Insiders ranked by realized 90-day signed return on their open-market trades at Commerce Bancshares Inc /Mo/. Minimum 3 scored trades. Returns are signed - a sale followed by a rally counts against the insider.
Year-over-year tone shift - average net-tone change across Risk Factors and MD&A vs the prior 10-K. This filing is 0.12pp more bullish than last year's.
Why YoY instead of absolute: the LM lexicon has ~6.6× more negative words than positive (legal/risk-disclosure language is heavy on hedging), so every 10-K reads bearish on raw tone. Year-over-year change strips that bias and surfaces the actual shift in management's framing.
Tone shift by section
The two components the gauge averages: how Risk Factors and MD&A each shifted in net tone versus last year's 10-K. The headline above is their average, so a green needle over a soft section just means the other section carried it.
Real-time Form 4 intelligence. Smarter insider tracking.
Flat
Net-tone change vs last year's 10-K.
MD&A
+0.02pp
Flat
Net-tone change vs last year's 10-K.
Per-snippet highlights
Sentence-level sentiment highlighting with category and subcategory filters is coming once the snippet-scoring pipeline lands. For now, dig into the actual section text on the Sections tab.
Language change vs prior 10-K
Risk Factors (Item 1A) - words with the biggest YoY frequency increase
Negative rising
loss+3
adverse+2
adversely+2
unanticipated+2
unable+2
Positive rising
successfully+3
success+2
successful+2
efficiencies+2
benefit+2
Risk Factors (Item 1A)
5,751 words
Item 1a. RISK FACTORS
Making or continuing an investment in securities issued by the Company, including its common stock, involves certain risks that you should carefully consider. If any of the following risks actually occur, the Company's business, financial condition or results of operations could be negatively affected, the market price for your securities could decline, and you could lose all or a part of your investment. Further, to the extent that any of the information contained in this Annual Report on Form 10-K constitutes forward-looking statements, the risk factors set forth below also are cautionary statements identifying important factors that could cause the Company’s actual results to differ materially from those expressed in any forward-looking statements made by or on behalf of Commerce Bancshares, Inc.
Market Risks
Difficult market conditions may affect the Company’s industry.
The concentration of the Company’s banking business in the United States particularly exposes it to downturns in the U.S. economy. In particular, the Company may face the following risks in connection with market conditions:
Language change vs prior 10-K
MD&A (Item 7) - words with the biggest YoY frequency increase
Negative rising
declined+4
loss+2
litigation+2
losses+1
unfunded+1
Positive rising
gains+5
effective+2
improvements+2
enhancements+2
benefit+1
MD&A (Item 7)
28,270 words
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Forward-Looking Statements
This report may contain “forward-looking statements” that are subject to risks and uncertainties and include information about possible or assumed future results of operations. Many possible events or factors could affect the future financial results and performance of Commerce Bancshares, Inc. and its subsidiaries (the "Company"). This could cause results or performance to differ materially from those expressed in the forward-looking statements. Words such as “expects”, “anticipates”, “believes”, “estimates”, variations of such words and other similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions which are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in, or implied by, such forward-looking statements. Readers should not rely solely on the forward-looking statements and should consider all uncertainties and risks discussed throughout this report. Forward-looking statements speak only as of the date they are made. The Company does not undertake to update forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements are made or to reflect the occurrence of unanticipated events. Such possible events or factors include the risk factors identified in Item 1a Risk Factors and the following: changes in economic conditions in the Company’s market area; changes in policies by regulatory agencies, governmental legislation and regulation; fluctuations in interest rates; changes in liquidity requirements; demand for loans in the Company’s market area; changes in accounting and tax principles; estimates made on income taxes; of settlement agreements to become final in accordance with their terms; and competition with other entities that offer financial services.
• In 2025, the United States ("U.S.") economy experienced positive but uneven growth. The economy saw moderating but persistently elevated inflation, a solid but slowing labor market, and solid consumer spending, particularly later in 2025. Uncertainties about tariff policies and international trade contributed to price pressures and uncertainty. Looking ahead to 2026, inflationary pressures have eased but elevated living costs are still a concern for consumers, and uncertainty remains around tariffs, monetary policy, and unemployment.
• The U.S. economy is affected by global events and conditions, including U.S. trade disputes and renewed trade agreements with various countries. Although the Company does not directly hold foreign debt or have significant activities with foreign customers, the global economy, the strength of the U.S. dollar, international trade conditions, and oil prices may ultimately affect interest rates, business import/export activity, capital expenditures by businesses, and investor confidence. Unfavorable changes in these factors may result in declines in consumer credit usage, adverse changes in payment patterns, reduced loan demand, and higher loan delinquencies and default rates. These could impact the Company’s future provision for credit losses, as a significant part of the Company’s business includes consumer and credit card lending.
• In addition to the results above, a slowdown in economic activity may cause declines in financial services activity, including declines in bank card, corporate cash management and other fee businesses, as well as the fees earned by the Company on such transactions.
• The process used to estimate credit losses in the Company’s loan portfolio requires difficult, subjective, and complex judgments, including consideration of economic conditions and how these economic predictions might impair the ability of its borrowers to repay their loans. If an instance occurs that renders these predictions no longer capable of accurate estimation, this may in turn impact the reliability of the process.
• Competition in the industry could intensify as a result of the increasing consolidation of financial services companies in connection with current market conditions, thereby reducing market prices for various products and services which could in turn reduce the Company’s revenues.
The performance of the Company is dependent on the economic conditions of the markets in which the Company operates.
The Company’s success is heavily influenced by the general economic conditions of the specific markets in which it operates. Unlike larger national or other regional banks that are more geographically diversified, the Company provides financial services primarily throughout the states of Missouri, Kansas, central Illinois, Oklahoma, and Colorado. It also has a growing presence in additional states through its offices in: Texas, Iowa, Indiana, Michigan, Ohio, Florida, and Tennessee that serve commercial or trust customers. As the Company does not have a significant banking presence in other parts of the country, a prolonged economic downturn in the markets where the Company has a primary or growing presence could have a material adverse effect on the Company’s financial condition and results of operations.
The Company operates in a highly competitive industry and market area.
The Company operates in the financial services industry and has numerous competitors including other banks and insurance companies, securities dealers, brokers, trust and investment companies, mortgage bankers, and financial technology companies. Consolidation among financial service providers and new changes in technology, product offerings and regulation continue to challenge the Company's marketplace position. As consolidation occurs, larger regional and national banks may enter the Company's markets and add to existing competition. Large, national financial institutions have substantial capital, technology and marketing resources. These new competitors may lower fees to grow market share, which could result in a loss of
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customers and lower fee revenue for the Company. They may have greater access to capital at a lower cost than the Company, and may have higher loan limits, both of which may adversely affect the Company’s ability to compete effectively. The Company must continue to make investments in its products and delivery systems to stay competitive with the industry, or its financial performance may suffer.
Regulatory and Compliance Risks
The Company is subject to extensive government regulation and supervision.
As part of the financial services industry, the Company is subject to extensive federal and state regulation and supervision. Banking regulations are primarily intended to protect depositors’ funds, federal deposit insurance funds, and the banking system, not shareholders. These regulations affect the Company’s lending practices, capital structure, investment practices, dividend policy, and growth, among other things. Congress and federal regulatory agencies continually review banking laws, regulations, and policies for possible changes. Changes to statutes, regulations, or regulatory policies, including changes in interpretation or implementation of statutes, regulations, or policies, could affect the Company in substantial and unpredictable ways. Such changes could subject the Company to additional costs, limit the types of financial services and products it may offer, restrict the Company's ability to pay dividends, subject the Company to higher capital requirements, and/or increase the ability of non-banks to offer competing financial services and products, among other things. During November 2023, the FDIC approved a final rule implementing a one-time special assessment to recover the loss to the DIF associated with protecting uninsured depositors following the closures of Silicon Valley Bank and Signature Bank in 2023. Largely as a result of the FDIC's approval of its final rule, the Company's deposit insurance expense was $33.2 million in 2023, compared to $10.6 million in 2022. For the year ended December 31, 2025, the Company's deposit insurance expense was $10.0 million. Assessments driven by regulation, such as these, increased the Company's expenses in 2023 and additional assessments could further increase the Company's expenses.
Beyond the expense of additional regulation, failure to comply with laws, regulations, or policies could result in sanctions by regulatory agencies, civil money penalties, and/or reputation damage, which could have a material adverse effect on the Company’s business, financial condition, and results of operations. While the Company has policies and procedures designed to prevent any such violations, there can be no assurance that such violations will not occur.
Significant changes in federal monetary policy could materially affect the Company’s business.
The Federal Reserve System regulates the supply of money and credit in the United States. Its policies determine in large part the cost of funds for lending and interest rates earned on loans and paid on borrowings and interest-bearing deposits. Credit conditions are influenced by its open market operations in U.S. government securities, changes in the member bank discount rate, and bank reserve requirements. Changes in Federal Reserve Board policies are beyond the Company’s control and difficult to predict, and such changes may result in lower interest margins and a lack of demand for credit products.
Climate-related and other Environmental, Social, and Governance ("ESG") developments could result in additional regulation and reporting for the Company.
In recent years, federal, state and international lawmakers and regulators have increased their focus on financial institutions' and other companies' risk oversight, disclosures and practices in connection with climate change and other ESG matters. For example, the state of California, in which the Company does business, has enacted bills that would require the Company and other entities to report climate-related information such as greenhouse gas emissions and climate-related risks, and other states have proposed climate disclosure legislation. The SEC has also announced plans to propose rules to require enhanced disclosure regarding human capital management and board diversity for public issuers. These additional disclosures and reporting would require increased time and expense for the Company related to information gathering and compliance.
Liquidity and Capital Risks
The Company is subject to both interest rate and liquidity risk.
With oversight from its Asset-Liability Management Committee, the Company devotes substantial resources to monitoring its liquidity and interest rate risk on a monthly basis. The Company's net interest income is the largest source of overall revenue to the Company, representing 63% of total revenue for the year ended December 31, 2025. The interest rate environment in which the Company operates fluctuates in response to general economic conditions and policies of various governmental and regulatory agencies, particularly the Federal Reserve Board, which regulates the supply of money and credit in the U.S. Changes in monetary policy, including changes in interest rates, will influence loan originations, deposit generation, demand for investments and revenues and costs for earning assets and liabilities, and could significantly impact the Company’s net interest income.
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To combat the high inflation experienced in 2022 and 2023, the Federal Reserve Board significantly increased the benchmark interest rate from nearly zero at the start of 2022 to between 4.25% and 4.50% at the end of 2022 and continued to raise interest rates at a more modest pace to between 5.25% and 5.50% by the end of July 2023. These elevated rates remained in effect for the first half of 2024 and drove an increase in unrealized losses in fixed rate asset portfolios. During September 2024, the Federal Reserve began reducing rates as inflation began to subside. Rates remained unchanged at 4.25% to 4.50% throughout the first eight months of 2025 until the Federal Reserve Board cut rates .25% in September 2025. By December 2025, the Federal Reserve had implemented 3 rate cuts for the year. Monetary policy led by the Federal Reserve in the coming year will play a crucial role in liquidity and interest rate risk. Future economic conditions or other factors could shift monetary policy resulting in additional increases or decreases in the benchmark rate. Furthermore, changes in interest rates could result in unanticipated changes to customer deposit balances and adversely affect the Company’s liquidity position.
The soundness of other financial institutions could adversely affect the Company.
As demonstrated by banking failures within the industry during 2023, the Company’s ability to engage in routine funding transactions could be adversely affected by the actions and commercial soundness of other financial institution counterparties. Financial services institutions are interrelated because of trading, clearing, counterparty or other relationships. The Company has exposure to many different industries and counterparties and routinely executes transactions with counterparties in the financial industry, including brokers and dealers, commercial banks, investment banks, mutual funds, and other institutional clients. Transactions with these institutions include overnight and term borrowings, interest rate swap agreements, securities purchased and sold, short-term investments, and other such transactions. Because of this exposure, defaults by, or rumors or questions about, one or more financial services institutions or the financial services industry in general, could lead to market-wide liquidity problems and defaults by other institutions. Many of these transactions expose the Company to credit risk in the event of default of its counterparty or client, while other transactions expose the Company to liquidity risks should funding sources quickly disappear. In addition, the Company’s credit risk may be exacerbated when the collateral held cannot be realized or is liquidated at prices not sufficient to recover the full amount of the exposure due to the Company. Any such losses could materially and adversely affect results of operations.
Decreased confidence in regional banks among deposit customers, investors, and other counterparties may cause significant disruption, volatility and reduced valuations of equity and other securities of banks in the capital markets. Rapidly rising interest rates could result in an increase in unrealized losses in the Company's available for sale debt securities portfolio. Additionally, rising interest rates may result in increased competition for bank deposits. These events could have adverse impacts on the market price and volatility of the Company’s stock. These events could also lead to increases in the Company’s interest expense, as it could require the Company to raise interest rates paid to depositors in order to compete with other banks, and in an effort to replace deposits, seek borrowings which carry higher interest rates.
Bank failures during 2023 caused concern and uncertainty regarding the liquidity adequacy of the banking sector as a whole and resulted in some regional bank customers choosing to maintain deposits with larger financial institutions. A significant reduction in the Company’s deposits could materially and adversely impact the Company’s liquidity, ability to fund loans, and results of operations. In addition to customer deposits, the Company borrows on an overnight and short-term basis from third parties in the form of federal funds purchased and repurchase agreements and through lines of credit and borrowings from the FHLB and FRB. If the Company were not able to access borrowings through those facilities due to an increase in demand from other banks or due to insufficient levels of pledgeable assets, its ability to borrow funds may be materially adversely impacted.
Commerce Bancshares, Inc. relies on dividends from its subsidiary bank for most of its revenue.
Commerce Bancshares, Inc. is a separate and distinct legal entity from its banking and other subsidiaries. It receives substantially all of its revenue from dividends from its subsidiary bank. These dividends, which are limited by various federal and state regulations, are the principal source of funds to pay dividends on its common stock and to meet its other cash needs. In the event the subsidiary bank is unable to pay dividends, the Company may not be able to pay dividends or other obligations, which would have a material adverse effect on the Company's financial condition and results of operations.
Operational Risks
The Company’s asset valuation may include methodologies, models, estimations and assumptions which are subject to differing interpretations and could result in changes to asset valuations that may materially adversely affect its results of operations or financial condition.
The Company uses estimates, assumptions, and judgments when certain financial assets and liabilities are measured and reported at fair value. Assets and liabilities carried at fair value inherently result in greater financial statement volatility. Fair values and the information used to record valuation adjustments for certain assets and liabilities are based on quoted market prices and/or other observable inputs provided by independent third-party sources, when available. When such third-party
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information is not available, fair value is estimated primarily by using cash flow and other financial modeling techniques utilizing assumptions such as credit quality, liquidity, interest rates and other relevant inputs. Changes in underlying factors, assumptions, or estimates in any of these areas could materially impact the Company’s future financial condition and results of operations. Furthermore, if models used to calculate fair value of financial instruments are inadequate or inaccurate due to flaws in their design or execution, upon sale, the Company may not realize the cash flows of a financial instrument as modeled and could incur material, unexpectedlosses.
During periods of market disruption, including periods of significantly rising or high interest rates, rapidly widening credit spreads or illiquidity, it may be difficult to value certain assets if trading becomes less frequent and/or market data becomes less observable. There may be certain asset classes in active markets with significant observable data that become illiquid due to the current financial environment. In such cases, certain asset valuations may require more subjectivity and management judgment. As such, valuations may include inputs and assumptions that are less observable or require greater estimation. Further, rapidly changing and unprecedented credit and equity market conditions could materially impact the valuation of assets as reported within the Company’s consolidated financial statements, and the period-to-period changes in value could vary significantly. Decreases in value may have a material adverse effect on results of operations or financial condition.
The Company’s operations rely on certain external vendors.
The Company relies on third-party vendors to provide products and services necessary to maintain day-to-day operations. For example, the Company outsources a portion of its information systems, communication, data management, and transaction processing to third parties. Accordingly, the Company is exposed to the risk that these vendors might not perform in accordance with the contracted arrangements or service level agreements because of changes in the vendor’s organizational structure, financial condition, support for existing products and services, or strategic focus. Such failure to perform could be disruptive to the Company’s operations, which could have a materially adverse impact on its business, financial condition and results of operations. These third parties are also sources of risk associated with operational errors, system interruptions or breaches and unauthorized disclosure of confidential information. If the vendors encounter any of these issues, the Company could be exposed to disruption of service, damage to reputation and litigation. Because the Company is an issuer of both debit and credit cards, it is periodically exposed to losses related to security breaches which occur at retailers that are unaffiliated with the Company (e.g., customer card data being compromised at retail stores). These losses include, but are not limited to, costs and expenses for card reissuance as well as losses resulting from fraudulent card transactions.
Integrating FineMark into the Company may be more difficult, costly, or time consuming than expected and the anticipated benefits and cost savings of the Merger may not be realized.
The success of the Company’s Merger with FineMark, including anticipated benefits and cost savings, will depend, in part, on the Company's ability to successfully combine and integrate the businesses of the Company and FineMark in a manner that permits growth opportunities and does not materially disrupt the existing customer relations nor result in decreased revenues due to loss of customers. It is possible that the integration process could result in the disruption of either company’s ongoing businesses or inconsistencies in standards, controls, procedures, and policies that adversely affect the combined company’s ability to maintain relationships with clients, customers, depositors, and employees or to achieve the anticipated benefits and cost savings of the Merger. If the Company experiences difficulties with the integration process, the anticipated benefits of the Merger may not be realized fully or at all, or may take longer to realize than expected. Integration efforts will also divert management attention and resources. These integration matters could have an adverse effect on the Company for an undetermined period after completion of the Merger. An inability to realize the full extent of the anticipated benefits of the Merger and the other transactions contemplated by the Merger Agreement, as well as any delays encountered in the integration process, could have an adverse effect upon the revenues, levels of expenses and operating results of the Company following the completion of the Merger, which may adversely affect the value of the common stock of the Company following the completion of the Merger. Additionally, following consummation of the acquisition of FineMark, the Company made fair value estimates of certain assets and liabilities in recording the acquisition. Actual values of these assets and liabilities could differ from the estimates, which could impact regulatory capital ratios and result in the Company not achieving the anticipated benefits of the acquisition of FineMark.
There can be no assurances that the Company will be successful following the acquisition of FineMark or that it will realize the expected operating efficiencies, cost savings or other benefits currently anticipated from the acquisition of FineMark.
The Company has incurred and is expected to incur substantial costs related to the Merger.
The Company has incurred and is expected to continue to incur substantial expenses in connection with the Merger. These costs include legal, financial advisory, accounting, consulting, and other advisory fees, retention, severance, and employee benefit-
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related costs, public company filing fees and other regulatory fees, financial printing and other printing costs, closing, integration and other related costs.
Additional unanticipated costs may be incurred in the integration of the Company’s business with the business of FineMark, and there are many factors beyond the Company’s control that could affect the total amount or timing of integration costs. Although the Company expects that the elimination of duplicative costs, as well as the realization of other efficiencies related to the integration of the businesses, may offset incremental transaction and acquisition-related costs over time, this net benefit may not be achieved in the near term, or at all.
The Company may be unable to retain personnel successfully.
