DEF: Commerce Bancshares Details 2025 Performance, 2026 Executive Pay

Commerce Bancshares, Inc. announced its virtual 2026 Annual Meeting, highlighted strong 2025 financial performance, and detailed changes to its executive compensation structure for 2026.

Summary

• The Annual Meeting of Shareholders will be held virtually on April 24, 2026, at 9:30 a.m. Central Time.
• Shareholders will vote on electing four Directors to the 2029 Class, ratifying KPMG LLP as the independent registered public accounting firm for 2026, and advisory approval of executive compensation (Say on Pay).
• The record date for voting is February 17, 2026, with 147,283,966 shares of Common Stock outstanding and entitled to vote.
• The company delivered strong performance in 2025, generating record revenues and net income of $566 million, or $4.04 in diluted earnings per share.
• Exceptional liquidity, capital strength, and credit quality were maintained throughout 2025.
• The 2025 Return on Average Assets (ROAA) was 1.79%, significantly higher than the Peer Median of 1.17% and the Large Bank Median of 1.02%.
• The company traded at 2.0x price to tangible book value (P/TBV) in 2025, above the Peer Median (1.6x) and Large Bank Median (1.9x).
• The 2025 annual incentive plan paid out at 183.6% of target, reflecting strong performance.
• The 2026 long-term incentive plan has been redesigned to utilize restricted stock units, with one-third time-based and two-thirds performance-based, including a relative Total Shareholder Return (TSR) modifier and a cap on payouts if TSR is negative.
• The Board determined that 10 non-employee directors are independent, while David W. Kemper and John W. Kemper, as executive officers, are not independent.
• The Audit and Risk Committee oversees enterprise risk management, including credit, market, liquidity, operational, legal, compliance, strategic, and reputational risks.
• Comprehensive information security and data privacy policies are in place, aligned with NIST and ISO standards, and are subject to regular internal and external audits.
• The company maintains an Outstanding CRA rating for 30 years, demonstrating strong community engagement and support for lowand moderate-income families.
• Related party transactions in 2025 included compensation to David W. Kemper ($455,440 salary, $328,000 bonus, $249,946 equity awards), retirement benefits to Jonathan M. Kemper ($135,098), and compensation to Charlotte Kemper Black ($239,984).
• Total fees paid to KPMG LLP in 2025 were $2,135,483, comprising $1,803,690 for audit fees, $83,000 for audit-related fees, and $248,793 for tax fees.
• The CEO Pay Ratio for 2025 was 82 to 1, with the CEO's annual total compensation at $6,498,082 and the median employee's at $78,891.

Sentiment

Score: 8

Explanation: StockSavvy.ai views this filing positively due to strong 2025 financial performance, superior profitability metrics compared to peers, and proactive adjustments to executive compensation for better shareholder alignment, despite recent underperformance in TSR.

Positives

• Achieved record revenues and net income of $566 million, or $4.04 diluted EPS in 2025.
• Maintained exceptional liquidity, capital strength, and credit quality.
• Reported a 2025 Return on Average Assets (ROAA) of 1.79%, significantly outperforming the Peer Median (1.17%) and Large Bank Median (1.02%).
• Sustained a 10-year average ROAA of 1.50% and a 5-year average ROAA of 1.60%, both considerably above peer and large bank medians.
• Traded at a premium valuation with a 2025 price to tangible book value (P/TBV) of 2.0x, exceeding the Peer Median (1.6x) and Large Bank Median (1.9x).
• Demonstrated long-term premium valuation with 5-year and 10-year average P/TBV of 2.8x and 2.7x, respectively, well above industry averages.
• The 2025 annual incentive plan paid out at 183.6% of target, reflecting strong company performance.
• Redesigned the 2026 long-term incentive plan to enhance shareholder alignment through performance-based restricted stock units and a negative Total Shareholder Return (TSR) payout cap.
• Maintains strong corporate governance practices, including a majority of independent directors and robust risk oversight by the Audit and Risk Committee.
• Received an 'Outstanding' Community Reinvestment Act (CRA) rating for 30 consecutive years, highlighting strong community engagement.
• Achieved 92% shareholder approval for the 2025 Say on Pay advisory vote, indicating confidence in executive compensation practices.

