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KANSAS CITY, Mo.--(BUSINESS WIRE)-- Commerce Bancshares, Inc. (NASDAQ: CBSH) announced earnings of $.66 per share for the quarter ended September 30, 2009, compared to $.48 per share in the previous quarter and $.32 per share in the third quarter of 2008. Net income for the third quarter amounted to $51.6 million compared to $37.0 million in the previous quarter and $24.7 million in the same period last year. During the third quarter of 2008, the Company recorded a loss on the purchase of auction rate securities totaling approximately $21 million after tax, or $.27 per share. For the quarter, the return on average assets totaled 1.16% and the return on average equity was 11.5%.
For the nine months ended September 30, 2009, earnings per share totaled $1.54 compared to $1.90 for the first nine months of last year. Net income amounted to $119.5 million for the first nine months of 2009 compared with $144.8 million in 2008, or a decline of $25.4 million. At September 30, 2009, the ratio of tangible common equity to total assets improved to 9.6% compared to 8.7% at the same time last year.
In making this announcement, David W. Kemper, Chairman and CEO, said, "Although the economy remains challenging, this quarter we were pleased to report an increase in net income of 40%, or $14.7 million, over the previous quarter. The increase in net income over the previous quarter was mainly the result of 4% growth in total revenue and good overall expense control. Our net interest margin increased to 4.02% from 3.91% in the previous quarter. Loan balances continued to decline this quarter as a result of weak demand, while deposits were relatively flat."
Mr. Kemper continued, "During this quarter we strengthened our balance sheet, enhancing both our capital and liquidity positions while also building our loan loss reserves. Tangible common equity increased $153 million this quarter through retained earnings, securities portfolio appreciation and stock issuance. Liquidity also increased as our loan to deposit ratio declined to 77.4%. During the quarter we increased our allowance for loan losses by $4.5 million to $190.5 million, representing 1.85% of outstanding loans. Net loan charge-offs declined by $5.1 million from the prior quarter. Non-performing assets, consisting of non-accrual loans and foreclosed property, declined by $2.5 million to $129.2 million, or 1.26% of loans."
Total assets at September 30, 2009, were $18.0 billion, total loans were $10.6 billion, and total deposits were $13.8 billion.
Commerce Bancshares, Inc. is a registered bank holding company offering a full line of banking services, including investment management and securities brokerage. The Company currently operates in over 370 locations in Missouri, Illinois, Kansas, Oklahoma and Colorado. The Company also has operating subsidiaries involved in mortgage banking, credit related insurance, and private equity activities.
Summary of Non-Performing Assets and Past Due Loans
(Dollars in thousands) 6/30/09 9/30/09 9/30/08 Non-Accrual Loans $122,648 $121,698 $41,600 Foreclosed Real Estate $9,039 $7,535 $4,622 Total Non-Performing Assets $131,687 $129,233 $46,222 Non-Performing Assets to Loans 1.23% 1.26% . 42% Non-Performing Assets to Total Assets .74% .72% .27% Loans 90 Days & Over Past Due - Still $39,968 $45,614 $31,878 Accruing
This financial news release, including management's discussion of third quarter results, is posted to the Company's web site at www.commercebank.com.
