This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Commerce Bancshares Beats on Margin Expansion (Update 2)

Updated with comments from KBW analyst Christopher McGratty and Jefferies analyst Emlen Harmon, and market close information.

NEW YORK ( TheStreet) -- Commerce Bancshares (CBSH - Get Report) on Thursday reported that its second-quarter net interest margin expanded to 3.55% from 3.45% the previous quarter, running counter to the trend for most banks in the prolonged low-rate environment.

The Kansas City, Mo., lender reported second-quarter earnings of $74.3 million, or 84 cents share, beating by a wide margin the consensus estimate of a 72-cent profit, among analysts polled by Thomson Reuters. In comparison, the company earned $65.8 million, or 74 cents a share, during the first quarter and $69.0 million, or 75 cents a share, during the second quarter of 2011.

The company's shares rose 2% to close at $39.28, while most other bank stocks showed declines. The KBW Bank Index (I:BKX) declined over 1% to close at 44.46, with all 24 index components showing declines, except for Commerce Bancshares.

Commerce had $20.7 billion in total assets as of June 30. Nonperforming assets, including non-accrual loans and repossessed real estate, declined to a strong 0.88% of total assets as of June 30, improving from 0.95% the previous quarter, and 1.12% a year earlier.

Second-quarter net interest income increased to $165.1 million from $159.7 million in the first quarter, and $164.7 million in the second quarter of 2011. The improved second-quarter interest income included "interest income of $1.3 million on two non-performing commercial loans," and "interest income of $1.1 million on the early pay-off of a commercial real estate loan," according to the company. Together, these two items contributed four cents to the second-quarter bottom line.

Another major factor in Commerce's increase in net interest income -- and the widened net interest margin -- was "an increase in inflation income of $4.4 million on the Company's inflation protected securities (TIPs), which increased the yield on the overall securities portfolio by 20 basis points to 2.75%," while increasing interest income on the company's $9 billion securities portfolio by $4 million over the previous quarter.

While Commerce's average loans during the second quarter increased slightly from the second quarter and declined slightly from a year earlier, period-end total loans grew 1% sequentially and 2% year-over-year, as new lending activity accelerated toward the end of the second quarter, with "growth of $165.1 million in business, personal real estate loans and consumer loans," according to CEO David Kemper.

While the company's total non-interest income declined slightly year-over-year to $100.8 million during the second quarter, Commerce managed to offset most of the 44.5% decline in debit card interchange fees -- from the Durbin Amendment to the Dodd-Frank bank reform legislation, which cut the fees charged by large banks to merchants to process debit card purchases starting in the fourth quarter of 2011 -- with "an increase in corporate card and trust fees."

Second-quarter bank card transaction fee income totaled $38.4 million, increasing from $34.7 million in the first quarter, while declining from $41.3 million in the second quarter of 2011. Trust fee income grew to $23.8 million in the second quarter, from $22.8 million the previous quarter, and $22.5 million, a year earlier.
1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
CBSH $46.08 -0.09%
AAPL $93.24 -0.41%
FB $117.81 -0.21%
GOOG $701.43 0.82%
TSLA $211.53 -4.96%


Chart of I:DJI
DOW 17,660.71 +9.45 0.05%
S&P 500 2,050.63 -0.49 -0.02%
NASDAQ 4,717.0940 -8.5450 -0.18%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs