Quiet Cash From Commerce Bancshares

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This has been a rough year for many regional bank stocks, but Commerce Bancshares (Nasdaq: CBSH) is nevertheless still among those whose shares are up for the last year. This is a decidedly non-flashy company based in Missouri with a pretty good track record of getting the job done and doing right by its shareholders.

Third-quarter results would seem to reflect that while the going has gotten tougher, this bank is still going. While reported net earnings were flat with the year-ago level, pre-tax earnings were up 8% and reported earnings per share were up 7% as Commerce Bancshares continues to buy back stock and reduce the number of shares outstanding.

While net interest income was up less than 2%, non-interest income rose 10% in the quarter. Expenses were well-controlled yet again, and the efficiency ratio improved to 57.6% (from 59.2%). Although the net interest margin did slip a bit from the second quarter, it was still up in a year-over-year comparison (3.86% vs. 3.82%) as higher loan rates and average balances stayed ahead of rising deposit costs. Credit quality worsened slightly in the quarter (as measured by charge-offs), but the absolute level is still quite good on a historical basis.

With decent strength in construction and business lending, coupled with some growth in consumer lending, average loan balances were up more than 6% on a year-over-year basis. Deposits, though, were basically flat, so Commerce Bancshares' loan-to-deposit ratio climbed in the period. This doesn't really bother me because liquidity looks fine and the company can continue to profit by upping this ratio (within reason, of course).

Shares of Commerce Bancshares actually trade at a slight discount to its supposed peer group, even though it boasts a better return on equity and assets and a superior historical growth rate. That qualifies as interesting in my book. There are hundreds of bank investment options out there, ranging from good regional outfits like BB&T (NYSE: BBT) to national outfits like Wachovia (NYSE: WB) and foreign players like Lloyds (NYSE: LYG) or ABN Amro (NYSE: ABN). Commerce Bancshares isn't flashy and doesn't pay a great dividend, but it's hard to argue with performance, and this company certainly has that.

For more Takes to bank on:

• M&T: One to Bank On
• A Closer Look at Bank Stocks
• Quiet Performance at Commerce Bancshares

Lloyds is a Motley Fool Inside Value recommendation.

Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).