COMMERCE BANCSHARES, INC. and SUBSIDIARIES
FINANCIAL HIGHLIGHTS
(Unaudited) For the Three Months Ended For the Nine Months
Ended
June 30 Sept. 30 Sept. 30 Sept. 30 Sept. 30
2009 2009 2008 2009 2008
FINANCIAL SUMMARY(In thousands, except per
share data)
Net interest $ 157,445 $ 163,539 $ 151,564 $ 470,999 $ 436,450
income
Taxable
equivalent
net
interest 162,323 168,408 155,458 484,673 447,610
income
Non-interest 98,562 102,135 95,593 293,128 290,486
income
Investment
securities
gains (2,753 ) (945 ) 1,149 (5,870 ) 25,480
(losses),
net
Provision
for loan 41,166 35,361 29,567 119,695 67,567
losses
Non-interest 160,011 154,489 184,446 467,386 471,692
expense
Net income 36,968 51,649 24,673 119,453 144,819
Cash 18,515 18,962 18,018 55,736 54,003
dividends
Net total
loan 36,033 30,896 18,734 101,848 45,122
charge-offs
Business 2,378 4,626 1,775 10,846 2,315
charge-offs
Real estate
-
construction
and land 10,373 4,463 1,217 24,062 2,194
charge-offs
Real estate
- business 1,033 1,253 257 3,062 1,198
charge-offs
Consumer
credit card 13,214 12,577 8,314 36,554 22,842
charge-offs
Consumer 8,476 6,522 6,060 24,331 14,546
charge-offs
Home equity 96 233 208 629 338
charge-offs
Student 2 2 - 4 -
charge-offs
Real estate
- personal 215 797 182 1,557 356
charge-offs
Overdraft 246 423 721 803 1,333
charge-offs
Per common
share:
Net income - $ 0.48 $ 0.66 $ 0.33 $ 1.55 $ 1.92
basic
Net income - $ 0.48 $ 0.66 $ 0.32 $ 1.54 $ 1.90
diluted
Cash $ 0.240 $ 0.240 $ 0.238 $ 0.720 $ 0.714
dividends
Diluted wtd.
average 76,690 78,563 76,065 77,096 75,976
shares o/s
RATIOS
Average
loans to 81.58 % 77.40 % 93.29 % 81.96 % 92.46 %
deposits (1)
Return on
total 0.84 % 1.16 % 0.60 % 0.91 % 1.18 %
average
assets
Return on
total 8.91 % 11.49 % 6.06 % 9.49 % 12.14 %
average
equity
Non-interest
income to 38.50 % 38.44 % 38.68 % 38.36 % 39.96 %
revenue (2)
Efficiency 62.15 % 57.75 % 74.20 % 60.76 % 64.43 %
ratio (3)
AT PERIOD
END
Book value
per share $ 22.04 $ 23.45 $ 21.16
based on
total equity
Market value $ 31.83 $ 37.24 $ 44.19
per share
Allowance
for loan
losses
as a
percentage 1.74 % 1.85 % 1.42 %
of loans
Tier I
leverage 9.08 % 9.65 % 9.11 %
ratio
Tangible
equity to 8.85 % 9.60 % 8.66 %
assets ratio
(4)
Common
shares 77,049,199 78,922,671 75,701,500
outstanding
Shareholders 4,503 4,449 4,487
of record
Number of
bank/ATM 373 373 367
locations
Full-time
equivalent 5,181 5,148 5,202
employees
Sept. 30 Sept. 30
OTHER YTD 2009 2008
INFORMATION
High market
value per $ 44.41 $ 50.47
share
Low market
value per $ 27.80 $ 34.76
share
(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).
COMMERCE BANCSHARES, INC. and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited) For the Three Months Ended For the Nine Months Ended
(In thousands,
except per share June 30 Sept. 30 Sept. 30 Sept. 30 Sept. 30
data)
2009 2009 2008 2009 2008
Interest income $ 198,992 $ 201,647 $ 209,464 $ 594,513 $ 640,221
Interest expense 41,547 38,108 57,900 123,514 203,771
Net interest 157,445 163,539 151,564 470,999 436,450
income
Provision for 41,166 35,361 29,567 119,695 67,567
loan losses
Net interest
income after
provision for 116,279 128,178 121,997 351,304 368,883
loan losses
NON-INTEREST
INCOME
Deposit account
charges and other 26,935 27,750 27,854 80,277 83,189
fees
Bank card 30,105 31,279 29,317 88,552 85,019
transaction fees
Trust fees 19,355 19,258 20,518 57,486 60,917
Bond trading 6,151 4,834 2,604 16,381 9,951
income
Consumer
brokerage 3,213 3,045 3,439 9,566 10,259
services
Loan fees and 3,733 6,851 1,594 13,545 4,884
sales
Other 9,070 9,118 10,267 27,321 36,267
Total
non-interest 98,562 102,135 95,593 293,128 290,486
income
INVESTMENT
SECURITIES
GAINS (LOSSES),
NET
Impairment losses (10,080 ) (3,457 ) - (35,422 ) -
on securities
Less
noncredit-related
losses on
securities not
expected to be 9,286 1,993 - 32,611 -
sold
Net impairment (794 ) (1,464 ) - (2,811 ) -
losses
Realized gains
(losses) on sales
and
fair value (1,959 ) 519 1,149 (3,059 ) 25,480
adjustments
Investment
securities gains (2,753 ) (945 ) 1,149 (5,870 ) 25,480
(losses), net
NON-INTEREST
EXPENSE
Salaries and 86,279 87,267 83,766 260,299 250,023
employee benefits
Net occupancy 11,088 11,752 11,861 34,652 34,735
Equipment 6,255 6,306 6,122 18,883 18,273
Supplies and 8,249 8,061 9,276 24,994 26,545
communication
Data processing 15,007 15,500 14,229 44,854 41,951
and software
Marketing 4,906 4,846 4,926 14,099 15,660
Deposit insurance 12,969 4,833 510 21,908 1,535
Indemnification - (2,496 ) 2,879 (2,496 ) (5,929 )
obligation
Loss on purchase
of auction rate - - 32,967 - 33,266
securities
Other 15,258 18,420 17,910 50,193 55,633
Total
non-interest 160,011 154,489 184,446 467,386 471,692
expense
Income before 52,077 74,879 34,293 171,176 213,157
income taxes
Less income taxes 15,257 23,415 9,534 52,264 67,320
Net income before
non-controlling 36,820 51,464 24,759 118,912 145,837
interest
Less
non-controlling
interest
expense (income) (148 ) (185 ) 86 (541 ) 1,018
Net income $ 36,968 $ 51,649 $ 24,673 $ 119,453 $ 144,819
Net income per
common share - $ 0.48 $ 0.66 $ 0.33 $ 1.55 $ 1.92
basic
Net income per
common share - $ 0.48 $ 0.66 $ 0.32 $ 1.54 $ 1.90
diluted
COMMERCE BANCSHARES, INC. and SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Unaudited) June 30 Sept. 30 Sept. 30 (In thousands) 2009 2009 2008 ASSETS Loans $ 10,699,674 $ 10,282,690 $ 10,985,789 Allowance for loan losses (186,001 ) (190,466 ) (156,031 ) Net loans 10,513,673 10,092,224 10,829,758 Loans held for sale 388,706 317,913 392,697 Investment securities: Available for sale 5,156,343 6,075,632 3,659,488 Trading 17,259 9,242 12,353 Non-marketable 133,925 133,732 153,423 Total investment securities 5,307,527 6,218,606 3,825,264 Federal funds sold and securities purchased under agreements to 40,155 12,620 457,295 resell Interest earning deposits with 8,318 118,745 --- banks Cash and due from banks 376,051 342,949 496,970 Land, buildings and equipment - 406,612 403,900 409,676 net Goodwill 125,585 125,585 125,585 Other intangible assets - net 15,849 15,060 18,299 Other assets 537,567 305,505 397,856 Total assets $ 17,720,043 $ 17,953,107 $ 16,953,400 LIABILITIES AND STOCKHOLDERS' EQUITY Deposits: Non-interest bearing demand $ 1,517,398 $ 1,512,529 $ 1,187,334 Savings, interest checking and 8,281,652 8,678,985 7,451,845 money market Time open and C.D.'s of less 2,137,049 2,004,276 2,018,444 than $100,000 Time open and C.D.'s of $100,000 1,770,243 1,645,005 1,654,464 and over Total deposits 13,706,342 13,840,795 12,312,087 Federal funds purchased and securities sold under agreements to repurchase 1,174,121 1,130,193 1,559,975 Other borrowings 847,108 821,941 1,250,510 Other liabilities 294,163 309,534 229,095 Total liabilities 16,021,734 16,102,463 15,351,667 Stockholders' equity: Preferred stock --- --- --- Common stock 385,812 395,182 360,935 Capital surplus 655,020 710,588 482,441 Retained earnings 664,189 696,876 760,145 Treasury stock (823 ) (825 ) (161 ) Accumulated other comprehensive (7,928 ) 47,003 (4,749 ) income (loss) Total stockholders' equity 1,696,270 1,848,824 1,598,611 Non-controlling interest 2,039 1,820 3,122 Total equity 1,698,309 1,850,644 1,601,733 Total liabilities and equity $ 17,720,043 $ 17,953,107 $ 16,953,400
COMMERCE BANCSHARES, INC. and SUBSIDIARIES
AVERAGE BALANCE SHEETS - AVERAGE RATES AND YIELDS
(Unaudited) For the Three Months Ended
(Dollars in June 30, 2009 September 30, 2009 September 30, 2008
thousands)
Avg. Avg. Avg.