The success of the Merger will depend in part on the Company’s ability to retain the talent and dedication of key employees. It is possible that these employees may decide not to remain with the Company, and if the Company is unable to retain key employees, including management, who are critical to the successful integration and future operations of the companies, the Company could face disruptions in their operations, loss of existing customers, loss of key information, expertise or know-how and unanticipated additional recruitment costs. In addition, if key employees terminate their employment, the Company’s business activities may be adversely affected, as management’s attention may be diverted from successfully hiring suitable replacements and may not be able to locate or retain suitable replacements for any key employees who leave, all of which may cause the Company’s business to suffer.
Credit Risks
The allowance for credit losses may be insufficient or future credit losses could increase.
The allowance for credit losses on loans and the liability for unfunded lending commitments at December 31, 2025 reflect management's estimate of credit losses expected in the loan portfolio, including unfunded lending commitments, as of the balance sheet date. See Note 2 to the consolidated financial statements and the section captioned “Allowance for Credit Losses on Loans and Liability for Unfunded Lending Commitments” in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, of this report for further discussion related to the Company’s process for determining the appropriate level of the allowance for credit losses on loans and the liability for unfunded lending commitments at December 31, 2025.
The Company's estimate of credit losses utilizes a life of loan loss concept, and the level of the allowance is based on management’s methodology that utilizes historical net charge-off rates and adjusts for the impacts in the reasonable and supportable forecast and other qualitative factors. Key assumptions include the application of historical loss rates, prepayment speeds, economic forecast results of a reasonable and supportable period, the period to revert to historical loss rates, and qualitative factors. The Company’s allowance level is subject to review by regulatory agencies, and that review could also result in adjustments to the allowance for credit losses. Additionally, the volatility of the Company's provision for credit losses may change from year to year due to macroeconomic variables that influence the Company's loss estimates, and the volatility in credit losses may be material to the Company's earnings.
The Company’s investment portfolio values may be adversely impacted by deterioration in the credit quality of underlying collateral within the various categories of investment securities it owns.
The Company maintains a portfolio of investments, which includes available for sale debt securities, trading securities, equity securities, and other investments. The Company does not hold any investments classified as held-to-maturity. The Company generally invests in liquid, investment grade securities, however, these securities are subject to changes in market value due to changing interest rates and implied credit spreads. While the Company maintains prudent risk management practices over bonds issued by municipalities and other issuers, credit deterioration in these bonds could occur and result in losses. Certain mortgage and asset-backed securities (which are collateralized by residential mortgages, credit cards, automobiles, mobile homes or other assets) may decline in value due to actual or expected deterioration in the underlying collateral. Under accounting rules, when an available for sale debt security is in an unrealized loss position, the entire loss in fair value is required to be recognized in current earnings if the Company intends to sell the security or believes it is more likely than not that the Company will be required to sell the security before the value recovers. Additionally, the current expected credit loss model (CECL) requires that lifetime expected credit losses on securities be recorded in current earnings. This could result in significant losses.
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The Company could recognize losses on securities held in its securities portfolio, particularly if it were to sell a significant portion of its investments prior to maturity.
The Company's available for sale debt securities portfolio is carried at fair value, with unrealized gains and losses carried in accumulated other comprehensive income (loss) within shareholder's equity. The fair value of investments, including available for sale debt investments, may change with changes in interest rates, credit concerns, or other economic factors. Due mostly to the increase in interest rates during 2022 and 2023, the fair value of the Company's available of sale debt securities included a net unrealized loss of $646.8 million at December 31, 2025. As of December 31, 2025, the Company has the intent and ability to maintain its available for sale debt investments until recovery of their amortized cost basis. However, if in the future the Company were to elect to sell or needed to sell the investments before the recovery of their amortized cost basis, the Company could realize significant losses in its income statement.
Strategic Risk
New lines of business or new products and services may subject the Company to additional risk.
From time to time, the Company may implement new lines of business or offer new products and services within existing lines of business. There are substantial risks and uncertainties associated with these efforts, particularly in instances where the markets are not fully developed. In developing and marketing new lines of business and new products or services, the Company may invest significant time and resources. Initial timetables for the introduction and development of new lines of business and new products or services may not be achieved and price and profitability targets may not prove feasible. External factors, such as compliance with regulations, competitive alternatives and shifting market preferences may also impact the successful implementation of a new line of business or a new product or service. Furthermore, any new line of business, or new product or service, could have a significant impact on the effectiveness of the Company’s system of internal controls. Failure to successfully manage these risks in the development and implementation of new lines of business and new products or services could have a material adverse effect on the Company’s financial condition and results of operations.
Technology Risks
A successful cyber attack or other computer system breach could significantly harm the Company, its reputation and its customers.
The Company relies heavily on communications and information systems to conduct its business, and as part of its business, the Company maintains significant amounts of data about its customers and the products they use. The Company’s data is maintained on its own systems and on the systems of its vendors, business partners and third-party service providers. The Company relies on a layered system of security controls to secure collection, transmission, storage, and retrieval of data, including confidential data, in its computer systems and the systems of third parties. Information security risks continue to increase due to new technologies, the increasing use of the Internet and telecommunication technologies (including mobile devices) to conduct financial and other business transactions, and the increased sophistication and activities of organized crime, perpetrators of fraud, hackers, and others. These risks may also be intensified by factors such as an increased volume and complexity of cyber attacks during periods of heightened geopolitical tensions and emerging technological innovations, such as the use of artificial intelligence (“AI”) tools and quantum computing, that may enablemalicious actors to develop more advanced social engineering attacks, circumvent security controls, evade detection and remove forensic evidence. These risks may also be intensified by factors such as an increased volume and complexity of cyber attacks during periods of heightened geopolitical tensions and emerging technological innovations, such as the use of artificial intelligence (“AI”) tools and quantum computing, that may enablemalicious actors to develop more advanced social engineering attacks, circumvent security controls, evade detection and remove forensic evidence. The Company has faced security incidents, which have been minor in scope and impact, and it expects unauthorized parties to continue to attempt to gain access to its systems or information, as well as those of its business partners and service providers. The Company makes significant investments in various technology to identify and prevent intrusions into its information systems. The Company has policies, procedures and controls designed to identify, protect, detect, respond, and recover from security incidents. The Company also requires ongoing security awareness training for employees, hosts tabletop exercises to test response readiness, and performs regular audits using both internal and outside resources. However, there can be no assurance that any such failures, interruptions or security breaches will not occur, or if they do occur, that they will be adequately addressed. In addition to unauthorized access, denial-of-service attacks or other operational disruptions could prevent the Company from adequately serving customers. Should any of the Company's systems become compromised or customer information be obtained by unauthorized parties, the reputation of the Company could be damaged, relationships with existing customers may be impaired, and the Company could be subject to lawsuits, all of which could result in lost business and have a material adverse effect on the Company’s business, financial condition and results of operations.
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The Company continually encounters technological change.
The financial services industry is continually undergoing rapid technological change with frequent introductions of new technology-driven products and services, including the entrance of financial technology companies offering new financial service products. The Company regularly upgrades or replaces technological systems to increase efficiency, enhance product and service capabilities, eliminate risks of end-of-lifecycle products, reduce costs, and better serve our customers. As the Company completes system upgrades, it may face operational risks after system conversions, including disruptions to its technology systems, which may adversely impact customers. The Company’s future success depends, in part, upon its ability to address the needs of its customers by using technology to provide products and services that will satisfy customer demands, as well as to create additional efficiencies in the Company’s operations. Many of the Company’s competitors have substantially greater resources to invest in technological improvements. The Company may encounter significant problems in effectively implementing new technology-driven products and services and may not be successful in marketing the new products and services to its customers. These problems might include significant time delays, cost overruns, loss of key people, and technological system failures. Failure to successfully keep pace with technological change affecting the financial services industry or failure to successfully complete the replacement of technological systems could have a material adverse effect on the Company’s business, financial condition and results of operations.
General Risks
The Company must attract and retain skilled employees.
The Company’s success depends, in large part, on its ability to attract and retain key people. Competition for the best people can be intense, and the Company spends considerable time and resources attracting, hiring, and retaining qualified people for its various business lines and support units. The unexpectedloss of the services of one or more of the Company’s key personnel could have a material adverse impact on the Company’s business because of their skills, knowledge of the Company’s market, and years of industry experience, as well as the difficulty of promptly finding qualified replacement personnel.
Public health threats or outbreaks of communicable diseases could have an adverse effect on the Company's operations and financial results.
The Company may face risks related to public health threats or outbreaks of communicable diseases. A widespread healthcare crisis, such as an outbreak of a communicable disease could adversely affect the global economy and the Company’s financial performance. For example, the global COVID-19 pandemic caused significant disruption and harm to the economy and the financial markets in which the Company operates.
As seen during the COVID-19 pandemic, fallout from economic and societal changes resulting from significant public health threats may cause prolonged global or national recessionary economic conditions, which could have a material adverse effect on the Company's business, results of operations and financial condition. The potential impacts of future epidemics, pandemics, or other outbreaks of an illness, disease, or virus could therefore materially and adversely affect the Company's business, revenue, operations, financial condition, liquidity and cash flows.
Our business and financial results may be affected by societal and governmental responses to climate change and related environmental issues.
The current and anticipated effects of climate change have raised concerns for the condition of the global environment. These concerns have changed and will continue to change the behavior of consumers and businesses. Further, governments have increased their attention on the issue of climate change. As a result, international agreements have been signed to attempt to reduce global temperatures and federal and state legislative and regulatory initiatives have been proposed to seek to mitigate the effects of climate change. The Company and its customers may need to respond to new laws and regulations as well as new consumer and business preferences resulting from climate change concerns. These changes may result in cost increases, asset value reductions, and operating process changes to the Company and its customers. The impact on our customers will likely vary depending on their specific attributes, including reliance on or role in carbon intensive activities. Among the impacts to the Company could be a drop in demand for our products and services, particularly in certain industries. In addition, the Company could experience reductions in creditworthiness on the part of some customers or in the value of assets securing loans. The Company’s efforts to take these risks into account in making lending and other decisions, including by increasing the Company’s business with climate-friendly companies, may not be effective in protecting the Company from the adverse impact of new laws and regulations or changes in consumer or business behavior.
failure
litigation
Overview
The Company operates as a super-community bank and offers a broad range of financial products to consumer, municipal, and commercial customers, delivered with a focus on high-quality, personalized service. The Company is headquartered in Missouri, with its principal offices in Kansas City and St. Louis, Missouri. Customers are served from 236 locations primarily in Missouri, Kansas, Illinois, Oklahoma and Colorado and commercial offices throughout the nation's midsection. A variety of delivery platforms are utilized, including an extensive network of branches and ATM machines, full-featured online banking, a mobile application, and a centralized contact center.
The core of the Company’s competitive advantage is its focus on the local markets in which it operates, its offering of competitive, sophisticated financial products, and its concentration on relationship banking and high-touch service. In order to enhance shareholder value, the Company targets core revenue growth. To achieve this growth, the Company focuses on strategies that will expand new and existing customer relationships, offer opportunities for controlled expansion in additional markets, utilize improved technology, and enhance customer satisfaction.
Various indicators are used by management in evaluating the Company’s financial condition and operating performance. Among these indicators are the following:
• Net income and earnings per share — Net income attributable to Commerce Bancshares, Inc. during 2025 was $566.3 million, an increase of 7.6% compared to the previous year. The return on average assets was 1.79% in 2025, and the return on average common equity was 15.76%. Diluted earnings per share increased 9.5% in 2025 compared to 2024.
• Total revenue — Total revenue is comprised of net interest income and non-interest income. Total revenue in 2025 increased $108.3 million, or 6.5%, from 2024, as net interest income grew $71.6 million, and non-interest income increased $36.7 million. Growth in net interest income resulted principally from increases in interest income from investment securities, and a decrease in interest expense on borrowings and deposits. The increase in non-interest income in 2025 was mainly due to higher trust fees and deposit account fees, partly offset by lower bank card fees.
• Non-interest expense — Total non-interest expense increased 3.0% this year compared to 2024, mainly due to higher salaries and employee benefits expense and professional and other services expense, partially offset by lower deposit insurance expense.
• Asset quality — Net loan charge-offs totaled $40.7 million in 2025, an increase of $1.8 million from those recorded in 2024, and averaged .23% of loans in both 2025 and 2024. Total non-performing assets, which include non-accrual loans and foreclosed real estate, amounted to $17.0 million at December 31, 2025, compared to $18.6 million at December 31, 2024, and represented .10% of loans outstanding at December 31, 2025.
• Shareholder return — During 2025, the Company paid cash dividends of $1.05 per share on its common stock, representing an increase of 6.9% over the previous year. In 2025, the Company issued its 32nd consecutive annual 5% common stock dividend, and in February 2026, the Company's Board of Directors authorized an increase of 5.0% in
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the common cash dividend. The Company purchased 3,608,530 shares in 2025. Total shareholder return, including the change in stock price and dividend reinvestment, was 2.1%, 9.1%, and 9.2% over the past 5, 10, and 15 years, respectively.
The following discussion and analysis should be read in conjunction with the consolidated financial statements and related notes. The historical trends reflected in the financial information presented below are not necessarily reflective of anticipated future results.
Key Ratios
(Based on average balances)
Return on total assets
Return on common equity
Equity to total assets
Loans to deposits (1)
Non-interest bearing deposits to total deposits
Net yield on interest earning assets (tax equivalent basis)
(Based on end of period data)
Non-interest income to revenue (2)
Efficiency ratio (3)
Tier I common risk-based capital ratio
Tier I risk-based capital ratio
Total risk-based capital ratio
Tier I leverage ratio
Tangible common equity to tangible assets ratio (4)
Common cash dividend payout ratio
(1) Includes loans held for sale.
(2) Revenue includes net interest income and non-interest income.
(3) The efficiency ratio is calculated as non-interest expense (excluding intangibles amortization) as a percent of total revenue.
(4) The tangible common equity to tangible assets ratio is a measurement which management believes is a useful indicator of capital adequacy and utilization. It provides a meaningful basis for period to period and company to company comparisons, and also assists regulators, investors and analysts in analyzing the financial position of the Company. Tangible common equity and tangible assets are non-GAAP measures and should not be viewed as substitutes for, or superior to, data prepared in accordance with GAAP.
The following table is a reconciliation of the GAAP financial measures of total equity and total assets to the non-GAAP measures of total tangible common equity and total tangible assets.
(Dollars in thousands)
Total equity
Less non-controlling interest
Less goodwill
Less intangible assets*
Total tangible common equity (a)
Total assets
Less goodwill
Less intangible assets*
Total tangible assets (b)
Tangible common equity to tangible assets ratio (a)/(b)
* Intangible assets other than mortgage servicing rights.
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Results of Operations
$ Change
% Change
(Dollars in thousands)
Net interest income
Provision for credit losses
Non-interest income
Investment securities gains (losses), net
Non-interest expense
Income taxes
Income (expense) attributable to non-controlling interest
Net income attributable to Commerce
Bancshares, Inc.
N.M. - Not meaningful.
Net income attributable to Commerce Bancshares, Inc. (net income) for 2025 was $566.3 million, an increase of $39.9 million, or 7.6%, compared to $526.3 million in 2024. Diluted income per common share was $4.04 in 2025, compared to $3.69 in 2024. The growth in net income resulted mainly from increases of $71.6 million in net interest income and $36.7 million in non-interest income, partly offset by increases in non-interest expense and the provision for credit losses of $28.6 million and $23.2 million, respectively. The return on average assets was 1.79% in 2025 compared to 1.72% in 2024, and the return on average common equity was 15.76% in 2025 compared to 16.66% in 2024. At December 31, 2025, the ratio of tangible common equity to tangible assets increased to 11.11%, compared to 9.92% at year end 2024.
During 2025, net interest income grew mainly due to an increase of $38.4 million in interest income earned on investment securities and $19.7 million in interest income on securities purchased under resell agreements, both due to higher average balances and rates, and a decrease of $39.7 million in interest expense on deposits, mainly due to lower average rates. These increases to net interest income were partly offset by a decrease of $26.3 million in interest earned on loans, due to lower average rates, partly offset by higher average balances. Total rates earned on average interest earning assets decreased six basis points this year, while funding costs decreased 28 basis points for deposits and 69 basis points for borrowings. The provision for credit losses increased mainly due to higher net loan charge-offs and an increase in the estimate of the allowance for credit losses on loans this year compared to last year. These increases were slightly offset by a decrease in the liability for unfunded lending commitments. Net loan charge-offs increased $1.8 million, mainly due to higher consumer credit card and business loan net charge-offs in 2025.
Non-interest income grew 6.0% in 2025, mainly due to increases in trust fees and deposit account fees. Net investment securities gains of $3.7 million were recorded in 2025 and were comprised mainly of fair value gains on the Company's private equity investment portfolio, partly offset by losses on sales of available for sale debt securities. Non-interest expense increased $28.6 million in 2025 compared to 2024, mainly due to higher salaries and benefits expense, data processing and software expense and professional and other services expense.
Net income for 2024 was $526.3 million, an increase of $49.3 million, or 10.3%, compared to $477.1 million in 2023. Diluted income per common share was $3.69 in 2024, compared to $3.30 in 2023. The growth in net income resulted mainly from increases of $42.5 million in non-interest income and $42.1 million in net interest income, partly offset by increases in non-interest expense and income taxes of $20.2 million and $10.5 million, respectively. The return on average assets was 1.72% in 2024 compared to 1.49% in 2023, and the return on average common equity was 16.66% in 2024 compared to 17.94% in 2023. At December 31, 2024, the ratio of tangible common equity to tangible assets increased to 9.92%, compared to 8.85% at year end 2023.
During 2024, net interest income grew mainly due to an increase of $78.4 million in interest income earned on loans, mainly due to higher average rates, and a decrease of $43.9 million in interest expense on borrowings, mainly due to lower average balances, partly offset by an increase in interest expense on deposits of $90.0 million, mainly due to higher average rates paid. Total rates earned on average interest earning assets increased 52 basis points in 2024, while funding costs increased 52 basis points for deposits and decreased 28 basis points for borrowings. The provision for credit losses increased mainly due to higher net loan charge-offs and an increase in the estimate of the allowance for credit losses on loans this year compared to 2023. These increases were partly offset by a decrease in the liability for unfunded lending commitments. Net loan charge-offs increased $7.8 million, mainly due to higher credit card and consumer loan net charge-offs in 2024, partly offset by a decrease in business loan net charge-offs.
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Non-interest income grew 7.4% in 2024, mainly due to increases in trust fees and deposit account fees. Net investment securities gains of $7.8 million were recorded in 2024 and were comprised mainly of gains on the sales of equity securities, partly offset by losses on sales of available for sale debt securities. Non-interest expense increased $20.2 million in 2024 compared to 2023, mainly due to higher salaries and benefits expense and data processing and software expense, partly offset by a decrease in deposit insurance expense.
The Company distributed a 5% stock dividend for the 32nd consecutive year on December 16, 2025. All per share and average share data in this report has been restated for the 2025 stock dividend.
