8-K: Commerce Bancshares Reports Strong Q4 2025 Earnings

Commerce Bancshares, Inc. announced earnings of $1.01 per share for the fourth quarter of 2025, driven by record revenues and robust capital management.

Summary

• Q4 2025 earnings per share were $1.01, matching Q3 2025 and up from $0.96 in Q4 2024.
• Net income for Q4 2025 was $140.7 million, an increase of $4.6 million from Q4 2024, but a slight decrease of $0.9 million from Q3 2025.
• Full-year 2025 earnings per share reached $4.04, up from $3.69 in 2024, with net income of $566.3 million.
• Total assets at December 31, 2025, were $32.9 billion, an increase of $626.4 million over the prior quarter.
• Net interest income increased by $3.7 million quarter-over-quarter to $283.2 million, and by $16.5 million year-over-year.
• Non-interest income grew by $4.7 million quarter-over-quarter to $166.2 million, and by $10.8 million year-over-year, representing 37.0% of total revenue.
• Average loan balances increased by 1.0% quarter-over-quarter to $17.7 billion, and by 3.2% year-over-year.
• Average deposit balances increased by $816.0 million (3.3%) quarter-over-quarter to $25.6 billion.
• The FineMark acquisition was completed on January 1, 2026, valued at approximately $529 million, adding $2.7 billion in loans, $3.1 billion in deposits, and $8.7 billion in wealth assets under administration.

Sentiment

Score: 8

Explanation: The filing reports strong financial performance for both the quarter and the full year, with record revenues, excellent credit quality, robust capital, and strategic growth through acquisition. While there was a slight quarter-over-quarter dip in net income due to specific factors, the overall trend and peer comparisons are highly positive.

Positives

• Q4 2025 earnings per share of $1.01 increased from $0.96 in Q4 2024.
• Full-year 2025 earnings per share of $4.04 significantly increased from $3.69 in 2024.
• Net interest income increased 6% year-over-year to $283.2 million.
• Non-interest income increased 7% year-over-year to $166.2 million, contributing 37% of total revenue.
• Book value per share increased 17% year-over-year to $27.75.
• Tangible common equity to tangible assets ratio grew 119 basis points to 11.11% year-over-year.
• Credit quality remains excellent with non-accrual loans at 0.09% of total loans, down two basis points year-over-year.
• Net loan charge-offs decreased to 0.22% annualized, compared to 0.23% in the prior quarter and 0.25% in the same quarter last year.
• The Tier 1 Common Risk-Based Capital Ratio of 17.46% (as of 9/30/2025) is the 2nd highest among the top 50 U.S. banks.
• Return on Average Common Equity YTD of 15.76% is the 3rd highest among the top 50 U.S. banks.
• The company has a track record of over 7% total annualized return to shareholders over the last 20 years, outperforming the KBW Regional Bank Index.
• This marks the 57th consecutive year of common dividend increases (based on 1Q2025 paid dividend).
• Total cost of deposits decreased 6 basis points from Q3 to 1.14%.
• Unrealized loss on available for sale debt securities decreased $41.7 million to $646.8 million at period end.
• The FineMark acquisition was completed, strengthening wealth management and private banking.

Negatives

• Net income for Q4 2025 decreased slightly by $0.9 million compared to the prior quarter, primarily due to lower gains on investment securities and higher non-interest expense.
• Net interest margin decreased 4 basis points from Q3 to 3.60%.
• Loan yield (FTE) on the loan portfolio decreased 18 basis points quarter-over-quarter to 5.84%.
• Bank card transaction fees decreased 2% year-over-year, mainly due to lower net corporate and credit card fees.
• Non-interest expense increased 7% year-over-year and 4% quarter-over-quarter, partly due to acquisition-related expenses ($3 million in Q4) and a $1.6 million software write-off.

Risks

• Forward-looking statements involve significant risks and uncertainties and are subject to change based on various factors (some of which are beyond Commerce's control).
• Factors that could cause actual results to differ materially from forward-looking statements are set forth in Commerce's Annual Report on Form 10-K for the year ended December 31, 2024, and other SEC filings.

Future Outlook

The company expects approximately $1.2 billion in cash flows from maturities and paydowns of investments over the next twelve months. The FineMark systems conversion is targeted for late 2026.

