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Commerce Bancshares, Inc. (CBSH - Free Report) reported fourth-quarter 2016 earnings of 68 cents per share, surpassing the Zacks Consensus Estimate of 67 cents. Moreover, the figure reflects a 13.3% rise from the year-ago quarter.
Better-than-expected results were primarily driven by an increase in both net interest income and non-interest income. Moreover, the company witnessed solid growth in both loans and deposits. However, rising expenses and an increase in provisions were the undermining factors, which probably led to the 1.4% decline in shares of the company following its earnings release.
Net income available to the common shareholders in the reported quarter was $69.3 million, up 12.8% year over year.
The company reported full-year earnings per share of $2.61, up 7.4% year over year. However, the figure lagged the Zacks Consensus Estimate of $2.65. Also, net income available to common shareholders for 2016 came in at $266.4 million, reflecting an increase of 4.6% from the prior year.
Revenue Growth Offsets Escalating Expenses
Total revenue for the quarter was $292.7 million, an increase of 5.1% year over year. However, the figure lagged the Zacks Consensus Estimate of $297.4 million.
Also, revenues for 2016 came in at $1.15 billion, up 6.6% year over year. However, the figure marginally lagged the Zacks Consensus Estimate of $1.17 billion.
Quarterly net interest income increased 6.6% year over year to $173.2 million. The rise reflected higher interest income, partially offset by a growing interest expense.
Non-interest income summed $119.5 million, up 3% year over year. The increase was driven by an improvement in all the components except bank card transaction fees and capital market fees.
Non-interest expenses rose 3.1% year over year to $181.3 million triggered by a rise in salaries and employee benefits costs, net occupancy expenses, data processing and software costs and deposit insurance.
Efficiency ratio for the quarter declined to 61.82% from 62.97% in the prior-year quarter. A fall in efficiency ratio indicates higher profitability.
Strong Balance Sheet
As of Dec 31, 2016, total loans summed $13.41 billion, up 1.4% sequentially. Also total deposits as on the same date came in at $21.10 billion, up 4.6% from the prior month.
However, total stockholder’s equity was $2.50 billion as of Dec 31, 2016, a fall of 2.3% from the previous month.
Credit Quality: A Mixed Bag
Allowance for loan losses, as a percent of total loans, for the quarter was 1.16%, down 6 basis points (bps) year over year. Further, net loan charge-offs to average loans ratio (annualized) declined 3 bps year over year to 0.27%.
However, provision for loan losses increased 13.2% year over year to $10.4 million.
Improving Profitability & Strong Capital Position
As of Dec 31, 2016, Tier I leverage ratio was 9.55%, rising 32 bps year over year. Moreover, tangible common equity to tangible assets ratio grew 18 bps year over year to 8.66%.
Further, the company’s return on average assets improved 9 bps year over year to 1.14%, and return on average common equity came up 60 bps year over year to 11.48%.
Our Take
Commerce Bancshares is well positioned to capitalize on inorganic growth opportunities, given a strong capital base and healthy liquidity level. Also, the company’s persistent fee income growth as well as strong loan and deposit balances remain impressive.
However, its significant exposure to residential mortgage and commercial real estate loans can pose a problem in the near term. Also, elevated expenses remain a concern.
Commerce Bancshares Inc. Price, Consensus and EPS Surprise
Among other banks, Capital One Financial Corporation (COF - Free Report) is scheduled to announce its results on Jan 24, Huntington Bancshares Incorporated (HBAN - Free Report) on Jan 25, and SVB Financial Group will announce its numbers on Jan 26.
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Commerce Bancshares (CBSH) Q4 Earnings Beat Estimates
Commerce Bancshares, Inc. (CBSH - Free Report) reported fourth-quarter 2016 earnings of 68 cents per share, surpassing the Zacks Consensus Estimate of 67 cents. Moreover, the figure reflects a 13.3% rise from the year-ago quarter.
