Commerce Bancshares Inc.
) reported first-quarter 2012 earnings of 75 cents per share,
significantly ahead of the Zacks Consensus Estimate of 67 cents.
However, after considering the losses on held-for-sale real estate
property and certain incentives related to new bankcard network
agreements, the company reported earnings per share of 74
This compares favorably with the prior quarter's earnings of 69
cents per share and the year-ago quarter's earnings of 66
Commerce Bancshares' results benefited from higher fee income
and a drop in operating expenses, which was partially offset by a
lower net interest income. Moreover, credit quality and capital
ratios continued to show improvements.
Net income for the reported quarter was $65.8 million, up 7%
sequentially from $61.5 million and 9% year over year from $60.5
Quarter in Detail
Commerce Bancshares' quarterly revenues were $260.2 million,
down from $262.0 million in the prior quarter and $262.4 million in
the prior-year quarter. The decline was largely due to a drop in
net interest income, partially offset by higher non-interest
income. However, total revenues were ahead of the Zacks Consensus
Estimate of $257.0 million.
Commerce Bancshares reported taxable-equivalent net interest
income of $165.7 million in the first quarter, dipping 1.4%
sequentially and 0.5% year over year. The drop was attributable to
lower rates earned on loans, partly mitigated by a decline in rates
paid on deposit accounts.
Net interest margin in the first quarter stood at 3.45%, down 1
basis point sequentially and 40 basis points year over year.
Non-interest income in the quarter rose 0.6% from the previous
quarter, but fell 1.4% from the previous-year quarter to $94.6
million. The improvement was primarily due to higher trust fees,
deposit account charges and other fees as well as capital market
fees. These were, however, partially offset by lower bankcard
transaction fees as well as loan fees and sales.
Non-interest expense during the quarter decreased 3.6% from the
prior quarter and 2.3% from the year-ago quarter to $150.5 million.
The sequential fall was mainly attributable to the absence of
certain one-time charges that were recorded during the previous
Efficiency ratio, in the quarter under review, improved to
58.91% from 60.71% in the prior quarter and 59.64% in the year-ago
quarter. The fall in efficiency ratio implies an improvement in
The first-quarter witnessed considerable year-over-year
improvement in Commerce Bancshares' credit quality. Total
nonperforming assets declined to $87.5 million or 0.95% of loans
outstanding from $93.8 million or 1.02% at the end of the
prior-quarter and $103.0 million or 1.10% at the end of the
prior-year quarter. Similarly, net charge-offs declined 28.7%
sequentially and 40.6% year over year to $11.2 million.
Further, the allowance for loan losses as a percentage of total
loans was 1.96% compared with 2.01% in the prior quarter and 2.08%
in the previous-year quarter. Likewise, provision for loan losses
decreased from $12.1 million in the prior quarter and $15.9 million
in the year-ago quarter to $8.2 million.
Average loans (excluding loans held for sale) inched up 1.1%
quarter over quarter, but dropped 2.5% year over year to $9.20
billion. Sequential rise reflected higher loan balances in all
categories except consumer, consumer credit card as well as
revolving home equity.
In the reported quarter, total average deposits slightly
increased 1.7% sequentially to $11.5 billion, reflecting growth in
money market deposit balances along with growth in certificate of
The year saw betterment in Commerce Bancshares' capital ratios.
As of March 31, 2012, the company's return on average assets
improved to 1.29% from 1.19% as of December 31, 2011. Also, as of
March 31, 2012, the company's return on average equity climbed to
12.04% from 11.39% as of December 31, 2011.
Similarly, book value as of March 31, 2012 was $24.83 per share,
up from $24.40 as of December 31, 2011 and $22.64 as of March 31,
During the reported quarter, Commerce Bancshares repurchased
810,642 shares at an average cost of $38.98.
With a strong capital base and an excellent liquidity position,
Commerce Bancshares is robustly poised to expand inorganically.
Moreover, the company's direct retail and commercial banking
franchise are expected to perform steadily. However, prevailing low
interest rates, diminishing loan demands and muted economic growth
are expected to hurt the company's overall performance.
One of Commerce Bancshares' peers,
TCF Financial Corporation
), is expected to announce its first quarter 2012 results on April
Commerce Bancshares currently retains a Zacks # 3 Rank, which
translates into a short-term 'Hold' rating. Also, considering the
fundamentals, we are maintaining our long-term "Neutral"
recommendation on the shares.
COMMERCE BANCSH (
): Free Stock Analysis Report
TCF FINL CORP (
): Free Stock Analysis Report
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