429
|
|
|
|
192
|
|
|
|
.9
|
|
|
|
Total non-interest expense
|
|
$
|
152,886
|
|
|
$
|
140,181
|
|
|
$
|
12,705
|
|
|
|
9.1
|
%
|
|
|
Non-interest expense for the first quarter of 2009 amounted to
$152.9 million, an increase of $12.7 million, or 9.1%,
compared with $140.2 million recorded in the first quarter
of last year. Included in non-interest expense in the first
quarter of last year was a reduction of $8.8 million in
certain Visa indemnification costs that did not reoccur in the
current quarter. Exclusive of this item, non-interest expense in
the current quarter grew 2.6% compared to the same period last
year. Compared with the first quarter of last year, salaries and
benefits expense increased $3.7 million, or 4.5%, resulting
mainly from increased staffing, related to several growth
initiatives, and higher pension costs. Full-time equivalent
employees increased to 5,222 at March 31, 2009 compared to
5,128 at March 31, 2008. Occupancy costs declined by $257
thousand, or 2.1%, from the same quarter last year, primarily
due to lower seasonal maintenance costs, and partly offset by
higher building depreciation expense. Equipment expenses
increased $415 thousand, or 7.0%, over the same quarter last
year due to higher maintenance contract expense and depreciation
expense on data processing equipment. Supplies and communication
expense was flat, while marketing costs declined $940 thousand,
or 17.8%. Data processing and software costs increased $784
thousand, or 5.8%, mainly as a result of higher costs for
several new software and servicing systems, partly offset by a
slight reduction in bank card processing costs. Other
non-interest expense increased $192 thousand, or .9%, over the
same quarter last year primarily due to a $3.6 million
increase in FDIC insurance expense, partly offset by an
impairment charge of $2.3 million related to foreclosed
land which was recorded in the first quarter of 2008. The FDIC
is currently considering a one-time special assessment on the
banking industry which could raise deposit insurance premiums
significantly. While not finalized, it is expected that this
assessment would be paid in the third quarter of 2009, based on
average deposits in the second quarter of 2009.
40
Provision
and Allowance for Loan Losses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
(Dollars in thousands)
|
|
Mar. 31, 2009
|
|
|
Mar. 31, 2008
|
|
|
Dec. 31, 2008
|
|
|
|
|
Provision for loan losses
|
|
$
|
43,168
|
|
|
$
|
20,000
|
|
|
$
|
41,333
|
|
|
|
Net loan charge-offs (recoveries):
|
|
|
|
|
|
|
|
|
|
|
|
|
Business
|
|
|
3,842
|
|
|
|
(509
|
)
|
|
|
2,099
|
|
Real estate-construction and land
|
|
|
9,226
|
|
|
|
774
|
|
|
|
4,021
|
|
Real estate-business
|
|
|
776
|
|
|
|
902
|
|
|
|
978
|
|
Consumer credit card
|
|
|
10,763
|
|
|
|
6,593
|
|
|
|
8,674
|
|
Consumer
|
|
|
9,333
|
|
|
|
3,956
|
|
|
|
6,901
|
|
Home equity
|
|
|
300
|
|
|
|
(6
|
)
|
|
|
91
|
|
Real estate-personal
|
|
|
545
|
|
|
|
101
|
|
|
|
1,358
|
|
Overdrafts
|
|
|
134
|
|
|
|
86
|
|
|
|
623
|
|
|
|
Total net loan charge-offs
|
|
$
|
34,919
|
|
|
$
|
11,897
|
|
|
$
|
24,745
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
Mar. 31, 2009
|
|
|
Mar. 31, 2008
|
|
|
Dec. 31, 2008
|
|
|
|
|
Annualized net loan charge-offs*:
|
|
|
|
|
|
|
|
|
|
|
|
|
Business
|
|
|
.47
|
%
|
|
|
|
%
|
|
|
.25
|
%
|
Real estate-construction and land
|
|
|
4.58
|
|
|
|
.45
|
|
|
|
2.21
|
|
Real estate-business
|
|
|
.15
|
|
|
|
.16
|
|
|
|
.17
|
|
Consumer credit card
|
|
|
5.94
|
|
|
|
3.48
|
|
|
|
4.48
|
|
Consumer
|
|
|
2.40
|
|
|
|
.97
|
|
|
|
1.64
|
|
Home equity
|
|
|
.24
|
|
|
|
|
|
|
|
.07
|
|
Real estate-personal
|
|
|
.14
|
|
|
|
.03
|
|
|
|
.35
|
|
Overdrafts
|
|
|
6.48
|
|
|
|
2.45
|
|
|
|
23.49
|
|
|
|
Total annualized net loan charge-offs
|
|
|
1.28
|
%
|
|
|
.44
|
%
|
|
|
.90
|
%
|
|
|
|
|
|
* |
|
as a percentage of average loans
(excluding loans held for sale) |
The Company has an established process to determine the amount
of the allowance for loan losses, which assesses the risks and
losses inherent in its portfolio. This process provides an
allowance consisting of a specific allowance component based on
certain individually evaluated loans and a general component
based on estimates of reserves needed for pools of loans with
similar risk characteristics.
Loans subject to individual evaluation are defined by the
Company as impaired, and generally consist of business,
construction, commercial real estate and personal real estate
loans on non-accrual status. These loans are evaluated
individually for the impairment of repayment potential and
collateral adequacy, and in conjunction with current economic
conditions and loss experience, allowances are estimated. Loans
not individually evaluated are aggregated and reserves are
recorded using a consistent methodology that considers
historical loan loss experience by loan type, delinquencies,
current economic factors, loan risk ratings and industry
concentrations.
In using this process and the information available, management
must consider various assumptions and exercise considerable
judgment to determine the overall level of the allowance for
loan losses. Because of these subjective factors, actual
outcomes of inherent losses can differ from original estimates.
The process of determining adequate levels of the allowance for
loan losses is subject to regular review by the Companys
Credit Administration personnel and outside regulators.
41
Net loan charge-offs for the first quarter of 2009 amounted to
$34.9 million, compared with $24.7 million in the
prior quarter and $11.9 million in the first quarter of
last year. The increase in net charge-offs in the first quarter
of 2009 compared to the previous quarter was mainly due to
increased losses of $4.5 million in consumer and credit
card loans, $5.2 million in construction and land real
estate loans, and $1.7 million in business loans. Consumer
credit card net charge-offs totaled $10.8 million in the
current quarter, and increased $2.1 million compared to the
previous quarter. Consumer loan charge-offs totaled
$9.3 million in the current quarter, and increased
$2.4 million over the previous quarter. The increase in
consumer loan charge-offs was mostly due to higher net
charge-offs on marine and recreational vehicle loans, which
increased $1.6 million. The ratio of annualized total net
loan charge-offs to total average loans was 1.28%, compared to
.90% in the previous quarter and .44% in the first quarter of
last year.
