Core Viewpoint - Commerce Bancshares (CBSH) has received an upgrade to a Zacks Rank 2 (Buy), indicating a positive outlook on its earnings estimates, which is a significant factor influencing stock prices [1][4]. Earnings Estimates and Revisions - The Zacks Consensus Estimate for Commerce for the fiscal year ending December 2025 is projected at $4.08 per share, remaining unchanged from the previous year [9]. - Over the past three months, analysts have increased their earnings estimates for Commerce by 3.7% [9]. Zacks Rating System - The Zacks rating system is based solely on a company's changing earnings picture, tracking EPS estimates from sell-side analysts [2]. - The system classifies stocks into five groups, with Zacks Rank 1 (Strong Buy) stocks historically generating an average annual return of +25% since 1988 [8]. - The upgrade to Zacks Rank 2 places Commerce in the top 20% of Zacks-covered stocks, indicating strong potential for near-term price increases due to favorable earnings estimate revisions [11]. Market Dynamics - Changes in earnings estimates are strongly correlated with stock price movements, influenced by institutional investors who adjust their valuations based on these estimates [5][6]. - The Zacks rating system aims to provide a balanced perspective, maintaining an equal proportion of "buy" and "sell" ratings across its universe of over 4,000 stocks [10].

Core Viewpoint - Commerce Bancshares, Inc. (CBSH) has agreed to acquire FineMark Holdings in an all-stock transaction valued at $585 million, expected to close on January 1, 2026, pending regulatory and shareholder approvals [2][8]. Group 1: Deal Overview - The acquisition will involve FineMark shareholders receiving 0.690 shares of CBSH common stock for each FineMark share, valuing the deal at $41.87 per share based on CBSH's closing price on June 13, 2025 [4]. - FineMark, founded in 2007, operates 13 banking offices across Florida, Arizona, and South Carolina, with assets of $4 billion, deposits of $3.1 billion, and loans of $2.6 billion as of March 31, 2025 [3][2]. Group 2: Financial Impact - The transaction is projected to be 6% accretive to CBSH's 2026 GAAP earnings, with anticipated cost savings of 15% on FineMark's non-interest expenses [4][8]. - The deal is expected to result in a tangible book value per share dilution of 2.2%, with an earn-back period of 1.6 years, and will incur one-time, pre-tax expenses of $57 million [5][4]. Group 3: Management Insights - CBSH's President and CEO, John Kemper, emphasized the strategic significance of the acquisition, highlighting the shared values and client-centric approach between the two companies [6]. - FineMark's CEO, Joseph R. Catti, expressed enthusiasm about the partnership, noting the alignment in mission and culture, which will facilitate continued growth [6]. Group 4: Market Context - Over the past year, CBSH shares have increased by 13.3%, which is below the industry's growth of 23.5% [9]. - CBSH currently holds a Zacks Rank of 3 (Hold) [10].

Summary of Commerce Bancshares (CBSH) M&A Conference Call Company and Industry - **Company**: Commerce Bancshares Inc. - **Acquired Company**: Finemark Holdings Inc. (holding company of Finemark National Bank and Trust) - **Industry**: Banking and Wealth Management Core Points and Arguments 1. **Acquisition Announcement**: Commerce Bancshares announced the acquisition of Finemark Holdings, a private bank with nearly $8 billion in assets under management and $4 billion in banking assets, aiming to expand its presence in high-growth markets like Florida, Arizona, and South Carolina [5][6][10]. 2. **Wealth Management Focus**: The acquisition aligns with Commerce's strategy to enhance its wealth management platform, as Finemark has a strong non-interest revenue model, with 43% of its total revenue coming from non-interest sources [8][9]. 3. **Credit Quality**: Finemark has a strong credit history with only 13 basis points of cumulative net charge-offs over the last ten years, indicating a conservative approach to lending [9]. 4. **Combined Assets**: Post-acquisition, the combined entities will manage over $84 billion in total wealth assets, making it the sixteenth largest bank-managed trust company in the U.S. [10]. 5. **Leadership Transition**: Joseph Caddy, Chairman and CEO of Finemark, will become Chairman of Commerce Trust, ensuring continuity and leveraging his leadership experience [10]. 6. **Financial Metrics**: The deal is structured as a 100% stock transaction valued at approximately $585 million, with an EPS accretion of 6% expected once cost savings are realized [12][13]. 7. **Cost Savings and Integration**: Expected pre-tax cost savings of $15 million represent 15% of Finemark's non-interest expenses, with a focus on low integration risk due to similar business models [14][15]. 8. **Future Growth Potential**: The acquisition is expected to enhance Commerce's ability to drive sustainable growth, particularly in wealth management and private banking [18]. Additional Important Content 1. **Long-term Relationship**: The relationship with Finemark has been built over five years, indicating a strategic and measured approach to the acquisition [23][24]. 2. **Market Expansion**: The acquisition allows Commerce to solidify its presence in Florida and expand into Arizona and South Carolina, which are identified as attractive growth markets [8][51]. 3. **Asset Sensitivity**: The loan portfolio composition is expected to be similar to Commerce's, with asset repricing anticipated to enhance margins [25][26]. 4. **M&A Strategy**: While this is the first bank deal since 2013, Commerce maintains that M&A is part of its long-term strategy, focusing on commercial and wealth-focused banks [30][32]. 5. **Dividend and Buyback Plans**: Commerce plans to maintain its dividend policy and may resume stock buybacks in the second half of the year, despite the acquisition [54][55]. This summary encapsulates the key points from the conference call regarding the acquisition of Finemark Holdings by Commerce Bancshares, highlighting the strategic rationale, financial implications, and future growth opportunities.

