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Shares of Commerce Bancshares Inc. CBSH gained 2.2% in response to better-than-expected quarterly performance. Its first-quarter 2025 earnings of 98 cents per share surpassed the Zacks Consensus Estimate of 93 cents. The bottom line also jumped 19.5% from the prior-year quarter.
Results benefited from a rise in net interest income (NII) and non-interest income. An increase in loans and deposit balances was also a tailwind. However, a substantial jump in provisions and higher adjusted expenses were the headwinds.
Net income attributable to common shareholders was $131.6 million, up 16.8% year over year.
CBSH’s Revenues Increase, Adjusted Expenses Rise
Total revenues in the quarter were $428.1 million, up 7.6% year over year. The top line outpaced the Zacks Consensus Estimate of $415.9 million.
NII was $269.1 million, rising 8.1% from the year-ago quarter. Our estimate for NII was $261.5 million.
Net yield on interest-earning assets expanded 23 basis points (bps) to 3.56%. Our estimate for the metric was 3.57%.
Non-interest income was $158.9 million, up 7%. The rise was driven by the increase in all the components except bank card transaction fees. Our estimate for non-interest income was $150.2 million.
Non-interest expenses decreased 3% to $238.4 million. The absence of the litigation settlement expense and an FDIC special assessment accrual adjustment were the primary reasons for the decline. Excluding one-time costs incurred last year's quarter, adjusted expenses rose 3%. We had projected expenses of $249.1 million.
Net investment securities loss was $7.6 million compared with $0.3 million in the prior-year quarter.
The efficiency ratio declined to 55.61% from 61.67% in the year-ago quarter. A fall in the efficiency ratio indicates an improvement in profitability.
CBSH’s Loans & Deposits Rise
As of March 31, 2025, net loans were $17.21 billion, up almost 1% from the prior quarter. Total deposits were $25.84 billion, which rose 2.2%. Our estimates for net loans and total deposits were $17.32 billion and $25.51 billion, respectively.
Commerce Bancshares’ Asset Quality Worsens
Provision for credit losses was $14.5 million, which soared substantially from the prior-year quarter’s $4.8 million. Our estimate for the metric was $10.2 billion.
The allowance for credit losses on loans to total loans was 0.96%, increasing 3 bps year over year. The ratio of annualized net loan charge-offs to total average loans was 0.25%, up from 0.21%.
Further, non-accrual loans to total loans were 0.13%, up 10 bps from the prior-year quarter.