For the first quarter of 2009, annualized net charge-offs on
average construction and land loans were 4.58% compared with
2.21% in the previous quarter and .45% in the same period last
year. Additionally, annualized net charge-offs on average
consumer credit card loans were 5.94%, compared with 4.48% in
the previous quarter and 3.48% in the same period last year.
Consumer loan net charge-offs for the quarter amounted to 2.40%
of average consumer loans, compared to 1.64% in the previous
quarter and .97% in the same quarter last year.
The provision for loan losses for the first quarter of 2009
totaled $43.2 million, which was a $1.8 million
increase compared to the previous quarter and a
$23.2 million increase compared to the first quarter of
2008. The amount of the provision in each quarter was determined
by managements review and analysis of the adequacy of the
allowance for loan losses, involving all the activities and
factors described above regarding that process. The higher
provision in the current quarter was influenced by higher
incurred losses within the loan portfolio and an increase in
classified loans, stemming from increasing risk in the broader
economy.
The allowance for loan losses at March 31, 2009 amounted to
$180.9 million, or 1.65% of total loans (excluding loans
held for sale) compared to $172.6 million, or 1.53%, at
December 31, 2008 and $141.7 million, or 1.30%, at
March 31, 2008. The increase in the allowance compared to
previous periods resulted primarily from higher provisions, as
noted above. The Company considers the allowance for loan losses
adequate to cover losses inherent in the loan portfolio at
March 31, 2009.
42
Risk
Elements of Loan Portfolio
The following table presents non-performing assets and loans
which are past due 90 days and still accruing interest.
Non-performing assets include non-accruing loans and foreclosed
real estate. Loans are placed on non-accrual status when
management does not expect to collect payments consistent with
acceptable and agreed upon terms of repayment. Loans that are
90 days past due as to principal
and/or
interest payments are generally placed on non-accrual, unless
they are both well-secured and in the process of collection, or
they are consumer loans that are exempt under regulatory rules
from being classified as non-accrual.
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31
|
|
|
December 31
|
|
(Dollars in thousands)
|
|
2009
|
|
|
2008
|
|
|
|
|
Non-accrual loans:
|
|
|
|
|
|
|
|
|
Business
|
|
$
|
11,084
|
|
|
$
|
4,007
|
|
Real estate construction and land
|
|
|
74,985
|
|
|
|
48,871
|
|
Real estate business
|
|
|
16,737
|
|
|
|
13,137
|
|
Real estate personal
|
|
|
7,117
|
|
|
|
6,794
|
|
Consumer
|
|
|
96
|
|
|
|
87
|
|
|
|
Total non-accrual loans
|
|
|
110,019
|
|
|
|
72,896
|
|
|
|
Foreclosed real estate
|
|
|
8,666
|
|
|
|
6,181
|
|
|
|
Total non-performing assets
|
|
$
|
118,685
|
|
|
$
|
79,077
|
|
|
|
Non-performing assets as a percentage of total loans
|
|
|
1.08
|
%
|
|
|
.70
|
%
|
Non-performing assets as a percentage of total assets
|
|
|
.66
|
%
|
|
|
.45
|
%
|
|
|
Loans past due 90 days and still accruing interest:
|
|
|
|
|
|
|
|
|
Business
|
|
$
|
6,593
|
|
|
$
|
1,459
|
|
Real estate construction and land
|
|
|
3,944
|
|
|
|
466
|
|
Real estate business
|
|
|
2,653
|
|
|
|
1,472
|
|
Real estate personal
|
|
|
4,697
|
|
|
|
4,717
|
|
Consumer
|
|
|
2,320
|
|
|
|
3,478
|
|
Home equity
|
|
|
441
|
|
|
|
440
|
|
Student
|
|
|
15,115
|
|
|
|
14,018
|
|
Consumer credit card
|
|
|
15,648
|
|
|
|
13,914
|
|
|
|
Total loans past due 90 days and still accruing
interest
|
|
$
|
51,411
|
|
|
$
|
39,964
|
|
|
|
Non-accrual loans, which are also considered impaired, totaled
$110.0 million at March 31, 2009, and increased
$37.1 million over amounts recorded at December 31,
2008. The increase over December 31, 2008 occurred mainly
in construction and land real estate non-accrual loans, which
increased $26.1 million, and in business non-accrual loans,
which increased $7.1 million. At March 31, 2009,
non-accrual loans were comprised mainly of construction and land
real estate loans (68.2%), business real estate loans (15.2%)
and business loans (10.1%). Foreclosed real estate increased
$2.5 million to a balance of $8.7 million at
March 31, 2009. The increase was mainly due to the
acquisition of one property with a carrying value of
$2.4 million.
Total loans past due 90 days or more and still accruing
interest amounted to $51.4 million as of March 31,
2009, and increased $11.4 million over December 31,
2008. The increase in the past due totals at March 31, 2009
compared to December 31, 2008 resulted mainly from
increases of $5.1 million in business and $3.5 million
in construction and land real estate loan delinquencies.
In addition to the non-accrual loans mentioned above, the
Company also has identified loans for which management has
concerns about the ability of the borrowers to meet existing
repayment terms. They are
43
primarily classified as substandard under the Companys
internal rating system. The loans are generally secured by
either real estate or other borrower assets, reducing the
potential for loss should they become non-performing. Although
these loans are generally identified as potential problem loans,
they may never become non-performing. Such loans totaled
$304.0 million at March 31, 2009 compared with
$338.7 million at December 31, 2008, resulting in a
decrease of 10.3%. Most of the decrease occurred in construction
and land real estate loans, which declined from
$135.3 million at year end to $97.9 million at
March 31, 2009. The overall balance at March 31, 2009
also included $107.5 million in business loans and
$53.6 million in business real estate loans.
Income
Taxes
Income tax expense was $13.6 million in the first quarter
of 2009, compared to $17.8 million in the fourth quarter of
2008 and $30.7 million in the first quarter of 2008. The
Companys effective income tax rate, including the effect
of non-controlling interest, was 30.6% in the first quarter of
2009, compared with 28.8% in the fourth quarter of 2008 and
32.3% in the first quarter of 2008. The changes in the effective
tax rate for the first quarter of 2009 compared to the first and
fourth quarters of 2008 were primarily due to changes in the mix
of taxable and non-taxable income during those periods.
44
Financial
Condition
Balance
Sheet
Total assets of the Company were $17.9 billion at
March 31, 2009 compared to $17.5 billion at
December 31, 2008. Earning assets (excluding fair value
adjustments on investment securities) amounted to
$16.8 billion at March 31, 2009 consisting of 68% in
loans and 28% in investment securities, compared to
$16.2 billion at December 31, 2008.
During the first quarter of 2009, average loans, excluding loans
held for sale, increased $158.7 million, or 1.5% compared
to the previous quarter, representing annualized growth of 6.0%.
