Shares of Commerce Bancshares Inc. (CBSH - Free Report) gained 1.5% following the release of first-quarter 2024 results. Quarterly earnings per share of 86 cents surpassed the Zacks Consensus Estimate of 80 cents. However, the bottom line decreased 5.5% from the prior-year quarter.
Results benefited from a rise in non-interest income and lower provisions, which were partially offset by net losses on investment securities. Also, the company recorded a sequential improvement in loan balances in the quarter. However, a decline in net interest income (NII) and higher expenses were the major headwinds.
Net income attributable to common shareholders was $112.7 million, down 5.7% year over year. Our estimate for the metric was $99.9 million.
Revenues Improve but Expenses Rise
Total quarterly revenues were $397.8 million, up 2.2% year over year. The top line also beat the Zacks Consensus Estimate of $385.9 million.
NII was $249 million, down 1%. Our estimate for NII was $242.8 million.
Net yield on interest-earning assets expanded 7 basis points (bps) from the prior-year quarter to 3.33%.
Non-interest income was $148.8 million, up 8.2%. The rise was driven by an increase in almost all fee income components except for consumer brokerage services fees. Our estimate for non-interest income was $139.4 million.
Non-interest expenses increased 9.6% to $245.7 million. The rise was due to an increase in all cost components except marketing expenses. The expenses included a $10 million litigation settlement charge and $4 million related to the adjustment to FDIC special assessment. We had projected expenses to be $237.9 million, which did not include the litigation settlement charge.
Net investment securities recorded a loss of $259 thousand compared to a loss of $306 thousand in the prior-year quarter.
The efficiency ratio increased to 61.67% from 57.49% in the year-ago quarter. A rise in the efficiency ratio indicates a deterioration in profitability.
As of Mar 31, 2024, total loans were $17.3 billion, up marginally from the prior quarter. Total deposits as of the same date were $24.44 billion, down 3.6%. Our estimates for total loans and deposits were $17.1 billion and $24.9 billion, respectively.
Asset Quality Improves
Provision for credit losses was $4.8 million, which decreased 58.2% from the prior-year quarter. Our estimate for the metric was $16.3 million.
Non-accrual loans to total loans were 0.03%, down 3 bps from the prior-year quarter. Allowance for credit losses on loans to total loans was 0.93%, decreasing 3 bps.
On the other hand, the ratio of annualized net loan charge-offs to total average loans was 0.21%, up from 0.17% in the year-earlier quarter.
Capital Ratios Improve, Profitability Ratios Deteriorate
As of Mar 31, 2024, the Tier I leverage ratio was 11.75%, up from 10.61% in the year-ago quarter. Tangible common equity to tangible assets ratio increased to 9.24% from the prior-year quarter’s 7.92%.
At the end of the first quarter, the return on total average assets was 1.48%, down from the year-ago period’s 1.54%. Return on average equity was 15.39% compared with 18.75% in the prior-year quarter.
Share Repurchase Update
During the reported quarter, the company repurchased approximately 0.81 million shares at an average price of $52.13.
Our Take
Commerce Bancshares’ revenues are expected to be driven by decent loan demand and its initiatives to strengthen fee income sources. However, rising expenses remain a near-term headwind.
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
Hilltop Holdings Inc. (HTH - Free Report) is scheduled to release its first-quarter 2024 results on Apr 18.
Over the past 30 days, the Zacks Consensus Estimate for HTH’s quarterly earnings has remained unchanged at 31 cents. This implies a 30% decrease from the prior year quarter.
WaFd, Inc. (WAFD - Free Report) is slated to report its second-quarter fiscal 2024 results on Apr 22.
Over the past 30 days, the Zacks Consensus Estimate for WAFD’s quarterly earnings has moved 34% lower to 31 cents. This indicates a 67.4% decrease from the prior year quarter.
Free Report – The Bitcoin Profit Phenomenon
Zacks Investment Research has released a Special Report to help you pursue massive profits from the world’s first and largest decentralized form of money.
No guarantees for the future, but in the past three presidential election years, Bitcoin’s returns were as follows: 2012 +272.4%, 2016 +161.1%, and 2020 +302.8%.
Zacks predicts another significant surge. Click below for Bitcoin: A Tumultuous Yet Resilient History.