Critical Accounting Estimates and Related Policies
The Company's consolidated financial statements are prepared based on the application of certain accounting policies, the most significant of which are described in Note 1 to the consolidated financial statements. Certain of these policies require numerous estimates and strategic or economic assumptions that may prove inaccurate or be subject to variations which may significantly affect the Company's reported results and financial position for the current period or future periods. The use of estimates, assumptions, and judgments are necessary when financial assets and liabilities are required to be recorded at, or adjusted to reflect, fair value. Current economic conditions may require the use of additional estimates, and some estimates may be subject to a greater degree of uncertainty due to the current instability of the economy. The Company has identified several policies as being critical because they require management to make particularly difficult, subjective and/or complex judgments about matters that are inherently uncertain and because of the likelihood that materially different amounts would be reported under different conditions or using different assumptions. These estimates and related policies are the Company's allowance for credit losses and fair value measurement policies.
Allowance for Credit Losses
The Company's Allowance for Credit Losses policies govern the processes and procedures used to estimate the collectability of its loan portfolio and unfunded lending commitments, and the potential for credit losses in its available for sale debt securities portfolio.
Allowance for Credit Losses – Loans and Unfunded Lending Commitments
The Company performs periodic and systematic detailed reviews of its loan portfolio and unfunded lending commitments to assess overall collectability. The level of the allowance for credit losses on loans and unfunded lending commitments reflects the Company's estimate of the losses expected in the loan portfolio and unfunded lending commitments over the assets’ contractual term.
The allowance for credit loss is an estimate that is subject to uncertainty due to the various assumptions and judgments used in the estimation process.
The allowance for credit losses is measured on a collective (pool) basis. Loans are aggregated into pools based on similar risk characteristics including borrower type, collateral type and expected credit loss patterns. Loans that do not share similar risk characteristics, primarily large loans on non-accrual status, are evaluated on an individual basis.
The allowance for credit losses is measured using an average historical loss model which incorporates relevant information about past events (including historical credit loss experience on loans with similar risk characteristics), current conditions, and an economic forecast that may affect the collectability of the remaining cash flows over the contractual term of the loans. The calculated loss rate is increased or decreased to reflect expectations of future losses given a single path economic forecast. These adjustments to the loss rate are based on results from various regression models projecting the impact of the macroeconomic variables. The forecast is used for a reasonable and supportable period before reverting to historical averages using a straight-line method.
Additionally, the allowance for credit losses considers other qualitative factors not included in historical loss rates or macroeconomic forecast such as changes in portfolio composition, underwriting practices, or significant unique events or conditions.
Adjustments to the allowance for credit losses are made by increases to or reductions in the provision for credit losses, which are reflected in the consolidated statements of income.
Assumptions, Judgments, and Uncertainties: The uncertainty in the estimation of the allowance for credit losses is created because key assumptions and judgments are applied throughout the process. Key assumptions include segmentation
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of the portfolio into pools, calculations of life of a loan using a combination of contractual terms and expected prepayment speeds and forecast of macroeconomic conditions. The Company utilizes a third-party macro-economic forecast that continuously changes due to economic conditions and events. The single path economic forecast includes key macroeconomic variables including GDP, disposable income, unemployment rate, various interest rates, consumer price index (CPI) inflation rate, housing price index (HPI), commercial real estate price index (CREPI) and market volatility. Each reporting period, the base macroeconomic forecast scenario is evaluated to ensure it is not inconsistent with management’s expectations. Changes in the forecast cause fluctuations in the estimates of the allowance for credit losses on loans and the liability for unfunded lending commitments. Potential changes in any one economic variable may or may not affect the overall allowance because a variety of economic variables and inputs are considered in estimating the allowance, and changes in those variables and inputs may not occur at the same rate, may not be consistent across product types and may have offsetting impacts to other changing variables and inputs.
Data points such as loan mix, level of loan balances outstanding, portfolio performance, line utilization trends and risk ratings change throughout the life of a portfolio which could cause changes to the expected credit losses.
Qualitative factors not included in historical information or macroeconomic forecast require significant judgment to identify and determine how to apply to the estimate for credit losses. The qualitative factors continuously evolve in reaction to other changing assumptions, data inputs and industry trends.
The Company uses its best judgment to assess the macroeconomic forecast, key assumptions and internal and external data in estimating the allowance for credit losses on loans and the liability for unfunded lending commitments. These estimates are subject to continuous refinement based on changes in the underlying external and internal data.
Impact if actual results differ from assumptions : The allowance for credit losses represents management’s best estimate of expected current credit losses in the loan portfolio and within the Company’s unfunded lending commitments, but changes in the inputs and assumptions described above could significantly impact the calculated estimated credit losses. Therefore, actual credit losses may differ significantly from estimated results. Significant deterioration in circumstances relating to loan quality and economic conditions could result in a requirement for additional allowance. Likewise, an upturn in loan quality and improved economic conditions may require a reduction in the allowance for credit losses. In either instance, changes could have a significant impact on our financial condition and results of operations.
Allowance for Credit Losses - Available for Sale Debt Securities
The level of the allowance for credit losses on available for sale securities reflects the Company’s estimate of the losses expected in the available for sale debt security portfolio. In order to estimate the allowance for credit losses on available for sale debt securities, the Company performs quarterly reviews of its investment portfolio to identify securities in an unrealized loss position.
Changes to the allowance for credit losses are made by changes to or reductions in the provision for credit losses, which are reflected in the consolidated statements of income.
Assumptions, Judgments, and Uncertainties: Securities for which fair value is less than amortized cost are reviewed for impairment. Special emphasis is placed on securities whose credit rating has fallen below Baa3 (Moody's) or BBB- (Standard & Poor's), whose fair values have fallen more than 20% below purchase price, or those which have been identified based on management’s judgment. These securities are placed on a watch list and cash flow analyses are prepared on an individual security basis. Certain securities are analyzed using a projected cash flow model, discounted to present value, and compared to the current amortized cost bases of the securities. The model uses input factors such as cash flow projections, contractual payments required, expected delinquency rates, credit support from other tranches, prepayment speeds, collateral lossseverity rates (including loan to values), and various other information related to the underlying collateral. Securities not analyzed using the cash flow model are analyzed by reviewing risk ratings, credit support agreements, and industry knowledge to project future cash flows and any possible credit impairment.
Impact if actual results differ from assumptions : The allowance for credit losses represents management’s best estimate of expected credit losses in the available for sale debt securities portfolio, but significant change in interest rates and deterioration in economic conditions could result in a requirement for additional allowance. Likewise, an increase in interest rates and improved economic conditions may require a reduction in the allowance for credit losses. In either instance, anticipated changes could have a significant impact on our financial condition and results of operations.
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Fair Value Measurement
Investment securities, including available for sale debt, trading, equity and other securities, residential mortgage loans held for sale, derivatives and deferred compensation plan assets and associated liabilities are recorded at fair value on a recurring basis. Additionally, from time to time, other assets and liabilities may be recorded at fair value on a nonrecurring basis, such as loan values that have been reduced based on the fair value of the underlying collateral, other real estate (primarily foreclosed property), non-marketable equity securities and certain other assets and liabilities. These nonrecurring fair value adjustments typically involve write-downs of individual assets or application of lower of cost or fair value accounting.
Assumptions, Judgments, and Uncertainties: Fair value is an estimate of the exchange price that would be received to sell an asset or paid to transfer a liability in an orderly transaction (i.e., not a forced transaction, such as a liquidation or distressed sale) between market participants at the measurement date and is based on the assumptions market participants would use when pricing an asset or liability. Fair value measurement and disclosure guidance establishes a three-level hierarchy for disclosure of assets and liabilities recorded at fair value.
Fair value is measured based on a variety of inputs. Fair value may be based on quoted market prices for identical assets or liabilities traded in active markets (Level 1 valuations). If market prices are not available, quoted market prices for similar instruments traded in active markets, quoted prices for identical or similar instruments in markets that are not active, or model-based valuation techniques for which all significant assumptions are observable in the market are used (Level 2 valuations). Where observable market data is not available, the valuation is generated from model-based techniques that use significant assumptions not observable in the market (Level 3 valuations). Unobservable assumptions reflect the Company’s estimates for assumptions that market participants would use in pricing the asset or liability. Valuation techniques typically include discounted cash flow models and similar techniques, but may also include the use of market prices of assets or liabilities that are not directly comparable to the subject asset or liability.
The selection and weighting of the various fair value techniques may result in a fair value higher or lower than carrying value. Considerable judgment may be involved in determining the amount that is most representative of fair value.
For assets and liabilities recorded at fair value, the Company looks to active and observable market data when developing fair value measurements for those items where there is an active market. Certain assets and liabilities are not actively traded in observable markets, and the Company must use alternative valuation techniques to derive an estimated fair value measurement. In doing so, the Company may be required to make judgments about assumptions market participants would use in estimating the fair value of the financial instrument. The assumptions used to determine fair value adjustments are regularly evaluated by management for relevance under current facts and circumstances.
Changes in market conditions may reduce the availability of quoted prices or observable data. For example, reduced liquidity in the capital markets or changes in secondary market activities could result in observable market inputs becoming unavailable. When market data is not available, the Company uses valuation techniques requiring more management judgment to estimate the appropriate fair value.
Impairment analysis also relates to long-lived assets and core deposit and other intangible assets. An impairmentloss is recognized if the carrying amount of the asset is not likely to be recoverable and exceeds its fair value. In determining the fair value, management uses models and applies the techniques and assumptions previously discussed.
At December 31, 2025, assets and liabilities measured using observable inputs that are classified as either Level 1 or Level 2 represented 98.0% and 99.8% of total assets and liabilities recorded at fair value, respectively. Valuations generated from model-based techniques that use at least one significant assumption not observable in the market are considered Level 3, and the Company's Level 3 assets totaled $185.5 million, or 2.0% of total assets recorded at fair value on a recurring basis. The fair value hierarchy, the extent to which fair value is used to measure assets and liabilities, and the valuation methodologies and key inputs used are discussed in Note 17 on Fair Value Measurements.
Impact if actual results differ from assumptions : Changes in fair value are recorded either in earnings or accumulated other comprehensive income. Adjustments in the inputs and assumptions described above could significantly impact the fair values of the Company’s assets and liabilities and have a significant impact on our financial condition and results of operations.
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Net Interest Income
Net interest income, the largest source of revenue, results from the Company’s lending, investing, borrowing, and deposit gathering activities. It is affected by both changes in the level of interest rates and changes in the amounts and mix of interest earning assets and interest bearing liabilities. The following table summarizes the changes in net interest income on a fully taxable equivalent basis, by major category of interest earning assets and interest bearing liabilities, identifying changes related to volumes and rates. Changes not solely due to volume or rate changes are allocated to rate.
Change due to
Change due to
(In thousands)
Average Volume
Average Rate
Total
Average Volume
Average Rate
Total
Interest income, fully taxable-equivalent basis
Loans:
Business
Real estate - construction and land
Real estate - business
Real estate - personal
Consumer
Revolving home equity
Consumer credit card
Total interest on loans
Loans held for sale
Investment securities:
U.S. government and federal agency obligations
Government-sponsored enterprise obligations
State and municipal obligations
Mortgage-backed securities
Asset-backed securities
Other securities
Total interest on investment securities
Federal funds sold
Securities purchased under agreements to resell
Interest earning deposits with banks
Total interest income
Interest expense
Interest bearing deposits:
Savings
Interest checking and money market
Certificates of deposit of less than $100,000
Certificates of deposit of $100,000 and over
Federal funds purchased
Securities sold under agreements to resell
Other borrowings
Total interest expense
Net interest income, fully taxable-equivalent basis
Net interest income totaled $1.1 billion in 2025, increasing $71.6 million, or 6.9%, compared to $1.0 billion in 2024. On a fully taxable-equivalent (FTE) basis, net interest income totaled $1.1 billion, and increased $72.0 million over 2024. This growth was mainly due to increases of $38.4 million in interest earned on investment securities (FTE), due to higher average balances and rates earned and a decrease of $39.7 million in interest expense on interest bearing deposits, mainly due to lower average rates paid. These increases to income were partly offset by a decrease of $25.9 million in interest earned on loans (FTE), due to lower average rates earned, partly offset by higher average balances. The net yield on earning assets (FTE) was 3.63% in 2025 compared with 3.47% in 2024. The fully taxable-equivalent basis uses a federal income tax rate of 21%.
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During 2025, loan interest income (FTE) declined $25.9 million from 2024 mainly due to a decrease in rates earned, partly offset by growth of $387.3 million, or 2.3%, in average loan balances. The average fully taxable-equivalent rate earned on the loan portfolio decreased 29 basis points to 5.97% in 2025 compared to 6.26% in 2024. The rates earned on the loan portfolio were impacted by actions taken by the Federal Reserve in 2025 and 2024 to lower short-term interest rates, which caused most of the Company's variable rate loan portfolio to re-price lower and fixed rate loans to originate at lower interest rates than the weighted-average of the portfolio of fixed rate loans. Lower interest earned on construction and land, business real estate and business loans was the main driver of overall lower loan interest income. Interest on construction and land loans decreased $15.7 million due to a 96 basis point decline in the average rate earned and a $26.0 million, or 1.8%, decrease in the average balance. Business real estate loan interest decreased $9.3 million as the average rate earned decreased 33 basis points, while the average balance increased $49.5 million, or 1.4%. Business loan interest income decreased $7.1 million due to a 39 basis point decrease in the average rate earned, partly offset by an increase of $279.8 million, or 4.7%, in average balances. Interest on consumer credit card loans was lower by $4.0 million due to a decrease of 75 basis points in the average rate earned. Consumer loan interest income decreased $103 thousand mainly due to a decrease of 13 basis points in the average rate earned, mostly offset by an increase of $41.7 million, or 2.0%, in the average balance. The decreases in loan interest income were partly offset by an increase in personal real estate loan interest of $8.5 million as a result of an increase of 26 basis points in the average rate earned. In addition, revolving home equity loan interest increased $1.8 million due to growth in average balances of $29.8 million, or 8.9%.
Fully taxable-equivalent interest income on total investment securities increased $38.4 million during 2025, as the average rate earned increased 43 basis points, while average balances declined $236.5 million. The average rate on the total investment securities portfolio was 3.06% in 2025 compared to 2.63% in 2024, while the average balance of the total investment securities portfolio (excluding unrealized fair value adjustments on available for sale debt securities) was $10.2 billion in 2025 compared to an average balance of $10.4 billion in 2024. The increase in interest income was mainly due to higher interest income earned on U.S. government and asset-backed securities, partly offset by lower interest earned on mortgage-backed and state and municipal securities. Interest earned on U.S. government securities increased $53.6 million due to higher average balances of $1.2 billion, or 73.2%, and an increase in the average rate earned of 33 basis points. Contributing to the increase in interest earned on U.S. government securities was growth of $2.4 million in inflation income on treasury inflation-protected securities (TIPS). Interest earned on asset-backed securities increased $9.7 million, due to growth of 105 basis points in the average rate earned, partly offset by a decline in average balances of $230.5 million, or 13.2%. Interest earned on mortgage-backed securities decreased $19.1 million due to lower average balances of $808.5 million, or 15.1%, and a decrease of four basis points in the average rate earned. The decrease of $4.6 million in interest earned on state and municipal securities was mainly due to a decline of $255.2 million, or 25.0%, in average balances.
Interest on securities purchased under resell agreements increased $19.7 million compared to 2024 due to a $412.9 million, or 97.9%, increase in average balances and growth of 79 basis points in the average rate earned. Interest income on balances at the Federal Reserve decreased $17.6 million from 2024, due to a decline in the average rate earned of 96 basis points, partly offset by an increase in average balances of $104.8 million, or 4.5%.
During 2025, interest expense on deposits decreased $39.7 million from 2024 and resulted from a 28 basis point decrease in the overall average rate paid on deposits, slightly offset by an increase in average balances of $475.8 million, or 2.8%. Interest expense on interest checking and money market accounts decreased $16.5 million due to lower rates paid, which declined 20 basis points, partly offset by growth in average balances of $646.1 million, or 4.8%. Interest expense on certificates of deposit declined $23.2 million, due to a 71 basis point decrease in the average rate paid, coupled with a $144.0 million decrease in average balances. The overall rate paid on total deposits decreased from 1.96% in 2024 to 1.68% in the current year. Interest expense on borrowings decreased $17.7 million mainly due to a 69 basis point decrease in the average rate paid. Interest expense on federal funds purchased decreased $6.7 million, due to a $100.2 million decline in average balances and a 106 basis point decrease in the average rate paid. Interest expense on securities sold under repurchase agreements decreased $11.0 million due to a 60 basis point decrease in the average rate earned, partly offset by an increase of $118.9 million in average balances. The overall average rate incurred on all interest bearing liabilities was 1.83% in 2025, compared to 2.17% in 2024.
Net interest income totaled $1.0 billion in 2024, increasing $42.1 million, or 4.2%, compared to $998.1 million in 2023. On an FTE basis, net interest income totaled $1.0 billion, and increased $42.8 million over 2023. This growth was due to increases of $79.6 million in interest earned on loans (FTE), due to higher average rates and balances, and $18.2 million in interest earned on balances at the Federal Reserve, due to higher average balances, and a decrease of $44.8 million in interest expense on borrowings, mainly due to lower average balances. These increases to income were partly offset by an increase of $90.0 million in interest expense on deposits, mainly due to higher average rates paid, and lower interest earned on investment securities of $8.5 million, due to lower average balances, partly offset by higher average rates. The net yield on earning assets (FTE) was 3.47% in 2024 compared with 3.16% in 2023.
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During 2024, loan interest income (FTE) grew $79.6 million over 2023 mainly due to an increase in rates earned for all loan categories and growth of $310.2 million, or 1.8%, in average loan balances. The average fully taxable-equivalent rate earned on the loan portfolio increased 36 basis points to 6.26% in 2024 compared to 5.90% in 2023. Increased interest earned on business, consumer, personal real estate and business real estate loans was the main driver of overall higher loan interest income. Business loan interest income increased $33.3 million due to a 40 basis point increase in the average rate earned and an increase of $164.3 million, or 2.84%, in average balances. Interest earned on consumer loans increased $16.2 million mainly due to an increase of 74 basis points in the average rate earned. Personal real estate loan interest grew $13.0 million in 2024 compared to 2023 as a result of an increase of 35 basis points in the average rate earned and higher average balances of $63.8 million, or 2.14%. Interest on construction and land loans grew $1.3 million over 2023 due to growth in the average rate earned of 29 basis points, partly offset by a decrease of $35.0 million, or 2.4%, in average loan balances. Interest on business real estate loans increased $12.5 million as the average rate earned increased 21 basis points and the average balance grew $75.3 million, or 2.1%. Revolving home equity loan interest increased $2.5 million mainly due to growth in average balances of $30.7 million, or 10.1%. Interest on consumer credit card loans was higher by $829 thousand due to an increase of 16 basis points in the average rate earned.
Fully taxable-equivalent interest income on total investment securities decreased $8.5 million during 2024, as average balances declined $1.9 billion, while the average rate earned increased 34 basis points. The average rate on the total investment securities portfolio was 2.63% in 2024 compared to 2.29% in 2023, while the average balance of the total investment securities portfolio (excluding unrealized fair value adjustments on available for sale debt securities) was $10.4 billion in 2024 compared to an average balance of $12.4 billion in 2023. The decrease in interest income was mainly due to lower interest income earned on mortgage-backed, asset-backed and state and municipal securities, partly offset by higher interest income earned on U.S. government securities. Interest earned on mortgage-backed securities decreased $16.2 million due to lower average balances of $878.4 million, slightly offset by an increase of three basis points in the average rate earned. Interest earned on asset-backed securities decreased $12.8 million, due to a decline in average balances of $991.4 million, partly offset by an increase of 48 basis points in the average rate earned. The decrease of $10.9 million in interest earned on state and municipal securities was due to a decrease of $497.5 million in average balances and a decline of seven basis points in the average rate earned. Interest earned on U.S. government securities increased $35.9 million mainly due to higher average balances of $601.7 million, or 60.0%, and an increase in the average rate earned of 130 basis points. Interest earned on U.S. government securities was impacted by a decline of $2.5 million in inflation TIPS income.
