Commerce Bancshares (CBSH) Misses Q2 EPS by 19c

Commerce Bancshares (NASDAQ: CBSH) reported Q2 EPS of $0.34, $0.19 worse than the analyst estimate of $0.53.

In announcing these results, John Kemper, Chief Executive Officer, said, “While uncertainty surrounding the U.S. economy continued throughout the second quarter, we are cautiously optimistic about its resilience and encouraged by the strength of our customers and communities. Businesses have begun to reopen and adapt to the evolving COVID-19 operating environment and customer spending is rebounding from its lows in the second quarter. Commerce has always been committed to standing by our customers in difficult times. As part of our commitment, we have suspended foreclosure proceedings, offered fee waivers, and mobilized many internal resources to provide our commercial customers access to funding through the Paycheck Protection Program (PPP). In addition to the pandemic, our country is grappling with new, jarring reminders of the work that needs to be done to create a more just and equitable society, with broadened access to the wealth-creating engine of our economy. Commerce is committed to doing its part to create the positive and enduring change that is needed. Our strong culture, industry-leading capital levels, and commitment to sound credit policy enable us to be a source of stability for our team members, customers and communities in this period of uncertainty."

Mr. Kemper continued, “While net income was lower this quarter, it was mainly impacted by additional reserves recorded for future loan losses. Excluding the provision for credit losses and securities losses, net income grew modestly over the first quarter. A slight increase in net interest income and lower expense more than offset the decline in fee income this quarter. Compared to the prior quarter, consumer and business spending declined significantly, which negatively impacted bank card revenue. The PPP loan program drove tremendous growth in business loans this quarter, overshadowing strong growth in personal real estate loans. We secured funding for 7,443 customers to receive $1.5 billion in PPP loans, with a median loan size of $34 thousand. The net interest margin declined 39 basis points this quarter, reflecting not only the significant decline in interest rates over the past quarter, but also the rapid growth in deposits during the current quarter, which substantially increased our low-yielding balances held at the Federal Reserve.”

Mr. Kemper continued, "This quarter net loan charge-offs totaled $8.4 million, compared to $10.9 million in the prior quarter and $11.3 million in the second quarter of 2019. The ratio of annualized net loan charge-offs to average loans was .21% in the current quarter, .30% in the prior quarter and .32% in the second quarter of last year. Net loan charge-offs on commercial loans totaled $3.2 million this quarter. Net loan charge-offs on personal banking loans decreased $6.1 million to $5.2 million, mostly the result of new payment relief programs, which lowered consumer credit card loan net charge-offs noticeably this quarter. Further, while net charge-offs were mostly uneventful this quarter, the provision for credit losses exceeded net loan charge-offs by $72.1 million, as the economic forecast utilized in our CECL model deteriorated significantly from our expectation at the end of the first quarter, driving a second consecutive quarter of substantial increases to our reserves.”

For earnings history and earnings-related data on Commerce Bancshares (CBSH) click here.

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