The increase in loans was mainly the result of the acquisition
of $358.5 million, at fair value, in federally guaranteed
student loans late in the fourth quarter of last year. The
effect of this acquisition increased average balances by
$299.1 million in the current quarter. Late in the fourth
quarter of last year, the Company reclassified certain loans
collateralized by land to either construction or personal real
estate loans. The effect of this reclassification, which was
fully reflected in average balances in the current quarter, was
to increase average construction loans by $105.3 million
and personal real estate loans by $94.1 million, and
decrease business real estate, business, and consumer loans by
$142.1 million, $37.0 million, and $20.3 million,
respectively.
Exclusive of these changes, the average balances for business
and construction loans declined by $11.8 million and
$12.4 million, respectively. This decline was reflective of
lower customer line of credit usage and continued reductions in
outstanding balances as borrowers have reacted to the difficult
economy by reducing debt. In addition, average balances for
consumer, consumer credit card, and personal real estate loans
declined by $69.9 million, $35.7 million, and
$16.5 million, respectively, as pay-downs exceeded new loan
originations for these products. Also, the Company has reduced
its marketing efforts on both consumer credit cards and marine
and recreational vehicle lending products.
Average available for sale investment securities (excluding fair
value adjustments) increased to $3.8 billion in the current
quarter, an increase of $128.6 million compared to the
previous quarter. Period end balances (excluding fair value
adjustments) increased $895.3 million during the quarter,
up from $3.7 billion at December 31, 2008 to
$4.6 billion at March 31, 2009. During the current
quarter, maturities and principal pay-downs of securities
amounted to $237.4 million. The Company reinvested
$716.8 million in agency-guaranteed mortgage-backed
securities, $151.6 million in other asset-backed
securities, and $138.7 million in state and municipal
obligations. Sales of securities during the first quarter of
2009 were not significant, while the previous quarter included
sales of auction rate securities totaling $369 million in
par value.
Average deposits increased $813.9 million, or 6.5%, in the
current quarter, up to $13.3 billion during the first
quarter of 2009 compared to $12.4 billion during the fourth
quarter of 2008. The growth in average deposits resulted mainly
from increases in certificates of deposit ($345.6 million),
interest checking and money market deposits
($372.4 million), and non-interest bearing demand deposits
($80.5 million). These increases occurred in both consumer
and corporate accounts. Approximately 66% of the increase over
the previous quarter in certificates of deposit and 38% of the
increase in interest checking and money market deposits were
related to corporate customers. The average loans to deposits
ratio in the current quarter was 87.2% compared to 91.1% in the
previous quarter.
During the current quarter, the Companys average
borrowings decreased $413.7 million, or 15.8%, from the
previous quarter. The decrease was mainly the result of a
decline of $238.2 million in advances from the FHLB,
coupled with a decline of $88.3 million in borrowings under
the Federal Reserves Term Auction Facility. Additionally,
average borrowings of federal funds purchased declined by
$69.1 million.
45
Liquidity
and Capital Resources
Liquidity
Management
The Companys most liquid assets are comprised of available
for sale investment securities, federal funds sold, securities
purchased under agreements to resell, and balances at the
Federal Reserve Bank, as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31
|
|
|
March 31
|
|
|
December 31
|
|
(In thousands)
|
|
2009
|
|
|
2008
|
|
|
2008
|
|
|
|
|
Liquid assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal funds sold
|
|
$
|
33,050
|
|
|
$
|
171,282
|
|
|
$
|
59,475
|
|
Securities purchased under agreements to resell
|
|
|
10,000
|
|
|
|
353,751
|
|
|
|
110,000
|
|
Available for sale investment securities
|
|
|
4,550,908
|
|
|
|
3,413,816
|
|
|
|
3,630,753
|
|
Balances at the Federal Reserve Bank
|
|
|
592,162
|
|
|
|
|
|
|
|
638,158
|
|
|
|
Total
|
|
$
|
5,186,120
|
|
|
$
|
3,938,849
|
|
|
$
|
4,438,386
|
|
|
|
Federal funds sold and securities purchased under agreements to
resell totaled $43.1 million at March 31, 2009. These
investments normally have overnight maturities and are used for
general daily liquidity purposes. The fair value of the
available for sale investment portfolio was $4.6 billion at
March 31, 2009, and included an unrealized net loss of
$33.9 million. The overall net loss includes a
$94.2 million unrealized loss on mortgage and asset-backed
securities held by the bank subsidiary and a $35.9 million
unrealized gain on common stock held by the Parent. The
portfolio includes maturities of approximately $752 million
over the next 12 months, which offer substantial resources
to meet either new loan demand or reductions in the
Companys deposit funding base. The Company pledges
portions of its investment securities portfolio to secure public
fund deposits, securities sold under agreements to repurchase,
trust funds, letters of credit issued by the FHLB, and borrowing
capacity at the Federal Reserve Bank. At March 31, 2009,
total investment securities pledged for these purposes were as
follows:
|
|
|
|
|
|
|
|
|
March 31
|
|
(In thousands)
|
|
2009
|
|
|
|
|
Investment securities pledged for the purpose of securing:
|
|
|
|
|
Federal Reserve Bank borrowings
|
|
$
|
327,848
|
|
FHLB borrowings and letters of credit
|
|
|
339,361
|
|
Securities sold under agreements to repurchase
|
|
|
1,368,601
|
|
Other deposits
|
|
|
640,536
|
|
|
|
Total pledged, at fair value
|
|
$
|
2,676,346
|
|
|
|
Liquidity is also available from the Companys large base
of core customer deposits, defined as demand, interest checking,
savings, and money market deposit accounts. At March 31,
2009, such deposits totaled $9.6 billion and represented
69.0% of the Companys total deposits. These core deposits
are normally less volatile, often with customer relationships
tied to other products offered by the Company, promoting long
lasting relationships and stable funding sources. Time open and
certificates of deposit of $100,000 and over totaled
$2.2 billion at March 31, 2009. These accounts are
normally considered more volatile and higher costing, and
comprised 15.8% of total deposits at March 31, 2009.