Interest on federal funds sold decreased $610 thousand and interest on securities purchased under resell agreements decreased $291 thousand compared to 2023 both due to declines in average balances, partly offset by growth in the average rate earned. Interest income on balances at the Federal Reserve increased $18.2 million over 2023, due to growth in average balances of $344.8 million, or 17.6%.
During 2024, interest expense on deposits increased $90.0 million over 2023 and resulted mainly from a 52 basis point increase in the overall average rate paid on deposits. Interest expense on interest checking and money market accounts increased $80.5 million due to higher rates paid, which grew 59 basis points, and growth in average balances of $226.3 million, or 1.7%. Interest expense on certificates of deposit grew $9.5 million, due to a 33 basis point increase in the average rate paid, coupled with a $33.1 million increase in average balances. The overall rate paid on total deposits increased from 1.44% in 2023 to 1.96% in 2024. Interest expense on borrowings decreased $44.8 million mainly due to a $975.0 million decrease in average balances. Interest expense on federal funds purchased decreased $13.0 million, mainly due to a $265.7 million decline in average balances, while interest expense on securities sold under repurchase agreements increased $7.7 million due to a 26 basis point increase in the average rate earned and an increase of $47.4 million in average balances. Interest expense on Federal Home Loan Bank (FHLB) borrowings declined $39.5 million due to a decline of $756.7 million in average balances. The Company did not have any outstanding FHLB borrowings at December 31, 2024. The overall average rate incurred on all interest bearing liabilities was 2.17% in 2024, compared to 1.86% in 2023.
Provision for Credit Losses
The provision for credit losses is comprised of provisions for credit losses on loans and unfunded lending commitments and is recorded to adjust the allowance for credit losses on loans and the liability for unfunded lending commitments to a level deemed adequate by management based on the factors mentioned in the “Allowance for Credit Losses on Loans and Liability for Unfunded Lending Commitments” section of this discussion. The provision for credit losses was $56.1 million in 2025, an increase of $23.2 million from the 2024 provision.
The provision for credit losses on loans for the year ended December 31, 2025 was $57.4 million, compared to $39.2 million in 2024. The allowance for credit losses on loans totaled $179.5 million at December 31, 2025, an increase of $16.7 million compared to the prior year, and represented 1.01% of loans at year end 2025, compared to .95% at December 31, 2024.
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The provision for unfunded lending commitments was a benefit of $1.3 million during 2025, compared to a benefit of $6.3 million in 2024. The liability for unfunded lending commitments was $17.7 million at December 31, 2025, compared to $18.9 million at December 31, 2024.
Non-Interest Income
% Change
(Dollars in thousands)
Trust fees
Bank card transaction fees
Deposit account charges and other fees
Consumer brokerage services
Capital market fees
Loan fees and sales
Other
Total non-interest income
Non-interest income as a % of total revenue*
Total revenue per full-time equivalent employee
* Total revenue is calculated as net interest income plus non-interest income.
Below is a summary of net bank card transaction fees for the years ended December 31, 2025, 2024 and 2023, respectively.
% Change
(Dollars in thousands)
Net corporate card fees
Net debit card fees
Net merchant fees
Net credit card fees
Total bank card transaction fees
Non-interest income totaled $652.3 million, an increase of $36.7 million, or 6.0%, compared to $615.6 million in 2024. Trust fee income increased $18.3 million, or 8.5%, mainly as a result of higher private client trust fees (up 9.1%), which comprised 81.4% of trust fee income in 2025. The market value of total customer trust assets totaled $81.6 billion at year end 2025, which was an increase of 9.1% over year end 2024 balances. Bank card fees decreased $5.5 million, or 2.9%, from the prior year, mainly due to decreases in net corporate card fees of $3.9 million, net credit card fees of $1.6 million and net debit card fees of $488 thousand, partly offset by an increase in net merchant fees of $528 thousand. The decline in net corporate card fees from the prior year was mainly due to higher rewards expense. Net debit card fees decreased mainly due to lower interchange income, while net credit card fees decreased due to higher rewards expense. Net merchant fees increased mainly due to lower interchange and royalty fee expense, partly offset by lower merchant discount fee revenue. Deposit account fees increased $7.9 million, or 7.9%, mainly due to higher corporate cash management fees of $7.4 million. In 2025, corporate cash management fees comprised 66.7% of total deposit fees, while overdraft fees comprised 10.7% of total deposit fees. Revenue from consumer brokerage services increased $3.9 million, or 21.6%, mainly due to higher annuity fees, advisory fees and life insurance income. Capital markets fees increased $879 thousand, or 4.4%, mainly due to higher gains on trading securities, while loan fees and sales increased $992 thousand, or 7.7%, mainly due to higher loan commitment fees and mortgage banking revenue. Other non-interest income increased $10.3 million, or 17.1%, over the prior year mainly due to higher gains on asset sales of $3.8 million, tax credit sales fees of $2.2 million, cash sweep commissions of $2.0 million and international fees of $802 thousand. Additionally, an increase in fair value adjustments of $1.4 million was recorded on the Company's deferred compensation plan assets and liabilities, which affect both other income and other expense.
During 2024, non-interest income totaled $615.6 million, an increase of $42.5 million, or 7.4%, compared to $573.0 million in 2023. Trust fee income increased $23.5 million, or 12.3%, mainly as a result of higher private client trust fees (up 13.1%), which comprised 81.0% of trust fee income in 2024. The market value of total customer trust assets totaled $74.8 billion at year end 2024, which was an increase of 8.6% over year end 2023 balances. Bank card fees decreased $1.4 million, or .7%, from 2023, mainly due to a decrease in net corporate card fees of $4.0 million, partly offset by increases in net credit card fees of $1.6 million, net debit card fees of $636 thousand and net merchant fees of $407 thousand. The decline in net corporate card fees from 2023 was mainly due to lower interchange income coupled with higher rewards expense. Net debit card fees increased mainly due to higher interchange income, while net credit card fees increased due to lower rewards expense. Net
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merchant fees increased mainly due to higher merchant discount fees, partly offset by lower interchange fees. Deposit account fees increased $9.3 million, or 10.3%, mainly due to higher corporate cash management fees of $8.5 million and other deposit fees of $894 thousand. In 2024, corporate cash management fees comprised 64.6% of total deposit fees, while overdraft fees comprised 11.5% of total deposit fees. Capital markets fees increased $5.7 million, or 40.3%, mainly due to higher trading securities income of $4.1 million and underwriting income of $2.4 million. Revenue from consumer brokerage services increased $918 thousand, or 5.3%, mainly due to higher annuity fees, while loan fees and sales increased $1.7 million, or 15.5%, mainly due to higher loan commitment fees and mortgage banking revenue. Other non-interest income increased $2.7 million, or 4.8%, over 2023 mainly due to higher gains on asset sales of $2.5 million, cash sweep commissions of $2.2 million and tax credit sales fees of $2.1 million. These increases were partly offset by lower letter of credit fees of $2.3 million and swap fees of $1.2 million.
Investment Securities Gains (Losses), Net
(In thousands)
Net gains (losses) on sales of available for sale debt securities
Net gains (losses) on equity securities
Net gains (losses) on sales of private equity investments
Fair value adjustments of private equity investments
Total investment securities gains (losses), net
Net gains and losses on investment securities during 2025, 2024 and 2023 are shown in the table above. Included in these amounts are gains and losses arising from sales of securities from the Company’s available for sale debt portfolio, net gains and losses on equity securities, and gains and losses relating to private equity investments, which are primarily held by the Parent’s majority-owned private equity subsidiary. The gains and losses on private equity investments include fair value adjustments, in addition to gains and losses realized upon disposition. The portions of private equity investment gains and losses that are attributable to minority interests are reported as non-controlling interest in the consolidated statements of income, and resulted in expense of $2.1 million in 2025, $4.2 million in 2024, and $4.8 million in 2023.
Net securities gains of $3.7 million were recorded in 2025, which included net gains of $11.7 million in fair value adjustments on private equity investments and net gains of $1.4 million on equity securities. These gains were offset by net losses of $8.4 million realized on sales of available for sale debt securities resulting from the Company's sale of approximately $78.6 million (book value) in bonds, mainly non-agency mortgage-backed securities and asset-backed securities, and net losses of $1.0 million on sales of private equity investments.
Net securities gains of $7.8 million were recorded in 2024, which included net gains of $178.1 million on equity securities, net gains of $24.1 million in fair value adjustments on private equity investments, and net gains of $1.9 million on sales of private equity investments. These gains were offset by net losses of $196.3 million realized on sales of available for sale debt securities resulting from the Company's sale of approximately $1.3 billion (book value) in bonds, mainly state and municipal, mortgage-backed, and corporate debt securities.
Net securities gains of $15.0 million were recorded in 2023, which included net gains of $24.0 million in fair value adjustments on private equity investments. This increase was partly offset by losses of $8.4 million realized on sales of available for sale debt securities resulting from the Company's sale of approximately $1.1 billion (book value) in bonds, mainly state and municipal securities and asset-backed securities, net losses of $100 thousand on sales of private equity investments, and net losses of $487 thousand on equity securities.
The Company's significant gains in equity securities for the year ended December 31, 2024 primarily relate to gains recorded on its shares of Visa, as described in Note 3, Investment Securities. Likewise, the $196.3 million losses realized on the Company's available for sale debt securities portfolio mainly relate to the successful execution of its planned available for sale debt security portfolio repositioning, in which the Company sold bonds with an amortized cost of $1.2 billion and subsequently reinvested the proceeds into higher yielding available for sale debt securities. Additional information about the Company's available for sale debt portfolio repositioning transactions is discussed in Note 3, Investment Securities.
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Non-Interest Expense
% Change
(Dollars in thousands)
Salaries
Employee benefits
Data processing and software
Net occupancy
Professional and other services
Marketing
Equipment
Supplies and communication
Deposit insurance
Other
Total non-interest expense
Efficiency ratio
Salaries and benefits as a % of total non-interest expense
Number of full-time equivalent employees
N.M. - Not meaningful.
Non-interest expense was $979.8 million in 2025, an increase of $28.6 million, or 3.0%, over the previous year. Salaries and benefits expense increased $20.6 million, or 3.4%, mainly due to higher full-time salaries, incentive compensation and healthcare expense. Full-time equivalent employees totaled 4,667 at December 31, 2025, compared to 4,693 at December 31, 2024. Data processing and software expense increased $6.6 million, or 5.2%, primarily due to increased costs for service providers and higher software expense. Net occupancy expense increased $1.1 million, or 2.1%, mainly due to higher building depreciation expense and demolition costs, partly offset by higher external rent income. Professional and other services expense increased $13.8 million, or 39.3%, mainly due to higher legal, professional and loan recording fees. Professional and other services expense included acquisition related expense of $5.6 million in 2025. Marketing expense increased $2.3 million, or 10.4%, and equipment expense increased $889 thousand, or 4.3%, mainly due to higher furniture and equipment rental and service contract expense. Supplies and communication expense increased $395 thousand, or 2.0%, while deposit insurance expense decreased $6.4 million mainly due to accrual adjustments in 2024 and 2025 related to the FDIC's special assessment to replenish the Deposit Insurance Fund. Other non-interest expense decreased $10.6 million, or 21.7%, mainly due to litigation settlement expense of $10.0 million, net of insurance, and a $5.0 million donation to a related charitable foundation, both recorded in 2024. In addition, a $1.5 million reimbursement related to a litigation settlement was recorded in 2025. These decreases were partly offset by higher in travel and entertainment expense of $1.3 million, and an increase in fair value adjustments of $1.4 million recorded on the Company's deferred compensation plan assets and liabilities.
In 2024, non-interest expense was $951.2 million, an increase of $20.2 million, or 2.2%, over 2023. Salaries and benefits expense increased $23.8 million, or 4.1%, mainly due to higher costs for full-time salaries, incentive compensation, payroll taxes and 401(k) expense, slightly offset by lower contract labor expense. Full-time equivalent employees totaled 4,693 at December 31, 2024, compared to 4,718 at December 31, 2023. Data processing and software expense increased $8.6 million, or 7.3%, primarily due to increased costs for service providers and higher software expense and bank card processing fees. Net occupancy expense decreased $406 thousand, or .8%, mainly due to higher external rent income, partly offset by higher building depreciation expense. Professional and other services expense decreased $1.1 million, or 3.1%, mainly due to declines in other professional fees, loan collection fees, and pension plan expense, partly offset by an increase in legal fees. Marketing expense decreased $2.2 million, or 8.8%, while equipment expense increased $1.1 million, or 5.5%, mainly due to higher furniture and equipment depreciation expense. Supplies and communication expense decreased $129 thousand, or .7%, while deposit insurance expense decreased $16.7 million due to a $16.0 million accrual recorded in 2023 for a special assessment by the FDIC to replenish the Deposit Insurance Fund. Other non-interest expense increased $7.2 million, or 17.4%, mainly due to litigation settlement expense of $10.0 million and a $5.0 million donation to a related charitable foundation, both recorded in 2024. These increases were partly offset by deconversion costs of $2.1 million recorded in 2023, as well as decreases in swap fee amortization expense of $859 thousand, travel and entertainment expense of $687 thousand and recruiting expense of $489 thousand.
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Income Taxes
Income tax expense was $161.1 million in 2025, compared to $145.1 million in 2024 and $134.5 million in 2023. The effective tax rate, including the effect of non-controlling interest, was 22.2% in 2025 compared to 21.6% in 2024 and 22.0% in 2023. The increase in the effective tax rate in 2025 compared to the rate for 2024 was mostly due to higher state and local income taxes. Additional information about income tax expense is provided in Note 9 to the consolidated financial statements.
Financial Condition
Loan Portfolio Analysis
Classifications of consolidated loans by major category at December 31, 2025 and 2024 are shown in the table below. This portfolio consists of loans which were acquired or originated with the intent of holding to their maturity. Loans held for sale are separately discussed in a following section. A schedule of average balances invested in each loan category below is disclosed within the Average Balance Sheets section of Management's Discussion and Analysis of Financial Condition and Results of Operations below.
Balance at December 31
(In thousands)
Commercial:
Business
Real estate — construction and land
Real estate — business
Personal banking:
Real estate — personal
Consumer
Revolving home equity
Consumer credit card
Overdrafts
Total loans
The table below presents contractual maturities of the loan portfolio, based on payment due dates, as well as a breakdown of fixed rate and floating rate loans at December 31, 2025.
Principal Payments Due
(In thousands)
One Year
or Less
After One
Year Through
Five Years
After Five
Years Through Fifteen Years
After Fifteen Years
Total
Commercial:
Business
Real estate — construction and land
Real estate — business
Personal banking:
Real estate — personal
Consumer
Revolving home equity
Consumer credit card
Overdrafts
Total loans
Loans with fixed rates
Loans with floating rates
Total loans
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The following table shows loan balances at December 31, 2025, segregated between those with fixed interest rates and those with variable rates that fluctuate with an index.
(In thousands)
Fixed Rate Loans
Variable Rate Loans
Total
% Variable Rate Loans
Business
Real estate — construction and land
Real estate — business
Real estate — personal
Consumer
Revolving home equity
Consumer credit card
Overdrafts
Total loans
Total loans at December 31, 2025 were $17.8 billion, an increase of $551.2 million, or 3.2%, over balances at December 31, 2024. The increase in loans during 2025 occurred mainly due to growth in business and consumer loans. Business loans increased $385.6 million, or 6.4%, mainly due to increases in commercial and industrial loans and commercial card loans of $290.2 million and $92.5 million, respectively. Construction loans increased $28.1 million, or 2.0%, mainly due to an increase in commercial construction lending. Business real estate loans increased $13.3 million, or .4%, mainly due to an increase in industrial lending, partly offset by a decline in senior living lending. Personal real estate loans decreased $4.8 million, or .2%. The Company sells certain long-term fixed rate mortgage loans to the secondary market, and loan sales in 2025 totaled $92.2 million, compared to $70.0 million in 2024. Consumer loans increased $123.7 million, or 6.0%, mainly due to an increase in private banking lending. Consumer credit card loans decreased $6.2 million, or 1.0%, while revolving home equity loan balances increased $18.5 million, or 5.2%, compared to balances at year end 2024.
The Company currently holds approximately 31% of its loan portfolio in the Kansas City market, 25% in the St. Louis market, and 44% in other regional markets. The portfolio is diversified from a business and retail standpoint, with 65% in loans to businesses and 35% in loans to consumers. The Company believes a diversified approach to loan portfolio management, strong underwriting criteria and an aversion toward credit concentrations from an industry, geographic and product perspective, have contributed to low levels of problem loans and credit losses on loans experienced over the last several years.
The Company participates in credits of large, publicly traded companies which are defined by regulation as shared national credits, or SNCs. Regulations define SNCs as loans exceeding $100 million that are shared by three or more financial institutions. The Company typically participates in these loans when business operations are maintained in the local communities or regional markets and opportunities to provide other banking services are present. At December 31, 2025, the balance of SNC loans totaled approximately $1.5 billion, with an additional $2.6 billion in unfunded commitments, compared to a balance of $1.6 billion, with an additional $2.5 billion in unfunded commitments, at year end 2024.
Commercial Loans
Business
Total business loans amounted to $6.4 billion at December 31, 2025 and includes loans used mainly to fund customer accounts receivable, inventories, and capital expenditures. The business loan portfolio includes tax-advantaged loans and leases which carry tax-free interest rates. These loans totaled $702.1 million at December 31, 2025, an increase of $12.9 million, or 1.9%, over December 31, 2024 balances. In addition to tax-advantaged leases, the business loan portfolio also includes other direct financing and sales type leases totaling $717.3 million at December 31, 2025, a decrease of $10.0 million, or 1.4%, from December 31, 2024. These loans are used by commercial customers to finance capital purchases ranging from computer equipment to office and transportation equipment. Additionally, the Company has $296.6 million of outstanding loans included within its $303.0 million oil and gas energy-related loan portfolio at December 31, 2025, which is further discussed within the Oil and Gas Energy Lending section of the Risk Elements of the Loan Portfolio section located within Management's Discussion and Analysis of Financial Condition and Results of Operations. Also included in the business portfolio are corporate card loans, which totaled $424.6 million at December 31, 2025 and are made in conjunction with the Company’s corporate card business for corporate trade purchases. Corporate card loans are made to corporate, non-profit and government customers nationwide, but have very short-term maturities, which limits credit risk.
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Business loans, excluding corporate card loans, are made primarily to customers in the regional trade area of the Company, generally the central Midwest, encompassing the states of Missouri, Kansas, Illinois, and nearby Midwestern markets, including Iowa, Oklahoma, Colorado, Texas, Tennessee, Michigan, Indiana, and Ohio. This portfolio is diversified from an industry standpoint and includes businesses engaged in manufacturing, wholesaling, retailing, agribusiness, insurance, financial services, public utilities, health care, and other service businesses. Emphasis is upon middle-market and community businesses with known local management and financial stability. Consistent with management’s strategy and emphasis upon relationship banking, most borrowing customers also maintain deposit accounts and utilize other banking services. Net loan charge-offs in this category totaled $1.5 million in 2025 compared to $1.1 million in 2024. Non-accrual business loans were $123 thousand (less than .1% of business loans) at December 31, 2025 compared to $101 thousand at December 31, 2024.