Rates Rates Rates
Average Earned/ Average Earned/ Average Earned/
ASSETS: Balance Paid Balance Paid Balance Paid
Loans:
Business (A) $ 3,259,712 3.81 % $ 3,019,018 3.77 % $ 3,473,797 4.70 %
Real estate -
construction 750,983 3.50 698,876 3.74 698,420 4.78
and land
Real estate - 2,174,443 5.05 2,147,094 5.04 2,324,683 5.80
business
Real estate - 1,596,413 5.55 1,577,908 5.38 1,508,736 5.75
personal
Consumer 1,497,806 6.87 1,423,911 6.99 1,717,075 7.07
Home equity 498,083 4.33 491,525 4.35 479,025 4.72
Student 347,239 2.61 341,516 2.37 - -
Consumer 697,542 12.70 728,547 12.60 790,303 10.76
credit card
Overdrafts 8,603 - 11,288 - 12,381 -
Total loans(B) 10,830,824 5.27 10,439,683 5.31 11,004,420 5.88
Loans held for 513,789 1.53 293,636 1.95 352,283 4.26
sale
Investment
securities:
U.S.
government & 158,664 3.03 412,667 4.47 117,311 4.08
federal agency
State &
municipal 906,402 5.22 907,536 4.97 700,250 5.40
obligations(A)
Mortgage and
asset-backed 3,649,150 4.66 3,985,402 4.47 2,453,686 5.04
securities
Other
marketable 193,280 5.40 194,802 5.20 81,552 3.23
securities(A)
Total
available for 4,907,496 4.74 5,500,407 4.58 3,352,799 5.03
sale
securities (B)
Trading 19,273 3.12 18,143 3.08 23,278 3.71
securities (A)
Non-marketable 138,405 3.65 134,422 4.98 144,476 5.83
securities(A)
Total
investment 5,065,174 4.70 5,652,972 4.58 3,520,553 5.06
securities
Federal funds
sold and
securities
purchased
under 25,853 0.56 31,360 0.66 419,628 2.01
agreements to
resell
Interest
earning 212,930 0.10 203,954 0.23 - -
deposits with
banks
Total interest 16,648,570 4.91 16,621,605 4.93 15,296,884 5.55
earning assets
Non-interest
earning assets 926,055 986,142 1,090,215
(B)
Total assets $ 17,574,625 $ 17,607,747 $ 16,387,099
LIABILITIES
AND EQUITY:
Interest
bearing
deposits:
Savings $ 451,900 0.15 $ 443,263 0.15 $ 410,201 0.31
Interest
checking and 8,460,468 0.37 8,653,109 0.35 7,498,605 0.77
money market
Time open &
C.D.'s of less 2,129,991 2.74 2,107,778 2.54 2,041,276 3.14
than $100,000
Time open &
C.D.'s of 2,003,537 1.98 1,785,414 1.87 1,554,804 2.95
$100,000 and
over
Total interest
bearing 13,045,896 1.00 12,989,564 0.90 11,504,886 1.47
deposits
Borrowings:
Federal funds
purchased and
securities
sold under
agreements to 962,804 0.35 937,728 0.35 1,368,050 1.58
repurchase
Other 873,596 3.79 833,189 3.66 1,103,224 3.61
borrowings (C)
Total 1,836,400 1.99 1,770,917 1.90 2,471,274 2.48
borrowings
Total interest
bearing 14,882,296 1.12 % 14,760,481 1.02 % 13,976,160 1.65 %
liabilities
Non-interest
bearing demand 860,819 877,500 668,191
deposits
Other 167,510 185,916 123,168
liabilities
Equity 1,664,000 1,783,850 1,619,580
Total
liabilities $ 17,574,625 $ 17,607,747 $ 16,387,099
and equity
Net interest $ 162,323 $ 168,408 $ 155,458
income (T/E)
Net yield on
interest 3.91 % 4.02 % 4.04 %
earning assets
(A) Stated on a tax equivalent basis using a federal income tax rate of 35%.