46
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31
|
|
|
March 31
|
|
|
December 31
|
|
(In thousands)
|
|
2009
|
|
|
2008
|
|
|
2008
|
|
|
|
|
Core deposit base:
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-interest bearing demand
|
|
$
|
1,507,168
|
|
|
$
|
1,442,782
|
|
|
$
|
1,375,000
|
|
Interest checking
|
|
|
522,303
|
|
|
|
461,630
|
|
|
|
700,714
|
|
Savings and money market
|
|
|
7,606,162
|
|
|
|
6,827,138
|
|
|
|
6,909,592
|
|
|
|
Total
|
|
$
|
9,635,633
|
|
|
$
|
8,731,550
|
|
|
$
|
8,985,306
|
|
|
|
Other important components of liquidity are the level of
borrowings from third party sources and the availability of
future credit. The Companys outside borrowings are mainly
comprised of federal funds purchased, securities sold under
agreements to repurchase, and advances from the Federal Reserve
Bank and FHLB, as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31
|
|
|
March 31
|
|
|
December 31
|
|
(In thousands)
|
|
2009
|
|
|
2008
|
|
|
2008
|
|
|
|
|
Borrowings:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal funds purchased
|
|
$
|
159,360
|
|
|
$
|
295,790
|
|
|
$
|
24,900
|
|
Securities sold under agreements to repurchase
|
|
|
842,192
|
|
|
|
1,161,446
|
|
|
|
1,001,637
|
|
FHLB advances
|
|
|
825,233
|
|
|
|
759,724
|
|
|
|
1,025,721
|
|
Subordinated debentures
|
|
|
14,310
|
|
|
|
14,310
|
|
|
|
14,310
|
|
Term auction facility
|
|
|
|
|
|
|
|
|
|
|
700,000
|
|
Other long-term debt
|
|
|
7,732
|
|
|
|
7,830
|
|
|
|
7,750
|
|
|
|
Total
|
|
$
|
1,848,827
|
|
|
$
|
2,239,100
|
|
|
$
|
2,774,318
|
|
|
|
Federal funds purchased and securities sold under agreements to
repurchase are generally borrowed overnight, and amounted to
$1.0 billion at March 31, 2009. Federal funds
purchased are unsecured overnight borrowings obtained mainly
from upstream correspondent banks with which the Company
maintains approved lines of credit. Securities sold under
agreements to repurchase are secured by a portion of the
Companys investment portfolio and are comprised of both
non-insured customer funds, totaling $342.2 million at
March 31, 2009, and structured repurchase agreements of
$500.0 million purchased from an upstream financial
institution. The Company may periodically borrow additional
short-term funds from the Federal Reserve Bank through its Term
Auction Facility (TAF) or the discount window, although no such
borrowings were outstanding at the current quarter end. The
Company also borrows on a secured basis through advances from
the FHLB, which totaled $825.2 million at March 31,
2009. Most of these advances have fixed interest rates and
mature in 2009 through 2017. In addition, the Company has
$14.3 million in outstanding subordinated debentures issued
to wholly-owned grantor trusts, funded by preferred securities
issued by the trusts. Other outstanding long-term borrowings
relate mainly to the Companys leasing activities and
private equity investments.
47
The Company pledges certain assets, including loans and
investment securities, to both the Federal Reserve Bank and the
FHLB as security to establish lines of credit and borrow from
these entities. Based on the amount and type of collateral
pledged, the FHLB establishes a collateral value from which the
Company may draw advances against the collateral. Also, this
collateral is used to enable the FHLB to issue letters of credit
in favor of public fund depositors of the Company. The Federal
Reserve Bank also establishes a collateral value of assets
pledged and permits borrowings from either the discount window
or the TAF. The following table reflects the collateral value of
assets pledged, borrowings, and letters of credit outstanding,
in addition to the estimated future funding capacity available
to the Company at March 31, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2009
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
(In thousands)
|
|
FHLB
|
|
|
Reserve
|
|
|
|
|
Collateral value pledged
|
|
$
|
2,487,746
|
|
|
$
|
1,346,391
|
|
Advances outstanding
|
|
|
(825,233
|
)
|
|
|
|
|
Letters of credit issued
|
|
|
(1,272,789
|
)
|
|
|
|
|
|
|
Available for future advances
|
|
$
|
389,724
|
|
|
$
|
1,346,391
|
|
|
|
In addition to those mentioned above, several other sources of
liquidity are available. The Company has strong long-term
deposit ratings from Moodys and Standard &
Poors of Aa2 and A+, respectively. Additionally, its sound
commercial paper rating of
A-1 from
Standard & Poors and short-term rating of
P-1 from
Moodys would help ensure the ready marketability of its
commercial paper, should the need arise. No commercial paper has
been issued or outstanding during the past ten years. Neither
the Company nor its banking subsidiary has any subordinated debt
or hybrid instruments which could affect future borrowing
capacity. Because of its lack of significant long-term debt, the
Company believes that it could generate additional liquidity
through its Capital Markets Group from sources such as jumbo
certificates of deposit or privately placed debt offerings.
Future financing could also include the issuance of common or
preferred stock. As mentioned in Note 8 on Common Stock and
as discussed further below, in February 2009, the Company
entered into an equity distribution agreement with a broker
dealer pursuant to which the Company may periodically offer and
sell shares of the Companys common stock having aggregate
gross sales proceeds of up to $200 million.
Cash and cash equivalents (defined as Cash and due from
banks, Federal funds sold and securities purchased
under agreements to resell, and Interest earning
deposits with banks as segregated in the accompanying
balance sheets) was $1.0 billion at March 31, 2009
compared to $1.3 billion at December 31, 2008. The
$289.4 million decline includes changes in the various cash
flows resulting from the operating, investing and financing
activities of the Company, as shown in the accompanying
statement of cash flows for March 31, 2009. Operating
activities include net income adjusted for certain non-cash
items, in addition to changes in the levels of loans held for
sale and securities held for trading purposes. During the first
quarter of 2009, operating activities used cash of
$69.5 million, partly due to activity in these portfolios.
Investing activities, which occur mainly in the loan and
investment securities portfolios, used cash of
$319.8 million. Most of the cash outflow was due to
$855.9 million in purchases of investment securities,
partly offset by $237.7 million in proceeds from sales,
maturities and pay downs, and a $307.5 million decline in
the loan portfolio. Financing activities provided cash of
$100.0 million, resulting from increases of
$414.3 million in certificates of deposit and
$628.4 million in other deposit accounts. These cash
inflows were partly offset by decreases of $700.0 million
in TAF borrowings and $200.5 million in FHLB advances.
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.
48
Capital
Management
The Company and its bank subsidiary maintain strong regulatory
capital ratios, which exceed the well-capitalized guidelines
under federal banking regulations. Information about the
Companys risk-based capital is shown below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minimum Ratios
|
|
|
|
|
|
|
|
|
|
for
|
|
|
|
March 31
|
|
|
December 31
|
|
|
Well-Capitalized
|
|
(Dollars in thousands)
|
|
2009
|
|
|
2008
|
|
|
Banks
|
|
|
|
|
Risk-adjusted assets
|
|
$
|
13,815,101
|
|
|
$
|
13,834,161
|
|
|
|
|
|
Tier I risk-based capital
|
|
|
1,527,020
|
|
|
|
1,510,959
|
|
|
|
|
|
Total risk-based capital
|
|
|
1,715,965
|
|
|
|
1,702,916
|
|
|
|
|
|
Tier I risk-based capital ratio
|
|
|
11.05
|
%
|
|
|
10.92
|
%
|
|
|
6.00
|
%
|
Total risk-based capital ratio
|
|
|
12.42
|
%
|
|
|
12.31
|
%
|
|
|
10.00
|
%
|
Tier I leverage ratio
|
|
|
8.93
|
%
|
|
|
9.06
|
%
|
|
|
5.00
|
%
|
|
|
The Company maintains a treasury stock buyback program, and in
February 2008 was authorized by the Board of Directors to
repurchase up to 3,000,000 shares of its common stock. In
2008, the Company elected to cease market purchases of treasury
stock and preserve its cash and capital position. Accordingly,
during the quarter ended March 31, 2009 the Company
purchased only 11,005 shares of treasury stock at an
average cost of $32.41 per share. At March 31, 2009,
2,866,547 shares remained available for purchase under the
current Board authorization.