Real Estate-Construction and Land
The portfolio of loans in this category amounted to $1.4 billion at December 31, 2025, an increase of $28.1 million, or 2.0%, over the prior year and comprised 8.1% of the Company’s total loan portfolio. Commercial construction and land development loans totaled $1.3 billion, or 88.3% of total construction loans at December 31, 2025. These loans increased $31.2 million over 2024 year end balances, driving the increase in the total construction portfolio. Commercial construction loans are made during the construction phase for small and medium-sized office and medical buildings, manufacturing and warehouse facilities, apartment complexes, shopping centers, hotels and motels, and other commercial properties. Commercial land development loans relate to land owned or developed for use in conjunction with business properties. Residential construction and land development loans at December 31, 2025 totaled $169.2 million, or 11.7% of total construction loans. Net loan charge-offs in this category totaled $40 thousand in 2025 compared to no net loan charge-offs in 2024.
Real Estate-Business
Total business real estate loans were $3.7 billion at December 31, 2025 and comprised 20.7% of the Company’s total loan portfolio. This category includes mortgage loans for small and medium-sized office and medical buildings, manufacturing and warehouse facilities, distribution facilities, multi-family housing, farms, shopping centers, hotels and motels, churches, and other commercial properties. The business real estate borrowers and/or properties are generally located in local and regional markets where Commerce does business, and emphasis is placed on owner-occupied lending (34.0% of this portfolio), which presents lower risk levels. Additional information about business real estate loans by borrower is disclosed within the Real Estate - Business Loans section of the Risk Elements of the Loan Portfolio section located within Management's Discussion and Analysis of Financial Condition and Results of Operations. At December 31, 2025, balances of non-accrual loans amounted to $14.8 million, or .4% of business real estate loans, down $169 thousand from year end 2024. The Company experienced net loan recoveries of $95 thousand in 2025, compared to net loan recoveries of $106 thousand in 2024.
Personal Banking Loans
Real Estate-Personal
At December 31, 2025, there were $3.1 billion in outstanding personal real estate loans, which comprised 17.2% of the Company’s total loan portfolio. The mortgage loans in this category are mainly for owner-occupied residential properties. The Company originates both adjustable and fixed rate mortgage loans, and at December 31, 2025, 48% of the portfolio was comprised of adjustable rate loans, while 52% was comprised of fixed rate loans. The Company does not purchase any loans from outside parties or brokers.
The Company originates certain mortgage loans with the intent to sell to the secondary market, generally FNMA or FHLMC conforming fixed rate loans. The remaining loans are originated with the intent to hold to maturity. Of the $455.3 million of mortgage loans originated in 2025, $92.2 million were sold to the secondary market. This compares to $453.0 million of mortgage loans originated and $70.0 million of loans sold to the secondary market in 2024. The increase in loan sales during 2025 compared to 2024 was mainly due to a continued demand for fixed rate mortgage loans. Net loan charge-offs in 2025 totaled $556 thousand, compared to net loan charge-offs of $239 thousand in 2024. Balances of non-accrual loans in this category were $842 thousand at December 31, 2025, compared to $1.0 million at year end 2024.
Consumer
Consumer loans consist of private banking, automobile, motorcycle, marine, tractor/trailer, recreational vehicle (RV), fixed rate home equity, patient health care financing and other types of consumer loans. These loans totaled $2.2 billion at December 31, 2025. Approximately 35% of the consumer portfolio consists of automobile loans, 40% in private banking loans, 9% in fixed rate home equity loans, and 11% in patient healthcare financing loans. Total consumer loans increased $123.7 million at year end 2025 compared to year end 2024, mainly due to increases of $154.2 million in private banking loans and $8.9 million in patient healthcare financing. These increases in consumer loan balances were partly offset by declines of $16.2
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million in fixed rate home equity loans and $7.3 million in other vehicle and equipment loans. Net charge-offs on total consumer loans were $9.8 million in both 2025 and 2024, averaging .46% of consumer loans in both 2025 and 2024.
Revolving Home Equity
Revolving home equity loans, of which 100% are adjustable rate loans, totaled $375.2 million at year end 2025. An additional $946.9 million was available in unused lines of credit, which can be drawn at the discretion of the borrower. Home equity loans are secured mainly by second mortgages (and less frequently, first mortgages) on residential property of the borrower. The underwriting terms for the home equity line product permit borrowing availability, in the aggregate, generally up to 80% or 90% of the appraised value of the collateral property at the time of origination. Net loan charge-offs were $5 thousand in 2025, compared to net loan recoveries of $166 thousand in 2024.
Consumer Credit Card
Total consumer credit card loans amounted to $589.7 million at December 31, 2025 and comprised 3.3% of the Company’s total loan portfolio. The credit card portfolio is concentrated within regional markets served by the Company. The Company offers a variety of credit card products, including affinity cards, rewards cards, and standard and premium credit cards, and emphasizes its credit card relationship product, Special Connections. Approximately 36% of the households that own a Commerce credit card product also maintain a deposit relationship with the subsidiary bank. Approximately 96% of the outstanding credit card loan balances had a floating interest rate at year end 2025, compared to 95% at year end 2024. Net charge-offs amounted to $27.1 million in 2025, an increase of $1.0 million over $26.0 million in 2024.
Loans Held for Sale
At December 31, 2025, loans held for sale were mainly comprised of certain long-term fixed rate personal real estate loans. The personal real estate loans are carried at fair value and totaled $4.0 million at December 31, 2025. This portfolio is further discussed in Note 2 to the consolidated financial statements.
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Allowance for Credit Losses on Loans and Liability for Unfunded Lending Commitments
To determine the amount of the allowance for credit losses on loans and the liability for unfunded lending commitments, the Company has established a process which assesses the risks and losses expected in its portfolios. This process provides an allowance based on estimates of allowances for pools of loans and unfunded lending commitments, as well as a second, smaller component based on certain individually evaluated loans and unfunded lending commitments. The Company's policies and processes for determining the allowance for credit losses on loans and the liability for unfunded lending commitments are discussed in Note 1 to the consolidated financial statements and in the " Allowance for Credit Losses " discussion within Critical Accounting Policies above.
Loans subject to individual evaluation generally consist of business, construction, business real estate and personal real estate loans on non-accrual status. These non-accrual loans are evaluated individually for impairment based on factors such as payment history, borrower financial condition and collateral. For collateral dependent loans, appraisals of collateral (including exit costs) are normally obtained annually but discounted based on the date last received and market conditions. From these evaluations of expected cash flows and collateral values, specific allowances are determined.
Loans which are not individually evaluated are segregated by loan type and sub-type and are collectively evaluated. These loans consist of commercial loans (business, construction and business real estate) which have been graded pass, special mention, or substandard, and also include all personal banking loans except personal real estate loans on non-accrual status.
The allowance for credit losses on loans and the liability for unfunded lending commitments are estimates that require significant judgment including projections of the macro-economic environment. The Company utilizes a third-party macro-economic forecast that continuously changes due to economic conditions and events. These changes in the forecast cause fluctuations in the allowance for credit losses on loans and the liability for unfunded lending commitments. The Company uses judgment to assess the macro-economic forecast and internal loss data in estimating the allowance for credit losses on loans and the liability for unfunded lending commitments. These estimates are subject to periodic refinement based on changes in the underlying external and internal data.
At December 31, 2025, the allowance for credit losses on loans was $179.5 million, compared to $162.7 million at December 31, 2024. The allowance for credit losses relating to commercial loans and personal banking loans increased $10.1 million and $6.6 million, respectively, during 2025. The increase in the allowance for credit losses on commercial loans was primarily due to weakness in soft commodity prices impacting certain industries and model enhancements related to the forecast, while the allowance for credit losses on personal banking loans increased over the December 31, 2024 allowance due to recent increased loan net charge-off trends impacting expected loss rate assumptions for the consumer credit card, automobile, and other non-real estate consumer portfolios along with forecast model enhancements targeted at the consumer credit card portfolio. The percentage of allowance to loans increased to 1.01% at December 31, 2025, compared to .95% at December 31, 2024. See Note 2 to the consolidated financial statements for the various model assumptions utilized in the Company's CECL estimate at December 31, 2025.
Net loan charge-offs totaled $40.7 million in 2025, representing a $1.8 million increase compared to net charge-offs of $38.9 million in 2024. The increase was largely due to higher net charge-offs of $1.0 million, $432 thousand and $317 thousand on consumer credit card, business and personal real estate loans, respectively, during 2025. These increases were partially offset by a $240 thousand decrease in net charge-offs on overdraft loans in 2025 compared to 2024. Consumer credit card loan net charge-offs were 4.81% of average consumer credit card loans in 2025, compared to 4.64% in 2024, and consumer loan net charge-offs were .46% of average consumer loans in both 2025 and 2024. The ratio of net loan charge-offs to total average loans outstanding was .33% in 2025 and .23% in 2024.
Total loans delinquent 90 days or more and still accruing were $24.7 million at December 31, 2025, an increase of $143 thousand compared to year end 2024. Non-accrual loans at December 31, 2025 were $15.8 million, a decrease of $2.5 million from the prior year, mainly due to a decrease in non-accrual revolving home equity loans of $2.0 million. The allowance for credit losses as a percentage of non-accrual loans was 1,139.5% at December 31, 2025, compared to 890.4% at December 31, 2024. The increase in the ratio of the allowance to non-accrual loans was driven by the decrease in non-accrual loans outstanding and the increase in the allowance for credit losses, as described above. The 2025 year-end balance of non-accrual loans was comprised of $123 thousand of business loans, $842 thousand of personal real estate loans and $14.8 million of business real estate loans.
At December 31, 2025, the liability for unfunded lending commitments was $17.7 million, a decrease of $1.3 million compared to December 31, 2024. The decrease in the liability for unfunded lending commitments during 2025 was driven primarily by decreases in the balance of unfunded lending commitments. The Company's unfunded lending commitments
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primarily relate to construction loans, and the Company's estimate for credit losses in its unfunded lending commitments utilizes the same model and forecast as its estimate for credit losses on loans. See Note 2 for further discussion of the model inputs utilized in the Company's estimate of credit losses.
The Company considers the allowance for credit losses on loans and the liability for unfunded lending commitments adequate to cover losses expected in the loan portfolio, including unfunded commitments, at December 31, 2025.
The schedules which follow summarize the relationship between loan balances and activity in the allowance for credit losses on loans:
Years Ended December 31
(Dollars in thousands)
Loans outstanding at end of year (A)
Average loans outstanding (A)
Allowance for credit losses:
Balance at end of prior year
Provision for credit losses on loans
Loans charged off:
Business
Real estate — construction and land
Real estate — business
Real estate — personal
Consumer
Revolving home equity
Consumer credit card
Overdrafts
Total loans charged off
Recoveries of loans previously charged off:
Business
Real estate — construction and land
Real estate — business
Real estate — personal
Consumer
Revolving home equity
Consumer credit card
Overdrafts
Total recoveries
Net loans charged off
Balance at end of year
Ratio of allowance to loans at end of year
Ratio of provision to average loans outstanding
Non-accrual loans
Ratio of non-accrual loans to total loans outstanding
Ratio of allowance for credit losses on loans to non-accrual loans
(A) Net of unearned income, before deducting allowance for credit losses on loans, excluding loans held for sale.
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Years Ended December 31
Ratio of net charge-offs (recoveries) to average loans outstanding, by loan category:
Business
Real estate — construction and land
Real estate — personal
Consumer
Revolving home equity
Consumer credit card
Overdrafts
Ratio of total net charge-offs to total average loans outstanding
Average loans outstanding by loan class are listed on the Company's average balance sheet on page 62 .
The following schedule provides a breakdown of the allowance for credit losses on loans (ACL) by loan category and the percentage of each loan category to total loans outstanding at year end.
(Dollars in thousands)
Credit Loss Allowance Allocation
% of Loans to Total Loans
% of ACL to Loan Category
Credit Loss Allowance Allocation
% of Loans to Total Loans
% of ACL to Loan Category
Business
RE — construction and land
RE — business
RE — personal
Consumer
Revolving home equity
Consumer credit card
Overdrafts
Total
The following schedule shows a summary of the activity in the liability for unfunded lending commitments.
Years Ended December 31
(In thousands)
LIABILITY FOR UNFUNDED LENDING COMMITMENTS
Balance at beginning of period
Provision for credit losses on unfunded lending commitments
Balance at end of period
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Risk Elements of the Loan Portfolio
Management reviews the loan portfolio continuously for evidence of problem loans. During the ordinary course of business, management becomes aware of borrowers that may not be able to meet the contractual requirements of loan agreements. Such loans are placed under close supervision with consideration given to placing the loan on non-accrual status, the need for an additional allowance for credit loss, and (if appropriate) partial or full loan charge-off. Loans are placed on non-accrual status when management does not expect to collect payments consistent with acceptable and agreed upon terms of repayment. After a loan is placed on non-accrual status, any interest previously accrued but not yet collected is reversed against current income. Interest is included in income only as received and only after all previous loan charge-offs have been recovered, so long as management is satisfied there is no impairment of collateral values. The loan is returned to accrual status only when the borrower has brought all past due principal and interest payments current, and, in the opinion of management, the borrower has demonstrated the ability to make future payments of principal and interest as scheduled. Loans that are 90 days past due as to principal and/or interest payments are generally placed on non-accrual, unless they are both well-secured and in the process of collection, or they are comprised of those personal banking loans that are exempt under regulatory rules from being classified as non-accrual. Consumer installment loans and related accrued interest are normally charged down to the fair value of related collateral (or are charged off in full if no collateral) once the loans are more than 120 days delinquent. Credit card loans and the related accrued interest are charged off when the receivable is more than 180 days past due.
The following schedule shows non-performing assets and loans past due 90 days and still accruing interest.
December 31
(Dollars in thousands)
Total non-accrual loans
Real estate acquired in foreclosure
Total non-performing assets
Non-performing assets as a percentage of total loans
Non-performing assets as a percentage of total assets
Loans past due 90 days and still accruing interest
Non-accrual loans totaled $15.8 million at year end 2025, a decrease of $2.5 million from the balance at year end 2024. The decrease from December 31, 2024 occurred mainly in revolving home equity, which decreased $2.0 million. At December 31, 2025, non-accrual loans were comprised of business real estate (93.9%), personal real estate (5.3%), and business (0.8%) loans. Foreclosed real estate totaled $1.2 million at December 31, 2025, an increase of $875 thousand when compared to December 31, 2024. Total non-performing assets remain low compared to the overall banking industry in 2025, with the non-performing assets to total loans ratio at .1% at December 31, 2025. Total loans past due 90 days or more and still accruing interest were $24.7 million as of December 31, 2025, an increase of $143 thousand when compared to December 31, 2024. Balances by class for non-accrual loans and loans past due 90 days and still accruing interest are shown in the "Delinquent and non-accrual loans" section of Note 2 to the consolidated financial statements.
In addition to the non-performing and past due loans mentioned above, the Company also has identified loans for which management has concerns about the ability of the borrowers to meet existing repayment terms. They are classified as substandard under the Company’s internal rating system. The loans are generally secured by either real estate or other borrower assets, reducing the potential for loss should they become non-performing. Although these loans are generally identified as potential problem loans, they may never become non-performing. Such loans totaled $264.9 million at December 31, 2025, compared with $330.3 million at December 31, 2024, resulting in a decrease of $65.4 million or 19.8%. The decrease in potential problem loans was largely driven by a $89.9 million decrease in business real estate loans and a $19.5 million decrease in business loans, partly offset by a $44.0 million increase in construction and land loans.
December 31
(In thousands)
Potential problem loans:
Business
Real estate – construction and land
Real estate – business
Real estate – personal
Total potential problem loans
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Loans with Special Risk Characteristics
Management relies primarily on an internal risk rating system, in addition to delinquency status, to assess risk in the loan portfolio, and these statistics are presented in Note 2 to the consolidated financial statements. However, certain types of loans are considered at a higher risk of loss due to their terms, location, or special conditions. Construction and land loans and business real estate loans are subject to higher risk because of the impact that volatile interest rates and a changing economy can have on real estate value, and because of the potential volatility of the real estate industry. Certain home equity loans have contractual features that could increase credit exposure in a market of declining real estate prices, when interest rates are steadily increasing, or when a geographic area experiences an economic downturn. For these home equity loans, higher risks could exist when 1) loan terms require a minimum monthly payment that covers only interest, or 2) loan-to-collateral value (LTV) ratios at origination are above 80%, with no private mortgage insurance. Information presented below for home equity loans is based on LTV ratios which were calculated with valuations at loan origination date. The Company does not obtain updated appraisals or valuations unless the loans become significantly delinquent or are in the process of being foreclosed upon. In addition, FICO scores are obtained and updated on a quarterly basis for most of the loans in the Personal Banking portfolio. This is a published credit score designed to measure the risk of default by taking into account various factors from a borrower's financial history and is considered supplementary information utilized by the Company, as management does not consider this information in evaluating the allowance for credit losses on loans. The Bank normally obtains a FICO score at the loan's origination and renewal dates, and updates are obtained on a quarterly basis. For credit monitoring purposes, the Company analyzes delinquency information, current FICO scores, and line utilization. This has remained an effective means of evaluating credit trends and identifying problem loans, partly because the Company offers standard, conservative lending products.
Real Estate - Construction and Land Loans
The Company’s portfolio of construction and land loans, as shown in the table below, amounted to 8.1% of total loans outstanding at December 31, 2025. The largest component of construction and land loans was commercial construction, which increased $29.1 million during the year ended December 31, 2025. At December 31, 2025, multi-family residential construction loans totaled approximately $553.1 million, or 45.1%, of the commercial construction loan portfolio.
(Dollars in thousands)
December 31, 2025
% of Total
% of Total Loans
December 31, 2024
% of Total
% of Total Loans
Commercial construction
Residential construction
Residential land and land development
Commercial land and land development
Total real estate – construction and land loans
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Real Estate – Business Loans
Total business real estate loans were $3.7 billion at December 31, 2025 and comprised 20.7% of the Company’s total loan portfolio. These loans include properties such as manufacturing and warehouse buildings, distribution facilities, small office and medical buildings, churches, hotels and motels, shopping centers, and other commercial properties. Approximately 34.0% of these loans were for owner-occupied real estate properties, which have historically resulted in lower net charge-off rates than non-owner-occupied commercial real estate loans.
(Dollars in thousands)
December 31, 2025
% of Total
% of Total Loans
December 31, 2024
% of Total
% of Total Loans
Owner-occupied
Industrial
Office
Hotels
Multi-family
Retail
Farm
Senior living
Other
Total real estate - business loans
Information about the credit quality of the Company's business real estate loan portfolio as of December 31, 2025 and December 31, 2024 is provided in the table below.
