It has been about a month since the last earnings report for Commerce Bancshares (CBSH Quick QuoteCBSH - Free Report) . Shares have lost about 8% in that time frame, outperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Commerce due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Commerce Bancshares Q1 Earnings Top Estimates, Revenues Up Y/Y

Commerce Bancshares’ first-quarter 2022 earnings of 97 cents per share easily surpassed the Zacks Consensus Estimate of 89 cents. The bottom line, however, declined 8.5% from the prior-year quarter.

Results benefited from an improvement in net interest income, a slight rise in loan balance and provision benefit. However, an increase in non-interest expenses and lower non-interest income were the major headwinds.

Net income attributable to common shareholders was $118.2 million, down 9.8% year over year.

Revenues & Expenses Rise

Total revenues were $340.6 million, up marginally year over year. The top line beat the Zacks Consensus Estimate of $340.2 million.

Net interest income was $208.8 million, up 1.5% from the prior-year quarter. Net yield on interest-earning assets contracted 26 basis points (bps) to 2.45%.

Non-interest income was $131.8 million, falling 3.1%. The decline was mainly due to lower capital market fees and loan fees and sales.

Non-interest expenses increased 6.8% to $205.6 million. The rise was due to an increase in all cost components.

Efficiency ratio increased to 60.29% from 56.37% in the year-ago quarter. A rise in efficiency ratio indicates deterioration in profitability.

As of Mar 31, 2022, total loans were $15.5 billion, up 1.9% from the prior quarter. Total deposits as of the same date were $29.3 billion, down 1.7%.

Credit Quality Improves

Provision for credit losses was a benefit of $9.9 million, up from $6.2 million in the prior-year quarter. The ratio of annualized net loan charge-offs to total average loans was 0.12%, down from 0.25% recorded in the year-earlier quarter.

Non-accrual loans to total loans were 0.05%, down 9 bps year over year. Allowance for credit losses on loans to total loans was 0.87%, declining 35 bps.

Capital & Profitability Ratios Deteriorate

As of Mar 31, 2022, Tier I leverage ratio was 9.07%, down from 9.38% recorded in the year-ago quarter. Tangible common equity to tangible assets ratio declined to 8.09% from the prior-year quarter’s 9.57%.

At the end of the first quarter, return on total average assets was 1.33%, down from the year-ago period’s 1.63%. Return on average common equity was 14.41%, down from 15.69%.

Share Repurchase Update

During the reported quarter, Commerce Bancshares repurchased 795,387 shares at an average price of $70.22.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates review.

VGM Scores

At this time, Commerce has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Commerce has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.