COMMERCE BANCSHARES, INC. STRATEGIC ACQUISITION OF FINEMARK HOLDINGS, INC. Expanding our presence in high-growth markets and leveraging our substantial wealth platform June 16, 2025 DISCLOSURES CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS This presentation may contain forward-looking statements, including, but not limited to, certain plans, expectations, goals, projections, and statements about the benefits of the proposed business combination transaction between Commerce Bancshares, Inc. ("Commerce ...

Core Viewpoint - Commerce Bancshares, Inc. (CBSH) is positioned for top-line growth due to strong loan demand and high interest rates, although concerns about weak asset quality and elevated expenses persist [1] Group 1: Growth Drivers - Solid loan balances have recorded a compound annual growth rate (CAGR) of 3.2% from 2019 to 2024, contributing to revenue growth despite a decline in 2020, with a five-year CAGR of 4.2% [2] - Total revenues are expected to grow at a CAGR of 2.7% by 2027, with capital market fees projected to grow at 5.1% and loan fees and sales at 5% [3] Group 2: Interest Rates and Balance Sheet Strategy - The Federal Reserve's steady interest rates will support CBSH's net yield on interest-earning assets, which expanded to 3.47% in 2024 from 3.16% in 2023 and is expected to reach 3.75% by 2027 [4][5] - CBSH's balance sheet repositioning strategy, initiated in May 2024, involves selling debt securities and reinvesting proceeds at higher yields, which is anticipated to boost growth [4] Group 3: Capital and Liquidity Position - As of March 31, 2025, CBSH had total debt of $624.7 million and cash and due from banks totaling $3.3 billion, indicating strong earnings capacity to meet debt obligations [6] - CBSH has a history of consistent capital distribution, including a 5% stock dividend for over 25 years and a share repurchase program, enhancing shareholder value [7] Group 4: Near-Term Challenges - Asset quality has been deteriorating, with a significant rise in provisions for credit losses recorded in 2022 and 2023, and total net loan charge-offs (NCOs) showing a CAGR of 2.8% over four years ending in 2024 [8][9] - Non-interest expenses have increased at a CAGR of 4.4% over the last five years, primarily due to higher salaries and benefits, and are expected to continue rising amid technology investments and inflationary pressures [11]

Core Viewpoint - Commerce Bancshares (CBSH) has been upgraded to a Zacks Rank 2 (Buy), indicating a positive outlook on its earnings estimates, which significantly influence stock prices [1][3]. Earnings Estimates and Stock Price Impact - The Zacks rating system emphasizes the correlation between changes in earnings estimates and stock price movements, particularly due to institutional investors adjusting their valuations based on these estimates [4][6]. - Rising earnings estimates for Commerce suggest an improvement in the company's underlying business, which could lead to higher stock prices as investors respond positively [5][10]. Earnings Estimate Revisions - For the fiscal year ending December 2025, Commerce is expected to earn $4.08 per share, reflecting a 5.4% increase from the previous year [8]. - Over the past three months, the Zacks Consensus Estimate for Commerce has risen by 3.6%, indicating a trend of increasing analyst estimates [8]. Zacks Rank System - The Zacks Rank system classifies stocks based on earnings estimate revisions, with only the top 20% of stocks receiving a 'Strong Buy' or 'Buy' rating, highlighting their potential for market-beating returns [9][10]. - The upgrade of Commerce to a Zacks Rank 2 places it in the top 20% of Zacks-covered stocks, suggesting a favorable outlook for its stock price in the near term [10].

Core Viewpoint - Commerce Bancshares (CBSH) shares have increased by approximately 9.4% since the last earnings report, but this performance is below that of the S&P 500 [1] Group 1: Earnings Report and Market Reaction - The recent earnings report indicates that estimates for Commerce Bancshares have trended upward over the past month, with a consensus estimate shift of 6.65% [2] - Investors and analysts are closely monitoring whether the positive trend will continue leading up to the next earnings release [1] Group 2: VGM Scores and Investment Strategy - Commerce Bancshares has a subpar Growth Score of D, a Momentum Score of C, and a Value Score of C, placing it in the middle 20% for the value investment strategy [3] - The overall aggregate VGM Score for the stock is D, which is relevant for investors not focused on a single strategy [3] Group 3: Future Outlook - The upward trend in estimates and the magnitude of revisions suggest a promising outlook for Commerce Bancshares, leading to a Zacks Rank of 2 (Buy) [4] - An above-average return is expected from the stock in the coming months [4]

Financial Performance - For the quarter ended March 31, 2025, net income attributable to Commerce Bancshares, Inc. was $131.6 million, an increase of $18.9 million, or 16.8%, compared to the same quarter in 2024[160]. - Net interest income for the first quarter of 2025 was $269.1 million, an increase of $20.1 million, or 8.1%, compared to the first quarter of 2024[160]. - Non-interest income rose by $10.1 million, or 6.8%, compared to the first quarter of 2024, primarily driven by increases in trust fees, deposit account fees, and capital market fees[161]. - The efficiency ratio improved to 55.61% in the first quarter of 2025, down from 61.67% in the same quarter of 2024[155]. - Diluted earnings per common share increased to $0.98, a rise of 19.5% compared to $0.82 in the first quarter of 2024[160]. - The annualized return on average assets was 1.69%, while the annualized return on average equity was 15.82% for the quarter ended March 31, 2025[160]. - Total non-interest income rose by $10.1 million, or 6.8%, to $158.9 million in Q1 2025, mainly due to higher trust fees and deposit account charges[172]. - The Wealth segment's pre-tax profitability increased by $2.9 million, or 6.8%, in Q1 2025 compared to the same period last year[236]. - The Commercial segment's income before income taxes rose by $8.8 million, or 9.8%, in Q1 2025 compared to Q1 2024[234]. Credit Losses and Loan Performance - The provision for credit losses increased by $9.7 million, or 202.6%, compared to the same quarter in the prior year, due to an increase in the estimate of allowance for credit losses on loans[160]. - The allowance for credit losses on loans increased to $167.0 million at March 31, 2025, representing 0.96% of total loans, up from 0.95% at December 31, 2024[183]. - The provision for credit losses on loans was $15.1 million for the first quarter of 2025, an increase of $8.1 million compared to $6.9 million in the same period last year[182]. - Net loan charge-offs totaled $10.8 million in Q1 2025, up from $10.7 million in the previous quarter and $8.9 million in the same quarter last year[180]. - Non-accrual loans increased to $22.6 million at March 31, 2025, up $4.3 million from December 31, 2024, primarily due to increases in business real estate non-accrual loans[188]. - Total non-performing assets were $23.2 million at March 31, 2025, representing 0.13% of total loans, compared to 0.11% at December 31, 2024[188]. - The annualized net charge-offs on average consumer credit card loans were 5.04% in Q1 2025, compared to 4.59% in the previous quarter[181]. - Potential problem loans decreased to $286.9 million at March 31, 2025, a decline of 13.2% from $330.3 million at December 31, 2024[189]. - The company considers the allowance for credit losses and the liability for unfunded commitments adequate to cover expected losses in the loan portfolio as of March 31, 2025[185]. Equity and Capital - Total equity as of March 31, 2025, was $3.5 billion, up from $2.96 billion in the same period of 2024[159]. - The tangible common equity to tangible assets ratio improved to 10.33% as of March 31, 2025, compared to 9.24% a year earlier[159]. - The Company met all capital adequacy requirements with a Tier I common risk-based capital ratio of 16.86% as of March 31, 2025[223]. Deposits and Borrowings - Total average deposits decreased by $83.7 million this quarter, primarily due to declines in demand deposits and certificates of deposit by $165.6 million and $158.2 million, respectively[210]. - Core customer deposits totaled $23.5 billion, representing 90.9% of total deposits, with an increase of $588.3 million compared to December 31, 2024[214]. - The Company has a borrowing capacity of $6.1 billion through advances from the FHLB and the Federal Reserve[214]. - Certificates of deposit of $100,000 or greater totaled $1.4 billion, comprising 5.3% of total deposits[216]. Interest Income and Expense - Total interest income (FTE) decreased by $10.3 million, or 3.9%, to $255.9 million in Q1 2025 compared to the same quarter last year, primarily due to a 25 basis point decrease in the average rate earned[166]. - Interest income on investment securities increased by $10.3 million to $77.0 million in Q1 2025, driven by a $1.7 billion increase in average balances and a 201 basis point increase in the average rate earned[167]. - The average fully taxable-equivalent yield on total interest-earning assets was 4.81% in Q1 2025, up from 4.78% in Q1 2024[169]. - Interest expense decreased by $14.5 million compared to Q1 2024, with a notable decline in interest expense on interest-bearing deposits[170]. - The overall average rate incurred on all interest-bearing liabilities was 1.89% in Q1 2025, down from 2.21% in Q1 2024[171]. - The average rate paid on total interest bearing deposits decreased to 1.72% in Q1 2025 from 1.97% in Q1 2024, indicating a reduction in funding costs[241]. Market and Stock Performance - The market price of common stock increased to $62.23, compared to $50.67 in the same quarter of 2024[155]. - The Company purchased 854,806 shares at an average price of $64.56 during the three months ended March 31, 2025, with 2,076,842 shares remaining available for purchase[225]. Cash Flow and Investments - Cash flows from operating activities provided $138.6 million, while investing activities used $373.4 million, resulting in a net decrease in cash of $102.1 million[221]. - Total investment securities pledged for securing borrowings amounted to $6.3 billion as of March 31, 2025[213]. - The fair value of the available for sale debt portfolio was $9.3 billion at March 31, 2025, with an unrealized net loss of $832.9 million[212]. - The unrealized loss on available for sale debt securities decreased by $157.7 million to $832.9 million at the end of Q1 2025[209]. - The unrealized loss on debt securities improved to $(935,054) thousand in Q1 2025 from $(1,274,125) thousand in Q1 2024, indicating a reduction in market risk exposure[241]. Loan Portfolio Composition - As of March 31, 2025, the company's total loans outstanding amounted to $32.4 billion, with construction and land loans representing 8.2% of this total[192][207]. - The commercial construction loan portfolio increased by $18.6 million during the first quarter of 2025, totaling $1.2 billion, which is 85.7% of the construction and land loans[193]. - Business real estate loans totaled $3.6 billion, accounting for 20.9% of the total loan portfolio, with owner-occupied properties making up 34.5% of these loans[194]. - The company's revolving home equity loans stood at $356.7 million, with 93.3% requiring interest-only monthly payments[197]. - The consumer loan portfolio included $774.3 million in auto loans, which represented 36.6% of the consumer loan portfolio, with new auto loans originated totaling $98.0 million in Q1 2025[199]. - The energy lending portfolio decreased to $322.4 million, or 1.9% of total loans, down by $15.6 million from the previous quarter[203]. - Shared national credits (SNCs) remained stable at $1.6 billion, with additional unfunded commitments of $2.3 billion as of March 31, 2025[205].