The Companys common stock dividend policy reflects its
earnings outlook, desired payout ratios, the need to maintain
adequate capital levels, and alternative investment options. The
Company paid a per share cash dividend of $.24 in the first
quarter of 2009, which was a .8% increase compared to the fourth
quarter of 2008.
Common
Equity Offering
On February 27, 2009, the Company entered into an equity
distribution agreement with a broker dealer, acting as the
Companys sales agent, relating to the offering of the
Companys common stock having aggregate gross sales
proceeds of up to $200 million. This offering is described
in a prospectus supplement, including the associated base
prospectus, which the Company filed with the Securities and
Exchange Commission on February 27, 2009.
Sales of these shares will be made by means of brokers
transactions on or through the Nasdaq Global Select Market
(NASDAQ), trading facilities of national securities
associations or alternative trading systems, block transactions
and such other transactions as may be agreed upon by the Company
and the sales agent, at market prices prevailing at the time of
the sale or at prices related to the prevailing market prices.
The Company and the sales agent will determine jointly, as often
as daily, how many shares to sell under this offering until all
shares of common stock subject to the offering have been sold,
or until the Company or the sales agent terminate the offering.
During the first quarter of 2009, 2,900 shares were issued
under this offering. Gross proceeds from these sales were $99
thousand, with an average sale price of $34.06 per share.
Commissions paid to the sales agent for the sale of these shares
were $1,481. After payment of commissions but before expenses
relating to the offering, net proceeds during the first quarter
of 2009 totaled $97 thousand, with average net sale proceeds of
$33.54 per share.
Subsequently, another 685,833 shares were sold during the
period April 1 May 6, 2009 (the
Subsequent Period), for gross proceeds of
$23.6 million, with an average sale price of $34.40 per
share. Commissions paid to the sales agent for the sale of these
shares were $354 thousand. After payment of commissions but
before expenses relating to the offering, net proceeds during
the Subsequent Period totaled $23.2 million, with average
net sale proceeds of $33.88 per share.
49
Commitments
and Off-Balance Sheet Arrangements
Various commitments and contingent liabilities arise in the
normal course of business which are not required to be recorded
on the balance sheet. The most significant of these are loan
commitments, which at March 31, 2009 totaled
$7.7 billion (including approximately $3.6 billion in
unused approved credit card lines). In addition, the Company
enters into standby and commercial letters of credit. These
contracts amounted to $396.5 million and
$24.4 million, respectively, at March 31, 2009. Since
many commitments expire unused or only partially used, these
totals do not necessarily reflect future cash requirements. The
carrying value of the guarantee obligations associated with the
standby letters of credit, which has been recorded as a
liability on the balance sheet, amounted to $3.3 million at
March 31, 2009. Management does not anticipate any material
losses arising from commitments and contingent liabilities and
believes there are no material commitments to extend credit that
represent risks of an unusual nature.
The Company periodically purchases various state tax credits
arising from third-party property redevelopment. Most of the tax
credits are resold to third parties, although some may be
retained for use by the Company. During the first three months
of 2009, purchases and sales of tax credits amounted to
$6.2 million and $6.5 million, respectively, and at
March 31, 2009, outstanding purchase commitments totaled
$142.8 million. The Company has additional funding
commitments arising from several investments in private equity
concerns, classified as non-marketable investment securities in
the accompanying consolidated balance sheets, amounting to
$1.6 million at March 31, 2009. The Company also has
unfunded commitments relating to its investments in low-income
housing partnerships, which amounted to $2.9 million at
March 31, 2009.
50
Segment
Results
The table below is a summary of segment pre-tax income results
for the first three months of 2009 and 2008. In the first
quarter of 2009, selected business units were realigned between
reporting segments so that discount brokerage services and
Private Banking accounts were moved from Consumer to Money
Management, while portions of indirect lending were moved from
Commercial to the Consumer segment. The information presented
below for 2008 has been revised to incorporate these changes in
order to provide comparable data.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money
|
|
|
Segment
|
|
|
Other/
|
|
|
Consolidated
|
|
(In thousands)
|
|
Consumer
|
|
|
Commercial
|
|
|
Management
|
|
|
Totals
|
|
|
Elimination
|
|
|
Totals
|
|
|
|
|
Three Months Ended March 31, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
$
|
87,816
|
|
|
$
|
56,145
|
|
|
$
|
9,978
|
|
|
$
|
153,939
|
|
|
$
|
(3,924
|
)
|
|
$
|
150,015
|
|
Provision for loan losses
|
|
|
(20,619
|
)
|
|
|
(14,173
|
)
|
|
|
(271
|
)
|
|
|
(35,063
|
)
|
|
|
(8,105
|
)
|
|
|
(43,168
|
)
|
Non-interest income
|
|
|
35,424
|
|
|
|
26,539
|
|
|
|
28,924
|
|
|
|
90,887
|
|
|
|
1,544
|
|
|
|
92,431
|
|
Investment securities losses, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,172
|
)
|
|
|
(2,172
|
)
|
Non-interest expense
|
|
|
(72,812
|
)
|
|
|
(47,098
|
)
|
|
|
(26,195
|
)
|
|
|
(146,105
|
)
|
|
|
(6,781
|
)
|
|
|
(152,886
|
)
|
|
|
Income before income taxes
|
|
$
|
29,809
|
|
|
$
|
21,413
|
|
|
$
|
12,436
|
|
|
$
|
63,658
|
|
|
$
|
(19,438
|
)
|
|
$
|
44,220
|
|
|
|
Three Months Ended March 31, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
$
|
80,096
|
|
|
$
|
48,734
|
|
|
$
|
9,267
|
|
|
$
|
138,097
|
|
|
$
|
2,010
|
|
|
$
|
140,107
|
|
Provision for loan losses
|
|
|
(10,970
|
)
|
|
|
(1,211
|
)
|
|
|
(7
|
)
|
|
|
(12,188
|
)
|
|
|
(7,812
|
)
|
|
|
(20,000
|
)
|
Non-interest income
|
|
|
37,565
|
|
|
|
25,754
|
|
|
|
29,342
|
|
|
|
92,661
|
|
|
|
(501
|
)
|
|
|
92,160
|
|
Investment securities gains, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23,323
|
|
|
|
23,323
|
|
Non-interest expense
|
|
|
(70,188
|
)
|
|
|
(44,973
|
)
|
|
|
(24,589
|
)
|
|
|
(139,750
|
)
|
|
|
(431
|
)
|
|
|
(140,181
|
)
|
|
|
Income before income taxes
|
|
$
|
36,503
|
|
|
$
|
28,304
|
|
|
$
|
14,013
|
|
|
$
|
78,820
|
|
|
$
|
16,589
|
|
|
$
|
95,409
|
|
|
|
Decrease in income before income taxes:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount
|
|
$
|
(6,694
|
)
|
|
$
|
(6,891
|
)
|
|
$
|
(1,577
|
)
|
|
$
|
(15,162
|
)
|
|
$
|
(36,027
|
)
|
|
$
|
(51,189
|
)
|
|
|
Percent
|
|
|
(18.3
|
)%
|
|
|
(24.3
|
)%
|
|
|
(11.3
|
)%
|
|
|
(19.2
|
)%
|
|
|
N.M.
|
|
|
|
(53.7
|
)%
|
|
|
Consumer
For the three months ended March 31, 2009, income before
income taxes for the Consumer segment decreased
$6.7 million, or 18.3%, from the first quarter of 2008.
