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Commerce Bancshares Inc. Reports Operating Results (10-Q)

August 06, 2012 | About:
10qk

10qk

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Commerce Bancshares Inc. (CBSH) filed Quarterly Report for the period ended 2012-06-30.

Commerce Bancshares, Inc. has a market cap of $3.52 billion; its shares were traded at around $39.67 with a P/E ratio of 13.1 and P/S ratio of 3.2. The dividend yield of Commerce Bancshares, Inc. stocks is 2.3%. Commerce Bancshares, Inc. had an annual average earning growth of 4.4% over the past 10 years.

Highlight of Business Operations:

For the quarter ended June 30, 2012, net income attributable to Commerce Bancshares, Inc. (net income) amounted to $70.7 million, an increase of $1.7 million, or 2.5%, compared to the second quarter of the previous year, and an increase of $4.9 million compared to the previous quarter. For the current quarter, the annualized return on average assets was 1.38%, the annualized return on average equity was 12.80%, and the efficiency ratio was 58.53%. Diluted earnings per share was $.80, an increase of 6.7% compared to $.75 per share in the second quarter of 2011. During the current quarter, the Company recorded loan recoveries totaling $3.6 million (effectively reducing the provision for loan losses) and recorded interest income of $1.3 million on two non-performing commercial loans. The Company also received interest income of $1.1 million on the early pay-off of a commercial real estate loan. These items were offset by an expense accrual of $5.7 million related to the provisions in the proposed settlement of certain Visa-related interchange litigation. The proposed settlement, which was announced in July 2012, is discussed further in Note 14 to the consolidated financial statements.

Net income for the first six months of 2012 was $136.5 million, an increase of $7.0 million, or 5.4%, over the same period last year and included a decline of $14.6 million, or 52.2%, in the provision for loan losses. Diluted earnings per share was $1.54, an increase of 9.2% compared to $1.41 per share in the same period last year. For the first six months of 2012, the annualized return on average assets was 1.34%, the annualized return on average equity was 12.42%, and the efficiency ratio was 58.72%. Net interest income decreased $841 thousand, or .3%, due to lower earnings on the Company's loan portfolio, partly offset by lower expense incurred on deposits. Non-interest income decreased $1.9 million, or .9%, due to a decline of $12.9 million in debit card fees (the effect of new debit card fee regulations effective late in 2011). These declines were partly offset by increases of $7.0 million in merchant and corporate card fees, $2.5 million in trust fees and $2.2 million in capital market fees. Net securities gains increased $2.1 million, mainly due to fair value adjustments and sales of private equity investments. Non-interest expense decreased $672 thousand, or .2%, compared to the same period last year and included lower occupancy, equipment and FDIC insurance costs, offset by higher salaries and benefits and data processing costs.

For the second quarter of 2012, total non-interest income amounted to $100.8 million compared with $101.3 million in the same quarter last year, which was a decrease of $528 thousand, or .5%. Bank card fees for the quarter declined $2.9 million, or 6.9%, from the second quarter of last year, as a result of a decline in debit card interchange fees of $7.0 million, or 44.5% (mainly the effect of new pricing limitations effective in late 2011), but was partly offset by growth in corporate card fees of $3.6 million, or 25.5%. Corporate card and debit card fees for the current quarter totaled $17.7 million and $8.7 million, respectively. Merchant fees grew by 6.1% due to higher transaction volumes, and totaled $6.4 million for the quarter. Trust fees for the quarter increased $1.3 million, or 5.7%, over the same quarter last year, resulting mainly from growth in both personal and institutional trust fees. Deposit account fees declined $814 thousand, or 3.9%, compared to last year as overdraft fees declined by $1.7 million, but were offset by growth in various other deposit fees of $892 thousand, or 38.5%. Capital market fees for the current quarter increased slightly to $5.0 million, while consumer brokerage services revenue decreased by $304 thousand, or 10.6%, due to declines in life insurance revenue. Loan fees and sales revenue was down $369 thousand, or 17.8%, from the same period last year mainly due to a decline in gains on student loan sales and lower mortgage banking revenue, partly offset by higher commercial loan commitment fees. Other non-interest income for the current quarter increased $2.5 million over the same quarter last year and included higher tax credit sales income and lease-related fees.

Non-interest income for the six months ended June 30, 2012 was $195.4 million compared to $197.3 million in the first six months of 2011, resulting in a decrease of $1.9 million, or .9%. Bank card fees decreased $5.6 million, or 7.1%, as a result of a $12.9 million, or 43.0%, decrease in debit card interchange fees, partly offset by growth in corporate card and merchant fees of 21.2% and 10.2%, respectively. Trust fee income increased $2.5 million, or 5.7%, as a result of growth in personal and institutional trust fees. Deposit account fees decreased $778 thousand, or 1.9%, mainly due to a decline in overdraft and return item fees of $2.5 million, while various other deposit fees increased $1.7 million. Capital market fees increased $2.2 million, or 22.5%, as a result of growth in sales of mainly fixed income securities to correspondent banks and other commercial customers. Consumer brokerage services revenue decreased by $441 thousand, or 8.0%, mainly due to a decline in variable annuity commissions and life insurance income, partly offset by growth in advisory fees. Loan fees and sales decreased $632 thousand, or 16.2%, due to a decline in mortgage banking revenue. Other non-interest income increased by $886 thousand, or 5.9%, mainly due to higher tax credit sales income and lease-related fees, partly offset by lower fees on interest rate swap sales.

Wealth segment pre-tax profitability for the six months ended June 30, 2012 increased $2.0 million, or 8.1%, over the same period in the previous year. Net interest income increased $228 thousand, or 1.2%, and was impacted by a $895 thousand decline in deposit interest expense, offset by a $369 thousand decrease in loan interest income. Non-interest income increased $2.0 million, or 3.8%, over the prior year due to higher trust fees. Non-interest expense decreased $375 thousand, or .8%, mainly due to lower fraud losses and legal and professional expenses, partly offset by higher salary costs.

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