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Commerce Bancshares, Inc. (CBSH - Free Report) reported first-quarter 2017 earnings of 68 cents per share, surpassing the Zacks Consensus Estimate of 65 cents. Moreover, the figure reflects a 9.7% rise from the year-ago quarter.
Better-than-expected results were primarily driven by an increase in total revenue based on higher net interest income. The company witnessed growth in loans but deposits were relatively low. Rising expenses and an increase in provisions were the undermining factors. Shares of Commerce Bancshares lost 2.4% following its earnings release.
Net income available to the common shareholders in the reported quarter was $69.3 million, up 9.7% year over year.
Revenues Improve but Costs Escalate
Total revenue for the quarter was $295.3 million, an increase of 4.4% year over year. However, the figure marginally lagged the Zacks Consensus Estimate of $296 million.
Quarterly net interest income increased 8.9% year over year to $178.3 million.
Non-interest income was $117.1 million, down 1.6% year over year. The decrease was mainly due to lower profits on branch property sales along with lower bank card and swap fee income.
Non-interest expenses rose 5.3% year over year to $186.8 million triggered by a rise in salaries and employee benefits costs, bank card expense and professional fees. However, the rise was partly offset by lower supplies, communication and marketing costs. Non-interest expenses included a contribution expense of $2.3 million related to the donation of appreciated securities.
Efficiency ratio for the quarter increased to 63.14% from 62.62% in the prior-year quarter. A rise in efficiency ratio indicates lower profitability.
Strong Balance Sheet
As of Mar 31, 2017, total loans were $13.57 billion, up 1.2% sequentially. Total deposits, as of the same date, were $21.09 billion, down marginally from the prior month.
However, total stockholder’s equity was $2.56 billion as of Mar 31, 2017, an increase of 2.5% from the previous month.
Credit Quality: A Mixed Bag
Allowance for loan losses, as a percent of total loans, came in at 1.16%, down 4 basis points (bps) year over year. Net loan charge-offs to average loans ratio (annualized) remained stable year over year at 0.28%.
However, provision for loan losses increased 17.9% year over year to $11.1 million.
Improving Profitability & Strong Capital Position
As of Mar 31, 2017, Tier I leverage ratio was 9.56%, up 45 bps year over year. Moreover, tangible common equity to tangible assets ratio grew 19 bps year over year to 9.03%.
Further, the company’s return on average assets improved 8 bps year over year to 1.15%, and return on average common equity increased 54 bps year over year to 11.74%.
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 and strong loan and deposit balances remain impressive.
However, its significant exposure to residential mortgage and commercial real estate loans can pose a threat in the near term. Also, elevated expenses remain a concern.
Commerce Bancshares, Inc. Price, Consensus and EPS Surprise
Among other banks, First Financial Bancorp. (FFBC - Free Report) is scheduled to announce results on Apr 20. Both First Midwest Bancorp, Inc. and Old National Bancorp (ONB - Free Report) will report on Apr 25.
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Just released, today's 220 Zacks Rank #5 Strong Sells demand urgent attention. If any are lurking in your portfolio or Watch List, they should be removed immediately. These are sinister companies because many appear to be sound investments. However, from 1988 through 2016, stocks from our Strong Sell list have actually performed 6X worse than the S&P 500. See today's Zacks "Strong Sells" absolutely free >>.
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Commerce Bancshares (CBSH) Q1 Earnings Beat, Costs Rise
Commerce Bancshares, Inc. (CBSH - Free Report) reported first-quarter 2017 earnings of 68 cents per share, surpassing the Zacks Consensus Estimate of 65 cents. Moreover, the figure reflects a 9.7% rise from the year-ago quarter.
Better-than-expected results were primarily driven by an increase in total revenue based on higher net interest income. The company witnessed growth in loans but deposits were relatively low. Rising expenses and an increase in provisions were the undermining factors. Shares of Commerce Bancshares lost 2.4% following its earnings release.
Net income available to the common shareholders in the reported quarter was $69.3 million, up 9.7% year over year.
Revenues Improve but Costs Escalate
Total revenue for the quarter was $295.3 million, an increase of 4.4% year over year. However, the figure marginally lagged the Zacks Consensus Estimate of $296 million.
Quarterly net interest income increased 8.9% year over year to $178.3 million.
Non-interest income was $117.1 million, down 1.6% year over year. The decrease was mainly due to lower profits on branch property sales along with lower bank card and swap fee income.
Non-interest expenses rose 5.3% year over year to $186.8 million triggered by a rise in salaries and employee benefits costs, bank card expense and professional fees. However, the rise was partly offset by lower supplies, communication and marketing costs. Non-interest expenses included a contribution expense of $2.3 million related to the donation of appreciated securities.
Efficiency ratio for the quarter increased to 63.14% from 62.62% in the prior-year quarter. A rise in efficiency ratio indicates lower profitability.
Strong Balance Sheet
As of Mar 31, 2017, total loans were $13.57 billion, up 1.2% sequentially. Total deposits, as of the same date, were $21.09 billion, down marginally from the prior month.
However, total stockholder’s equity was $2.56 billion as of Mar 31, 2017, an increase of 2.5% from the previous month.
Credit Quality: A Mixed Bag
Allowance for loan losses, as a percent of total loans, came in at 1.16%, down 4 basis points (bps) year over year. Net loan charge-offs to average loans ratio (annualized) remained stable year over year at 0.28%.
However, provision for loan losses increased 17.9% year over year to $11.1 million.
Improving Profitability & Strong Capital Position
As of Mar 31, 2017, Tier I leverage ratio was 9.56%, up 45 bps year over year. Moreover, tangible common equity to tangible assets ratio grew 19 bps year over year to 9.03%.
Further, the company’s return on average assets improved 8 bps year over year to 1.15%, and return on average common equity increased 54 bps year over year to 11.74%.
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 and strong loan and deposit balances remain impressive.
However, its significant exposure to residential mortgage and commercial real estate loans can pose a threat 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 #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Among other banks, First Financial Bancorp. (FFBC - Free Report) is scheduled to announce results on Apr 20. Both First Midwest Bancorp, Inc. and Old National Bancorp (ONB - Free Report) will report on Apr 25.
Sell These Stocks Now
Just released, today's 220 Zacks Rank #5 Strong Sells demand urgent attention. If any are lurking in your portfolio or Watch List, they should be removed immediately. These are sinister companies because many appear to be sound investments. However, from 1988 through 2016, stocks from our Strong Sell list have actually performed 6X worse than the S&P 500. See today's Zacks "Strong Sells" absolutely free >>.