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On Jun 3, 2013, we reiterated our long-term recommendation on Commerce Bancshares, Inc. (CBSH - Analyst Report) at Neutral. This was based on the company’s sturdy capital base and solid liquidity position, despite its first-quarter earnings marginally missing the Zacks Consensus Estimate.

Why Neutral?

Commerce Bancshares has expanded through periodic acquisitions driven by a stable balance sheet position. Further, the company is an attractive choice for yield-seeking investors. The company has an effective share repurchase program and a consistent dividend payment policy. Moreover, it is conveniently poised for growth, given a rise in deposits and stable loan to deposit ratio.

Commerce Bancshares’ earnings of 67 cents per share were a penny below the Zacks Consensus Estimate. The lower-than-expected results were mainly due to a fall in revenues, partly offset by reduced operating expenses.  

Following the first-quarter results, the Zacks Consensus Estimate for 2013 fell by a cent to $2.84 per share over the last 60 days. For 2014, the Zacks Consensus Estimate dipped 1.0% to $2.91 per share, over the same time-frame. Hence, Commerce Bancshares currently carries a Zacks Rank #3 (Hold).

Additionally, net interest income will likely be adversely affected in the near to mid-term due to a decrease in average loans coupled with a low interest rate environment. Further, higher operating expenses remain a major concern for Commerce Bancshares.

Other Banks Worth Considering

Better performing Midwest banks include Enterprise Financial Services Corp. (EFSC - Snapshot Report),  First Interstate Bancsystem Inc. (FIBK - Snapshot Report) and Old Second Bancorp Inc. (OSBC - Snapshot Report), all of which carry a Zacks Rank #1 (Strong Buy).

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