Negatives

• One-year and five-year total shareholder returns have been below those of peer banks, primarily attributed to market, valuation, and interest rate dynamics rather than underlying operating performance.
• Experienced greater multiple compression due to higher starting valuation multiples during periods of heightened interest rate volatility.
• The asset-sensitive balance sheet strategy, while enhancing long-term profitability, does not provide the same relative earnings tailwinds as some peers in declining rate environments.

Risks

• Exposure to credit, market (interest rate), liquidity, operational, legal, compliance, strategic, and reputational risks, which are subject to examination by regulatory bodies such as the Federal Reserve, Missouri Division of Finance (MDOF), and Consumer Financial Protection Bureau (CFPB).
• Information security and data privacy risks, managed through comprehensive policies, regular internal and external audits, and third-party penetration testing.
• Risk of financial restatement due to material noncompliance with financial reporting requirements, which would trigger the Clawback Policy for incentive-based compensation.
• Market conditions and interest rate dynamics can negatively impact total shareholder return, as observed in recent periods despite strong operating performance.

Future Outlook

The company is well-positioned to support sustainable growth and long-term shareholder returns. For 2026, the long-term incentive plan has been redesigned to use restricted stock units, with one-third time-based and two-thirds performance-based, tied to Adjusted ROAE, Diluted EPS Growth, and relative Total Shareholder Return (TSR) compared to peers over a three-year period. A governance factor caps the modifier at 100% if the company's TSR is negative over the three-year period, preventing additional payments for above-median performance in a negative market.

Management Comments

• "We are again utilizing the Securities and Exchange Commission rule allowing companies to furnish proxy materials to their shareholders over the internet. This process allows us to expedite receipt of materials, lower the costs of distribution, and reduce the environmental impact." David W. Kemper, Executive Chairman
• "Your vote is very important. I look forward to you attending the meeting." David W. Kemper, Executive Chairman
• "Commerce delivered a strong performance in 2025, generating record revenues and net income of $566 million, or $4.04 in diluted earnings per share, while sustaining a premium valuation relative to peers."
• "These results reflected the durability of Commerces diversified earnings model, disciplined expense management, and consistently strong fee based businesses."
• "Throughout the year, the Company maintained exceptional liquidity, capital strength, and credit quality, reinforcing the long-term resilience of the balance sheet."
• "The Company is well-positioned to support sustainable growth and long-term shareholder returns."
• "The Board believes this divergence [in TSR] primarily reflects market, valuation, and interest rate dynamics rather than underlying operating performance."
• "This positioning [asset-sensitive balance sheet] is designed to enhance longterm profitability across interest rate cycles, though it does not produce the same relative earnings tailwinds as some peers in declining rate environments."

Industry Context

StockSavvy.ai notes that Commerce Bancshares' strong 2025 financial performance, particularly its ROAA and P/TBV, positions it favorably against regional and large bank medians, indicating robust operational efficiency and market confidence. The company's asset-sensitive balance sheet strategy, while historically beneficial in rising rate environments, presents a nuanced challenge in declining rate environments, a common consideration for banks navigating interest rate cycles. The redesign of the long-term incentive plan to include performance-based restricted stock units and a negative TSR cap reflects a broader industry trend towards greater alignment of executive compensation with shareholder returns and enhanced corporate governance, responding to evolving investor expectations.

Comparison to Industry Standards

• The 2025 Return on Average Assets (ROAA) of 1.79% significantly exceeded the Peer Median of 1.17% and the Large Bank Median of 1.02%.
• The 10-year average ROAA of 1.50% was notably higher than the Peer Median of 1.12% and the Large Bank Median of 1.03%.
• The 2025 Price to Tangible Book Value (P/TBV) of 2.0x was above the Peer Median of 1.6x and modestly above the Large Bank Median of 1.9x, indicating a premium valuation.
• The 5-year average P/TBV of 2.8x and 10-year average of 2.7x were substantially higher than Peer Medians (1.7x / 1.8x) and Large Bank Medians (1.8x / 1.8x).
• Peer Banks for financial performance benchmarking include ABCB, ASB, OZK, BOKF, CADE, CFR, FNB, FIBK, FULT, HWC, HOMB, ONB, PFNP, PB, SFNC, UMBF, UBSI, UCB, WSFS, WSFS.
• Large Banks for financial performance benchmarking include JPM, BAC, C, WFC, USB, PNC, TFC, FCNC, A, CFG, HBAN.
• The NEO Compensation Peer Group, used for executive compensation benchmarking, consists of 24 companies including Ameris Bancorp (ABCB), Old National Bankcorp (ONB), Associated Banc-Corp (ASB), Pinnacle Financial Partners (PNFPP), BOK Financial Corp (BOKF), Properity Bankshares Inc (PB), Bank OZK (OZK), SouthState Bank (SSB), Cadence Bank (CADE), Synovus Financial Corp (SNV), Columbia Banking System Inc (COLB), Texas Capital Bancshares Inc (TCBI), Comerica Inc (CMA), UMB Financial Corp (UMBF), Cullen/Frost Bankers Inc (CFR), United Bankshares Inc (UBSI), F.N.B. Corp (FNB), Valley National Bancorp (VLY), First Interstate BancSystem (FIBK), Webster Financial Corp (WBS), Fulton Financial Corp (FULT), Wintrust Financial Corp (WTFC), Hancock Whitney Corp (HWC), WSFS Financial Corp (WSFS).

