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Commerce Bancshares (CBSH) Beats on Q3 Earnings, Costs Rise
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Commerce Bancshares, Inc.’s (CBSH - Free Report) third-quarter 2018 earnings per share of $1.03 have surpassed the Zacks Consensus Estimate of 97 cents. Further, the figure reflects an improvement of 53.7% from the year-ago quarter.
Results primarily benefited from improvement in net interest income as well as non-interest income. Moreover, lower provisions supported results to quite an extent. Further, improvement in capital and profitability ratios was another positive for the company. However, elevated expenses hurt results. Probably due to this increase in expenses shares of the company lost 3.7% following the release.
Net income attributable to Commerce Bancshares was $112.6 million, up 51% from the prior-year quarter.
Revenue Growth Offsets Rise in Expenses
Total revenues for the quarter were $331.5 million, reflecting a year-over-year increase of 10.7%. In addition, the reported figure outpaced the Zacks Consensus Estimate of $330.9 million.
Net interest income was $207.8 million, rising 13.8% year over year.
Non-interest income was $123.7 million, up 5.8% year over year. This increase was driven by improvement in almost all components except capital market fees, loan fees and sales, and other income.
Non-interest expenses increased 3.3% year over year to $185.1 million. All expense components except supplies and communication, deposit insurance, and community service costs witnessed a rise.
Efficiency ratio for the quarter under review decreased to 55.73% from 59.73% reported in the year-ago quarter. Fall in efficiency ratio indicates higher profitability.
Loans Improve Marginally, Deposits Fall
As of Sep 30, 2018, total loans were $14.0 billion, up marginally from the prior-quarter level. However, total deposits, as of the same date, were $20.1 billion, down nearly 1% from the last-reported quarter.
Total stockholders’ equity was $2.8 billion as of Sep 30, 2018, reflecting rise of 1.3% from the last-reported quarter.
Credit Quality Improves
Provision for loan losses decreased 6.6% year over year to nearly $10 million in the reported quarter. Additionally, allowance for loan losses, as a percentage of total loans, came in at 1.14%, contracting 1 bps year over year. Further, the ratio of net loan charge-offs to average loans was 0.28%, down from 0.31% in the prior-year quarter.
Capital & Profitability Ratios Show Improvement
As of Sep 30, 2018, Tier I leverage ratio was 11.38%, up from 10.16% recorded in the prior-year quarter. Moreover, tangible common equity to tangible assets ratio grew to 10.10% from 9.72% as of Sep 30, 2017.
At the end of the reported quarter, return on average assets was 1.81%, up from 1.19% witnessed in the year-ago quarter. Return on average common equity was 16.43%, up from 11.35% in the year-ago quarter.
Our Take
Commerce Bancshares remains on track for top-line growth driven by continued rise in loan balances along with higher interest rates. Moreover, the company’s efforts to grow fee income are likely to continue supporting revenues. However, mounting expenses remain a major concern for the company and might hurt profitability. Also, its significant exposure to real estate loans might pose near-term risks.
Commerce Bancshares, Inc. Price, Consensus and EPS Surprise
Among other Midwest banks, Old National Bancorp (ONB - Free Report) is slated to release numbers on Oct 22, while First Midwest Bancorp, Inc. and First Interstate BancSystem, Inc. (FIBK - Free Report) are scheduled to announce results on Oct 23 and Oct 24, respectively.
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Commerce Bancshares (CBSH) Beats on Q3 Earnings, Costs Rise
Commerce Bancshares, Inc.’s (CBSH - Free Report) third-quarter 2018 earnings per share of $1.03 have surpassed the Zacks Consensus Estimate of 97 cents. Further, the figure reflects an improvement of 53.7% from the year-ago quarter.
Results primarily benefited from improvement in net interest income as well as non-interest income. Moreover, lower provisions supported results to quite an extent. Further, improvement in capital and profitability ratios was another positive for the company. However, elevated expenses hurt results. Probably due to this increase in expenses shares of the company lost 3.7% following the release.
Net income attributable to Commerce Bancshares was $112.6 million, up 51% from the prior-year quarter.
Revenue Growth Offsets Rise in Expenses
Total revenues for the quarter were $331.5 million, reflecting a year-over-year increase of 10.7%. In addition, the reported figure outpaced the Zacks Consensus Estimate of $330.9 million.
Net interest income was $207.8 million, rising 13.8% year over year.
Non-interest income was $123.7 million, up 5.8% year over year. This increase was driven by improvement in almost all components except capital market fees, loan fees and sales, and other income.
Non-interest expenses increased 3.3% year over year to $185.1 million. All expense components except supplies and communication, deposit insurance, and community service costs witnessed a rise.
Efficiency ratio for the quarter under review decreased to 55.73% from 59.73% reported in the year-ago quarter. Fall in efficiency ratio indicates higher profitability.
Loans Improve Marginally, Deposits Fall
As of Sep 30, 2018, total loans were $14.0 billion, up marginally from the prior-quarter level. However, total deposits, as of the same date, were $20.1 billion, down nearly 1% from the last-reported quarter.
Total stockholders’ equity was $2.8 billion as of Sep 30, 2018, reflecting rise of 1.3% from the last-reported quarter.
Credit Quality Improves
Provision for loan losses decreased 6.6% year over year to nearly $10 million in the reported quarter. Additionally, allowance for loan losses, as a percentage of total loans, came in at 1.14%, contracting 1 bps year over year. Further, the ratio of net loan charge-offs to average loans was 0.28%, down from 0.31% in the prior-year quarter.
Capital & Profitability Ratios Show Improvement
As of Sep 30, 2018, Tier I leverage ratio was 11.38%, up from 10.16% recorded in the prior-year quarter. Moreover, tangible common equity to tangible assets ratio grew to 10.10% from 9.72% as of Sep 30, 2017.
At the end of the reported quarter, return on average assets was 1.81%, up from 1.19% witnessed in the year-ago quarter. Return on average common equity was 16.43%, up from 11.35% in the year-ago quarter.
Our Take
Commerce Bancshares remains on track for top-line growth driven by continued rise in loan balances along with higher interest rates. Moreover, the company’s efforts to grow fee income are likely to continue supporting revenues. However, mounting expenses remain a major concern for the company and might hurt profitability. Also, its significant exposure to real estate loans might pose near-term risks.
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 Midwest banks, Old National Bancorp (ONB - Free Report) is slated to release numbers on Oct 22, while First Midwest Bancorp, Inc. and First Interstate BancSystem, Inc. (FIBK - Free Report) are scheduled to announce results on Oct 23 and Oct 24, respectively.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>