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

Commerce Bancshares Inc.’s CBSH third-quarter 2025 earnings of $1.06 per share missed the Zacks Consensus Estimate of $1.09. Nevertheless, the bottom line rose 3.9% from the prior-year quarter.

Results benefited from a rise in net interest income (NII) and non-interest income. An increase in loan balances was also a tailwind. However, increased provisions and higher expenses were headwinds.

Net income attributable to common shareholders was $141.5 million, up 2.5% year over year. Our estimate for the metric was $140.3 million.

CBSH’s Revenues Improve, Expenses Rise

Total revenues were $440.9 million, up 4.6% year over year. The top line outpaced the Zacks Consensus Estimate of $433.8 million.

NII was $279.4 million, rising 6.5% from the year-ago quarter. Our estimate for NII was $273.6 million.

Net yield on interest-earning assets expanded 14 basis points (bps) to 3.64%. Our estimate for the metric was 3.71%.

Non-interest income was $161.5 million, up 1.5% year over year. The rise was driven by an increase in almost all components, except for bank card transaction fees, capital market fees and other non-interest income. Our estimate for non-interest income was $160.3 million.

Non-interest expenses increased 2.7% year over year to $244 million. The rise was due to an increase in almost all cost components except for marketing, supplies and communication, and other expenses. We had projected expenses of $244.5 million.

Investment securities gains were $7.9 million compared with $3.9 million from the prior-year quarter.

The efficiency ratio declined to 55.26% from 56.31% in the year-ago quarter. A fall in the efficiency ratio indicates an improvement in profitability.

CBSH’s Loan Balances Rise, Deposits Decline

As of Sept. 30, 2025, net loans were $17.61 billion, up slightly from the prior quarter. Total deposits were $25.46 billion, which declined marginally on a sequential basis. Our estimates for net loans and total deposits were $17.41 billion and $25.83 billion, respectively.

Commerce Bancshares’ Asset Quality Worsens

Provision for credit losses was $20.1 million, which soared substantially from the prior-year quarter’s $9.1 million. Our estimate for the metric was $6.9 million.

The allowance for credit losses on loans to total loans was 0.99%, increasing 5 bps year over year. The ratio of annualized net loan charge-offs to total average loans was 0.23%, up from 0.22% in the prior-year quarter.

Non-accrual loans to total loans were 0.09%, down from the prior-year quarter’s 0.11%.

CBSH’s Capital Ratios Improve, Profitability Ratios Decline

As of Sept. 30, 2025, the Tier I leverage ratio was 12.95%, up from 12.31% in the year-ago quarter. Tangible common equity to tangible assets ratio increased to 11.27% from the prior-year quarter’s 10.47%.

At the third-quarter end, the return on total average assets was 1.78%, down from the year-ago period’s 1.80%. Return on average equity was 15.26% compared with 16.81% in the prior-year quarter.

CBSH’s Share Repurchase Update

In the reported quarter, the company repurchased 0.42 million shares at an average price of $60.32.

Our Take on Commerce Bancshares

CBSH’s revenues are expected to be driven by decent loan demand and its balance sheet repositioning strategy. Its efforts to bolster fee income are encouraging. However, rising expenses and deteriorating asset quality remain near-term headwinds.

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.

Performance of Other Banks

Hancock Whitney Corp.’s HWC third-quarter 2025 earnings per share of $1.49 exceeded the Zacks Consensus Estimate of $1.41. Further, the bottom line rose 12% from the prior year quarter.

HWC’s results benefited from a rise in NII and non-interest income. An increase in loan balances was also a tailwind. However, increased provisions and higher expenses were headwinds.

First Horizon Corporation’s FHN third-quarter 2025 adjusted earnings per share (excluding notable items) of 51 cents surpassed the Zacks Consensus Estimate of 45 cents. This compares favorably with 42 cents in the year-ago quarter.

The results of FHN benefited from a rise in NII and non-interest income, along with provision benefits. However, a decline in loan and deposit balances acted as a headwind.

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This article originally published on Zacks Investment Research (zacks.com).

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