Commerce Bancshares, Inc. Announces Fourth Quarter and 2007 Earnings

Commerce Bancshares, Inc. (NASDAQ: CBSH) announced earnings of $.60 per share for the three months ended December 31, 2007, a decrease of 21.1% compared to $.76 per share in the fourth quarter of 2006. Net income for the fourth quarter amounted to $43.7 million compared to $57.0 million in the same period last year. The current quarter included a pre-tax charge of $21.0 million related to the Company’s share of certain estimated litigation costs of VISA U.S.A., Inc. (VISA). Operating earnings per share, exclusive of this litigation charge, for the current quarter amounted to $.78, or an increase of 3% over last year. On an operating earnings basis, the return on average assets for the three months ended December 31, 2007 was 1.4%, the return on average equity was 14.9% and the efficiency ratio was 59.8%. For the year ended December 31, 2007, earnings per share totaled $2.82 compared to $2.94 in 2006. Net income in 2007 amounted to $206.7 million compared to $219.8 million in 2006. Exclusive of the above mentioned litigation costs, operating net income in 2007 amounted to $219.9 million, or $3.00 per share. In making this announcement, David W. Kemper, Chairman and CEO, said, "We are pleased to report a 3% growth in operating earnings per share and 9% growth in revenue per share this quarter compared to the same period last year. While we were required to expense our share of certain estimated VISA litigation costs this quarter, we expect significant future benefits from our proportionate ownership in that organization. Operating results this quarter were driven by a relatively stable net interest margin and continued loan growth, combined with solid increases in a number of our fee-based businesses. Bankcard and trust fees grew 11% and 10%, respectively. Exclusive of the VISA charge, non-interest expense was well controlled this quarter.” Mr. Kemper continued, "While we experienced higher levels of net loan charge-offs in our consumer loan portfolios this quarter, overall credit quality remained good with net loan charge-offs for the year at .42% compared with .29% last year. Our allowance for loan losses totaled $133.6 million, or 1.26% of outstanding loans. Total non-performing assets decreased $8.0 million from last quarter to $33.4 million as of December 31, 2007. Our allowance for loan losses represented 677% of total non-accrual loans.” Total assets at December 31, 2007 were $16.2 billion, total loans were $10.8 billion, and total deposits were $12.6 billion. Also during the quarter, the Company paid a 5% stock dividend for the 14th consecutive year. 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 350 locations in Missouri, Illinois, Kansas, Oklahoma and Colorado. The Company also has operating subsidiaries involved in mortgage banking, credit related insurance, venture capital, and real estate activities. Summary of Non-Performing Assets and Past Due Loans (Dollars in thousands)   9/30/07   12/31/07   12/31/06 Non-Accrual Loans   $25,962   $19,739   $16,708 Foreclosed Real Estate   $15,408   $13,678   $1,515 Total Non-Performing Assets   $41,370   $33,417   $18,223 Non-Performing Assets to Loans   .40%   .32%   .19% Non-Performing Assets to Total Assets   .26%   .21%   .12% Loans 90 Days & Over Past Due – Still Accruing   $19,227   $20,886   $20,376 Comparison of GAAP and Non-GAAP Information   For the Three Months Ended   For the Year Ended Sept. 30   Dec. 31   Dec. 31 Dec. 31   Dec. 31 (Dollars in thousands)   2007   2007   2006   2007   2006 Net income $ 55,898 $ 43,692 $ 57,017 $ 206,660 $ 219,842 Provision relating to VISA litigation, net of tax   -   13,199   -   13,199   - Operating net income   $ 55,898   $ 56,891   $ 57,017   $ 219,859   $ 219,842   GAAP basis: Diluted earnings per share $ .77 $ .60 $ .76 $ 2.82 $ 2.94 Return on average assets 1.43% 1.09% 1.51% 1.33% 1.54% Return on average equity 15.10% 11.46% 15.52% 14.00% 15.96% Efficiency ratio   59.81%   68.67%   59.12%   62.72%   60.55% Operating income basis (non-GAAP): Diluted earnings per share $ .77 $ .78 $ .76 $ 3.00 $ 2.94 Return on average assets 1.43% 1.42% 1.51% 1.42% 1.54% Return on average equity 15.10% 14.92% 15.52% 14.89% 15.96% Efficiency ratio   59.81%   59.78%   59.12%   60.42%   60.55% 