There are no safe havens in the stock market. Every stock carries risk. But some less than others. This column features stocks that have shown one or more of the following characteristics: less volatility, better earnings, larger market caps, safe and increasing dividends. In these times of turmoil, our goal is to show readers better opportunities for investing with fewer risks.

March 22, 2010 - Commerce Bancshares Inc. (CBSH-NASDAQ) operates as the bank holding company for Commerce Bank, N.A. which provides various general banking services to individuals and businesses. It operates in three segments: Consumer, Commercial, and Wealth.

The Commercial segment provides various corporate lending, merchant and commercial bank card products, leasing, and international services, as well as business and government deposit and cash management services.

The Wealth segment offers traditional trust and estate tax planning services, brokerage services, and advisory and discretionary investment portfolio management services to personal and institutional corporate customers. This segment also manages a family of proprietary mutual funds, which are available for sale to trust and general retail customers.

As of December 31, 2009, the company served customers through a network of branches and ATM machines, online banking, and a central contact center from approximately 370 locations in Missouri, Kansas, Illinois, Oklahoma, and Colorado. Commerce Bancshares, Inc. was founded in 1966 and is headquartered in Kansas City, Missouri.

The big difference for CBSH: its problem assets were less of a problem than most of its peer's assets. Also, its loan loss reserve more than covered any losses actualized from sales of problem properties and past due credits which were lower. Since the loan loss reserve was more than adequate, the bank didn't have to increase its loan loss reserve. In fact, it decreased its contribution to loan loss reserves.

Going forward, the challenge will be revenue growth. The economy is still weak, most particularly real estate: single family, multi-family and commercial with some analysts seeing large problems in the commercial loan sector as small businesses don't survive and their retail space sits empty.

On the other side of the balance sheet are the cost of deposits. They're already very low with interest rates most likely to head higher over the next year as the economy rebounds, and the Fed tightens. So expect to see costs increase for funding. Also, there are new rules on overdraft fees that will lower revenues.

But earnings can still grow as the bank keeps a tight lid on expenses, continues lower credit losses and has higher commercial fee income from new markets. By 2011, analysts see things improving for the whole economy which should make CBSH's loan portfolio perform even better, decreasing the loan loss reserve requirement and improving commercial business.

Earnings have been down for the last 3 years. In 2007, they were $2.56, then $2.36, followed by $2.07. This year, 7 analysts have a consensus estimate of $2.28, and next year, they see $2.92. Clearly, at least as the analysts see it, the worst is over for CBSH.

More numbers: Trailing P/E is 19.88 while the Forward P/E is 14.13. Price to sales is 3.95. Price to book is 1.81. Book value is $22.70. Operating margin was a notable 30.90% for the last 12 months while Profit Margin was 19.56%. Return on equity was 9.77%. Return on assets was .95%. Beta was a very low .28. There are 83.01 million shares outstanding. Float is 75.70 million. Insiders own 9.89%. Institutions own 52%. There is an annual dividend of 94 cents for a yield of 2.30%.

Conservative investors who have avoided the financial sector may find it worthwhile to dig deeper into CBSH's numbers. There's nothing exciting here. That's what makes it attractive. This is a regional bank that continues to make good loans. When the economy improves, earnings should rebound nicely. Also, with so many troubled banks available for sale, look for CBSH to add on a few more banks in its markets at favorable prices.

- Company Web site: www.commercbank.com

- Ted Allrich