Management Changes

Corporate Governance

Related Party Transactions

• During 2025, Commerce Bancshares, Inc. paid David W. Kemper (Executive Chairman, father of John W. Kemper) a salary and other compensation of $455,440, a bonus of $328,000, and equity awards of $249,946.
• During 2025, Commerce Bank paid retirement benefits of $135,098 to Jonathan M. Kemper (retired Chairman Emeritus, Commerce Bank, Kansas City Region, brother of David W. Kemper, and uncle of John W. Kemper).
• During 2025, Commerce Bank paid a salary and other compensation of $239,984 to Charlotte Kemper Black (Foundation Director, niece of David W. Kemper, and cousin of John W. Kemper).
• Various Related Parties have deposit accounts with Commerce Bank and some also have a direct or indirect interest in other transactions with Commerce Bank, including loans in the ordinary course of business, all made on substantially the same terms as those prevailing for comparable non-related transactions, and did not involve more than normal risk of collectability or present other unfavorable features.

Stakeholder Impact

• Shareholders: Directly impacted by voting on director elections, auditor ratification, and executive compensation. Benefit from strong financial performance and premium valuation, but recent underperformance in Total Shareholder Return (TSR) is a concern. The redesigned long-term incentive plan aims for better alignment with shareholder interests.
• Employees: Benefit from a competitive compensation program, employee-led resource groups, competitive benefits, educational assistance, and flexible work schedules. The Clawback Policy applies to executive officers, promoting accountability.
• Customers: Benefit from the company's commitment to developing tailored products and solutions, affordable home ownership options, and robust information security and data privacy policies protecting their data.
• Communities: Benefit from the company's employee volunteerism, lending products designed to meet community needs, and the consistent 'Outstanding' Community Reinvestment Act (CRA) rating for 30 years.
• Creditors: Benefit from the company's exceptional liquidity, capital strength, and disciplined risk management, reinforcing the long-term resilience of the balance sheet.

Next Steps

• Shareholders are invited to attend and vote at the virtual Annual Meeting on April 24, 2026.
• Shareholders will vote on the election of four Directors to the 2029 Class, the ratification of KPMG LLP as the independent auditor for 2026, and the advisory approval of executive compensation.
• The Committee on Governance/Directors will follow the requirements described in the company's Bylaws if any director nominee in an uncontested election does not receive a Majority Vote.
• The company will promptly publicly disclose any Board decision regarding director resignations.
• Shareholders intending to present a proposal for the April 30, 2027 annual meeting to be included in the company's proxy statement must submit it by November 13, 2026.
• Shareholders intending to nominate Directors or present proposals not under SEC Rule 14a-8 for the April 30, 2027 annual meeting must provide notice between January 30, 2027, and March 1, 2027.

Key Dates

Recommendation

The company demonstrates strong financial performance and profitability metrics that consistently outperform industry peers, indicating a well-managed and resilient business model. However, recent total shareholder returns have lagged peers, attributed to market dynamics and the company's asset-sensitive balance sheet in a volatile interest rate environment. While the redesigned executive compensation plan for 2026 aims to improve shareholder alignment, the current market conditions and the company's valuation premium suggest a "hold" position until there is clearer evidence of improved TSR performance or a more favorable interest rate outlook.

Keywords

Commerce Bancshares, CBSH, Proxy Statement, Annual Meeting, Executive Compensation, Financial Performance, Banking, Regional Bank, ROAA, P/TBV, Corporate Governance, Risk Management, ESG, Shareholder Return, KPMG, Say on Pay