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Commerce Bancshares Q1 2011 Earnings Review
Commerce Bancshares (Nasdaq:CBSH) reported a strong increase in earnings over the same quarter in 2010, as the bank was helped by a lower provision for loan losses. The bank also cited cost cutting for the improvement in earnings.
TUTORIAL: Stock Basics
Company Profile
Commerce Bancshares is a large regional bank that operates in various states located mostly in the Midwest. The bank reported total assets of $19 billion and total deposits of $15.5 billion as of March 31, 2011.
Financial Results
Commerce Bancshares reported net income of $60.5 million in the quarter ending March 31, 2011, up 38% compared to $44.2 million in the first quarter of 2010. Earnings per diluted share came in 69 cents per share in the most recent quarter compared to 50 cents per diluted share in the comparable quarter of 2010. Earnings were down on a sequential basis from the $61.9 million or 70 cents per diluted share reported in the quarter ending December 31, 2010.
The quarter's results got a boost from an $18.5 million decline in the provision for loan losses relative to the level recorded by the bank in the first quarter of 2010. The bank said the decline was due to the "improving credit environment" that it experienced during the quarter.
Other banks reporting significant declines in loan loss provisions include Webster Financial Corp (NYSE:WBS), which recorded $10 million in the first quarter of 2011 compared to $43 million in the same quarter of 2010.
Loan Growth
Commerce Bancshares reported very little loan growth in the first quarter of 2011, as average loans increased by only 0.6% compared to the previous quarter. The decline was more severe on a year over year basis, with average loans falling by 9.2%. The management of Commerce Bancshares cited continued "soft loan demand" for the declines.
Deposits
Commerce Bancshares did better on deposit growth in the quarter and reported an increase in deposits of $593 million, 4.1% above the previous quarter. Commerce Bancshares said that two thirds of this growth came from business accounts, and 29% of total deposits for the bank were non interest bearing.
Asset Quality
Commerce Bancshares has maintained decent asset quality all through the recession and financial crisis, and this quarter's results were no exception. The bank reported nonperforming assets to total assets ratio of 0.54%, up slightly from 0.53% last quarter, but a decline from the first quarter of 2010.
Other banks have higher levels of nonperforming assets. Bank of the Ozarks (Nasdaq:OZRK) reported this ratio at 1.62%, as of March 31, 2011. Park National (NYSE:PRK) reported 4.48% of its assets as nonperforming in the most recent quarter.
Commerce Bancshares experienced an increase in nonperforming assets at the beginning of the recession like many banks, but has seen a general decline from the peak reached in 2009.
Stock Buyback
Commerce Bancshares also continued its stock repurchase program and reported the purchase of 101,625 shares at an average cost of $42.43 per share in the first quarter of 2011.
Bottom Line
Commerce Bancshares reported higher earnings in the first quarter of 2011, as the bank benefited from lower loan loss provisions due to an improved credit environment and better expense control. (For related reading, also take a look at Analyzing A Bank's Financial Statements.)
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TUTORIAL: Stock Basics
Company Profile
Commerce Bancshares is a large regional bank that operates in various states located mostly in the Midwest. The bank reported total assets of $19 billion and total deposits of $15.5 billion as of March 31, 2011.
Financial Results
Commerce Bancshares reported net income of $60.5 million in the quarter ending March 31, 2011, up 38% compared to $44.2 million in the first quarter of 2010. Earnings per diluted share came in 69 cents per share in the most recent quarter compared to 50 cents per diluted share in the comparable quarter of 2010. Earnings were down on a sequential basis from the $61.9 million or 70 cents per diluted share reported in the quarter ending December 31, 2010.
The quarter's results got a boost from an $18.5 million decline in the provision for loan losses relative to the level recorded by the bank in the first quarter of 2010. The bank said the decline was due to the "improving credit environment" that it experienced during the quarter.
Other banks reporting significant declines in loan loss provisions include Webster Financial Corp (NYSE:WBS), which recorded $10 million in the first quarter of 2011 compared to $43 million in the same quarter of 2010.
Loan Growth
Commerce Bancshares reported very little loan growth in the first quarter of 2011, as average loans increased by only 0.6% compared to the previous quarter. The decline was more severe on a year over year basis, with average loans falling by 9.2%. The management of Commerce Bancshares cited continued "soft loan demand" for the declines.
Commerce Bancshares did better on deposit growth in the quarter and reported an increase in deposits of $593 million, 4.1% above the previous quarter. Commerce Bancshares said that two thirds of this growth came from business accounts, and 29% of total deposits for the bank were non interest bearing.
Asset Quality
Commerce Bancshares has maintained decent asset quality all through the recession and financial crisis, and this quarter's results were no exception. The bank reported nonperforming assets to total assets ratio of 0.54%, up slightly from 0.53% last quarter, but a decline from the first quarter of 2010.
Other banks have higher levels of nonperforming assets. Bank of the Ozarks (Nasdaq:OZRK) reported this ratio at 1.62%, as of March 31, 2011. Park National (NYSE:PRK) reported 4.48% of its assets as nonperforming in the most recent quarter.
Commerce Bancshares experienced an increase in nonperforming assets at the beginning of the recession like many banks, but has seen a general decline from the peak reached in 2009.
Stock Buyback
Commerce Bancshares also continued its stock repurchase program and reported the purchase of 101,625 shares at an average cost of $42.43 per share in the first quarter of 2011.
Bottom Line
Commerce Bancshares reported higher earnings in the first quarter of 2011, as the bank benefited from lower loan loss provisions due to an improved credit environment and better expense control. (For related reading, also take a look at Analyzing A Bank's Financial Statements.)
Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!
by
Eric Fox
Eric J. Fox, CFA, is a freelance financial writer and has previous experience working in the asset management industry as an equity analyst and portfolio manager on the buy side. His favorite area to write on is the energy sector and he keeps current on the industry by reading Haynesville Shale, Permian Oil and Gas and various other blogs.
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