This decrease was mainly due to an increase of $9.6 million
in net loan charge-offs, occurring mainly in marine and
recreational vehicle, consumer credit card, and other consumer
loans. In addition, non-interest income declined
$2.1 million, coupled with an increase of $2.6 million
in non-interest expense. Partly offsetting these effects was a
$7.7 million increase in net interest income. The increase
in net interest income resulted mainly from a $22.3 million
decrease in deposit interest expense, party offset by a decline
of $11.9 million net allocated funding credits assigned to
the Consumer segments loan and deposit portfolios and a
$2.7 million decrease in loan interest income. The decrease
in non-interest income resulted mainly from declines in deposit
account fees (mainly overdraft charges), bank card fee income
(primarily credit card fees) and losses on the disposal of
assets acquired through foreclosure or repossession. These
declines were partly offset by an increase in mortgage banking
revenue due to refinancing activity. Non-interest expense grew
$2.6 million, or 3.7%, over the previous year due to higher
FDIC insurance expense, loan servicing fees, teller services
expense and online banking costs, partly offset by lower
marketing expense.
51
Commercial
For the three months ended March 31, 2009, income before
taxes for the Commercial segment decreased $6.9 million, or
24.3%, compared to the same period in the previous year. Net
loan charge-offs in this segment totaled $14.2 million in
the first quarter of 2009, an increase of $13.0 million
over the first quarter of 2008. During 2009, higher charge-offs
occurred on construction and business loans. Net interest income
increased $7.4 million, or 15.2%, due to lower net
allocated funding costs of $33.7 million and a decrease in
deposit interest expense of $2.3 million, which were partly
offset by a $28.6 million decline in loan interest income.
Non-interest income increased by $785 thousand, or 3.0%, over
the previous year due to higher cash management fees and bank
card fees (mainly corporate card), partly offset by lower gains
on renewals and sales of equipment leases and lower tax credit
sales income. Non-interest expense increased $2.1 million,
or 4.7%, over the previous year, mainly due to higher salaries
and benefits expense, corporate management fees, FDIC insurance
expense, and allocated cash management charges. These increases
were partly offset by a $2.3 million impairment charge on
foreclosed land which was recorded in the first quarter of 2008.
Money
Management
Money Management segment pre-tax profitability for the three
months ended March 31, 2009 decreased $1.6 million, or
11.3%, from the same period in the previous year. Net interest
income increased $711 thousand, or 7.7%, and was impacted by a
$3.6 million decline in deposit interest expense and a
$3.4 million decline in overnight borrowings expense,
offset by a $5.2 million decrease in assigned net funding
credits. Non-interest income declined $418 thousand, or 1.4%,
from the prior year due to lower trust fee income, partly offset
by higher bond trading income. Non-interest expense increased
$1.6 million, or 6.5%, mainly due to higher FDIC insurance
expense and allocated processing costs.
The Other/Elimination category in the preceding table includes
the activity of various support and overhead operating units of
the Company, in addition to the investment securities portfolio
and other items not allocated to the segments. In accordance
with the Companys transfer pricing policies, the excess of
the total provision over charge-offs is not allocated to a
business segment, and is included in this category. The pre-tax
profitability of this category was lower than in the previous
period by $36.0 million. This decline was mainly due to
unallocated amounts recorded in the first quarter of 2008:
securities gains of $22.2 million and an $8.8 million
reduction in a Visa litigation obligation, both related to the
bank subsidiarys membership in Visa. In addition, net
interest income in this category, related to earnings of the
investment portfolio and interest expense on borrowings not
allocated to a segment, declined $5.9 million.
Impact
of Recently Issued Accounting Standards
The Company adopted Statement of Financial Accounting Standards
No. 157, Fair Value Measurements, on
January 1, 2008. This Statement defines fair value,
establishes a framework for measuring fair value in generally
accepted accounting principles, and expands disclosures about
fair value measurements. It emphasizes that fair value is a
market-based measurement and should be determined based on
assumptions that a market participant would use when pricing an
asset or liability. Additionally, it establishes a fair value
hierarchy that provides the highest priority to measurements
using quoted prices in active markets and the lowest priority to
measurements based on unobservable data. The Statement does not
require any new fair value measurements. The Statement also
modifies the guidance for initial recognition of fair value for
certain derivative contracts held by the Company. Former
accounting guidance precluded immediate recognition in earnings
of an unrealized gain or loss, measured as the difference
between the transaction price and fair value of these
instruments at initial recognition. This guidance was nullified
by the Statement. In accordance with the new recognition
requirements of the Statement, the Company increased equity by
$903 thousand on January 1, 2008.
The Company adopted Statement of Financial Accounting Standards
No. 158, Employers Accounting for Defined
Benefit Pension and Other Postretirement Plans, at
December 31, 2006. The Statement requires an employer to
recognize the overfunded or underfunded status of a defined
benefit postretirement plan as an asset or liability in its
statement of financial position and to recognize changes in that
funded status in the year in which the changes occur through
other comprehensive income. Beginning in 2008, the Statement
also
52
required an employer to measure plan assets and obligations as
of the date of its fiscal year end statement of financial
position. In order to transition to a fiscal year end
measurement date, the Company used earlier measurements to
allocate net periodic benefit cost for the period between
September 30, 2007 (the previous measurement date) and
December 31, 2008 proportionately between retained earnings
and net periodic benefit cost recognized during 2008. The
Company recorded the transition adjustment, which increased
retained earnings by $348 thousand, on December 31, 2008.
In September 2006, the Emerging Issues Task Force (EITF) reached
a consensus on EITF Issue
06-4,
Accounting for Deferred Compensation and Postretirement
Benefit Aspects of Endorsement Split-Dollar Life Insurance
Arrangements. This EITF Issue addresses accounting for
separate agreements which split life insurance policy benefits
between an employer and employee. The Issue requires the
employer to recognize a liability for future benefits payable to
the employee based on the substantive agreement with the
employee, because the postretirement benefit obligation is not
effectively settled through the purchase of the insurance
policy. The EITF Issue was effective January 1, 2008, and
the Companys adoption on that date resulted in a reduction
to equity of $716 thousand.