(B) The allowance for loan losses and unrealized gains/(losses) on available for sale
securities are included in non-interest earning assets.
(C) Interest expense capitalized on construction projects is not deducted from interest
expense in the calculation of the rate shown above.
COMMERCE BANCSHARES, INC.
Management Discussion of Third
Quarter Results
September 30, 2009
For the quarter ended September 30, 2009, net income amounted to $51.6 million, an increase of $14.7 million over the previous quarter and an increase of $27.0 million over the same quarter last year. For the current quarter, the return on average assets was 1.16%, the return on average equity was 11.49%, and the efficiency ratio was 57.75%. Compared to the previous quarter, net interest income (tax equivalent) increased by $6.1 million to $168.4 million, while non-interest income increased by $3.6 million to $102.1 million. Non-interest expense for the quarter totaled $154.5 million, a decline of $5.5 million from the previous quarter, which included costs for a special FDIC assessment of $8.0 million. Compared to the previous quarter, the provision for loan losses declined $5.8 million, totaling $35.4 million in the current quarter. The 3rd quarter of 2008 included a pre-tax loss of $33.0 million on the purchase of auction rate securities.
Balance Sheet Review
During the 3rd quarter of 2009, average loans, excluding loans held for sale, decreased $391.1 million, or 3.6%, compared to the previous quarter. Also, average loans decreased $564.7 million, or 5.1%, this quarter compared to the same period last year. The decrease in average loans compared to the previous quarter was mainly the result of lower business loan totals, which declined $240.7 million, coupled with declining balances in most other categories, including construction, business real estate and consumer loans. Consumer credit card loans grew 4.4% this quarter compared to the previous quarter.
The decline in business loans continued to reflect lower line of credit usage, lower demand, and pay-downs by business loan customers. Average construction and business real estate loans declined by $52.1 million and $27.3 million, respectively, compared to the previous quarter. These declines were reflective of continued uncertain economic conditions in the real estate markets and lower overall demand. Average balances of personal real estate and consumer loans declined by $18.5 million and $73.9 million, respectively, as loan pay-downs continued to exceed new loan originations for these products. Also, the Company has ceased most marine and RV lending in the consumer loan portfolio. The average balance of loans held for sale (comprised mostly of student loans) declined $220.2 million this quarter as the Company sold student loans totaling $221.1 million, most of which were originated during the last 12 months.
Total available for sale investment securities (excluding fair value adjustments) increased on average by $592.9 million to $5.5 billion this quarter compared with the previous quarter. The majority of this increase was the result of purchases of U.S. Treasury inflation-protected bonds and other asset-backed securities, which increased average balances by $262.4 million and $414.9 million, respectively. At September 30, 2009, the fair value of the Company's available for sale investment securities included an unrealized gain of $106.4 million compared to $18.6 million at June 30, 2009, reflecting improved bond prices this quarter.
Total average deposits declined $39.7 million, or .3%, during the 3rd quarter of 2009 compared to the previous quarter, but increased $1.7 billion, or 13.9%, compared to the 3rd quarter of 2008. Compared to the previous quarter, the decrease in average deposits resulted mainly from a decline of $240.3 million in average certificate of deposit balances, which was partly offset by growth of $200.7 million in average money market accounts. During the current quarter, the Company reduced rates on certain short-term jumbo corporate certificates of deposit because of improving liquidity which resulted in a decline of $258.9 million in these balances. Excluding this effect, total deposits would have grown on average by $219.2 million over the previous quarter. The average loans to deposits ratio in the current quarter was 77.4%, compared to 81.6% in the previous quarter.
During the current quarter, the Company's average borrowings decreased $65.5 million compared to the previous quarter. This decrease was partly the result of a $25.1 million decline in average federal funds purchased and repurchase agreement balances, combined with a $40.4 million reduction in average advances from the Federal Home Loan Bank (FHLB).
