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Commerce Bancshares (CBSH) Q4 Earnings Beat, Provisions Up

Commerce Bancshares Inc.’s CBSH fourth-quarter 2022 earnings per share of $1.04 surpassed the Zacks Consensus Estimate of $1.02. The bottom line increased 15.6% from the prior-year quarter.

Results have been primarily benefited from an improvement in net interest income (NII), a slight rise in loan balance and higher rates. However, an increase in non-interest expenses and provisions and fall in non-interest income were the major headwinds.
Net income attributable to common shareholders was $131.6 million, up 14.6% year over year.

In 2022, earnings of $3.85 per share was in line with the Zacks Consensus Estimate, however declined 6.3% year over year. Net income was $488.4 million, down 8%.

Revenues & Expenses Rise

Total quarterly revenues were $391.5 million, up 10.2% year over year. The top line misses the Zacks Consensus Estimate of $396.6 million.

In 2022, net revenues increased 6.7% to $1.49 billion. The top line lagged the Zacks Consensus Estimate of $1.50 billion.

NII was $254.6 million, up 22.6% from the prior-year quarter. This increase was driven by higher interest earned on loans, partly offset by lower interest earned on investment securities and rise in interest expense. Net yield on interest-earning assets expanded 75 basis points (bps) to 3.18%.

Non-interest income was $136.8 million, decreasing 7.4%. The downswing was a result of lower trust fees, deposit account fees and loan fees partly offset by higher sweep fees.

Non-interest expenses increased 6.5% to $216.7 million. The rise was due to higher salaries and employee benefit expenses, data processing and software expense, and travel and entertainment expense.

Efficiency ratio decreased to 55.26% from 57.29% in the year-ago quarter. A decrease in efficiency ratio indicates improvement in profitability.

As of Dec 31, 2022, total loans were $16.3 billion, up 2.5% from the prior quarter. Total deposits as of the same date were $26.2 billion, down 4.7%. Total stockholders’ equity was $2.5 billion, down 4.8% sequentially.

Credit Quality – Mixed Bag

Provision for credit losses of $15.5 million against a benefit of $7.1 million in the prior-year quarter.

The ratio of annualized net loan charge-offs to total average loans was 0.14%, down from 0.11% in the year-earlier quarter.

Non-accrual loans to total loans were 0.05%, down 1 bps year over year. Allowance for credit losses on loans to total loans was 0.92%, declining 7 bps.

Capital & Profitability Ratios Solid

As of Dec 31, 2022, Tier I leverage ratio was 10.34%, up from 9.13% in the year-ago quarter. Tangible common equity to tangible assets ratio declined to 7.32% from the prior-year quarter’s 9.01%.

At the end of the fourth quarter 2022, return on total average assets was 1.65%, up from the year-ago period’s 1.28%. Return on average common equity was 21.88%, up from 13.11% in the prior-year quarter.

Share Repurchase Update

During the reported quarter, Commerce Bancshares repurchased 332,178 shares at an average price of $70.15 per share.

Our Take

Commerce Bancshares’ revenues are likely to continue benefiting from a rise in loan demand, higher interest rates and efforts to strengthen fee income sources. However, rising expenses and provisions keep affecting its financials.

Commerce Bancshares, Inc. Price, Consensus and EPS Surprise

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 #3 (Hold). 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 fourth-quarter and full-year 2022 results on Jan 23.

Over the past 30 days, the Zacks Consensus Estimate for Zions Bancorporation’s quarterly earnings has declined 1.2% to $1.66. This implies a 23.9% increase from the prior-year quarter.

East West Bancorp, Inc. EWBC is slated to report fourth-quarter and full-year 2022 results on Jan 26.

Over the past 30 days, the Zacks Consensus Estimate for East West Bancorp’s quarterly earnings has increased marginally to $2.22. This indicates a 46.1% increase from the prior-year quarter.

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