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Commerce Bancshares (CBSH) Q2 Earnings Beat on Higher Revenues

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Commerce Bancshares Inc.’s (CBSH - Free Report) second-quarter 2022 earnings of 96 cents per share beat the Zacks Consensus Estimate by a penny. The bottom line, however, plunged 27.3% from the prior-year quarter.

Results benefited from an improvement in net interest income, a rise in loan balance and a modest increase in non-interest income. However, an increase in non-interest expenses and higher provisions were the major headwinds.

Net income attributable to common shareholders of $115.8 million tanked 28.7% year over year.

Revenues & Expenses Rise

Total revenues were $371.8 million, growing 7.1% year over year. The top line also handily outpaced the Zacks Consensus Estimate of $359.2 million.

Net interest income was $232.4 million, up 11.7%. Net yield on interest-earning assets increased 19 basis points (bps) to 2.79%.

Non-interest income was $139.4 million, up marginally. The rise was mainly driven by a rise in all components except loan fees and sales.

Non-interest expenses increased 7.8% to $213.5 million. The rise was due to an increase in almost all cost components.

Efficiency ratio increased to 57.29% from 56.90% in the year-ago quarter. A rise in efficiency ratio indicates deterioration in profitability.

As of Jun 30, 2022, total loans were $15.7 billion, up 1.5% from the prior quarter. Total deposits as of the same date were $28.2 billion, down 3.9%.

Credit Quality: Mixed Bag

Provision for credit losses was $7.2 million against a benefit of $45.7 million in the prior-year quarter. The ratio of annualized net loan charge-offs to total average loans was 0.10%, up from 0.02% in the year-earlier quarter.

Non-accrual loans to total loans were 0.05%, down 2 bps year over year. Allowance for credit losses on loans to total loans was 0.88%, declining 22 bps.

Capital & Profitability Ratios Deteriorate

As of Jun 30, 2022, Tier I leverage ratio was 9.45%, up from 9.36% recorded in the year-ago quarter. Tangible common equity to tangible assets ratio declined to 7.56% from the prior-year quarter’s 9.91%.

At the end of the second quarter, return on total average assets was 1.36%, down from the year-ago period’s 1.93%. Return on average common equity was 16.29%, down from 19.12%.

Share Repurchase Update

During the reported quarter, Commerce Bancshares repurchased 846,223 shares at an average price of $67.77.

Our Take

Commerce Bancshares’ revenues are likely to continue benefiting from a rise in demand for loans, higher interest rates and efforts to strengthen fee income sources. However, 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 #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Banks

Hancock Whitney Corporation’s (HWC - Free Report) second-quarter 2022 earnings of $1.38 per share outpaced the Zacks Consensus Estimate of $1.34. The bottom line rose marginally from the prior-year quarter’s adjusted earnings of $1.37.

HWC’s results benefited from higher net interest income (NII), a fall in non-interest expenses, a rise in loan balance and provision benefit. However, a decline in non-interest income, mainly due to rising mortgage rates, was the undermining factor.

Washington Federal’s (WAFD - Free Report) third-quarter fiscal 2022 (ended Jun 30) earnings of 91 cents per share surpassed the Zacks Consensus Estimate of 79 cents. The figure reflects a year-over-year jump of 49.2%.

Results were primarily aided by higher revenues and improving loan balances. However, an increase in expenses and higher provisions were the undermining factors for WAFD.


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