Net Interest Income
Net interest income (tax equivalent) in the 3rd quarter of 2009 amounted to $168.4 million, an increase of $6.1 million, or 3.7%, compared with the previous quarter and an increase of $13.0 million, or 8.3%, compared to the 3rd quarter of last year. During the 3rd quarter of 2009, the net yield on earning assets (tax equivalent) was 4.02%, compared with 3.91% in the previous quarter and 4.04% in the same period last year.
The increase of $6.1 million in net interest income (tax equivalent) in the 3rd quarter of 2009 over the previous quarter was primarily the result of higher interest income earned on investment securities due to higher average balances, coupled with lower rates paid on deposits. This increase was offset somewhat by lower interest income earned on loans due to lower volumes. Interest income on loans (tax equivalent) decreased by $2.8 million this quarter due to lower average balances, especially in business and consumer loans. This effect was partly offset by an increase of $1.0 million due to higher average balances of consumer credit card loans. Interest income on investment securities increased $5.9 million (tax equivalent) as a result of a $587.8 million increase in average balances, mainly in U.S. Treasury inflation-protected (TIPS) and other asset-backed securities. At September 30, 2009, the Company owned TIPS with a book value of $372.0 million. During the current quarter, inflation-adjusted income earned on these bonds amounted to $2.4 million.
Interest expense on deposits declined $2.8 million in the 3rd quarter of 2009 compared with the previous quarter as a result of lower rates paid on virtually all deposit products, coupled with lower certificate of deposit balances which carry higher interest rates. Interest expense on borrowings decreased $612 thousand due mainly to lower average balances of FHLB advances.
The tax equivalent yield on interest earning assets in the 3rd quarter of 2009 increased 2 basis points over the previous quarter to 4.93%, while the overall cost of interest bearing liabilities decreased 10 basis points to 1.02%.
Non-Interest Income
For the 3rd quarter of 2009, total non-interest income amounted to $102.1 million, an increase of $6.5 million compared to $95.6 million in the same period last year. Also, current quarter non-interest income increased $3.6 million, or 3.6%, compared to $98.6 million recorded in the previous quarter.
Bank card fees for the quarter increased 6.7% over the 3rd quarter of last year, primarily due to continued growth in transaction fees earned on corporate card (growth of 26.4%) and debit card (growth of 3.1%) transactions, but continued to be negatively impacted by lower retail sales affecting both merchant and credit card fees. Trust fees for the quarter decreased 6.1% from the same period last year and were flat with the previous quarter, reflecting continued lower asset values and the effects of low interest rates on money market income. Deposit account fees decreased slightly from the same period last year, as overdraft fees were down 9.7%, partly offset by a 26.5% increase in corporate cash management fees. However, overdraft fee income grew 2.9% when compared to the previous quarter. Bond trading income for the current quarter totaled $4.8 million, an increase of 85.6% over the same period last year, due to higher sales of fixed income securities to correspondent banks and corporate customers. During the quarter, the Company sold $221.1 million of student loans held for sale and recorded a pre-tax gain of $4.4 million.
Investment Securities Gains and Losses
Net securities losses amounted to $945 thousand in the 3rd quarter of 2009, compared to net losses of $2.8 million in the previous quarter and net gains of $1.1 million in the same quarter last year. During the current quarter, the Company recorded additional credit-related impairment losses of $1.5 million on certain non-agency guaranteed mortgage-backed securities identified as other than temporarily impaired. The noncredit-related loss on these securities, which was recorded in other comprehensive income, was $2.0 million. At September 30, 2009, the par value of these bonds identified as other than temporarily impaired totaled $137.8 million, compared to $102.3 million at June 30, 2009.
The current quarter also included pre-tax gains of $519 thousand, most of which related to private equity investments of the Company. Minority interest expense related to this activity totaled $255 thousand and is included in non-controlling interest in the income statement.