In December 2007, the FASB issued Statement of Financial
Accounting Standards No. 141 (revised), Business
Combinations. The Statement retains the fundamental
requirements in Statement 141 that the acquisition method of
accounting be used for business combinations, but broadens the
scope of Statement 141 and contains improvements to the
application of this method. The Statement requires an acquirer
to recognize the assets acquired, the liabilities assumed, and
any non-controlling interest in the acquiree at the acquisition
date, measured at their fair values as of that date. Costs
incurred to effect the acquisition are to be recognized
separately from the acquisition. Assets and liabilities arising
from contractual contingencies must be measured at fair value as
of the acquisition date. Contingent consideration must also be
measured at fair value as of the acquisition date. The Statement
also changes the accounting for negative goodwill arising from a
bargain purchase, requiring recognition in earnings instead of
allocation to assets acquired. For business combinations
achieved in stages (step acquisitions), the assets and
liabilities must be recognized at the full amounts of their fair
values, while under former guidance the entity was acquired in a
series of purchases, with costs and fair values being identified
and measured at each step. The Statement applies to business
combinations occurring after January 1, 2009.
Also in December 2007, the FASB issued Statement of Financial
Accounting Standards No. 160, Noncontrolling
Interests in Consolidated Financial Statements an
amendment of ARB No. 51. The Statement clarifies that
a noncontrolling interest in a subsidiary is an ownership
interest in the consolidated entity that should be reported as
equity in the consolidated financial statements. The Statement
establishes a single method of accounting for changes in a
parents ownership interest if the parent retains its
controlling interest, deeming these to be equity transactions.
Such changes include the parents purchases and sales of
ownership interests in its subsidiary and the subsidiarys
acquisition and issuance of its ownership interests. The
Statement also requires that a parent recognize a gain or loss
in net income when a subsidiary is deconsolidated. It changes
the way the consolidated income statement is presented,
requiring consolidated net income to be reported at amounts that
include the amounts attributable to both the parent and the
noncontrolling interest, and requires disclosure of these
amounts on the face of the consolidated statement of income. The
Statement was effective on January 1, 2009, and its
adoption did not have a significant effect on the Companys
consolidated financial statements.
In June 2008, the FASB posted Staff Position
No. EITF 03-6-1,
Determining Whether Instruments Granted in Share-Based
Payment Transactions Are Participating Securities. This
pronouncement defines unvested stock awards which contain
nonforfeitable rights to dividends as securities which
participate in undistributed earnings. Such participating
securities must be included in the computation of earnings per
share under the two-class method. The two-class method is an
earnings allocation formula that determines earnings per share
for common stock and participating securities according to
dividends declared and participation rights in undistributed
earnings. The Company was required to apply the two-class method
to its computation of earnings per share effective
January 1, 2009, and its application did not have a
significant effect on the computation of earnings per share
attributable to common shareholders.
53
In December 2008, the FASB issued Staff Position
No. FAS 132(R)-1, Employers Disclosures
about Postretirement Benefit Plan Assets. The amendment
requires additional disclosures about asset investment policies
and strategies for defined benefit and other postretirement
plans. Disclosures about plan asset categories are also
required, including fair value measurements, valuation
techniques, risk concentrations, and rate of return assumptions.
The disclosures are required on an annual basis, effective with
the December 31, 2009 financial statements.
In January 2009, the FASB issued Staff Position
No. EITF 99-20-1,
Amendments to the Impairment Guidance of EITF Issue
No. 99-20.
The amendments purpose is to achieve a more consistent
determination of whether an other-than-temporary impairment has
occurred on beneficial interests. Specifically, the new
pronouncement no longer requires the usage of market participant
assumptions about future cash flows in determining
other-than-temporary impairment under the
EITF 99-20
model, and aligns that models impairment guidance with
SFAS 115. The Company has not yet been required to assess
impairment under
EITF 99-20,
and its assessments have been in accordance with SFAS 115
guidelines.
In April 2009, the FASB issued Staff Position (FSP)
No. FAS 157-4,
Determining Fair Value When the Volume and Level of
Activity for the Asset or Liability Have Significantly Decreased
and Identifying Transactions That Are Not Orderly. The FSP
provides additional guidance on reliance on transaction prices
or quoted prices when estimating fair value in accordance with
FAS 157, when market volume and activity have significantly
decreased. The FSP reaffirms the definition of fair value as the
price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market
participants. However, it requires additional analysis of
transaction prices or quoted prices, and the consideration of
adjustments to these inputs, depending on market conditions and
the orderliness of the transactions. The Company adopted the FSP
in March 2009, and its application did not result in a change in
valuation techniques and related inputs.
The FASB issued FSP
No. FAS 107-1
and APB
28-1,
Interim Disclosures about Fair Value of Financial
Instruments, in April 2009. This FSP requires certain
disclosures about the fair value of financial instruments,
previously required only in annual financial statements, in
interim period financial statements as well. These requirements
extend to all financial instruments for which it is practicable
to estimate fair value, whether fair value is recognized or not
recognized in the statement of financial position. The Company
adopted the FSP in March 2009 and has presented this information
in Note 15 on Fair Value of Financial Instruments in the
accompanying consolidated financial statements.
In April 2009, the FASB issued FSP
No. FAS 115-2
and
FAS 124-2,
Recognition and Presentation of Other-Than-Temporary
Impairments. The FSPs purpose is to make guidance on
other-than-temporary impairment for debt securities more
operational and to improve the presentation and disclosure of
other-than-temporary impairments on debt and equity securities
in the financial statements. The FSP includes guidance on
evaluating whether an impairment of a debt security is other
than temporary, determination of the amount of impairment to be
recognized in earnings and other comprehensive income, and
subsequent accounting for these securities. It requires a new
presentation on the statement of earnings which shows the total
impairment, offset for that amount considered noncredit-related
and recognized in other comprehensive income. Various additional
disclosures are required for investments in an unrealized loss
position, in addition to information about the methodologies and
inputs used in calculating the portion of impairment recognized
in earnings. The Company adopted the FSP in March 2009, and has
presented the required disclosures in Note 4 on Investment
Securities in the accompanying consolidated financial statements.
