Commerce Bancshares Inc. in Kansas City, Mo., said Thursday that its third-quarter net income rose 8.3% from a year earlier, to $55.9 million, showing signs of improving credit quality.

The $18.8 billion-asset company attributed the improved earnings to a lower provision for loan losses and a decline in problem assets.

Commerce reported that total nonperforming assets fell by 21% year over year in the three months and 1% compared with the second quarter, to $102.1 million.

The company also reduced its provision for loan losses by 1.5% from the second quarter and by 38% from a year earlier, to $21.8 million.

However, Commerce's chairman and chief executive, David W. Kemper, said in a press release that record-low interest rates, a flat short-term yield curve and soft loan demand continued to put pressure on the company's net interest income.

Net interest income declined 2.5% in the quarter, to $159.4 million.

Yet Kemper said that "continuing strong revenues in debit and credit card products helped to offset lower consumer deposit fees resulting from new regulations on overdraft charges implemented on July 1."

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