Commerce Bancshares said Thursday that its first-quarter profit increased 10% from a year earlier to $69.3 million as improved credit quality and strong gains in interest income more than offset rising expenses at the Kansas City, Mo., company.
Earnings per share also climbed 10% to 68 cents per share, or 3 cents higher than the average estimate of analysts polled by FactSet Research Systems.
Commerce’s bottom-line growth outpaced a 5.2% bump in noninterest expense. Revenue totaled $295.3 million, a 4.4% increase over the $282.8 million the company reported following the first quarter of 2016. Much of that upward movement can be attributed the favorable rate environment. Commerce's net interest margin widened to 3.14% from 2.95% a year earlier. Net interest income rose nearly 9%, to $178.3 million.
Deposits increased 2% over the past 12 months, reaching $21.1 billion on March 31, while loan balances climbed 7% to $13.6 billion. As a result, Commerce’s loan-to-deposit ratio climbed nearly 300 basis points to 64.3%.
Credit quality at Commerce was pristine to start with, but it got markedly better in the first quarter, as the dollar volume of nonperforming loans fell by 50%.
Nonperforming loans totaled $14.8 million, or just 0.11% of total loans as of March 31. A year earlier, Commerce’s nonperformers came in at $29.4 million. To put those numbers in perspective, the industrywide ratio of nonperforming loans to total loans was 1.41% at the end of 2016, according to the Federal Deposit Insurance Corp.
“The overall credit environment continues to be very favorable as both net loan chargeoffs and nonperforming loans remain at low levels,” Commerce Chairman and CEO David Kemper said in a press release.