(Dollars in thousands)
Pass
Special Mention
Substandard
Non-Accrual
Total
December 31, 2025
Owner-occupied
Industrial
Office
Hotels
Multi-family
Retail
Farm
Senior living
Other
Total
December 31, 2024
Owner-occupied
Industrial
Office
Retail
Hotels
Multi-family
Farm
Senior living
Other
Total
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Revolving Home Equity Loans
The Company has revolving home equity loans that are generally collateralized by residential real estate. Most of these loans (94.3%) are written with terms requiring interest-only monthly payments. These loans are offered in three main product lines: LTV up to 80%, 80% to 90%, and 90% to 100%. As shown in the following tables, the percentage of loans with LTV ratios greater than 80% has remained a small segment of this portfolio, and delinquencies have been low and stable. The weighted average FICO score for the total portfolio balance at December 31, 2025 was 778. At maturity, the accounts are re-underwritten and if they qualify under the Company's credit, collateral and capacity policies, the borrower is given the option to renew the line of credit or to convert the outstanding balance to an amortizing loan. If criteria are not met, amortization is required, or the borrower may pay off the loan. Over the next three years, approximately 11.1% of the Company's current outstanding balances are expected to mature. Of these balances, 85.8% have a FICO score above 700. The Company does not expect a significant increase in losses as these loans mature, due to their high FICO scores, low LTVs, and low historical loss levels.
(Dollars in thousands)
Principal Outstanding at December 31, 2025
New Lines Originated During 2025
Unused Portion of Available Lines at December 31, 2025
Balances Over 30 Days Past Due
Loans with interest-only payments
Loans with LTV:
Between 80% and 90%
Over 90%
Over 80% LTV
Total loan portfolio from which above loans were identified
* Percentage of total principal outstanding of $368.9 million at December 31, 2025.
** Percentage of total unused portion of available lines of $946.9 million at December 31, 2025.
(Dollars in thousands)
Principal Outstanding at December 31, 2024
New Lines Originated During 2024
Unused Portion of Available Lines at December 31, 2024
Balances Over 30 Days Past Due
Loans with interest-only payments
Loans with LTV:
Between 80% and 90%
Over 90%
Over 80% LTV
Total loan portfolio from which above loans were identified
* Percentage of total principal outstanding of $350.9 million at December 31, 2024 .
** Percentage of total unused portion of available lines of $947.9 million at December 31, 2024 .
Consumer Loans
The consumer loans category is mostly comprised of private banking loans and automobile loans. Private banking loans comprised 40.4% of the consumer loan portfolio at December 31, 2025. The Company's private banking loans are mostly executive lines of credit, which are secured primarily by assets held by the Company's trust department, and insurance premium finance loans, which are primarily secured by life insurance policies. Automobile loans, which include direct and indirect product lines, comprised 35.2% of the consumer loan portfolio at December 31, 2025, and outstanding balances for auto loans were $773.6 million and $776.7 million at December 31, 2025 and 2024, respectively. The balances over 30 days past due amounted to $11.0 million at December 31, 2025, compared to $14.4 million at the end of 2024, and comprised 1.4% of the outstanding balances of these loans at December 31, 2025 compared to 1.9% at 2024. For the year ended December 31, 2025, $365.9 million of new auto loans were originated, compared to $319.5 million during 2024. At December 31, 2025, the automobile loan portfolio had a weighted average FICO score of 758, and net charge-offs on auto loans were .9% of average auto loans.
The Company's consumer loan portfolio also includes fixed rate home equity loans, typically for home repair or remodeling, and these loans comprised 9.4% of the consumer loan portfolio at December 31, 2025. Losses on these loans have historically been low, and the Company had net recoveries of $137 thousand in 2025. The remaining portion of the Company's consumer loan portfolio is comprised of healthcare financing, boat, RV, motorcycle, other equipment, and unsecured consumer loans.
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Net charge-offs on consumer loans, other than automobile and fixed rate home equity loans, totaled $3.4 million in 2025 and were .3% of the average balances of these loans at December 31, 2025.
Consumer Credit Card Loans
The Company offers low introductory rates on selected consumer credit card products. Out of a portfolio at December 31, 2025 of $589.7 million in consumer credit card loans outstanding, approximately $128.3 million, or 21.8%, carried a low promotional rate. Within the next six months, $54.5 million of these loans are scheduled to convert to the ongoing higher contractual rate. To mitigate some of the risk involved with this credit card promotional feature, the Company performs credit checks and detailed analysis of the customer borrowing profile before approving the loan application. Below are the FICO scores for the Company's consumer credit card loan portfolio at December 31, 2025 and 2024. Management believes that the risks in the consumer loan portfolio are reasonable and the anticipated loss ratios are within acceptable parameters.
December 31, 2025
December 31, 2024
FICO score:
Under 600
780 and over
Total
Oil and Gas Energy Lending
The Company's energy lending portfolio was comprised of lending to the petroleum and natural gas sectors and totaled $303.0 million at December 31, 2025, a decrease of $35.0 million from year end 2024, as shown in the table below.
(In thousands)
December 31, 2025
December 31, 2024
Unfunded commitments at December 31, 2025
Extraction
Mid-stream shipping and storage
Downstream distribution and refining
Support activities
Total energy lending portfolio
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Investment Securities Analysis
Investment securities are comprised of securities that are classified as available for sale, equity, trading or other. The largest component, available for sale debt securities, decreased 3.8% during 2025 to $9.7 billion (excluding unrealized gains/losses in fair value) at year end 2025. During 2025, available for sale debt securities of $1.4 billion were purchased, which included $1.0 billion in U.S. government and federal agency obligations and $341.2 million in asset-backed securities. Total sales, maturities and pay downs of available for sale debt securities were $1.9 billion during 2025. During 2026, maturities and pay downs of approximately $ 1.2 billion are expected to occur. The Company's tax-exempt investment portfolio is included in its state and municipal obligations and represented 41% of this portfolio at December 31, 2025, compared to 39% at December 31, 2024. The decline in balances of tax-exempt investment securities during 2025 was mostly due to maturities within our investment securities portfolio.
At December 31, 2025, the fair value of available for sale securities was $9.1 billion, which included a net unrealized loss in fair value of $646.8 million, compared to a net unrealized loss of $990.6 million at December 31, 2024. The overall unrealized loss in fair value at December 31, 2025 included net losses of $10.2 million in government-sponsored enterprise obligations, net losses of $50.3 million in state and municipal securities, and net losses of $602.7 million in mortgage and asset-backed securities, partly offset by net gains of $21.5 million in U.S. government and federal agency obligations. For the year ended December 31, 2025, the Company did not recognize a credit loss expense on any available for sale debt securities.
Available for sale investment securities at year end for the past two years are shown below:
December 31
(In thousands)
Amortized Cost
U.S. government and federal agency obligations
Government-sponsored enterprise obligations
State and municipal obligations
Agency mortgage-backed securities
Non-agency mortgage-backed securities
Asset-backed securities
Other debt securities
Total available for sale debt securities
Fair Value
U.S. government and federal agency obligations
Government-sponsored enterprise obligations
State and municipal obligations
Agency mortgage-backed securities
Non-agency mortgage-backed securities
Asset-backed securities
Other debt securities
Total available for sale debt securities
At December 31, 2025, the available for sale portfolio included $3.2 billion of agency mortgage-backed securities, which are collateralized bonds issued by agencies including FNMA, GNMA, FHLMC, FHLB, and Federal Farm Credit Banks. Non-agency mortgage-backed securities totaled $435.7 million and included $247.1 million collateralized by commercial mortgages and $188.6 million collateralized by residential mortgages at December 31, 2025.
At December 31, 2025, U.S. government obligations included TIPS of $419.4 million, at fair value. Other debt securities include corporate bonds, notes and commercial paper.
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The types of securities held in the available for sale security portfolio at year end 2025 are presented in the table below. Additional detail by maturity category is provided in Note 3 to the consolidated financial statements.
December 31, 2025
Percent of Total Debt Securities
Weighted Average Yield
Estimated Average Maturity*
Available for sale debt securities:
U.S. government and federal agency obligations
years
Government-sponsored enterprise obligations
years
State and municipal obligations
years
Agency mortgage-backed securities
years
Non-agency mortgage-backed securities
years
Asset-backed securities
years
Other debt securities
years
*Based on call provisions and estimated prepayment speeds.
Equity securities mainly include common and preferred stock with readily determinable fair values that totaled $47.6 million at December 31, 2025, compared to $48.4 million at December 31, 2024.
Other securities totaled $230.5 million at December 31, 2025 and $230.1 million at December 31, 2024. These include Federal Reserve Bank stock and Federal Home Loan Bank (Des Moines) stock held by the bank subsidiary in accordance with debt and regulatory requirements. These are restricted securities and are carried at cost. Also included in other securities are private equity investments which are held by a subsidiary qualified as a Small Business Investment Company. These investments are carried at estimated fair value, but are not readily marketable. While the nature of these investments carries a higher degree of risk than the normal lending portfolio, this risk is mitigated by the overall size of the investments and oversight provided by management, and management believes the potential for long-term gains in these investments outweighs the potential risks. Other securities at year end for the past two years are shown below:
December 31
(In thousands)
Federal Reserve Bank stock
Federal Home Loan Bank stock
Private equity investments in debt securities
Private equity investments in equity securities
Total other securities
In addition to its holdings in the investment securities portfolio, the Company invests in securities purchased under agreements to resell, which totaled $850.0 million at December 31, 2025 and $625.0 million at December 31, 2024. Of the total resale agreements outstanding at December 31, 2025, $250.0 million mature in 2028, $250.0 million mature in 2029, and $350.0 million mature in 2030. The resale agreements have fixed base rates and some of the agreements include structures that increase the base rate when interest rates decline to certain levels. The counterparties to these agreements are other financial institutions from whom the Company has accepted collateral of $871.4 million in marketable investment securities at December 31, 2025. The average rate earned on these agreements during 2025 was 4.0%, compared to 3.2% in 2024.
Deposits and Borrowings
Deposits, including both individual and corporate customer deposits, are the primary funding source for the Bank and are acquired from a broad base of local markets. Total period-end deposits were $25.6 billion at December 31, 2025, compared to $25.3 billion last year, reflecting an increase of $345.9 million, or 1.4%.
Average deposits increased $530.7 million, or 2.2%, in 2025 compared to 2024, mainly resulting from increases of $452.3 million, $151.5 million and $124.5 million in interest checking account balances, money market account balances, and personal demand deposits, respectively. Partly offsetting these increases were decreases in business demand deposits of $156.1 million and certificate of deposit account balances of $144.0 million.
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The following table shows year end deposit balances by type, as a percentage of total deposits.
December 31
Non-interest bearing
Savings, interest checking and money market
Certificates of deposit of less than $100,000
Certificates of deposit of $100,000 and over
Total deposits
Core deposits, which include non-interest bearing, interest checking, savings, and money market deposits, supported 73% of average earning assets in both 2025 and 2024. Average balances by major deposit category for the last six years are disclosed in the Average Balance Sheets section of Management's Discussion and Analysis of Financial Condition and Results of Operations. A maturity schedule of all certificates of deposits outstanding at December 31, 2025 is included in Note 7 on Deposits in the consolidated financial statements.
Total uninsured deposits were calculated using the same methodology that the Company uses to determine uninsured deposits for regulatory reporting and amounted to $10.0 billion and $10.8 billion at December 31, 2025 and December 31, 2024, respectively. The following table shows a detailed breakdown of the maturities of uninsured certificates of deposit at December 31, 2025. The Company estimated the uninsured deposits in the following table by aggregating all deposit balances by customer and assuming federal deposit insurance would first apply to demand deposits, followed by savings deposits, and lastly to time deposits (beginning with the earliest maturity deposits).
(In thousands)
Uninsured Certificates of Deposit at December 31, 2025
Due in 3 months or less
Due in over 3 through 6 months
Due in over 6 through 12 months
Due in over 12 months
Total
The Company’s primary sources of overnight borrowings are federal funds purchased and securities sold under agreements to repurchase (repurchase agreements). Balances in these accounts can fluctuate significantly on a day-to-day basis and generally have one day maturities. Total balances of federal funds purchased and repurchase agreements outstanding at December 31, 2025 were $3.0 billion, comprised of federal funds purchased of $128.6 million and repurchase agreements of $2.9 billion. At December 31, 2025, balances of federal funds purchased increased $4.9 million and repurchase agreements outstanding increased $58.0 million compared to balances at December 31, 2024. On an average basis, these borrowings increased $18.7 million, during 2025, due to an increase of $118.9 million in repurchase agreements, largely offset by a decrease of $100.2 million in federal funds purchased. The average rates paid on federal funds purchased and repurchase agreements were 4.25% and 2.78%, respectively, during 2025, compared to rates of 5.31% on federal funds purchased and 3.38% paid on repurchase agreements during 2024.
In addition to the funding sources above, the Company may borrow from the FHLB on a short-term basis or long-term basis. During 2025 and 2024, there were no short-term borrowings from the FHLB. The Company did not borrow any long-term funds from the FHLB during 2025 or 2024.
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Liquidity and Capital Resources
Liquidity Management
Liquidity is managed within the Company in order to satisfy cash flow requirements of deposit and borrowing customers while at the same time meeting its own cash flow needs. The Company has taken numerous steps to address liquidity risk and has developed a variety of liquidity sources which it believes will provide the necessary funds for future growth or to replace deposit runoff during periods of stress and uncertainty in the banking industry. The Company manages its liquidity position through a variety of actions and sources including:
• A portfolio of liquid investments with overnight maturities,
• A portfolio of liquid available for sale debt securities,
• A diversified customer deposit base spread across three business segments,
• Access to the brokered certificate of deposit market,
• A loan to deposit ratio lower than industry average,
• Maintaining excellent debt ratings from both Standard & Poor's and Moody's national rating services,
• Available borrowing capacity of unsecured, overnight federal funds purchased, and
• Available borrowing capacity from the FHLB and Federal Reserve Bank.
The Company’s most liquid assets include balances at the Federal Reserve Bank, federal funds sold, available for sale debt securities, and securities purchased under agreements to resell. At December 31, 2025 and 2024, such assets were as follows:
(In thousands)
Balances at the Federal Reserve Bank
Federal funds sold
Securities purchased under agreements to resell
Available for sale debt securities
Total
Interest earning balances at the Federal Reserve Bank, which have overnight maturities and are used for general liquidity purposes, totaled $2.7 billion at December 31, 2025. The fair value of the available for sale debt portfolio was $9.1 billion at December 31, 2025 and included an unrealized loss of $692.1 million. The total net unrealized loss included net losses of $602.7 million on mortgage-backed and asset-backed securities and $50.3 million on state and municipal obligations.
Resale agreements totaled $850.0 million at December 31, 2025, with maturities in 2028 through 2030. Under these agreements, the Company lends funds to upstream financial institutions and holds marketable securities, safe-kept by a third-party custodian, as collateral. This collateral totaled $871.4 million in fair value at December 31, 2025.
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The Company's available for sale debt securities portfolio has a diverse mix of high quality and liquid investment securities with a duration of 4.3 years at December 31, 2025. Approximately $1.2 billion of the available for sale debt portfolio is expected to mature or pay down during 2026, and these funds offer substantial resources to meet either new loan demand or offset potential reductions in the Company’s deposit funding base. The Company pledges portions of its investment securities portfolio to secure public fund deposits, securities sold under agreements to repurchase, trust funds, letters of credit issued by the FHLB, and borrowing capacity at the FHLB and the Federal Reserve Bank. At December 31, 2025 and 2024, total investment securities pledged for these purposes were as follows:
(In thousands)
Investment securities pledged for the purpose of securing:
Federal Reserve Bank borrowings
FHLB borrowings and letters of credit
Repurchase agreements *
Other deposits
Total pledged securities
Unpledged and available for pledging
Ineligible for pledging
Total available for sale debt securities, at fair value
* Includes securities pledged for collateral swaps, as discussed in Note 20 to the consolidated financial statements
The average loans to deposits ratio is a measure of a bank's liquidity, and the Company’s average loans to deposits ratio was 69.8% for the year ended December 31, 2025. Core customer deposits, defined as non-interest bearing, interest checking, savings, and money market deposit accounts, totaled $23.3 billion and represented 90.7% of the Company’s total deposits at December 31, 2025. These core deposits are normally less volatile, often with customer relationships tied to other products offered by the Company promoting long lasting relationships and stable funding sources. Core deposits increased $347.9 million at year end 2025 compared to year end 2024, primarily due to increases in commercial, wealth, and retail banking core deposits of $197.4 million, $129.2 million, and $36.4 million, respectively. While the Company considers core retail banking and wealth deposits less volatile, corporate deposits could decline if interest rates increase significantly, encouraging corporate customers to increase investing activities, or if the economy deteriorates and companies experience lower cash inflows, reducing deposit balances. If these corporate deposits decline, the Company's funding needs may be met by liquidity supplied by investment security maturities and pay downs expected to total $1.2 billion over the next year, as noted above. In addition, as shown in the table of collateral available for future advances below, the Company has borrowing capacity of $6.3 billion through advances from the FHLB and the Federal Reserve.
(In thousands)
Core deposit base:
Non-interest bearing
Interest checking
Savings and money market
Total
Certificates of deposit of $100,000 or greater totaled $1.4 billion at December 31, 2025. These deposits are normally considered more volatile and higher costing, and comprised 5.3% of total deposits at December 31, 2025.
During the third quarter of 2024, the Company issued $100.0 million of brokered certificates, all of which matured by December 31, 2024. The Company may occasionally issue brokered certificates of deposit to test the reliability of this potential funding source. While it is not clear how many brokered certificates of deposit the market would allow the Company to issue, the Company believes brokered certificates of deposits may be an additional, reliable source of liquidity during periods of stress in the banking industry.
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Other important components of liquidity are the level of borrowings from third party sources and the availability of future credit. The Company’s outside borrowings are mainly comprised of federal funds purchased and repurchase agreements, as follows:
(In thousands)
Borrowings:
Federal funds purchased
Securities sold under agreements to repurchase
Other debt
Total
Federal funds purchased, which totaled $128.6 million at December 31, 2025, are unsecured overnight borrowings obtained mainly from upstream correspondent banks with which the Company maintains approved lines of credit. At December 31, 2025, the Company had approved lines of credit totaling $4.3 billion. Since these borrowings are unsecured and limited by market trading activity, their availability may be less certain than collateralized sources of borrowings. Retail repurchase agreements are offered to customers wishing to earn interest in highly liquid balances and are used by the Company as a funding source considered to be stable, but short-term in nature. Repurchase agreements are collateralized by securities in the Company’s investment portfolio. Total repurchase agreements at December 31, 2025 were comprised of non-insured customer funds totaling $2.9 billion, and securities pledged as collateral for these retail agreements totaled $2.9 billion.
The Company pledges certain assets, including loans and investment securities, to both the Federal Reserve Bank and the FHLB as security to establish lines of credit and borrow from these entities. Based on the amount and type of collateral pledged, the FHLB establishes a collateral value from which the Company may draw advancesagainst the collateral. Additionally, this collateral is used to enable the FHLB to issue letters of credit in favor of public fund depositors of the Company. The Federal Reserve Bank also establishes a collateral value of assets pledged and permits borrowings from the discount window. The following table reflects the collateral value of assets pledged, borrowings, and letters of credit outstanding, in addition to the estimated future funding capacity available to the Company at December 31, 2025.
December 31, 2025
(In thousands)
FHLB
Federal Reserve
Total
Total collateral value established by FHLB and FRB
Letters of credit issued
Available for future advances
The Company receives outside ratings from both Standard & Poor’s and Moody’s on both the consolidated company and its subsidiary bank, Commerce Bank. These ratings are as follows:
Standard & Poor’s
Moody’s
Commerce Bancshares, Inc.
