Commerce Bancshares (CBSH)

Non-interest expense for the first quarter of 2008 amounted to $140.8 million, an increase of $4.3 million, or 3.2%, compared with $136.4 million recorded in the first quarter of last year. Compared with the first quarter of last year, salaries and benefits expense increased $6.1 million, or 7.9%, mainly due to normal merit increases, higher incentive payments, and increased medical insurance costs. In addition, the effects of the bank acquisitions in 2007 increased salaries and benefits by $1.3 million during the current quarter. Full-time equivalent employees increased to 5,128 at March 31, 2008 compared to 5,030 at March 31, 2007. Occupancy costs grew $279 thousand, or 2.4%, over the same quarter last year, primarily due to higher real estate taxes. Equipment expenses decreased $526 thousand, or 8.2%, from the same quarter last year due to lower depreciation expense on data processing equipment and lower maintenance contract expense. Supplies and communication expense rose $218 thousand, or 2.6%, mainly due to higher courier and supplies expense, partly offset by lower data network expense. Data processing and software costs increased $2.0 million, or 17.7%, mainly as a result of higher bank card processing costs, which increased in conjunction with higher bank card revenues this quarter. Exclusive of these costs, core data processing and software expense increased 5.3%. Marketing costs increased $969 thousand, or 22.4%, over the same quarter last year as the Company increased efforts to attract new deposits and credit card business. As mentioned previously, an indemnification obligation for Visa litigation, established in the fourth quarter of 2007, was reduced by $8.8 million. This amount represents the Company’s portion of litigation costs relating to American Express and Discover litigation, for which Visa established an escrow account in conjunction with its IPO. Other non-interest expense increased $4.1 million, or 23.9%, over the same quarter last year primarily due to an impairment charge of $2.3 million related to foreclosed land expected to be sold in the second quarter of 2008. Smaller increases occurred in minority interest expense, which was related to investment gains in the venture capital subsidiaries, and the provision for off balance sheet credit exposure.

 

mainly as a result of higher depreciation expense and seasonal maintenance costs, partly offset by an increase in tenant rent income. Bank acquisitions contributed $1.0 million of the total increase in occupancy expense. Equipment expense declined $1.3 million, or 6.6%, mainly due to the relocation mentioned above. Supplies and communication expense increased $1.3 million, or 5.3%, mainly due to higher costs for supplies and postage and courier expense, partly offset by a decline in data network expense. Data processing and software expense decreased $2.1 million, or 5.6%, due to lower bank card processing fees and software costs. Other non-interest expense increased $4.4 million due to increases in miscellaneous operating losses, intangible assets amortization, and professional fees, partly offset by a reduction in minority interest expense.

 

expense, partly offset by lower data network expense. Data processing and software expense decreased $1.6 million, or 6.6%, due to lower bank card processing fees and online banking fees. Smaller variances occurred in equipment and marketing, which increased $94 thousand and $202 thousand, respectively. Other non-interest expense increased $2.3 million mainly due to increases in operating losses and intangible assets amortization. Partly offsetting these increases were declines in minority interest expense and professional fees.