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. This financial news release, including management’s discussion of fourth quarter results, is posted to the Company’s web site at www.commercebank.com. COMMERCE BANCSHARES, INC. and SUBSIDIARIES FINANCIAL HIGHLIGHTS                     For the Three Months Ended   For the Year Ended (Unaudited) Sept. 30   Dec. 31   Dec. 31 Dec. 31   Dec. 31   2007   2007   2006   2007   2006 FINANCIAL SUMMARY (In thousands, except per share data) Net interest income $135,262 $137,467 $134,232 $538,072 $513,199 Taxable equivalent net interest income 137,357 139,651 136,605 546,841 520,323 Non-interest income 95,137 98,101 90,030 371,581 352,586 Investment securities gains, net 1,562 3,270 24 8,234 9,035 Provision for loan losses 11,455 14,062 7,970 42,732 25,649 Non-interest expense 139,093 162,897 133,610 574,758 525,425 Net income 55,898 43,692 57,017 206,660 219,842 Cash dividends 17,133 17,104 16,463 68,915 65,758 Net total loan charge-offs 11,456 14,064 8,074 42,733 26,054 Net business charge-offs (recov) 1,853 1,847 (126 ) 4,393 (823 ) Net consumer credit card charge-offs 5,331 6,606 5,131 23,698 17,854 Net personal banking charge-offs (1) 2,449 3,747 2,217 9,984 6,236 Real estate - construction charge-offs 605 537 62 2,012 62 Real estate - business charge-offs (recov) 744 768 37 1,075 (36 ) Real estate - personal charge-offs 71 14 19 139 92 Net overdraft charge-offs 403 545 734 1,432 2,669 Per share: Net income - basic $0.78 $0.61 $0.77 $2.86 $2.98 Net income - diluted $0.77 $0.60 $0.76 $2.82 $2.94 Cash dividends $0.238 $0.238 $0.222 $0.952 $0.889 Diluted wtd. average shares o/s 72,707     72,482     74,940     73,189     74,678   RATIOS Average loans to deposits (2) 88.67 % 89.76 % 85.83 % 88.49 % 84.73 % Return on total average assets 1.43 % 1.09 % 1.51 % 1.33 % 1.54 % Return on total average stockholders' equity 15.10 % 11.46 % 15.52 % 14.00 % 15.96 % Non-interest income to revenue (3) 41.29 % 41.64 % 40.15 % 40.85 % 40.72 % Efficiency ratio (4) 59.81 %   68.67 %   59.12 %   62.72 %   60.55 % AT PERIOD END Book value per share based on total stockholders' equity $20.75 $21.28 $19.63 Market value per share $43.70 $44.86 $46.10 Allowance for loan losses as a percentage of loans 1.28 % 1.26 % 1.36 % Tier I leverage ratio 8.79 % 8.76 % 9.05 % Common shares outstanding 71,878,511 71,795,749 73,450,171 Number of bank/ATM locations 360 354 354 Full-time equivalent employees 5,077     5,083     4,932   OTHER YTD INFORMATION Dec. 312007 Dec. 312006 High market value per share $48.35 $48.25 Low market value per share     $41.22     $43.43     (1) Includes net charge-offs on consumer and home equity loans (2) Includes loans held for sale (3) Revenue includes net interest income and non-interest income. (4) The efficiency ratio is calculated as non-interest expense (excluding intangibles amortization) as a percent of revenue. All share and per share amounts have been restated to reflect the 5% stock distributed December 2007. COMMERCE BANCSHARES, INC. and SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME                       (Unaudited)   For the Three Months Ended   For the Year Ended (In thousands, except per share data)   Sept. 302007   Dec. 312007   Dec. 312006   Dec. 312007   Dec. 312006 INTEREST INCOME       Interest and fees on loans $188,863 $185,844 $175,123 $734,986 $643,329 Interest and fees on loans held for sale 5,049 4,626 5,532 21,940 21,788 Interest on investment securities 38,011 40,494 40,370 153,294 151,552 Interest on federal funds sold and securities purchased under agreements to resell 6,351 5,788 7,134 25,881 15,637 Total interest income 238,274 236,752 228,159 936,101 832,306   INTEREST EXPENSE Interest on deposits: Savings, interest checking and money market 31,173 27,472 27,532 116,094 96,442 Time open and C.D.'s of less than $100,000 28,541 28,180 26,007 110,957 85,424 Time open and C.D.'s of $100,000 and over 18,812 18,448 15,582 73,739 58,381 Interest on other borrowings 24,486 25,185 24,806 97,239 78,860 Total interest expense 103,012 99,285 93,927 398,029 319,107 Net interest income 135,262 137,467 134,232 538,072 513,199 Provision for loan losses 11,455 14,062 7,970 42,732 25,649 Net interest income after provision for loan losses 123,807 123,405 126,262 495,340 487,550   NON-INTEREST INCOME Deposit account charges and