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Commerce Bancshares (CBSH) Down 3.6% Despite In-Line Q4 Earnings

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Commerce Bancshares Inc.’s (CBSH - Free Report) fourth-quarter 2021 earnings per share of 94 cents matched the Zacks Consensus Estimate. The bottom line, however, declined 10.5% from the prior-year quarter.

Results primarily benefited from an improvement in non-interest income, a slight rise in loan balance and provision benefit. However, an increase in non-interest expenses and fall in net interest income were the major headwinds. Such concerns might have made investors turn bearish on the stock, which tanked 3.6% in yesterday’s trading.
 
Net income attributable to common shareholders was $114.9 million, down 11.5% year over year.

In 2021, earnings of $4.31 per share missed the consensus estimate of $4.34 and were up 55.6%. Net income was $530.8 million, up 55.2%.

Revenues & Expenses Rise

Total quarterly revenues were $355.4 million, up 3% year over year. The top line beat the Zacks Consensus Estimate of $349.3 million.

In 2021, net revenues increased 4.5% to $1.39 billion. The top line matched the consensus estimate of $1.39 billion.

Net interest income was $207.7 million, down 1% from the prior-year quarter. Net yield on interest-earning assets contracted 37 basis points (bps) to 2.43%.

Non-interest income was $147.7 million, growing 9.3%. The upswing resulted from an increase in all fee income components, except for loan fees and sales.

Non-interest expenses increased 3.7% to $203.6 million. The rise was due to increase in all cost components.

Efficiency ratio increased to 57.29% from 56.68% in the year-ago quarter. A rise in efficiency ratio indicates deterioration in profitability.

As of Dec 31, 2021, total loans were $15.2 billion, marginally up from the prior quarter. Total deposits as of the same date were $29.8 billion, up 5.9%. Total stockholders’ equity was $3.4 billion, down 1.2% sequentially.

Credit Quality Improves

Provision for credit losses was a benefit of $7.1 million, up from $4.4 million in the prior-year quarter. The ratio of annualized net loan charge-offs to total average loans was 0.11%, down from 0.19% recorded in the year-earlier quarter.

Non-accrual loans to total loans were 0.06%, down 10 bps year over year. Allowance for credit losses on loans to total loans was 0.99%, declining 36 bps.

Capital & Profitability Ratios Deteriorate

As of Dec 31, 2021, Tier I leverage ratio was 9.13%, down from 9.45% recorded in the year-ago quarter. Tangible common equity to tangible assets ratio declined to 9.01% from the prior-year quarter’s 9.92%.

At the end of the fourth quarter, return on total average assets was 1.28%, down from the year-ago period’s 1.63%. Return on average common equity was 13.11%, down from 15.49% in the prior-year quarter.

Share Repurchase Update

During the quarter, Commerce Bancshares repurchased 696,367 shares at an average price of $70.81.

Our Take

Commerce Bancshares’ revenues are likely to continue benefiting from a rise in deposit balances and efforts to strengthen fee income sources. However, low interest rates and rising expenses keep hurting its financials.

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 - Free Report) is scheduled to release fourth-quarter and full-year 2021 results on Jan 24.

Over the past 30 days, the Zacks Consensus Estimate for Zions Bancorporation’s quarterly earnings has remained unchanged at $1.33. This implies a 19.9% decrease from the prior-year quarter.

Prosperity Bancshares (PB - Free Report) is scheduled to release fourth-quarter and full-year 2021 results on Jan 26.

Over the past 30 days, the Zacks Consensus Estimate for Prosperity Bancshares’ quarterly earnings has remained unchanged at $1.37. This suggests a 7.4% decrease from the prior-year quarter.

East West Bancorp, Inc. (EWBC - Free Report) is slated to report fourth-quarter and full-year 2021 results on Jan 27.

Over the past 30 days, the Zacks Consensus Estimate for East West Bancorp’s quarterly earnings has remained unchanged at $1.55. This indicates a 34.8% increase from the prior-year quarter.