Issuer rating
Rating outlook
Stable
Commerce Bank
Issuer rating
Baseline credit assessment
Short-term rating
Rating outlook
Stable
Stable
The Company considers these ratings to be indications of a sound capital base and strong liquidity and believes that these ratings would help ensure the ready marketability of its commercial paper, should the need arise. No commercial paper has been outstanding during the past ten years. The Company has no subordinated or hybrid debt instruments which would affect future borrowing capacity. Because of its lack of significant long-term debt, the Company believes that, through its Commercial Tradable Products division or in other public debt markets, it could generate additional liquidity from sources such as jumbo certificates of deposit, privately-placed corporate notes or other forms of debt.
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The cash flows from the operating, investing and financing activities of the Company resulted in a net increase in cash, cash equivalents and restricted cash of $171.7 million in 2025, as reported in the consolidated statements of cash flows. Operating activities, consisting mainly of net income adjusted for certain non-cash items, provided cash flow of $645.1 million and has historically been a stable source of funds. Investing activities used cash of $462.4 million. Sales and maturities proceeds of investment securities (net of purchases) provided cash of $409.3 million, securities purchased under agreements to resell (net of repayments of securities purchased under agreements to resell) used cash of $225.0 million, and a net increase in the loan portfolio used cash of $594.0 million. Investing activities are somewhat unique to financial institutions in that, while large sums of cash flow are normally used to fund growth in investment securities, loans, or other bank assets, they are normally dependent on the financing activities described below.
During 2025, financing activities used cash of $11.0 million. This decrease in cash was largely driven by treasury stock purchases, which used cash of $207.6 million. The Company paid cash dividends of $146.6 million on common stock, while an increase in deposits provided cash of $271.1 million during 2025. Federal funds purchases and short-term securities sold under agreements to repurchase provided cash of $62.9 million. Future short-term liquidity needs for daily operations are not expected to vary significantly, and the Company believes it maintains adequate liquidity to meet these cash flows.
Cash outflows resulting from the Company’s transactions in its common stock were as follows:
(In millions)
Purchases of treasury stock
Common cash dividends paid
Cash used
The Parent faces unique liquidity constraints due to legal limitations on its ability to borrow funds from its bank subsidiary. The Parent obtains funding to meet its obligations from two main sources: dividends received from bank and non-bank subsidiaries (within regulatory limitations) and management fees charged to subsidiaries as reimbursement for services provided by the Parent, as presented below:
(In millions)
Dividends received from subsidiaries
Management fees
Total
These sources of funds are used mainly to pay cash dividends on outstanding stock, pay general operating expenses, and purchase treasury stock. At December 31, 2025, the Parent’s investment securities totaled $13.3 million at fair value, consisting mainly of equity securities. To support its various funding commitments, the Parent maintains a $20.0 million line of credit with its subsidiary bank. There were no borrowings outstanding under the line during 2025 or 2024.
Company senior management is responsible for measuring and monitoring the liquidity profile of the organization with oversight by the Company’s Asset/Liability Committee. This is done through a series of controls, including a written Contingency Funding Policy and risk monitoring procedures, which include daily, weekly and monthly reporting. In addition, the Company prepares forecasts to project changes in the balance sheet affecting liquidity and to allow the Company to better plan for forecasted changes.
Material Cash Requirements, Contractual Obligations, Commitments, and Off-Balance Sheet Arrangements
The Company's material cash requirements include commitments for contractual obligations (both short-term and long-term), commitments to extend credit, and off-balance sheet arrangements. The Company's material cash requirements for the next 12 months are primarily to fund loan growth. Additionally, the Company will utilize cash to fund deposit maturities and withdrawals that may occur in the next 12 months. Other contractual obligations, purchase commitments, lease obligations, and unfunded commitments may require cash payments by the Company within the next 12 months, and these, along with longer-term obligations, are discussed below.
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A table summarizing contractual cash obligations of the Company at December 31, 2025, and the expected timing of these payments follows:
Payments Due by Period
(In thousands)
In One Year or Less
After One Year Through Three Years
After Three Years Through Five Years
After Five Years
Total
Operating lease obligations
Purchase obligations
Certificates of Deposit*
Total
*Includes principal payments only.
In the normal course of business, various commitments and contingent liabilities arise that are not required to be recorded on the balance sheet. The most significant of these are loan commitments totaling $15.8 billion (including approximately $6.1 billion in unused, approved credit card lines) and the contractual amount of standby letters of credit totaling $648.2 million at December 31, 2025. As many commitments expire unused or only partially used, these totals do not necessarily reflect future cash requirements. Management does not anticipate any material losses arising from commitments or contingent liabilities and believes there are no material commitments to extend credit that represent risks of an unusual nature.
The Company funds a defined benefit pension plan for a portion of its employees. Under the funding policy for the plan, contributions are made as necessary to provide for current service and for any unfunded accrued actuarial liabilities over a reasonable period. No contributions to the defined benefit plan were made in 2025, 2024 or 2023, and the Company is not required nor does it expect to make a contribution in 2026.
The Company has investments in low-income housing partnerships generally within the areas it serves. These partnerships supply funds for the construction and operation of apartment complexes that provide affordable housing to that segment of the population with lower family income. If these developments successfully attract a specified percentage of residents falling in that lower income range, federal (and sometimes state) income tax credits are made available to the partners. The tax credits are normally recognized over ten years, and they play an important part in the anticipated yield from these investments. In order to continue receiving the tax credits each year over the life of the partnership, the low-income residency targets must be maintained. Under the terms of the partnership agreements, the Company has a commitment to fund a specified amount that will be due in installments over the life of the agreements, which ranges from 1 to 21 years. The Company's investments in low-income housing partnerships, which are recorded within other assets in the Company's consolidated balance sheets, totaled $99.7 million and $94.4 million December 31, 2025 and 2024, respectively. The Company's obligations related to unfunded commitments, which are recorded within other liabilities in the consolidated balance sheets, amounted to $54.6 million and $56.9 million at December 31, 2025 and 2024, respectively.
The net income tax benefit associated with these investments, which consists of proportional amortization expense, affordable housing tax credits and other related tax benefits, was reported in income tax expense in the Company's consolidated statements of income. The amount of proportional amortization expense recognized during the fiscal years 2025, 2024 and 2023 was $8.8 million, $7.1 million and $6.0 million, respectively, and the a mount of affordable housing tax credits and other related tax benefits was $10.2 million, $8.2 million and $7.0 million, respectively. The resulting net income tax benefit during the fiscal years 2025, 2024 and 2023 was $1.4 million, $1.1 million and $1.0 million, respectively.
The Company regularly purchases various state tax credits arising from third-party property redevelopment. These credits are either resold to third parties for a profit or retained for use by the Company. During 2025, purchases and sales of tax credits amounted to $179.4 million and $178.6 million, respectively. Income from the sales of tax credits were $7.4 million, $5.2 million and $3.1 million in 2025, 2024 and 2023, respectively. At December 31, 2025, the Company had outstanding purchase commitments totaling $165.2 million that it expects to fund in 2026. These commitments, along with the commitments for the next five years, are included in the table above.
Through the various sources of liquidity described above, the Company maintains a liquidity position that it believes will adequatelysatisfy its financial obligations.
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Capital Management
Under Basel III capital guidelines, at December 31, 2025 and 2024, the Company met all capital adequacy requirements and had regulatory capital ratios in excess of the levels established for well-capitalized institutions, as shown in the following table.
(Dollars in thousands)
Minimum Capital Requirement
Capital Conservation Buffer
Minimum Ratios Requirement including Capital Conservation Buffer
Minimum Ratios for Well-Capitalized Banks*
Risk-adjusted assets
Tier I common risk-based capital
Tier I risk-based capital
Total risk-based capital
Tier I common risk-based capital ratio
Tier I risk-based capital ratio
Total risk-based capital ratio
Tier I leverage ratio
Tangible common equity to tangible assets
Dividend payout ratio
* Under Prompt Corrective Action requirements
The Company is subject to a 2.5% capital conservation buffer, which is an amount above the minimum ratios under capital adequacy guidelines, and is intended to absorb losses during periods of economic stress. Failure to maintain the buffer will result in constraints on dividends, share repurchases, and executive compensation.
In the first quarter of 2020, the interim final rule of the Federal Reserve Bank and other U.S. banking agencies became effective, providing banks that adopted CECL (ASU 2016-13) during the 2020 calendar year the option to delay recognizing the estimated impact on regulatory capital until after a two year deferral period, followed by a three year transition period. In connection with the adoption of CECL on January 1, 2020, the Company elected to utilize this option. As a result, the two year deferral period for the Company extended through December 31, 2021. Beginning on January 1, 2022, the Company was required to phase in 25% of the previously deferred estimated capital impact of CECL, with an additional 25% to be phased in at the beginning of each subsequent year until fully phased in, which was during the first quarter of 2025.
The Company maintains a treasury stock buyback program under authorizations by its Board of Directors and periodically purchases stock in the open market. During 2024, the Company purchased 2.9 million shares, and during 2025 the Company purchased 3.6 million shares. At December 31, 2025, 3.2 million shares remained available for purchase under the current Board authorization.
The Company’s common stock dividend policy reflects its earnings outlook, desired payout ratios, the need to maintain adequate capital levels and alternative investment options. Per share cash dividends paid by the Company increased 6.9% in 2025 compared with 2024, and the Company increased its first quarter 2026 cash dividend 5%, making 2026 the Company's 58th consecutive year of regular cash dividend increases. The Company also distributed its 32nd consecutive annual 5% stock dividend in December 2025.
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Interest Rate Sensitivity
The Company’s Asset/Liability Management Committee (ALCO) measures and manages the Company’s interest rate risk on a monthly basis to identify trends and establish strategies to maintain stability in net interest income throughout various rate environments. Analytical modeling techniques provide management insight into the Company’s exposure to changing rates. These techniques include net interest income simulations and market value analysis. Management has set guidelines specifying acceptable limits within which net interest income and market value may change under various rate change scenarios.
The Company’s main interest rate measurement tool, income simulation, projects net interest income under various rate change scenarios in order to quantify the magnitude and timing of potential rate-related changes. Income simulations are able to capture option risks within the balance sheet where expected cash flows may be altered under various rate environments. Modeled rate movements include “shocks, ramps and twists.” Shocks are intended to capture interest rate risk under extreme conditions by immediately shifting rates up and down, while ramps measure the impact of gradual changes and twists measure yield curve risk. The size of the balance sheet is assumed to remain constant so that results are not influenced by growth predictions.
The Company also employs a sophisticated simulation technique known as a stochastic income simulation. This technique allows management to see a range of results from hundreds of income simulations. The stochastic simulation creates a vector of potential rate paths around the market’s best guess (forward rates) concerning the future path of interest rates and allows rates to randomly follow paths throughout the vector. This allows for the modeling of non-biased rate forecasts around the market consensus. Results give management insight into a likely range of rate-related risk as well as worst and best-case rate scenarios.
Additionally, the Company uses market value analyses to help identify longer-term risks that may reside on the balance sheet. This is considered a secondary risk measurement tool by management. The Company measures the market value of equity as the net present value of all asset and liability cash flows discounted along the current swap curve plus appropriate market risk spreads. It is the change in the market value of equity under different rate environments, or effective duration, that gives insight into the magnitude of risk to future earnings due to rate changes. Market value analyses also help management understand the price sensitivity of non-marketable bank products under different rate environments.
The tables below show the effects of gradual shifts in interest rates over a twelve month period on the Company’s net interest income versus the Company's net interest income in a flat rate scenario. The simulation presents three rising rate scenarios and three falling rate scenarios and in each scenario, rates are assumed to change evenly over 12 months. In these scenarios, the current balance sheet is held constant.
The Company utilizes this simulation for monitoring interest rate risk. While the future effects of rising and falling rates on deposit balances cannot be known, the Company maintains a practice of running multiple rate scenarios to better understand interest rate risk and its effect on the Company’s performance.
December 31, 2025
September 30, 2025
(Dollars in millions)
$ Change in
Net Interest
Income
% Change in
Net Interest
Income
$ Change in
Net Interest
Income
% Change in
Net Interest
Income
300 basis points rising
200 basis points rising
100 basis points rising
100 basis points falling
200 basis points falling
300 basis points falling
Under the simulation, in the three rising interest rate scenarios, interest rate risk is more asset sensitive when compared to the scenarios in the previous quarter. This change is primarily due to an increase in average interest earning cash balances at the Federal Reserve coupled with a reduction in the Federal funds rate, which resulted in lower projected deposit rates. In the falling interest rate scenarios, there was no material change from the previous quarter, which was mainly the result of an increase in average interest earning cash balances at the Federal Reserve. This increase was mostly offset by the Company's use of interest rate floors, which limits the repricing down of variable-rate assets while funding costs move lower.
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Derivative Financial Instruments
The Company maintains an overall interest rate risk management strategy that permits the use of derivative instruments to modify exposure to interest rate risk. Such instruments include interest rate swaps, interest rate floors, interest rate caps, credit risk participation agreements, mortgage loan commitments, forward sale contracts, and forward to-be-announced (TBA) contracts. The Company’s interest rate risk management strategy includes the ability to modify the re-pricing characteristics of certain assets and liabilities so that changes in interest rates do not adversely affect the net interest margin and cash flows.
In addition to using derivatives to manage interest rate risk, the Company enters into foreign exchange derivative instruments as an accommodation to customers and offsets the related foreign exchange risk by entering into offsetting third-party forward contracts with approved, reputable counterparties. This trading activity is managed within a policy of specific controls and limits.
In all of these contracts, the Company is exposed to credit risk in the event of nonperformance by counterparties, who may be bank customers or other financial institutions. The Company controls the credit risk of its financial contracts through credit approvals, limits and monitoring procedures. Because the Company generally only enters into transactions with high quality counterparties, there have been no losses associated with counterparty nonperformance on derivative financial instruments.
The following table summarizes the notional amounts and estimated fair values of the Company’s derivative instruments at December 31, 2025 and 2024. Notional amount, along with the other terms of the derivative, is used to determine the amounts to be exchanged between the counterparties. Because the notional amount does not represent amounts exchanged by the parties, it is not a measure of loss exposure related to the use of derivatives nor of exposure to liquidity risk. All of these derivative instruments utilized by the Company are further discussed in Note 19 on Derivative Instruments in the consolidated financial statements.
(In thousands)
Notional Amount
Positive Fair Value
Negative Fair Value
Notional Amount
Positive Fair Value
Negative Fair Value
Interest rate swaps
Interest rate floors
Interest rate caps
Credit risk participation agreements
Foreign exchange contracts
Mortgage loan commitments
Mortgage loan forward sale contracts
Forward TBA contracts
Total at December 31
Operating Segments
The Company segregates financial information for use in assessing its performance and allocating resources among three operating segments. The results are determined based on the Company’s management accounting process, which assigns balance sheet and income statement items to each responsible segment. These segments are defined by customer base and product type. The management process measures the performance of the operating segments based on the management structure of the Company and is not necessarily comparable with similar information for any other financial institution. Each segment is managed by executives who, in conjunction with the Chief Executive Officer, make strategic business decisions regarding that segment. The three reportable operating segments are Retail Banking, Commercial, and Wealth. Additional information is presented in Note 13 on Segments in the consolidated financial statements.
The Company uses a funds transfer pricing method to value funds used (e.g., loans, fixed assets, cash, etc.) and funds provided (deposits, borrowings, and equity) by the business segments and their components. This process assigns a specific value to each new source or use of funds with a maturity, based on current swap rates, thus determining an interest spread at the time of the transaction. Non-maturity assets and liabilities are valued using weighted average pools. The funds transfer pricing process attempts to remove interest rate risk from valuation, allowing management to compare profitability under various rate environments. The Company also assigns loan charge-offs and recoveries (labeled in the table below as “provision for credit
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losses”) directly to each operating segment instead of allocating an estimated credit loss provision. The operating segments also include a number of allocations of income and expense from various support and overhead centers within the Company.
The table below is a summary of segment pre-tax income results for the past three years.
(Dollars in thousands)
Retail Banking
Commercial
Wealth
Segment Totals
Other/Elimination
Consolidated Totals
Year ended December 31, 2025:
Net interest income
Provision for credit losses
Non-interest income
Investment securities gains (losses), net
Non-interest expense
Income before income taxes
Year ended December 31, 2024:
Net interest income
Provision for loan losses
Non-interest income
Investment securities gains (losses), net
Non-interest expense
Income before income taxes
Increase (decrease) in income before income taxes:
Amount
Percent
Year ended December 31, 2023:
Net interest income
Provision for loan losses
Non-interest income
Investment securities gains (losses), net
Non-interest expense
Income before income taxes
Increase (decrease) in income before income taxes:
Amount
Percent
Retail Banking
The Retail Banking segment, previously called the Consumer segment, includes consumer deposits, consumer finance, and consumer debit and credit cards. The Company renamed the Consumer segment to the Retail Banking segment in January 2026, however, there were no changes to the composition of the segment in conjunction with the name change. During 2025, income before income taxes for the Retail Banking segment decreased $19.1 million, or 7.8%, compared to 2024. This decrease was due to increases in non-interest expense of $9.4 million, or 2.9%, and the provision for credit losses of $1.2 million, or 3.2%, and declines in net interest income of $7.2 million, or 1.4%, and non-interest income of $1.4 million, or 1.4%. Net interest income decreased due to a $15.1 million decline in net allocated funding credits assigned to the Retail Banking segment's loan and deposit portfolios and a $1.8 million increase in loan interest income, partly offset by a decrease of $9.8 million in deposit interest expense. Non-interest income decreased mainly due to lower net bank card fees (mainly credit and debit card fees). Non-interest expense increased over the previous year mainly due to higher data processing and software, marketing and miscellaneous losses expense. In addition, allocated servicing and support costs increased due to higher allocated costs for retail administration and operations, while branch employee servicing costs declined. The provision for credit losses totaled $38.8 million, a $1.2 million increase over the prior year, which resulted mainly from higher auto and
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consumer credit card loan net charge-offs, partly offset by lower other vehicle and equipment loan net charge-offs. Total average loans in this segment decreased $98.0 million in 2025 compared to 2024 mainly due to declines in personal real estate and auto loans, partly offset by higher revolving and fixed-rate home equity loans. Average deposits increased $37.3 million, or .3%, over the prior year, resulting from growth in personal demand and certificate of deposit account balances, partly offset by declines in savings, interest checking and money market deposit account balances.
During 2024, income before income taxes for the Retail Banking segment decreased $52.6 million, or 17.6%, compared to 2023. This decrease was due to a decline in net interest income of $40.6 million, or 7.3%, an increase in the provision for credit losses of $10.2 million, or 37.0%, and higher non-interest expense of $4.7 million, or 1.5%, partly offset by an increase in non-interest income of $2.9 million, or 3.0%. Net interest income decreased due to an increase of $66.4 million in deposit interest expense, partly offset by a $19.7 million increase in loan interest income and a $6.1 million increase in net allocated funding credits. Non-interest income increased mainly due to growth in net bank card fees (mainly credit and debit card fees), deposit account fees and mortgage banking revenue . Non-interest expense increased over 2023 mainly due to higher miscellaneous losses and allocated support costs for information technology and retail operations, partly offset by lower salaries and benefits expense and allocated management support costs. The provision for credit losses totaled $37.6 million, a $10.2 million increase over 2023, which resulted mainly from higher consumer credit card and auto loan net charge-offs, partly offset by lower other vehicle and equipment loan net charge-offs. Total average loans in this segment decreased $1.7 million in 2024 compared to 2023 mainly due to declines in auto and other vehicle loans and personal real estate loans, partly offset by higher revolving and fixed-rate home equity loans. Average deposits increased $44.4 million, or .4%, over 2023, resulting from growth in certificate of deposit account balances, partly offset by declines in savings, interest checking and money market deposit account balances.