other fees 30,148 30,610 29,323 117,350 115,453 Bank card transaction fees 26,409 28,266 25,475 103,613 94,928 Trust fees 19,823 20,392 18,564 78,840 72,180 Trading account profits and commissions 2,174 3,172 1,918 8,647 8,132 Consumer brokerage services 3,056 3,014 2,318 12,445 9,954 Loan fees and sales 2,919 1,919 2,059 8,835 10,503 Other 10,608 10,728 10,373 41,851 41,436 Total non-interest income 95,137 98,101 90,030 371,581 352,586   INVESTMENT SECURITIES GAINS, NET 1,562 3,270 24 8,234 9,035   NON-INTEREST EXPENSE Salaries and employee benefits 77,312 78,433 73,140 308,768 288,273 Net occupancy 11,572 11,584 11,060 45,789 43,276 Equipment 5,761 6,246 6,536 24,121 25,665 Supplies and communication 8,546 8,524 8,332 34,162 32,670 Data processing and software 12,407 13,294 13,054 49,081 50,982 Marketing 4,775 4,247 3,945 18,199 17,317 Other 18,720 40,569 17,543 94,638 67,242 Total non-interest expense 139,093 162,897 133,610 574,758 525,425 Income before income taxes 81,413 61,879 82,706 300,397 323,746 Less income taxes 25,515 18,187 25,689 93,737 103,904 NET INCOME   $55,898   $43,692   $57,017   $206,660   $219,842   Net income per share - basic $0.78 $0.61 $0.77 $2.86 $2.98 Net income per share - diluted $0.77 $0.60 $0.76 $2.82 $2.94 Cash dividends per common share   $0.238   $0.238   $0.222   $0.952   $0.889 COMMERCE BANCSHARES, INC. and SUBSIDIARIES CONSOLIDATED BALANCE SHEETS               (Unaudited)   Sept. 30   Dec. 31   Dec. 31 (In thousands)   2007   2007   2006 ASSETS Loans $10,451,029 $10,605,368 $9,681,520 Allowance for loan losses (133,588 ) (133,586 ) (131,730 ) Net loans 10,317,441   10,471,782   9,549,790   Loans held for sale 303,658 235,896 278,598 Investment securities: Available for sale 3,411,804 3,165,020 3,415,440 Trading 17,189 26,478 6,676 Non-marketable 93,086   105,517   74,207   Total investment securities 3,522,079   3,297,015   3,496,323   Federal funds sold and securities purchased under agreements to resell 520,484 655,165 527,816 Cash and due from banks 543,626 673,081 626,500 Land, buildings and equipment - net 403,747 406,249 386,095 Goodwill 125,088 124,570 97,643 Other intangible assets - net 22,322 21,413 19,633 Other assets 265,864   319,660   247,951   Total assets $16,024,309   $16,204,831   $15,230,349     LIABILITIES AND STOCKHOLDERS' EQUITY Deposits: Non-interest bearing demand $1,148,991 $1,413,849 $1,312,400 Savings, interest checking and money market 6,971,076 7,155,366 6,879,047 Time open and C.D.'s of less than $100,000 2,398,877 2,374,782 2,302,567 Time open and C.D.'s of $100,000 and over 1,432,831   1,607,555   1,250,840   Total deposits 11,951,775 12,551,552 11,744,854 Federal funds purchased and securities sold under agreements to repurchase 2,059,095 1,239,219 1,771,282 Other borrowings 345,749 583,639 53,934 Other liabilities 176,124   302,735   218,165   Total liabilities 14,532,743   14,677,145   13,788,235   Stockholders' equity: Preferred stock --- --- --- Common stock 352,330 359,694 352,330 Capital surplus 421,733 475,220 427,421 Retained earnings 794,779 669,142 683,176 Treasury stock (91,040 ) (2,477 ) (20,613 ) Accumulated other comprehensive income (loss) 13,764   26,107   (200 ) Total stockholders' equity 1,491,566   1,527,686   1,442,114   Total liabilities and stockholders' equity   $16,024,309     $16,204,831     $15,230,349   COMMERCE BANCSHARES, INC. and SUBSIDIARIES AVERAGE BALANCES                       (Unaudited)   For the Three Months Ended For the Year Ended (Dollars in thousands)   Sept. 302007   Dec. 312007   Dec. 312006   Dec. 312007   Dec. 312006 Loans:         Business $3,103,903 $3,212,440 $2,805,946 $3,110,386 $2,688,722 Real estate - construction 705,232 677,651 627,631 671,986 540,574 Real estate - business 2,220,136 2,222,816 2,160,705 2,204,041 2,053,455 Real estate - personal 1,538,279 1,541,861 1,490,565 1,521,066 1,415,321 Consumer 1,605,879 1,642,600 1,411,988 1,558,302 1,352,047 Home equity 446,208 454,781 443,290 443,748 445,376 Consumer credit card 670,973 712,312 611,579 665,964 595,252 Overdrafts 14,468 17,152 13,329 13,823 14,685 Total loans 10,305,078 10,481,613 9,565,033 10,189,316 9,105,432 Loans held for sale 293,610 289,192 315,108 321,916 315,950 Investment securities (excluding unrealized gains and losses): Available for sale 3,222,014 3,310,548 3,440,245 