Fee income drives earnings growth at Commerce Bancshares

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Profits at Commerce Bancshares in Kansas City, Mo., rose by double digits in the first quarter as fee income expanded, yields on loans widened and funding costs held steady.

Net income at the $24.6 billion-asset company increased 41% to $101 million from the first quarter in 2017. Earnings per share totaled 92 cents, 13 cents higher than the mean estimate of analysts polled by FactSet Research Systems.

“We continued to see strong growth in top line revenue this quarter driven by a favorable interest rate environment and growth in our fee-based businesses,” Chairman and CEO David Kemper said in a press release.

Net interest income increased 8% to $192.9 million, as the yields on the bank’s loans grew while its funding costs remained low. The net interest margin expanded to 3.37% from 3.14% a year earlier.

Total loans increased 2.9% to $13.9 billion. Total deposits decreased 2.8% to $20.5 billion.

Noninterest income rose 9% to $119.7 million. Bank card and trust business revenue rose 15.9% and 12.6%, and deposit fees in Commerce's payments business grew, Kemper said.

Net loan chargeoffs totaled $10.4 million, compared with $9.2 million in last year's first quarter. The company charged off $10.6 million worth of loans in its consumer banking portfolio, while it recorded $255,000 worth of recoveries in its commercial portfolio. Nonperforming assets declined by 23% to $11.6 million, or 0.08% of total loans.

Noninterest expenses increased 1.6% to $182.3 million year over year.

Earlier this month, Commerce announced that Kemper, its CEO since 1988, will step down from the post on July 31 and be replaced by his son, John, the company’s president and chief operating officer. David Kemper will remain chairman.

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