Commercial
The Commercial segment provides lending (including the Small Business Banking product line within the branch network), leasing, international services, and business, government deposit, and related commercial cash management services, as well as merchant and commercial bank card products. The segment includes the Commercial Tradable Products division, which sells fixed-income securities, underwrites municipal bonds, and provides securities safekeeping and accounting services to its business and correspondent bank customers. Pre-tax income for 2025 increased $9.6 million, or 2.6%, compared to 2024, mainly due higher net interest income and non-interest income, partly offset by higher non-interest expense. Net interest income increased $16.5 million, or 3.2%, due to lower interest expense on deposits and customer repurchase agreements of $25.0 million and $10.4 million, respectively, coupled with higher net allocated funding credits of $12.7 million. These increases to income were partly offset by lower loan interest income of $32.1 million. Non-interest income increased $18.6 million, or 7.1%, over the previous year mainly due to higher gains on asset sales and growth in deposit account fees (mainly corporate cash management fees). These increases were partly offset by a decrease in net bank card fees (mainly corporate card fees). Non-interest expense increased $25.1 million, or 6.2%, mainly due to higher legal fees, salaries and benefits expense and allocated service and support costs for commercial payments and product support, commercial loan servicing and branch employee expense. The provision for credit losses increased $392 thousand over the same period last year, mainly due to higher commercial and industrial loan net charge-offs. Average segment loans increased $274.1 million, or 2.4%, compared to 2024, mainly due to growth in business and business real estate loans. Average deposits increased $386.9 million, or 3.9%, mainly due to an increase in interest checking account balances, partly offset by a decline in certificate of deposit account balances.
Pre-tax income for 2024 decreased $585 thousand, or .2%, compared to 2023, mainly due to lower net interest income and higher non-interest expense, mostly offset by higher non-interest income and a decrease in the provision for credit losses. Net interest income decreased $5.7 million, or 1.1%, mainly due to lower net allocated funding credits of $30.8 million, coupled with higher interest expense on deposits and customer repurchase agreements of $21.0 million and $8.2 million, respectively. These decreases to income were partly offset by higher loan interest income of $53.1 million. Non-interest income increased $13.2 million, or 5.3%, over 2023 mainly due to growth in deposit account fees (mainly corporate cash management fees), capital market fees, tax credit sales fees and loan commitment fees. These increases were partly offset by decreases in net bank card fees (mainly corporate card fees), letter of credit fees and swap fees. Non-interest expense increased $10.1 million, or 2.6%, mainly due to higher salaries and benefits expense and allocated servicing and support costs for management and bank operations. These increases were partly offset by lower insurance and marketing expense. The provision for credit losses decreased $2.1 million from 2023, mainly due to lower commercial and industrial loan net charge-offs. Average segment loans increased $240.8 million, or 2.2%, compared to 2023, mainly due to growth in business real estate, floor plan, tax free, and commercial and industrial loans. Average deposits decreased $498.9 million, or 4.8%, mainly due to declines in business demand and certificate of deposit account balances, partly offset by increases in interest checking and money market account balances.
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Wealth
The Wealth segment provides traditional trust and estate planning, advisory and discretionary investment management services, brokerage services, and includes Private Banking accounts. At December 31, 2025, the Trust group managed investments with a market value of $50.6 billion and administered an additional $31.0 billion in non-managed assets. It also provides investment management services to The Commerce Funds, a series of mutual funds with $2.6 billion in total assets at December 31, 2025. In 2025, pre-tax income for the Wealth segment was $190.7 million, compared to $172.8 million in 2024, an increase of $17.9 million, or 10.3%. Net interest income increased $2.8 million, or 3.2%, mainly due to a $9.4 million increase in loan interest income and a $3.7 million decrease in deposit interest expense. These increases to income were partly offset by a $10.3 million decrease in net allocated funding credits. Non-interest income increased $22.8 million, or 9.4%, over the prior year mainly due to higher private client and institutional trust fees and brokerage services fees (mainly life insurance, annuity and advisory fees). Non-interest expense increased $7.6 million, or 4.8%, mainly due to higher salaries and benefits, data processing and software, and allocated support costs for information technology. The provision for credit losses increased $170 thousand over the same period last year, mainly due to fixed-rate home equity loan net recoveries recorded in the prior year. Average assets increased $212.9 million, or 10.8%, during 2025 mainly due to higher personal real estate, fixed-rate home equity and business loan balances. Average deposits increased $148.6 million, or 6.2%, mainly due to growth in money market and certificate of deposit account balances.
In 2024, pre-tax income for the Wealth segment was $172.8 million, compared to $160.6 million in 2023, an increase of $12.2 million, or 7.6%. Net interest income decreased $12.0 million, or 12.0%, mainly due to a $20.3 million increase in deposit interest expense and a $510 thousand decline in net allocated funding credits assigned to the Wealth segment's loan and deposit portfolios, partly offset by an $8.9 million increase in loan interest income. Non-interest income increased $25.2 million, or 11.6%, over 2023 mainly due to higher private client and institutional trust fees, brokerage services fees and cash sweep commissions. Non-interest expense increased $1.2 million, or .8%, mainly due to higher salaries and benefits expense, partly offset by deconversion costs recorded in 2023. The provision for credit losses decreased $176 thousand from 2023 mainly due to net recoveries on fixed-rate home equity loans in 2024. Average assets increased $72.3 million, or 3.8%, during 2024 mainly due to higher personal real estate loan balances, partly offset by lower commercial and industrial and fixed-rate home equity loan balances. Average deposits increased $1.6 million, or .1%, due to growth in certificate of deposit and money market deposit account balances, mostly offset by declines in interest checking and business demand deposit account balances.
The segment activity, as shown above, includes both direct and allocated items. Amounts in the “Other/Elimination” column include the activity of various support and overhead operating units of the Company, in addition to the investment securities portfolio, brokered deposits and other items not allocated to the segments. In accordance with the Company's transfer pricing procedures, the difference between the total provision and total net charge-offs/recoveries is not allocated to a business segment and is included in this category. In 2025, the pre-tax net loss in this category was $66.8 million, compared to a net loss of $110.8 million in 2024. Net interest income increased $59.4 million and non-interest expense declined $13.5 million. These increases to income were partly offset by an increase of $21.5 million in the provision for credit losses and a $3.3 million decrease in non-interest income. Additionally, unallocated securities gains were $3.7 million in 2025, compared to securities gains of $7.8 million in 2024. The increase in net interest income was mainly due to higher interest income on investment securities and securities purchased under resell agreements, which are not allocated to the segments for management reporting purposes. The increase in the unallocated provision for credit losses was primarily driven by an increase in the provision for credit losses on loans, partly offset by a decrease in the liability for unfunded lending commitments, which are both not allocated to the segments for management reporting purposes. Net charge-offs are allocated to segments when incurred for management reporting purposes. The provision for credit losses on loans was $16.7 million in excess of net-charge offs in 2025, due to an increase in the allowance for credit losses on loans, while the provision was $347 thousand higher than net charge-offs in 2024. For the year ended December 31, 2025, the Company's provision for credit losses on unfunded lending commitments was a benefit of $1.3 million, compared to a benefit of $6.3 million in 2024.
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Impact of Recently Issued Accounting Standards
Income Taxes The FASB issued ASU 2023-09, "Income Taxes (Topic 740) - Improvements to Income Tax Disclosures", in December 2023. The amendments in this Update require additional disclosures regarding the rate reconciliation and income taxes paid. This Update also removed certain existing disclosure requirements. The Company adopted this Update for the year ended December 31, 2025, and applied the new disclosures on a retrospective basis.
Income Statement Reporting The FASB issued ASU 2024-03, "Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses" in November 2024. The amendments in this Update require new disclosures providing further detail of a company's income statement expense items. This Update is effective for annual periods beginning January 1, 2027, and interim periods beginning January 1, 2028. Early adoption is permitted. The amendments in this Update should be applied on a prospective basis. Other than the inclusion of additional disclosures, the adoption is not expected to have a significant effect on the Company's consolidated financial statements.
Internal-Use Software Development Costs The FASB issued ASU 2025-06, "Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Targeted Improvement to the Accounting for Internal-Use Software" in September 2025. The amendments in this Update are intended to modernize the accounting for internal-use software by eliminating references to software development project stages, making the guidance neutral to various development methodologies, including those currently in use and those that may be developed in the future. This Update is effective for annual and interim periods beginning after December 15, 2027. Early adoption is permitted as of the beginning of an annual reporting period. The amendments may be applied on a prospective, modified retrospective or full retrospective basis. The adoption is not expected to have a significant effect on the Company's consolidated financial statements.
Purchased Loans The FASB issued ASU 2025-08 "Financial Instruments - Credit Losses (Topic 326): Purchased Loans" in November 2025. This new guidance makes significant changes to the accounting for certain acquired seasoned loans subject to the current expected credit loss model (CECL). Under the ASU, the initial allowance for credit losses recorded upon the acquisition of loans in scope is recognized as an adjustment to the amortized cost basis of the loan - similar to the model for purchased credit deteriorated assets. For these loans, the "day-one" credit loss estimate does not impact earnings immediately but is instead amortized over time as an adjustment to interest income. Subsequent changes in the allowance for credit losses are reported in earnings within credit loss expense. The ASU is effective for fiscal periods beginning after December 15, 2026 and interim periods within. Early adoption is permitted and amendments are to be applied prospectively. The Company adopted this Update on January 1, 2026.
Derivatives and Hedging The FASB issued ASU 2025-09 "Derivatives and Hedging (Topic 815): Hedge Accounting Improvements" in December 2025. The amendments in this Update make targeted improvements to hedge account intended to better align financial reporting with an entity's risk-management activities. At a high level, the Update provides for a broader application of grouping forecasted transactions in cash flow hedges by replacing 'same risk exposure' requirements with a more flexible 'similar risk exposure' standard, which may apply to the Company's current cash flow hedges. This Update is effective for annual and interim periods beginning after December 15, 2026. Early adoption is permitted in an interim or annual reporting period. The amendments should be applied on a prospective basis for all hedging relationships, and the Company may elect to adopt the amendments for existing hedging relationships as of the adoption, without dedesignating the hedges. The Company is currently evaluating the provisions of this Update.
Interim Reporting The FASB issued ASU 2025-11 "Interim Reporting (Topic 270): Narrow-Scope Improvements" in December 2025. The amendments in this Update are intended to clarify interim disclosure requirements and the applicability of Topic 270. The ASU is effective for interim periods within annual periods beginning after December 15, 2027. Early adoption is permitted and amendments may be applied prospectively or retrospectively to prior periods presented. The Company does not anticipate a significant impact on the Company's consolidated financial statements.
Corporate Governance
The Company has adopted a number of corporate governance measures. These include corporate governance guidelines, a code of ethics that applies to its senior financial officers and the charters for its audit and risk committee, its committee on compensation and human resources, and its committee on governance/directors. This information is available on the Company’s investor relations website at investor.commercebank.com/overview/corporate-governance.
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AVERAGE BALANCE SHEETS — AVERAGE RATES AND YIELDS
Years Ended December 31
(Dollars in thousands)
Average
Balance
Interest
Income/
Expense
Average
Rates
Earned/Paid
Average
Balance
Interest
Income/
Expense
Average
Rates
Earned/Paid
Average
Balance
Interest
Income/
Expense
Average
Rates
Earned/Paid
ASSETS
Loans: (A)
Business (B)
Real estate – construction and land
Real estate – business
Real estate – personal
Consumer
Revolving home equity
Consumer credit card
Overdrafts
Total loans
Loans held for sale
Investment securities:
U.S. government & federal agency obligations
Government-sponsored enterprise obligations
State & municipal obligations (B)
Mortgage-backed securities
Asset-backed securities
Other debt securities
Trading debt securities (B)
Equity securities (B)
Other securities (B)
Total investment securities
Federal funds sold
Securities purchased under agreements to resell
Interest earning deposits with banks
Total interest earning assets
Allowance for credit losses on loans
Unrealized gain (loss) on debt securities
Cash and due from banks
Premises and equipment - net
Other assets
Total assets
LIABILITIES AND EQUITY
Interest bearing deposits:
Savings
Interest checking and money market
Certificates of deposit of less than $100,000
Certificates of deposit of $100,000 and over
Total interest bearing deposits
Borrowings:
Federal funds purchased
Securities sold under agreements to repurchase
Other borrowings (C)
Total borrowings
Total interest bearing liabilities
Non-interest bearing deposits
Other liabilities
Equity
Total liabilities and equity
Net interest margin (FTE)
Net yield on interest earning assets
Percentage increase (decrease) in net interest margin (FTE) compared to the prior year
(A) Loans on non-accrual status are included in the computation of average balances. Included in interest income above are loan fees and late charges, net of amortization of deferred loan origination fees and costs, which are immaterial. Credit card income from merchant discounts and net interchange fees are not included in loan income. E — A
VERAGE RATES AND
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Years Ended December 31
Average Balance
Interest Income/Expense
Average Rates Earned/Paid
Average Balance
Interest Income/Expense
Average Rates Earned/Paid
Average Balance
Interest Income/Expense
Average Rates Earned/Paid
Average Balance Five Year Compound Growth Rate
(B) Interest income and yields are presented on a fully taxable-equivalent basis using a federal income tax rate of 21%. Loan interest income includes tax free loan income (categorized as business loan income) which includes tax equivalent adjustments of $7,040,000 in 2025, $6,706,000 in 2024, $5,467,000 in 2023, $4,126,000 in 2022, $4,176,000 in 2021, and $4,916,000 in 2020. Investment securities interest income includes tax equivalent adjustments of $2,546,000 in 2025, $2,514,000 in 2024, $3,983,000 in 2023, $6,874,000 in 2022, $7,546,000 in 2021, and $8,042,000 in 2020. These adjustments relate to state and municipal obligations, trading securities, equity securities, and other securities.
(C) Interest expense of $2,000, $903,000, $1,370,000, $29,000 and $14,000, which was capitalized on construction projects in 2024, 2023, 2022, 2021, and 2020, respectively, is not deducted from the interest expense shown above. There was no capitalized interest in 2025.
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QUARTERLY AVERAGE BALANCE SHEETS — AVERAGE RATES AND YIELDS
Year ended December 31, 2025
Fourth Quarter
Third Quarter
Second Quarter
First Quarter
(Dollars in millions)
Average Balance
Average Rates Earned/Paid
Average Balance
Average Rates Earned/Paid
Average Balance
Average Rates Earned/Paid
Average Balance
Average Rates Earned/Paid
ASSETS
Loans:
Business (A)
Real estate – construction and land
Real estate – business
Real estate – personal
Consumer
Revolving home equity
Consumer credit card
Overdrafts
Total loans
Loans held for sale
Investment securities:
U.S. government & federal agency obligations
Government-sponsored enterprise obligations
State & municipal obligations (A)
Mortgage-backed securities
Asset-backed securities
Other debt securities
Trading debt securities (A)
Equity securities (A)
Other securities (A)
Total investment securities
Federal funds sold
Securities purchased under agreements to resell
Interest earning deposits with banks
Total interest earning assets
Allowance for credit losses on loans
Unrealized gain (loss) on debt securities
Cash and due from banks
Premises and equipment – net
Other assets
Total assets
LIABILITIES AND EQUITY
Interest bearing deposits:
Savings
Interest checking and money market
Certificates of deposit under $100,000
Certificates of deposit $100,000 & over
Total interest bearing deposits
Borrowings:
Federal funds purchased
Securities sold under agreements to repurchase
Other borrowings
Total borrowings
Total interest bearing liabilities
Non-interest bearing deposits
Other liabilities
Equity
Total liabilities and equity
Net interest margin (FTE)
Net yield on interest earning assets
(A) Stated on a fully taxable-equivalent basis using a federal income tax rate of 21%.
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— AVERAGE RATES AND YIELDS
Year ended December 31, 2024
Fourth Quarter
Third Quarter
Second Quarter
First Quarter
(Dollars in millions)
Average Balance
Average Rates Earned/Paid
Average Balance
Average Rates Earned/Paid
Average Balance
Average Rates Earned/Paid
Average Balance
Average Rates Earned/Paid
ASSETS
Loans:
Business (A)
Real estate – construction and land
Real estate – business
Real estate – personal
Consumer
Revolving home equity
Consumer credit card
Overdrafts
Total loans
Loans held for sale
Investment securities:
U.S. government & federal agency obligations
Government-sponsored enterprise obligations
State & municipal obligations (A)
Mortgage-backed securities
Asset-backed securities
Other debt securities
Trading debt securities (A)
Equity securities (A)
Other securities (A)
Total investment securities
Federal funds sold
Securities purchased under agreements to resell
Interest earning deposits with banks
Total interest earning assets
Allowance for credit losses on loans
Unrealized gain (loss) on debt securities
Cash and due from banks
Premises and equipment – net
Other assets
Total assets
LIABILITIES AND EQUITY
Interest bearing deposits:
Savings
Interest checking and money market
Certificates of deposit under $100,000
Certificates of deposit $100,000 & over
Total interest bearing deposits
Borrowings:
Federal funds purchased
Securities sold under agreements to repurchase
Other borrowings
Total borrowings
Total interest bearing liabilities
Non-interest bearing deposits
Other liabilities
Equity
Total liabilities and equity
Net interest margin (FTE)
Net yield on interest earning assets
(A) Stated on a fully taxable-equivalent basis using a federal income tax rate of 21%.
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SUMMARY OF QUARTERLY STATEMENTS OF INCOME
Year ended December 31, 2025
For the Quarter Ended
(In thousands, except per share data)
Interest income
Interest expense
Net interest income
Non-interest income
Investment securities gains (losses), net
Salaries and employee benefits
Other expense
Provision for credit losses
Income before income taxes
Income taxes
Non-controlling interest (expense) income
Net income attributable to Commerce Bancshares, Inc.
Net income per common share — basic*
Net income per common share — diluted*
Weighted average shares — basic*
Weighted average shares — diluted*
Year ended December 31, 2024
For the Quarter Ended
(In thousands, except per share data)
Interest income
Interest expense
Net interest income
Non-interest income
Investment securities gains (losses), net
Salaries and employee benefits
Other expense
Provision for credit losses
Income before income taxes
Income taxes
Non-controlling interest (expense) income
Net income attributable to Commerce Bancshares, Inc.
Net income per common share — basic*
Net income per common share — diluted*
Weighted average shares — basic*
Weighted average shares — diluted*
Year ended December 31, 2023
For the Quarter Ended
(In thousands, except per share data)
Interest income
Interest expense
Net interest income
Non-interest income
Investment securities gains (losses), net
Salaries and employee benefits
Other expense
Provision for credit losses
Income before income taxes
Income taxes
Non-controlling interest (expense) income
Net income attributable to Commerce Bancshares, Inc.
Net income per common share — basic*
Net income per common share — diluted*
Weighted average shares — basic*
Weighted average shares — diluted*
* Restated for the 5% stock dividend distributed in 2025.