3,254,467 3,456,219 Trading 16,343 29,897 15,471 22,321 17,444 Non-marketable 98,177 102,951 83,938 92,251 85,211 Total investment securities 3,336,534 3,443,396 3,539,654 3,369,039 3,558,874 Federal funds sold and securities purchased under agreements to resell 511,834 537,859 530,275 527,304 299,554 Total interest earning assets 14,447,056 14,752,060 13,950,070 14,407,575 13,279,810 Total assets 15,529,022 15,894,020 14,999,722 15,480,327 14,238,604   Deposits: Non-interest bearing deposits 660,681 660,310 664,017 647,888 642,545 Interest bearing deposits: Savings 392,317 375,974 400,737 392,942 393,870 Interest checking 211,469 207,536 179,332 194,555 175,619 Money market 6,814,225 6,864,403 6,682,961 6,802,388 6,541,661 Time open & C.D.'s of less than $100,000 2,389,019 2,391,787 2,293,197 2,359,386 2,077,257 Time open & C.D.'s of $100,000 and over 1,485,637 1,499,654 1,291,430 1,480,856 1,288,845 Total interest bearing deposits 11,292,667 11,339,354 10,847,657 11,230,127 10,477,252 Total deposits 11,953,348 11,999,664 11,511,674 11,878,015 11,119,797 Borrowings: Federal funds purchased and securities sold under agreements to repurchase 1,628,453 1,720,651 1,792,832 1,696,613 1,455,544 Other borrowings 346,076 492,214 104,488 292,446 182,940 Total borrowings 1,974,529 2,212,865 1,897,320 1,989,059 1,638,484   Total interest bearing liabilities 13,267,196 13,552,219 12,744,977 13,219,186 12,115,736 Total stockholders' equity 1,468,600 1,512,857 1,457,813 1,476,403 1,377,655   Net yield on interest earning assets (tax-equivalent basis)   3.77%   3.76%   3.89%   3.80%   3.92% COMMERCE BANCSHARES, INC. Management Discussion of Fourth Quarter Results December 31, 2007 For the quarter ended December 31, 2007, net income amounted to $43.7 million, a decrease of $13.3 million from the same quarter last year and a decrease of $12.2 million from the previous quarter. The current quarter included a pre-tax expense provision of $21.0 million related to the Company’s share of certain estimated VISA U.S.A., Inc. (VISA) litigation costs. Excluding this amount, net income amounted to $56.9 million, or an increase of $1.0 million over the previous quarter, and was virtually flat with the same period last year. Exclusive of the VISA item, for the current quarter, the return on average assets was 1.4%, the return on average equity was 14.9%, and the efficiency ratio was 59.8%. Balance Sheet Review During the 4th quarter of 2007, average loans, excluding held for sale loans, increased $176.5 million, or 1.7%, compared to the previous quarter, representing annualized growth of 6.8%. Average loans increased $916.6 million, or 9.6%, during the 4th quarter of 2007 compared to the same period last year. Overall during the quarter, the increase in average loans compared with the previous quarter consisted mainly of growth in business ($108.5 million), consumer ($36.7 million) and consumer credit card ($41.3 million) loans offset by a decline of $27.6 million in construction loans. The growth in average business loans this quarter was partly due to seasonal borrowings which increased in the previous quarter and continued into the 4th quarter of 2007, but with significant paydowns occurring by year end. The consumer loan growth occurred in marine and RV lending products, while the growth in credit card loans included normal seasonal growth in the 4th quarter. When compared with the same quarter last year, and excluding the effects of completed bank acquisitions in 2007, average loans grew by 7.0%. Available for sale investment securities increased on average by $119.8 million, or 3.7%, this quarter compared with the previous quarter. During the current quarter, sales, maturities and principal paydowns of securities totaled $464.2 million, while the Company reinvested $161.1 million in federal agency, mortgage-backed and other asset-backed securities. Total average deposits increased by $46.3 million during the 4th quarter of 2007 compared to the previous quarter, and $488.0 million, or 4.2%, compared to the 4th quarter of 2006. Compared to the previous quarter, growth in average deposits resulted from increases in money market accounts ($50.2 million) and certificates of deposit ($16.8 million), but was offset by declines in savings accounts. The average loans to deposits ratio in the current quarter