Commerce Bancshares (CBSH) Up 3.1% as Q1 Earnings Top Estimates

Shares of Commerce Bancshares Inc. CBSH gained 3.1% in response to better-than-expected first-quarter 2022 results. Earnings of 97 cents per share easily surpassed the Zacks Consensus Estimate of 89 cents. The bottom line, however, declined 8.5% from the prior-year quarter.

Results benefited from an improvement in net interest income, a slight rise in loan balance and provision benefit. However, an increase in non-interest expenses and lower non-interest income were the major headwinds for CBSH.

Net income attributable to common shareholders was $118.2 million, down 9.8% year over year.

Revenues & Expenses Rise

Total revenues were $340.6 million, up marginally year over year. The top line beat the Zacks Consensus Estimate of $340.2 million.

Net interest income was $208.8 million, up 1.5% from the prior-year quarter. Net yield on interest-earning assets contracted 26 basis points (bps) to 2.45%.

Non-interest income was $131.8 million, falling 3.1%. The decline was mainly due to lower capital market fees and loan fees and sales.

Non-interest expenses increased 6.8% to $205.6 million. The rise was due to an increase in all cost components.

Efficiency ratio increased to 60.29% from 56.37% in the year-ago quarter. A rise in efficiency ratio indicates deterioration in profitability.

As of Mar 31, 2022, total loans were $15.5 billion, up 1.9% from the prior quarter. Total deposits as of the same date were $29.3 billion, down 1.7%.

Credit Quality Improves

Provision for credit losses was a benefit of $9.9 million, up from $6.2 million in the prior-year quarter. The ratio of annualized net loan charge-offs to total average loans was 0.12%, down from 0.25% recorded in the year-earlier quarter.

Non-accrual loans to total loans were 0.05%, down 9 bps year over year. Allowance for credit losses on loans to total loans was 0.87%, declining 35 bps.

Capital & Profitability Ratios Deteriorate

As of Mar 31, 2022, Tier I leverage ratio was 9.07%, down from 9.38% recorded in the year-ago quarter. Tangible common equity to tangible assets ratio declined to 8.09% from the prior-year quarter’s 9.57%.

At the end of the first quarter, return on total average assets was 1.33%, down from the year-ago period’s 1.63%. Return on average common equity was 14.41%, down from 15.69%.

Share Repurchase Update

During the reported quarter, Commerce Bancshares repurchased 795,387 shares at an average price of $70.22.

Our Take

Commerce Bancshares’ revenues are likely to continue benefiting from a rise in demand for loans and efforts to strengthen fee income sources. However, rising expenses keep hurting its financials.

Commerce Bancshares, Inc. Price, Consensus and EPS Surprise

Commerce Bancshares, Inc. Price, Consensus and EPS Surprise

Commerce Bancshares, Inc. price-consensus-eps-surprise-chart | Commerce Bancshares, Inc. Quote

Currently, Commerce Bancshares carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Earnings Release Schedule of Other Banks

Zions Bancorporation ZION is scheduled to release first-quarter 2022 results on Apr 25.

Over the past 30 days, the Zacks Consensus Estimate for Zions Bancorporation’s quarterly earnings has moved 1.8% upward to $1.15. This implies a 39.5% decrease from the prior-year quarter.

Prosperity Bancshares PB is scheduled to release quarterly numbers on Apr 27.

Over the past 30 days, the Zacks Consensus Estimate for Prosperity Bancshares’ quarterly earnings has moved 1% lower to $1.29. This suggests a 10.4% decrease from the prior-year quarter.

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