Management Comments

• "Commerce delivered record revenues in the fourth quarter, driven by strong performance across both net interest income and non-interest income. Our overall results for the quarter and the full year are a reflection of the strength and diversity of our businesses and the dedication of our team members in serving our customers, communities and shareholders." John Kemper, President and CEO.
• "We repurchased 2.2 million common shares in the fourth quarter and ended the year with robust levels of liquidity and capital." John Kemper, President and CEO.
• "Compared to the same period last year, tangible common equity to tangible assets ratio grew 119 basis points to 11.11%, and our book value per share increased by $4.09, or 17%, to $27.75." John Kemper, President and CEO.
• "Credit quality remains excellent with non-accrual loans at .09% of total loans, down two basis points from the same period last year." John Kemper, President and CEO.
• "On January 1, 2026, we closed on the FineMark acquisition and officially welcomed our new colleagues into our organization. This combination strengthens our platform for sustained growth in wealth management and private banking, and I am eager see what we can accomplish together." John Kemper, President and CEO.

Industry Context

Commerce Bancshares continues to demonstrate strong performance relative to its peers, ranking 43rd largest U.S. bank by asset size and 27th by market cap (as of 9/30/2025). Its Tier 1 Common Risk-Based Capital Ratio is the 2nd highest among the top 50 U.S. banks, and its YTD Return on Average Common Equity is the 3rd highest. The company's conservative risk profile is reflected in significantly lower net loan charge-offs and non-accrual loans compared to peer averages, indicating superior credit quality management in the current banking environment. The acquisition of FineMark Holdings, Inc. aligns with a broader industry trend of consolidation and expansion in wealth management and private banking sectors to diversify revenue streams and enhance fee income.

Comparison to Industry Standards

• Tier 1 Risk-Based Capital Ratio of 17.5% significantly exceeds the peer median of 13.2%.
• Average Loan to Deposit Ratio of 69% is considerably lower than the peer average of 82%, indicating strong liquidity.
• Net Loan Charge-Offs (NCOs) of $16.0 million for Q4 2025 are substantially lower than the peer average of $140.6 million.
• NCO/Average Loans of 0.22% is significantly better than the peer average of 0.95%.
• Allowance for Credit Losses (ACL) to Total Loans of 1.01% is lower than the peer average of 1.36%, reflecting better credit quality.
• Non-Accrual Loans (NALs) of $15.8 million are much lower than the peer average of $154.4 million.
• NALs/Total Loans of 0.09% is significantly better than the peer average of 0.58%.
• ACL/NALs of 11.4x is substantially higher than the peer average of 2.8x, indicating a robust allowance coverage for non-accrual loans.
• The company's 20-year annualized return to shareholders of over 7% outperforms the annualized KBW Regional Bank Index return of over 4%.

Stakeholder Impact

• Shareholders: Positive impact due to increased earnings per share, higher book value per share, continued dividend increases (57th consecutive year), and share repurchases ($115 million in Q4). The FineMark acquisition is expected to strengthen the platform for sustained growth.
• Employees: FineMark acquisition welcomed new colleagues, indicating potential for integration and growth opportunities.
• Customers: Enhanced wealth management and private banking services through the FineMark acquisition, and continued high-touch service and personalized financial solutions.

Next Steps

• FineMark systems conversion targeted for late 2026.
• Expected cash flows of approximately $1.2 billion from maturities and paydowns of investments over the next twelve months.

Key Dates

Recommendation

The company delivered strong Q4 and full-year 2025 results, marked by record revenues, excellent credit quality, and robust capital metrics that significantly outperform industry peers. The successful integration of FineMark Holdings, Inc. positions the company for sustained growth in key strategic areas like wealth management. Consistent shareholder returns, including a 57-year dividend increase streak and active share repurchases, underscore a strong commitment to shareholder value. Despite a slight QoQ dip in net income due to non-recurring items, the underlying business strength and strategic execution warrant a strong buy recommendation for long-term investors.

Keywords

Commerce Bancshares, CBSH, Q4 2025 Earnings, Financial Results, Banking, Wealth Management, SEC Filing, Regional Bank, Net Interest Income, Non-Interest Income, Loan Growth, Deposit Growth, Credit Quality, FineMark Acquisition, Capital Ratios, Share Repurchase, Dividends