Core Viewpoint - Investors are evaluating Huntington Bancshares (HBAN) and Commerce Bancshares (CBSH) for potential undervalued stock opportunities, with HBAN currently appearing as the superior option based on various valuation metrics [1][7]. Valuation Metrics - HBAN has a forward P/E ratio of 10.24, significantly lower than CBSH's forward P/E of 15.15, indicating that HBAN may be undervalued [5]. - The PEG ratio for HBAN is 1.12, while CBSH's PEG ratio is considerably higher at 4.08, suggesting that HBAN offers better value relative to its expected earnings growth [5]. - HBAN's P/B ratio stands at 1.15, compared to CBSH's P/B of 2.35, further supporting the notion that HBAN is more attractively priced [6]. Earnings Outlook - HBAN is experiencing an improving earnings outlook, which enhances its attractiveness in the Zacks Rank model, indicating stronger potential for future performance compared to CBSH [3][7]. Value Grades - Based on the analysis of key fundamental metrics, HBAN has received a Value grade of B, while CBSH has a Value grade of D, highlighting HBAN's stronger position as a value investment [6].

Core Insights - Commerce Bancshares is experiencing growth in its wealth management business, with trust fees increasing by 11% year over year, driven by higher private client fees [1][3] - The company's non-interest income grew by 7% year over year, contributing to revenue diversification [2] - Non-interest income reached $159 million, accounting for 37.1% of total revenue, with trust fees specifically contributing $57 million [3] Wealth Management Growth - The wealth management business's trust fees increased by 10.7% compared to the same period last year, reflecting the company's strategic focus on this area [3] - Commerce Bancshares aims to expand its wealth management services by utilizing a new private banking loan and deposit system and entering new markets where wealth is concentrated [3] Financial Performance - The net interest income for Commerce Bancshares grew by 8% year over year, reaching a record high of $269 million in the first quarter [4] - The bank's credit profile remains strong, with robust capital and liquidity levels, positioning it well to serve customers amid economic uncertainties [5] Economic Outlook - The company acknowledges increasing uncertainty in the economic outlook due to tariffs, trade restrictions, and capital market adjustments, but believes it is well-positioned to navigate potential disruptions [6]