WAFD Gains as Q3 Earnings Beat on Fee Income, Weak Lending Hurts NII

Commerce Bancshares Inc.’s CBSH second-quarter 2025 earnings of $1.14 per share surpassed the Zacks Consensus Estimate of $1.02. The bottom line also jumped 10.7% 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 $152.5 million, up 9.3% year over year. Our estimate for the metric was $128.5 million.

CBSH’s Revenues Improve, Expenses Rise

Total revenues were $445.8 million, up 7.5% year over year. The top line outpaced the Zacks Consensus Estimate of $430.4 million.

NII was $280.1 million, rising 6.8% from the year-ago quarter. Our estimate for NII was $265.7 million.

Net yield on interest-earning assets expanded 15 basis points (bps) to 3.70%. Our estimate for the metric was 3.59%.

Non-interest income was $165.6 million, up 8.8% year over year. The rise was driven by an increase in almost all components, except for bank card transaction fees, and loan fees and sales. Our estimate for non-interest income was $157.5 million. 

Non-interest expenses increased 5.3% year over year to $244.4 million. The rise was due to an increase in almost all cost components except for other expenses. We had projected expenses of $246.2 million.

Investment securities gains were $0.4 million, plummeting from $3.2 million in the prior-year quarter.

The efficiency ratio declined to 54.77% from 55.95% 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 June 30, 2025, net loans were $17.50 billion, up 1.7% from the prior quarter. Total deposits were $25.49 billion, which declined 1.3% sequentially. Our estimates for net loans and total deposits were $17.39 billion and $25.07 billion, respectively.

Commerce Bancshares’ Asset Quality: A Mixed Bag

Provision for credit losses was $5.6 million, up 2.4% from the prior-year quarter. Our estimate for the metric was $9.6 billion.

The allowance for credit losses on loans to total loans was 0.94%, increasing 2 bps year over year. The ratio of annualized net loan charge-offs to total average loans was 0.22%, down from 0.23%.

Non-accrual loans to total loans were 0.11%, unchanged from the prior-year quarter.

CBSH’s Capital Ratios Improve, Profitability Ratios Mixed

As of June 30, 2025, the Tier I leverage ratio was 12.75%, up from 12.13% in the year-ago quarter. Tangible common equity to tangible assets ratio increased to 10.86% from the prior-year quarter’s 9.82%.

At the end of the second quarter, the return on total average assets was 1.95%, up from the year-ago period’s 1.86%. Return on average equity was 17.40% compared with 18.52% in the prior-year quarter.

CBSH’s Share Repurchase Update

In the reported quarter, the company repurchased 0.17 million shares at an average price of $60.54.

CBSH’s Key Development in the Quarter

In June, Commerce Bancshares entered an agreement to acquire FineMark Holdings for $585 million. The deal is expected to close on Jan. 1, 2026, subject to regulatory approval.

Per the deal, shareholders of FineMark will receive 0.690 shares of Commerce Bancshares common stock for each of their shares.

The transaction is expected to be 6% accretive to Commerce Bancshares' 2026 GAAP earnings, with fully phased cost savings. Cost savings of 15% of FineMark’s non-interest expenses are expected.

The merger will result in one-time, pre-tax expenses of $57 million, which is fully realized in the pro-forma tangible book value estimate at closing.

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 Major Banks

Solid trading and investment banking (IB) performance and impressive growth in credit card and wholesale loans drove JPMorgan’s JPM second-quarter 2025 adjusted earnings of $4.96 per share. The bottom line handily surpassed the Zacks Consensus Estimate of $4.51. (Find the latest EPS estimates and surprises on Zacks Earnings Calendar.)

This excluded an income tax benefit of $774 million. Including the one-time gain, JPMorgan’s earnings were $5.24 per share.

Markets revenues exceeded management's expectations of growth in the mid to high-single-digit range. The metric jumped 15% year over year to $8.9 billion.

JPMorgan’s IB business performance was also far more robust than expected by management. Total IB fees (in the Commercial & Investment Bank segment) were up 7% from the prior-year quarter to $2.51 billion.

The Bank of New York Mellon Corporation’s BK second-quarter 2025 adjusted earnings of $1.94 per share surpassed the Zacks Consensus Estimate of $1.74. Also, the bottom line reflected a jump of 28% from the prior-year quarter.

BNY Mellon’s results were primarily aided by a rise in fee revenues and net interest income. Also, the company recorded a provision benefit in the quarter, which was a tailwind. Growth in the assets under custody and/or administration, and assets under management balances supported results. However, higher expenses were an undermining factor for BK.

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

Zacks Investment Research

Q2 2025 net income rose 9.3% year-over-year to $152.5M, with EPS up 10.7% and strong loan growth. Pending $585M FineMark acquisition expected to close in January 2026. Capital and asset quality remain robust.

Original document: Commerce Bancshares, Inc. [CBSH] SEC 10-Q Quarterly Report — Jul. 16 2025

Earnings per share rose to $1.14 in Q2 2025, with net income up 9% year-over-year and strong returns on assets and equity. Loan and deposit growth, improved efficiency, and the FineMark acquisition position the company for continued expansion.

Original document: Commerce Bancshares, Inc. [CBSH] SEC 8-K Current Report — Jul. 16 2025