Better-than-expected results were primarily driven by an increase in both net interest income and non-interest income. Moreover, the company witnessed solid growth in both loans and deposits. However, rising expenses and an increase in provisions were the undermining factors, which probably led to the 1.4% decline in shares of the company following its earnings release.
Net income available to the common shareholders in the reported quarter was $69.3 million, up 12.8% year over year.
The company reported full-year earnings per share of $2.61, up 7.4% year over year. However, the figure lagged the Zacks Consensus Estimate of $2.65. Also, net income available to common shareholders for 2016 came in at $266.4 million, reflecting an increase of 4.6% from the prior year.
Revenue Growth Offsets Escalating Expenses
Total revenue for the quarter was $292.7 million, an increase of 5.1% year over year. However, the figure lagged the Zacks Consensus Estimate of $297.4 million.
Also, revenues for 2016 came in at $1.15 billion, up 6.6% year over year. However, the figure marginally lagged the Zacks Consensus Estimate of $1.17 billion.
Quarterly net interest income increased 6.6% year over year to $173.2 million. The rise reflected higher interest income, partially offset by a growing interest expense.
Non-interest income summed $119.5 million, up 3% year over year. The increase was driven by an improvement in all the components except bank card transaction fees and capital market fees.
Non-interest expenses rose 3.1% year over year to $181.3 million triggered by a rise in salaries and employee benefits costs, net occupancy expenses, data processing and software costs and deposit insurance.
Efficiency ratio for the quarter declined to 61.82% from 62.97% in the prior-year quarter. A fall in efficiency ratio indicates higher profitability.
Strong Balance Sheet
As of Dec 31, 2016, total loans summed $13.41 billion, up 1.4% sequentially. Also total deposits as on the same date came in at $21.10 billion, up 4.6% from the prior month.
However, total stockholder’s equity was $2.50 billion as of Dec 31, 2016, a fall of 2.3% from the previous month.
Credit Quality: A Mixed Bag
Allowance for loan losses, as a percent of total loans, for the quarter was 1.16%, down 6 basis points (bps) year over year. Further, net loan charge-offs to average loans ratio (annualized) declined 3 bps year over year to 0.27%.
However, provision for loan losses increased 13.2% year over year to $10.4 million.
Improving Profitability & Strong Capital Position
As of Dec 31, 2016, Tier I leverage ratio was 9.55%, rising 32 bps year over year. Moreover, tangible common equity to tangible assets ratio grew 18 bps year over year to 8.66%.
Further, the company’s return on average assets improved 9 bps year over year to 1.14%, and return on average common equity came up 60 bps year over year to 11.48%.
Our Take
Commerce Bancshares is well positioned to capitalize on inorganic growth opportunities, given a strong capital base and healthy liquidity level. Also, the company’s persistent fee income growth as well as strong loan and deposit balances remain impressive.
However, its significant exposure to residential mortgage and commercial real estate loans can pose a problem in the near term. Also, elevated expenses remain a concern.
Commerce Bancshares Inc. Price, Consensus and EPS Surprise
Commerce Bancshares Inc. Price, Consensus and EPS Surprise | 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.
Among other banks, Capital One Financial Corporation (COF - Free Report) is scheduled to announce its results on Jan 24, Huntington Bancshares Incorporated (HBAN - Free Report) on Jan 25, and SVB Financial Group will announce its numbers on Jan 26.
Zacks’ Best Private Investment Ideas
In addition to the recommendations that are available to the public on our website, how would you like to follow all Zacks' private buys and sells in real time?
Our experts cover all kinds of trades… from value to momentum . . . from stocks under $10 to ETF and option moves . . . from stocks that corporate insiders are buying up to companies that are about to report positive earnings surprises. You can even look inside exclusive portfolios that are normally closed to new investors. Starting today, for the next month, you can have unrestricted access. Click here for Zacks' private trades >>