Commerce Bancshares 3Q profit misses expectations

KANSAS CITY, Mo. (AP) — Commerce Bancshares Inc. on Thursday said its third-quarter net income rose 17 percent as loan losses fell more than its interest income. But the regional bank's earnings came in slightly below Wall Street's expectations.

Commerce Bancshares operates in more than 360 locations in Missouri, Illinois, Kansas, Oklahoma and Colorado.

The bank reported net income of $65.4 million, or 76 cents per share, for the July-to-September period. That was up from $55.9 million, or 64 cents per share, in the same quarter a year ago.

Analysts surveyed by FactSet had expected earnings of 77 cents per share, on average, in the latest quarter.

The loan loss provision at the Kansas City-based bank fell to $11.4 million from $21.8 million a year ago. Net charge-offs, or loans written off as uncollectible, fell to $14.9 million from $21.8 million.

But low interest rates cut into the amount the bank earned from deposits and loans. Net interest income slipped to $158.6 million from $159.4 million in the year-ago quarter. The decline was 4 percent from $164.7 million in this year's second quarter.

The bank's tax-equivalent net yield on earning assets fell to 3.51 percent in the latest quarter from 3.75 percent in the year-ago quarter, and 3.85 percent in this year's second quarter.

Chairman and CEO David Kemper noted that the bank's deposits grew to $16 billion, up 11 percent from a year ago. "However, loan demand remained weak, and, coupled with record low interest rates, interest margins were pressured," Kemper said.

Average loans, including loans held for sale, decreased by nearly 9 percent, or $871 million, compared with the year-ago quarter. Commerce Bancshares said that drop was primarily due to a decline in student loans, most of which the bank sold in 2010. The lender closed the quarter with $9.1 billion in loans overall.

Non-interest income, or money earned from fees and charges, rose to $101.6 million from $100 million in the year-ago quarter.

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