Non-Interest Expense
Non-interest expense for the current quarter amounted to $154.5 million, a decrease of $5.5 million compared with amounts recorded in the previous quarter and a decrease of $30.0 million compared to the same period last year. Non-interest expense for the previous quarter included costs for an FDIC special assessment of $8.0 million that did not reoccur in the current quarter. Additionally during the 3rd quarter of 2008, the Company recorded a loss on the purchase of auction rate securities totaling $33.0 million. Compared to the 3rd quarter of last year, salaries and benefits expense increased $3.5 million, or 4.2%, resulting mainly from higher medical and pension costs, coupled with increased incentives paid on certain capital markets activities. Full-time equivalent employees totaled 5,148 and 5,202 at September 30, 2009 and 2008, respectively.
Compared with the 3rd quarter of last year, supplies and communication costs declined 13.1% and occupancy costs were down .9%. Marketing costs were slightly lower than in the previous year, while data processing and software costs increased 8.9% as a result of higher costs for several new software and servicing systems put in place this year. FDIC insurance expense increased $4.3 million over the same quarter last year due to higher insurance rates assessed. Included in non-interest expense in the current quarter was a reduction of $2.5 million in certain Visa, Inc. (Visa) indemnification costs, compared to net costs of $2.9 million for Visa obligations in the 3rd quarter of 2008.
Income Taxes
The effective tax rate for the Company was 31.2% for the current quarter, compared with 29.2% in the previous quarter and 27.9% in the 3rd quarter of 2008.
Credit Quality
Net loan charge-offs for the 3rd quarter of 2009 amounted to $30.9 million, compared with $36.0 million in the prior quarter and $18.7 million in the 3rdquarter of last year. The decrease in net loan charge-offs in the 3rd quarter of 2009 compared to the previous quarter was mainly the result of a decline in losses on construction loans of $5.9 million, coupled with lower consumer banking losses of $2.0 million and lower consumer credit card losses. Net loan charge-offs on business loans increased by $2.2 million over the previous quarter. Combined net loan charge-offs for business, business real estate and construction loans this quarter totaled $10.3 million compared to $13.8 million in both the 1st and 2nd quarters of 2009. The ratio of annualized net loan charge-offs to total average loans was 1.17% in the current quarter compared to 1.33% in the previous quarter.
For the 3rd quarter of 2009, annualized net charge-offs on average consumer credit card loans decreased to 6.85%, compared with 7.60% in the previous quarter and 4.19% in the same period last year. Consumer loan net charge-offs for the quarter amounted to 1.82% of average consumer loans, compared to 2.27% in the previous quarter and 1.40% in the same quarter last year. The provision for loan losses for the current quarter totaled $35.4 million, and was $5.8 million lower than the previous quarter. However, the Company increased the allowance for loan losses by $4.5 million this quarter to $190.5 million, or 1.85% of total loans, excluding loans held for sale. The allowance for loan loss balance was 157% of total non-accrual loans.
At September 30, 2009, total non-performing assets amounted to $129.2 million, a decrease of $2.5 million from the previous quarter, and represented 1.26% of loans outstanding. Non-performing assets are comprised of non-accrual loans ($121.7 million) and foreclosed real estate ($7.5 million). At September 30, 2009, the balance of non-accrual loans included residential construction loans of $67.4 million, business real estate loans of $19.9 million and business loans of $24.1 million. Loans past due more than 90 days and still accruing interest totaled $45.6 million at September 30, 2009, but included $15.3 million in guaranteed student loans that the Company intends to hold to maturity.
Other
The Company's purchases of treasury stock during the current quarter were not significant and related mainly to employee stock option activity. In conjunction with the Company's previously announced at-the-market offering, the Company issued 1,845,621 shares of its common stock during the 3rd quarter of 2009. Gross proceeds from these sales during the quarter were $63.6 million, with an average sale price of $34.48 per share. Commissions paid to the sales agent for the sale of these shares were $955 thousand. After payment of commissions and SEC, legal, and accounting fees relating to the offering during the 3rd quarter of 2009, net proceeds totaled $62.7 million, with average net sale proceeds of $33.96 per share. On July 31, 2009, the Company terminated its Equity Distribution Agreement related to this offering and no further shares were issued.
Forward Looking Information
This information contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements include future financial and operating results, expectations, intentions and other statements that are not historical facts. Such statements are based on current beliefs and expectations of the Company's management and are subject to significant risks and uncertainties. Actual results may differ materially from those set forth in the forward-looking statements.
Source: Commerce Bancshares, Inc.
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