54
AVERAGE
BALANCE SHEETS AVERAGE RATES AND YIELDS
Three
Months Ended March 31, 2009 and 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter 2009
|
|
|
First Quarter 2008
|
|
|
|
|
|
|
Interest
|
|
|
Avg. Rates
|
|
|
|
|
|
Interest
|
|
|
Avg. Rates
|
|
|
|
Average
|
|
|
Income/
|
|
|
Earned/
|
|
|
Average
|
|
|
Income/
|
|
|
Earned/
|
|
(Dollars in thousands)
|
|
Balance
|
|
|
Expense
|
|
|
Paid
|
|
|
Balance
|
|
|
Expense
|
|
|
Paid
|
|
|
|
|
ASSETS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Business(A)
|
|
$
|
3,340,514
|
|
|
$
|
29,746
|
|
|
|
3.61
|
%
|
|
$
|
3,503,869
|
|
|
$
|
48,761
|
|
|
|
5.60
|
%
|
Real estate construction and land
|
|
|
816,433
|
|
|
|
6,716
|
|
|
|
3.34
|
|
|
|
684,388
|
|
|
|
9,958
|
|
|
|
5.85
|
|
Real estate business
|
|
|
2,140,638
|
|
|
|
26,923
|
|
|
|
5.10
|
|
|
|
2,233,985
|
|
|
|
36,024
|
|
|
|
6.49
|
|
Real estate personal
|
|
|
1,620,844
|
|
|
|
22,858
|
|
|
|
5.72
|
|
|
|
1,526,240
|
|
|
|
22,584
|
|
|
|
5.95
|
|
Consumer
|
|
|
1,579,456
|
|
|
|
26,950
|
|
|
|
6.92
|
|
|
|
1,635,503
|
|
|
|
29,901
|
|
|
|
7.35
|
|
Home equity
|
|
|
504,820
|
|
|
|
5,361
|
|
|
|
4.31
|
|
|
|
458,794
|
|
|
|
6,876
|
|
|
|
6.03
|
|
Student
|
|
|
353,650
|
|
|
|
3,220
|
|
|
|
3.69
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer credit card
|
|
|
734,510
|
|
|
|
21,554
|
|
|
|
11.90
|
|
|
|
761,197
|
|
|
|
21,081
|
|
|
|
11.14
|
|
Overdrafts
|
|
|
8,388
|
|
|
|
|
|
|
|
|
|
|
|
14,118
|
|
|
|
|
|
|
|
|
|
|
|
Total loans
|
|
|
11,099,253
|
|
|
|
143,328
|
|
|
|
5.24
|
|
|
|
10,818,094
|
|
|
|
175,185
|
|
|
|
6.51
|
|
|
|
Loans held for sale
|
|
|
463,477
|
|
|
|
3,432
|
|
|
|
3.00
|
|
|
|
312,532
|
|
|
|
3,917
|
|
|
|
5.04
|
|
Investment securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. government and federal agency
|
|
|
133,905
|
|
|
|
1,192
|
|
|
|
3.61
|
|
|
|
304,270
|
|
|
|
3,108
|
|
|
|
4.11
|
|
State and municipal
obligations(A)
|
|
|
747,219
|
|
|
|
9,455
|
|
|
|
5.13
|
|
|
|
505,539
|
|
|
|
7,128
|
|
|
|
5.67
|
|
Mortgage and asset-backed securities
|
|
|
2,826,302
|
|
|
|
36,237
|
|
|
|
5.20
|
|
|
|
2,373,242
|
|
|
|
29,672
|
|
|
|
5.03
|
|
Other marketable
securities(A)
|
|
|
142,166
|
|
|
|
2,046
|
|
|
|
5.84
|
|
|
|
113,995
|
|
|
|
1,402
|
|
|
|
4.95
|
|
Trading
securities(A)
|
|
|
16,564
|
|
|
|
123
|
|
|
|
3.01
|
|
|
|
50,006
|
|
|
|
732
|
|
|
|
5.89
|
|
Non-marketable
securities(A)
|
|
|
141,244
|
|
|
|
1,425
|
|
|
|
4.09
|
|
|
|
111,429
|
|
|
|
1,598
|
|
|
|
5.77
|
|
|
|
Total investment securities
|
|
|
4,007,400
|
|
|
|
50,478
|
|
|
|
5.11
|
|
|
|
3,458,481
|
|
|
|
43,640
|
|
|
|
5.08
|
|
|
|
Federal funds sold and securities purchased under agreements to
resell
|
|
|
109,889
|
|
|
|
114
|
|
|
|
.42
|
|
|
|
491,227
|
|
|
|
3,401
|
|
|
|
2.78
|
|
Interest earning deposits with banks
|
|
|
600,608
|
|
|
|
449
|
|
|
|
.30
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest earning assets
|
|
|
16,280,627
|
|
|
|
197,801
|
|
|
|
4.93
|
|
|
|
15,080,334
|
|
|
|
226,143
|
|
|
|
6.03
|
|
|
|
Less allowance for loan losses
|
|
|
(172,964
|
)
|
|
|
|
|
|
|
|
|
|
|
(134,926
|
)
|
|
|
|
|
|
|
|
|
Unrealized gain (loss) on investment securities
|
|
|
(48,658
|
)
|
|
|
|
|
|
|
|
|
|
|
64,340
|
|
|
|
|
|
|
|
|
|
Cash and due from banks
|
|
|
378,038
|
|
|
|
|
|
|
|
|
|
|
|
460,145
|
|
|
|
|
|
|
|
|
|
Land, buildings and equipment, net
|
|
|
414,954
|
|
|
|
|
|
|
|
|
|
|
|
411,709
|
|
|
|
|
|
|
|
|
|
Other assets
|
|
|
340,052
|
|
|
|
|
|
|
|
|
|
|
|
346,732
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
17,192,049
|
|
|
|
|
|
|
|
|
|
|
$
|
16,228,334
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND EQUITY:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest bearing deposits:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Savings
|
|
$
|
417,474
|
|
|
|
155
|
|
|
|
.15
|
|
|
$
|
381,498
|
|
|
|
360
|
|
|
|
.38
|
|
Interest checking and money market
|
|
|
7,881,388
|
|
|
|
7,898
|
|
|
|
.41
|
|
|
|
7,177,754
|
|
|
|
20,254
|
|
|
|
1.13
|
|
Time open & C.D.s of less than $100,000
|
|
|
2,092,092
|
|
|
|
14,747
|
|
|
|
2.86
|
|
|
|
2,317,963
|
|
|
|
25,259
|
|
|
|
4.38
|
|
Time open & C.D.s of $100,000 and over
|
|
|
2,093,235
|
|
|
|
11,300
|
|
|
|
2.19
|
|
|
|
1,589,816
|
|
|
|
17,300
|
|
|
|
4.38
|
|
|
|
Total interest bearing deposits
|
|
|
12,484,189
|
|
|
|
34,100
|
|
|
|
1.11
|
|
|
|
11,467,031
|
|
|
|
63,173
|
|
|
|
2.22
|
|
|
|
Borrowings:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal funds purchased and securities sold under agreements to
repurchase
|
|
|
994,807
|
|
|
|
1,230
|
|
|
|
.50
|
|
|
|
1,628,247
|
|
|
|
11,752
|
|
|
|
2.90
|
|
Other
borrowings(B)
|
|
|
1,207,688
|
|
|
|
8,529
|
|
|
|
2.86
|
|
|
|
730,074
|
|
|
|
7,521
|
|
|
|
|