was 89.8%, compared to 88.7% in the previous quarter. Average borrowings increased $238.3 million in the current quarter compared to the prior quarter, mainly due to increases in funding from Federal Home Loan Bank borrowings ($147.2 million), federal funds purchased ($52.4 million) and repurchase agreements ($39.8 million). During the quarter, the Company continued to diversify its funding sources and improve liquidity, and at December 31, 2007 its exposure to overnight federal funds borrowings was reduced by over $800 million to $126.1 million. Net Interest Income Net interest income in the 4th quarter of 2007 amounted to $137.5 million, an increase of $2.2 million, or 1.6%, compared with the previous quarter and an increase of $3.2 million, or 2.4%, compared to the 4th quarter of last year. During the 4th quarter of 2007, the net yield on earning assets (tax-equivalent) was 3.76%, compared with 3.77% in the previous quarter and 3.89% in the same period last year. The increase of $2.2 million in net interest income in the 4th quarter of 2007 over the previous quarter was primarily the result of lower rates paid on deposits and borrowings coupled with an increase in average loan and investment securities balances, but offset by lower rates earned on the loan portfolio. Interest income on loans decreased by $3.4 million this quarter, mainly due to lower rates earned on virtually all loan products, but offset by higher average balances on business, consumer, and consumer credit card loans. Interest on investment securities increased by $2.5 million compared to the previous quarter as a result of both higher balances and rates, occurring mainly in mortgage-backed and other asset-backed investment securities. Interest expense on deposits declined $4.4 million in the 4th quarter of 2007 compared with the previous quarter as a result of lower rates paid on nearly all deposit products, especially on premium money market accounts. Interest expense on other borrowings increased $699 thousand due to higher average balances of Federal Home Loan Bank advances, but was partly offset by lower rates paid on overnight federal funds purchased and repurchase agreements. During the current quarter, the overall tax equivalent yield on interest earning assets declined 17 basis points from the previous quarter to 6.43%, while the overall cost of interest bearing liabilities also decreased 17 basis points to 2.91%. Non-Interest Income For the 4th quarter of 2007, total non-interest income amounted to $98.1 million, an increase of 9.0% compared to $90.0 million in the same period last year, and an increase of 3.1% compared to $95.1 million recorded in the previous quarter. The increase in non-interest income over the 4th quarter of last year resulted mainly from double digit growth in bank card, brokerage, and bond trading income, in addition to solid growth in trust and corporate cash management fees. Bank card fees for the quarter increased 11.0% over the 4th quarter of last year, primarily due to higher fees earned on debit and corporate card transactions, which grew by 13.7% and 36.0%, respectively. Trust fees for the quarter increased 9.8% over the same quarter last year due to growth in both personal and corporate trust fees. Deposit account fees grew 4.4% this quarter over the same period last year as a result of growth in corporate cash management fees of 15.5%, along with a 2.5% increase in overdraft fee income. Brokerage fees, including equity sales commissions and annuity fees, grew 30.0% this quarter over the same period last year. Bond trading income increased 65.4% over the same period last year due to continued higher corporate and correspondent bank sales. During the current quarter, gains on sales of student loans totaled $794 thousand compared with $1.9 million in the previous quarter. Approximately $93.6 million of student loans were sold this quarter. The ratio of non-interest income to total revenue was 41.6% in the 4th quarter of 2007. Investment Securities Gains and Losses Net securities gains amounted to $3.3 million in the 4th quarter of 2007, compared to net gains of $24 thousand in the same quarter last year and net gains of $1.6 million in the previous quarter. Included in the current quarter were net gains of $2.2 million on sales of certain available for sale securities, coupled with a net gain of $1.1 million due to fair value adjustments on various private equity investments. Related minority interest expense totaled $181 thousand on these private equity net gains, which was recorded in other non-interest expense. Non-Interest Expense Non-interest expense for the current quarter amounted to $162.9 million, an increase of $29.3 million, or 21.9%, compared with amounts recorded in the same period last year, and was $23.8 million, or 17.1%, higher than amounts recorded in the prior quarter. As mentioned earlier, current quarter non-interest expense included a non-cash expense provision of $21.0 million related to the Company’s share of certain estimated VISA litigation costs. The covered litigation is described in VISA’s Form 10-K which was filed on December 13, 2007. The Company’s expense provision related to VISA’s American Express litigation, which was recently settled by VISA, and other VISA litigation, including the Discover and interchange litigation, which has not yet been settled. The Company currently anticipates that its proportional share of the proceeds of VISA’s initial public offering, expected to occur in 2008, will provide significant future benefit to the Company. Excluding the VISA litigation provision, non-interest expense in the current quarter grew by 6.2% over the same period last year. Compared to the 4th quarter of last year, salaries and benefits expense increased $5.3 million, or 7.2%, mainly as a result of normal merit increases and the effects of bank acquisitions in 2007, which increased salaries and benefits by approximately $886 thousand. Full-time equivalent employees totaled 5,083 and 4,932 at December 31, 2007 and 2006, respectively. Compared with the 4th quarter of last year, occupancy and supplies and communication costs increased 4.7% and 2.3%, respectively, for a combined increase of $716 thousand, while professional and loan collection fees grew by $1.5 million. Income Taxes The effective tax rate for the Company was 30.6% for the current quarter, compared with 31.3% in the previous quarter and 31.1% in the 4th quarter of 2006. Credit Quality Net loan charge-offs for the 4th quarter of 2007 amounted to $14.1 million, compared with $11.5 million in the prior quarter and $8.1 million in the 4th quarter of last year. The increase in net charge-offs in the 4th quarter of 2007 compared to the previous quarter was the result of higher personal banking and consumer credit card loan charge-offs. Year-to-date, the ratio of net loan charge-offs to total average loans was .42% compared to .29% last year. For the 4th quarter of 2007, annualized net charge-offs on average consumer credit card loans were 3.68%, compared with 3.15% in the previous quarter and 3.33% in the same period last year. Additionally, personal banking loan net charge-offs for the quarter amounted to .71% of average personal banking loans, compared to .47% in both the previous quarter and the same quarter last year. The provision for loan losses for the quarter totaled $14.1 million, and was $2.6 million higher than the previous quarter and $6.1 million higher than the 4th quarter of 2006. The allowance for loan losses at December 31, 2007 amounted to $133.6 million, or 1.26% of total loans, excluding held for sale loans. Total non-performing assets amounted to $33.4 million, a decrease of $8.0 million from the previous quarter, and represented .32% of loans outstanding. This decrease was partly the result of the sale of over $4.9 million of foreclosed real estate, comprised mainly of houses and residential lots. In addition, the Company resolved a $5.5 million non-accrual agricultural business loan as a result of the liquidation of related collateral. The Company also foreclosed on a business real estate loan, transferring the balance of $3.4 million to foreclosed property. Non-performing assets are comprised of non-accrual loans ($19.7 million) and foreclosed real estate ($13.7 million). Loans past due more than 90 days and still accruing interest totaled $20.9 million at December 31, 2007. Other The Company maintains a treasury stock buyback program. During the current quarter, the Company purchased 166 thousand shares of treasury stock at an average cost of $44.85 per share. 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.