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Commerce Bancorp Revenue Light

The bank reports a 38% decline in profits in the fourth quarter.

New Jersey's fast-growing

Commerce Bancorp

(CBH) - Get AllianzGI Convertible & Income 2024 Target Term Fund Report

hit a speed bump in the fourth quarter, as profits fell 38% from a year ago and revenue came in below analyst expectations.

In the quarter, Commerce earned $46.9 million, compared with $75 million in the year ago period. The bank earned 26 cents a share, down from 44 cents a share.

Included in the quarter was a previously announced $17 million after-tax charge stemming from the sale of poorly performing investments. Excluding the charge, Commerce earned 36 a share, beating the Thomson First Call consensus estimate by 9 cents.

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But revenue at the bank, while up 6% over a year ago, came in below Wall Street expectations. In the quarter, revenue totaled $397.5 million. Analysts were forecasting revenue of $408 million.

Meanwhile, expenses at Commerce, which keeps adding dozens of new branches each quarter, rose 27% to $321 million.

Like many banks, Commerce's earnings were hurt by a tricky interest rate environment that further narrowed the spread between short- and long-term interest rates. The so-called flattening of the yield curve has made it difficult for many banks to generate fat profits in their deposit and lending operations.

"The fourth quarter of 2005, was both exciting and challenging for Commerce as we continued to dramatically expand the unique Commerce model while challenged by the worst interest rate environment in recent years," said Vernon Hill, the bank's chairman and CEO, in a press release.

Over the course of 2005, Commerce's net interest margin, a measure of the profitability of a bank's deposit and investment operation, declined to 3.77% from 4.28%.

Net interest income, the difference between what a bank makes on its investments and loans and the money it pays out to depositors, rose 7% to $299 million.

In early trading, shares of Commerce were trading lower, down 43 cents, or 1.3%, to $32.22.