Commerce Bancshares 3Q net income down 53%

Commerce Bancshares Inc. per-share earnings fell 53.2 percent in the third quarter, largely due to the bank's decision to purchase $530 million in illiquid auction-rate securities from its customers, Commerce said today.

The Kansas City-based bank this morning reported third-quarter earnings of 36 cents per share, compared to 77 cents per share in the same quarter last year. Net income was $26.5 million, down 52.6 percent from $55.9 million posted a year ago.

"During the quarter, we elected to purchase, from our customers, auction-rate securities totaling $530 million," Commerce Chairman and CEO David W. Kemper said in a news release. "Due to the temporary illiquid nature of these securities, under fair value accounting rules, we recorded a noncash loss of $33 million. Excluding this item, noninterest expense in the current quarter remained well controlled and was up only 1 percent compared to the prior quarter."

Commerce also elected to increase its allowance for loan losses by $10.8 million for the quarter. That raised the allowance to 1.42 percent from 1.31 percent of average outstanding loans.

For the year to date, earnings per share are $2.02, down from $2.22 per share for the first nine months of 2007. Year-to-date net income is $146.6 million, compared to $163 million during the same period last year. Year-to-date return on average assets is 1.2 percent, and the return on average equity is 12.3 percent.

Total assets as of Sept. 30 were $17 billion, total loans were $11.4 billion and total deposits were $12.3 billion.

Commerce shares (Nasdaq: CBSH) closed Tuesday at $46.07 and were trading down at $45.66 as of 10 a.m. The 52-week range is $36.50 to $55.50.