Download Now – Today It’s FREE >>
Shares of Commerce Bancshares Inc. (CBSH - Free Report) gained 1.5% following the release of first-quarter 2024 results. Quarterly earnings per share of 86 cents surpassed the Zacks Consensus Estimate of 80 cents. However, the bottom line decreased 5.5% from the prior-year quarter.
Results benefited from a rise in non-interest income and lower provisions, which were partially offset by net losses on investment securities. Also, the company recorded a sequential improvement in loan balances in the quarter. However, a decline in net interest income (NII) and higher expenses were the major headwinds.
Net income attributable to common shareholders was $112.7 million, down 5.7% year over year. Our estimate for the metric was $99.9 million.
Revenues Improve but Expenses Rise
Total quarterly revenues were $397.8 million, up 2.2% year over year. The top line also beat the Zacks Consensus Estimate of $385.9 million.
NII was $249 million, down 1%. Our estimate for NII was $242.8 million.
Net yield on interest-earning assets expanded 7 basis points (bps) from the prior-year quarter to 3.33%.
Non-interest income was $148.8 million, up 8.2%. The rise was driven by an increase in almost all fee income components except for consumer brokerage services fees. Our estimate for non-interest income was $139.4 million.
Non-interest expenses increased 9.6% to $245.7 million. The rise was due to an increase in all cost components except marketing expenses. The expenses included a $10 million litigation settlement charge and $4 million related to the adjustment to FDIC special assessment. We had projected expenses to be $237.9 million, which did not include the litigation settlement charge.
Net investment securities recorded a loss of $259 thousand compared to a loss of $306 thousand in the prior-year quarter.
The efficiency ratio increased to 61.67% from 57.49% in the year-ago quarter. A rise in the efficiency ratio indicates a deterioration in profitability.
As of Mar 31, 2024, total loans were $17.3 billion, up marginally from the prior quarter. Total deposits as of the same date were $24.44 billion, down 3.6%. Our estimates for total loans and deposits were $17.1 billion and $24.9 billion, respectively.
Asset Quality Improves
Provision for credit losses was $4.8 million, which decreased 58.2% from the prior-year quarter. Our estimate for the metric was $16.3 million.
Non-accrual loans to total loans were 0.03%, down 3 bps from the prior-year quarter. Allowance for credit losses on loans to total loans was 0.93%, decreasing 3 bps.
On the other hand, the ratio of annualized net loan charge-offs to total average loans was 0.21%, up from 0.17% in the year-earlier quarter.
Capital Ratios Improve, Profitability Ratios Deteriorate
As of Mar 31, 2024, the Tier I leverage ratio was 11.75%, up from 10.61% in the year-ago quarter. Tangible common equity to tangible assets ratio increased to 9.24% from the prior-year quarter’s 7.92%.
At the end of the first quarter, the return on total average assets was 1.48%, down from the year-ago period’s 1.54%. Return on average equity was 15.39% compared with 18.75% in the prior-year quarter.
Share Repurchase Update
During the reported quarter, the company repurchased approximately 0.81 million shares at an average price of $52.13.
Our Take
Commerce Bancshares’ revenues are expected to be driven by decent loan demand and its initiatives to strengthen fee income sources. However, rising expenses remain a near-term headwind.
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
Hilltop Holdings Inc. (HTH - Free Report) is scheduled to release its first-quarter 2024 results on Apr 18.
Over the past 30 days, the Zacks Consensus Estimate for HTH’s quarterly earnings has remained unchanged at 31 cents. This implies a 30% decrease from the prior year quarter.
WaFd, Inc. (WAFD - Free Report) is slated to report its second-quarter fiscal 2024 results on Apr 22.
Over the past 30 days, the Zacks Consensus Estimate for WAFD’s quarterly earnings has moved 34% lower to 31 cents. This indicates a 67.4% decrease from the prior year quarter.
Free Report – The Bitcoin Profit Phenomenon
Zacks Investment Research has released a Special Report to help you pursue massive profits from the world’s first and largest decentralized form of money.
No guarantees for the future, but in the past three presidential election years, Bitcoin’s returns were as follows: 2012 +272.4%, 2016 +161.1%, and 2020 +302.8%.
Zacks predicts another significant surge. Click below for Bitcoin: A Tumultuous Yet Resilient History.
Download Now – Today It’s FREE >>
Get the latest research report on HTH - FREE
Get the latest research report on CBSH - FREE
Get the latest research report on WAFD - FREE