Commerce Bancshares, Inc. 's CBSH second-quarter 2018 earnings per share of $1.01 surpassed the Zacks Consensus Estimate of 89 cents. Also, the reported figure reflects an improvement of 42.3% from the year-ago quarter.
Results primarily benefited from improvement in net interest income as well as non-interest income. Also, a decrease in provisions was a tailwind. Further, the company's capital and profitability ratios improved during the quarter. However, elevated operating expenses acted as a headwind.
Net income attributable to Commerce Bancshares was $110.3 million, up 39.7% from the prior-year quarter.
Revenue Growth Offsets Rise in Costs
Total revenues for the quarter were $335.8 million, reflecting an increase of 12.6% year over year. In addition, the reported figure outpaced the Zacks Consensus Estimate of $319.3 million.
Net interest income came in at $211 million, rising 15.4% year over year. Furthermore, net interest margin was 3.50%, up 31 basis points (bps) year over year. The rise reflects increase in interest earned on loan portfolio and stable deposits cost.
Non-interest income was $124.9 million, up 8.2% year over year. This upswing was primarily driven by improvement in all components except capital market fees, loan fees and sales and other income.
Non-interest expenses flared up 2.8% year over year to $181.9 million. The upsurge largely resulted from rise in salaries and employee-benefit costs, data processing and software costs, and marketing costs.
Efficiency ratio for the quarter under review decreased to 54.06% from 59.21% reported in the year-ago quarter. A fall in efficiency ratio indicates higher profitability.
Loans Improve Marginally, Deposits Fall
As of Jun 30, 2018, total loans were $14.0 billion, up 0.4% from the prior-quarter level. However, total deposits, as of the same date, were $20.3 billion, edging down 1.1% from the prior quarter.
Total stockholders' equity was $2.8 billion as of Jun 30, 2018, reflecting a rise of 2.4% from the previous quarter.
Credit Quality Up
Provision for loan losses decreased 6.7% year over year to $10 million in the reported quarter. Additionally, allowance for loan losses, as a percentage of total loans, came in at 1.14%, contracting 2 bps year over year. Further, net loan charge-offs to average loans ratio shrunk 3 bps, year over year, to 0.29%.
Improving Capital & Profitability Ratios
As of Jun 30, 2018, Tier I leverage ratio was 11.18%, up from 9.87% recorded in the prior-year quarter. Moreover, tangible common equity to tangible assets ratio grew to 10.18% from 9.37% as of Jun 30, 2017.
Further, the company's return on average assets was 1.80%, inching up from 1.26% witnessed in the year-ago quarter. Return on average common equity was 16.78% at the end of the reported quarter, up from 12.48% in the year-earlier quarter.
Commerce Bancshares' improving net interest margin will likely continue driving the top line, moving ahead. Moreover, improving profitability and capital ratios look encouraging. Nevertheless, mounting expenses remain a major concern for the company and are expected to remain elevated in the near future. Also, significant exposure to real estate loans might pose near-term risks.
Commerce Bancshares, Inc. Price, Consensus and EPS Surprise
Currently, Commerce Bancshares carries a Zacks Rank #3 (Hold). You can the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .
Among other Midwest banks, Old National Bancorp ONB is slated to release its earnings numbers on Jul 23, while First Midwest Bancorp, Inc. FMBI and First Interstate BancSystem, Inc. FIBK are scheduled to announce their results on Jul 24 and Jul 25, respectively.
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