Commerce Bancshares Q3 Earnings Lag Estimates, Expenses Rise Y/Y

Core Insights - Commerce Bancshares Inc. (CBSH) reported third-quarter 2025 earnings of $1.06 per share, missing the Zacks Consensus Estimate of $1.09, but reflecting a 3.9% increase from the prior-year quarter [1][9] - The results were supported by an increase in net interest income (NII) and non-interest income, alongside a rise in loan balances, although increased provisions and higher expenses posed challenges [1][12] Financial Performance - Net income attributable to common shareholders was $141.5 million, up 2.5% year over year, surpassing the estimate of $140.3 million [2] - Total revenues reached $440.9 million, marking a 4.6% year-over-year increase and exceeding the Zacks Consensus Estimate of $433.8 million [3] - NII was reported at $279.4 million, a 6.5% increase from the previous year, also above the estimate of $273.6 million [3] - Non-interest income totaled $161.5 million, up 1.5% year over year, driven by increases in most components, except for bank card transaction fees and capital market fees [4] Expense and Efficiency Metrics - Non-interest expenses rose 2.7% year over year to $244 million, attributed to increases in nearly all cost components [5] - The efficiency ratio improved to 55.26% from 56.31% in the prior-year quarter, indicating enhanced profitability [5] Loan and Deposit Trends - As of September 30, 2025, net loans were $17.61 billion, showing a slight increase from the prior quarter, while total deposits declined marginally to $25.46 billion [6] Asset Quality and Provisions - Provision for credit losses surged to $20.1 million from $9.1 million in the prior-year quarter, significantly exceeding the estimate of $6.9 million [7] - The allowance for credit losses on loans to total loans was 0.99%, up 5 basis points year over year [7] Capital Ratios and Profitability - The Tier I leverage ratio improved to 12.95% from 12.31% in the year-ago quarter, and the tangible common equity to tangible assets ratio increased to 11.27% from 10.47% [10] - Return on total average assets was 1.78%, down from 1.80% in the prior year, while return on average equity decreased to 15.26% from 16.81% [10] Share Repurchase Activity - In the reported quarter, the company repurchased 0.42 million shares at an average price of $60.32 [11] Future Outlook - CBSH's revenues are anticipated to be driven by solid loan demand and a balance sheet repositioning strategy, although rising expenses and deteriorating asset quality present near-term challenges [12]