This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
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
$1 buys you full access to ALL of TheStreet's Subscription Services! Learn More

Commerce Bancshares Beats on Margin Expansion (Update 2)

Stocks in this article: CBSH

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

NEW YORK ( TheStreet) -- Commerce Bancshares (CBSH) 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

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

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
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

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

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, 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
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,827.75 +12.81 0.07%
S&P 500 2,072.83 +5.80 0.28%
NASDAQ 4,787.3170 +29.0650 0.61%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs