Core Insights - Commerce Bancshares (CBSH) reported revenue of $445.76 million for the quarter ended June 2025, reflecting a year-over-year increase of 7.5% and a surprise of +3.58% over the Zacks Consensus Estimate of $430.36 million [1] - Earnings per share (EPS) for the quarter was $1.14, up from $1.07 in the same quarter last year, with an EPS surprise of +11.76% compared to the consensus estimate of $1.02 [1] Financial Performance Metrics - Efficiency Ratio was reported at 54.8%, better than the estimated 55.9% by five analysts [4] - Net Interest Margin stood at 3.7%, exceeding the average estimate of 3.6% [4] - Book value per share was $27.43, higher than the estimated $26.85 [4] - Average total interest-earning assets were $30.63 billion, slightly below the average estimate of $30.64 billion [4] - Annualized net loan charge-offs to total average loans were 0.2%, better than the estimated 0.3% [4] - Non-accrual loans amounted to $18.87 million, lower than the average estimate of $21.76 million [4] - Tier I Leverage Ratio was reported at 12.8%, above the estimated 12.4% [4] - Total Non-Interest Income reached $165.61 million, surpassing the average estimate of $157.57 million [4] - Fully-taxable equivalent net interest income was $282.43 million, compared to the average estimate of $275.75 million [4] - Trust fees were $55.57 million, slightly below the average estimate of $55.69 million [4] - Bank card transaction fees totaled $46.36 million, compared to the average estimate of $47.42 million [4] - Deposit account charges and other fees were reported at $26.25 million, slightly above the average estimate of $26.19 million [4] Stock Performance - Shares of Commerce Bancshares have returned +5% over the past month, outperforming the Zacks S&P 500 composite's +4.5% change [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating expected performance in line with the broader market in the near term [3]

[Earnings Release and Highlights](index=1&type=section&id=FOR%20IMMEDIATE%20RELEASE%3A) Commerce Bancshares reported strong Q2 2025 financial results, highlighted by increased earnings and the strategic acquisition of FineMark Holdings [Performance Summary](index=1&type=section&id=Second%20Quarter%202025%20Performance%20Summary) Commerce Bancshares reported strong Q2 2025 financial results with diluted earnings per share of $1.14 and net income of $152.5 million, showing significant growth from prior periods Q2 2025 Earnings Summary | Metric | Q2 2025 | Q1 2025 | Q2 2024 | | :--- | :--- | :--- | :--- | | **Earnings Per Share (Diluted)** | $1.14 | $0.98 | $1.03 | | **Net Income** | $152.5M | $131.6M | $139.6M | First Half 2025 Performance Summary | Metric | H1 2025 | H1 2024 | | :--- | :--- | :--- | | **Earnings Per Share** | $2.12 | $1.85 | | **Net Income** | $284.1M | $252.2M | - CEO John Kemper attributed the strong performance to the company's diversified operating model, highlighting loan growth, strong fee income, low credit costs, and disciplined expense management as key drivers of steady profit growth[3](index=3&type=chunk) [Key Financial Highlights (Q2 2025)](index=1&type=section&id=Second%20Quarter%202025%20Financial%20Highlights%3A) Q2 2025 saw record net interest income of $280.1 million, a 14 basis point increase in net yield to 3.70%, and 8.8% non-interest income growth, alongside strong credit quality and capital levels Q2 2025 Key Metrics vs. Prior Periods | Metric | Q2 2025 | Change vs. Q1 2025 | Change vs. Q2 2024 | | :--- | :--- | :--- | :--- | | **Net Interest Income** | $280.1M | +$11.0M | N/A | | **Net Yield on Earning Assets** | 3.70% | +14 bps | N/A | | **Non-Interest Income** | $165.6M | N/A | +8.8% | | **Average Loans** | $17.5B | +1.5% | N/A | | **Net Loan Charge-off Ratio** | 0.22% | -3 bps | N/A | | **Return on Average Assets** | 1.95% | N/A | N/A | | **Efficiency Ratio** | 54.8% | N/A | N/A | - Trust fees grew by **$3.3 million**, or **6.3%**, compared to the same period last year, mainly due to higher private client fees[7](index=7&type=chunk) - The allowance for credit losses on loans to total loans ratio was **0.94%** at the end of the quarter, down slightly from **0.96%** at the end of Q1 2025[7](index=7&type=chunk) [Strategic Developments: FineMark Acquisition](index=1&type=section&id=FineMark%20Announcement) Commerce announced its strategic plan to acquire FineMark Holdings, Inc., expanding capabilities, specialized services, and market reach - The company announced plans to acquire FineMark Holdings, a bank and trust company based in Fort Myers, Florida[3](index=3&type=chunk) - The acquisition is expected to add new capabilities, specialized client services, and extend market reach for Commerce, while Commerce will provide scale, capital, and operational infrastructure to FineMark[3](index=3&type=chunk) [Financial Statements](index=3&type=section&id=FINANCIAL%20HIGHLIGHTS) This section presents Commerce Bancshares' detailed financial statements, including income, balance sheets, and credit quality, demonstrating overall financial health and performance [Financial Highlights Summary](index=3&type=section&id=FINANCIAL%20SUMMARY) The financial highlights table provides a comprehensive overview of Q2 2025 key performance indicators, showing improvements in revenue, net income, EPS, efficiency ratio, and net yield on earning assets Key Financial Metrics (Q2 2025 vs. Prior Periods) | Metric | Q2 2025 | Q1 2025 | Q2 2024 | | :--- | :--- | :--- | :--- | | **Total Revenue** | $445.8M | $428.1M | $414.5M | | **Net Income (attributable to CBSH)** | $152.5M | $131.6M | $139.6M | | **Diluted EPS** | $1.14 | $0.98 | $1.03 | | **Return on Average Assets** | 1.95% | 1.69% | 1.86% | | **Return on Average Equity** | 17.40% | 15.82% | 18.52% | | **Efficiency Ratio** | 54.77% | 55.61% | 55.95% | | **Net Yield on Interest Earning Assets** | 3.70% | 3.56% | 3.55% | [Consolidated Statements of Income](index=4&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20INCOME) The Q2 2025 consolidated income statement shows net interest income of $280.1 million and non-interest income of $165.6 million, contributing to a net income of $152.5 million Income Statement Highlights (in thousands) | Item | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | **Net Interest Income** | $280,147 | $262,249 | | **Total Non-Interest Income** | $165,613 | $152,244 | | **Total Non-Interest Expense** | $244,437 | $232,214 | | **Net Income Attributable to CBSH** | $152,479 | $139,553 | [Consolidated Balance Sheets](index=5&type=section&id=CONSOLIDATED%20BALANCE%20SHEETS%20-%20PERIOD%20END) As of June 30, 2025, total assets were $32.3 billion, with total loans at $17.7 billion, total deposits at $25.5 billion, and stockholders' equity at $3.64 billion Balance Sheet Highlights (in thousands) | Item | Jun. 30, 2025 | Mar. 31, 2025 | Jun. 30, 2024 | | :--- | :--- | :--- | :--- | | **Total Loans** | $17,665,468 | $17,379,421 | $17,163,065 | | **Total Investment Securities** | $9,236,826 | $9,601,068 | $8,917,152 | | **Total Assets** | $32,284,247 | $32,364,964 | $30,569,358 | | **Total Deposits** | $25,494,028 | $25,841,797 | $24,279,260 | | **Total Stockholders' Equity** | $3,640,572 | $3,477,787 | $3,137,735 | [Average Balance Sheets](index=6&type=section&id=AVERAGE%20BALANCE%20SHEETS) For Q2 2025, average total loans increased to $17.5 billion, average total deposits rose slightly to $24.92 billion, while average total assets decreased to $31.3 billion Average Balances (in thousands) | Item | Q2 2025 | Q1 2025 | Q2 2024 | | :--- | :--- | :--- | :--- | | **Total Loans** | $17,495,809 | $17,242,681 | $17,174,474 | | **Total Investment Securities** | $9,407,176 | $9,542,309 | $9,162,029 | | **Total Assets** | $31,297,059 | $31,502,166 | $30,235,950 | | **Total Deposits** | $24,918,180 | $24,855,168 | $24,285,452 | [Credit Quality](index=8&type=section&id=CREDIT%20QUALITY) Credit quality remained strong in Q2 2025, with annualized net loan charge-offs at 0.22%, non-accrual loans at 0.11%, and allowance for credit losses at 0.94% of total loans Key Credit Quality Ratios | Metric | Q2 2025 | Q1 2025 | Q2 2024 | | :--- | :--- | :--- | :--- | | **Total Net Loan Charge-offs Ratio** | 0.22% | 0.25% | 0.23% | | **Non-accrual Loans to Total Loans** | 0.11% | 0.13% | 0.11% | | **Allowance for Credit Losses to Total Loans** | 0.94% | 0.96% | 0.92% | - Total net loan charge-offs for Q2 2025 were **$9.7 million**, down from **$10.8 million** in the prior quarter[23](index=23&type=chunk) [Management's Discussion and Analysis (MD&A)](index=9&type=section&id=Management%20Discussion%20of%20Second%20Quarter%20Results) This section provides management's detailed analysis of Q2 2025 results, covering balance sheet changes, income and expense drivers, credit quality, and corporate actions [Balance Sheet Analysis](index=9&type=section&id=Balance%20Sheet%20Review) In Q2 2025, average loans grew to $17.5 billion, average available for sale debt securities decreased to $9.1 billion, and average deposits increased modestly to $63.0 million - Average loans increased by **$253.1 million** over the prior quarter to **$17.5 billion**, with growth in business loans (**+$141.1M**) and consumer loans (**+$66.3M**)[26](index=26&type=chunk) - Total average available for sale debt securities decreased by **$128.5 million** to **$9.1 billion**, with approximately **$1.3 billion** in maturities and pay downs expected in the next 12 months[27](index=27&type=chunk) - Total average deposits increased by **$63.0 million** compared to the previous quarter, driven by a **$58.2 million** increase in average demand deposits[28](index=28&type=chunk) [Net Interest Income Analysis](index=9&type=section&id=Net%20Interest%20Income) Net interest income increased by $11.0 million to $280.1 million in Q2 2025, driven by higher interest income and lower interest expense, expanding net yield to 3.70% - Net interest income rose **$11.0 million** from the previous quarter, driven by higher income on loans and securities and lower interest expense on borrowings and deposits[29](index=29&type=chunk) - The net yield on earning assets (FTE) increased to **3.70%** from **3.56%** in the prior quarter[29](index=29&type=chunk) - Interest expense decreased by **$3.8 million** QoQ, mainly due to lower average rates paid on deposits (**1.67%** vs **1.72%** in Q1) and lower average balances of borrowings[33](index=33&type=chunk) [Non-Interest Income Analysis](index=10&type=section&id=Non-Interest%20Income) Total non-interest income for Q2 2025 reached $165.6 million, an 8.8% year-over-year increase, primarily driven by higher trust fees and gains on asset sales - Non-interest income increased by **$13.4 million** (**8.8%**) compared to the same period last year, reaching **$165.6 million**[34](index=34&type=chunk) - Trust fees grew by **$3.3 million** (**6.3%**) over the same period last year, primarily from higher private client fees[36](index=36&type=chunk) - Other non-interest income increased YoY due to higher gains on asset sales (**+$5.5M**) and higher tax credit sales income (**+$956k**)[37](index=37&type=chunk) [Non-Interest Expense Analysis](index=10&type=section&id=Non-Interest%20Expense) Non-interest expense increased to $244.4 million in Q2 2025, primarily due to higher salaries, data processing, and professional services, including $1.9 million in acquisition costs - Non-interest expense increased to **$244.4 million**, up from **$232.2 million** in the same period last year[39](index=39&type=chunk) - The YoY increase was mainly due to higher salaries and employee benefits (**+$5.9M**), data processing and software (**+$1.4M**), and professional and other services (**+$4.4M**)[39](index=39&type=chunk)[40](index=40&type=chunk)[41](index=41&type=chunk) - Professional and other services expense included **$1.9 million** of acquisition-related legal and professional services costs[41](index=41&type=chunk) [Credit Quality Analysis](index=10&type=section&id=Credit%20Quality) Credit quality remained excellent in Q2 2025, with net loan charge-offs at 0.22%, allowance for credit losses at 0.94%, and non-accrual loans at 0.11% of total loans - The ratio of annualized net loan charge-offs to total average loans was **.22%** in Q2 2025, compared to **.25%** in the prior quarter and **.23%** in Q2 2024[43](index=43&type=chunk) - The allowance for credit losses on loans was **$165.3 million**, or **.94%** of total loans, a decrease of **$1.8 million** from the prior quarter[45](index=45&type=chunk) - Total non-accrual loans decreased by **$3.7 million** from the previous quarter to **$18.9 million**, representing **0.11%** of loans outstanding[46](index=46&type=chunk) [Other Corporate Actions](index=11&type=section&id=Other) In Q2 2025, Commerce Bancshares increased its cash dividend by 7.0% to $0.275 per share and repurchased 171,899 shares of treasury stock - The company paid a cash dividend of **$.275** per common share, a **7.0%** increase over the same period last year[47](index=47&type=chunk) - During the quarter, the company purchased **171,899 shares** of treasury stock at an average price of **$60.54**[47](index=47&type=chunk)

Group 1 - Commerce Bancshares (CBSH) reported quarterly earnings of $1.14 per share, exceeding the Zacks Consensus Estimate of $1.02 per share, and showing an increase from $1.07 per share a year ago, resulting in an earnings surprise of +11.76% [1] - The company achieved revenues of $445.76 million for the quarter ended June 2025, surpassing the Zacks Consensus Estimate by 3.58%, compared to $414.49 million in the same quarter last year [2] - Over the last four quarters, Commerce has consistently surpassed consensus EPS and revenue estimates [2] Group 2 - The stock has added approximately 1.6% since the beginning of the year, while the S&P 500 has gained 6.2%, indicating underperformance relative to the broader market [3] - The current consensus EPS estimate for the upcoming quarter is $1.01 on revenues of $430.55 million, and for the current fiscal year, it is $4.08 on revenues of $1.72 billion [7] - The Zacks Industry Rank for Banks - Midwest is in the top 34% of over 250 Zacks industries, suggesting a favorable outlook for the industry [8]

Core Viewpoint - Commerce Bancshares reported second-quarter total revenue of $445.8 million, exceeding expectations of $435.6 million [1] Financial Performance - Second-quarter provision for loan losses was $5.6 million, compared to an estimate of $15 million [1] - Earnings per share for the second quarter were $1.14 [1]

Core Viewpoint - Commerce Bancshares (CBSH) is positioned well to potentially beat earnings estimates in its upcoming quarterly report, supported by a history of positive earnings surprises [1][5]. Earnings Performance - For the last reported quarter, Commerce Bancshares achieved earnings of $0.98 per share, exceeding the Zacks Consensus Estimate of $0.93 per share, resulting in a surprise of 5.38% [2]. - In the previous quarter, the company reported earnings of $1.01 per share against an expected $0.94 per share, delivering a surprise of 7.45% [2]. Earnings Estimates - There has been a favorable change in earnings estimates for Commerce Bancshares, with a positive Zacks Earnings ESP (Expected Surprise Prediction) indicating potential for an earnings beat [5][8]. - The current Earnings ESP for Commerce is +1.79%, suggesting analysts are optimistic about its near-term earnings potential [8]. Predictive Metrics - Stocks with a positive Earnings ESP and a Zacks Rank of 3 (Hold) or better have a nearly 70% chance of producing a positive surprise [6]. - The Zacks Earnings ESP compares the Most Accurate Estimate to the Zacks Consensus Estimate, with the Most Accurate Estimate reflecting the latest analyst revisions [7].

Core Insights - Commerce Bancshares (CBSH) is expected to report quarterly earnings of $1.02 per share, reflecting a decline of 4.7% year-over-year, while revenues are forecasted to increase by 3.8% to $430.36 million [1] Earnings Estimates - There has been no revision in the consensus EPS estimate over the last 30 days, indicating stability in analysts' forecasts [1][2] - The consensus estimate for the 'Efficiency Ratio' is 55.9%, slightly improved from 56.0% in the same quarter last year [4] - Analysts predict a 'Net Interest Margin' of 3.6%, unchanged from the previous year [4] Key Financial Metrics - 'Average total interest earning assets' are estimated at $30.64 billion, up from $30.02 billion year-over-year [5] - The estimated 'Book value per share' is $26.85, compared to $24.48 a year ago [5] - The 'Tier I risk-based capital ratio' is expected to be 17.0%, an increase from 16.2% in the previous year [6] - The 'Total risk-based capital ratio' is projected at 17.8%, compared to 17.0% last year [6] Loan and Income Projections - 'Non-accrual loans' are expected to be $21.76 million, up from $19.30 million in the same quarter last year [7] - The forecast for 'Total Non-Interest Income' is $157.57 million, compared to $152.24 million a year ago [8] - 'Fully-taxable equivalent net interest income' is projected to reach $275.75 million, up from $264.58 million last year [8] - 'Trust fees' are expected to be $55.69 million, compared to $52.29 million in the same quarter last year [8] - 'Bank card transaction fees' are forecasted at $47.42 million, slightly down from $47.48 million last year [9] Stock Performance - Commerce shares have increased by 6.5% over the past month, outperforming the Zacks S&P 500 composite's 4.1% increase [9]

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.

Transaction Overview - Commerce Bancshares, Inc(CBSH) will acquire FineMark Holdings, Inc(FineMark) to expand its presence in high-growth markets and leverage its wealth platform[1] - The transaction value is $585.4 million[28] - The consideration is 100% stock, with a fixed exchange ratio of 0.690x shares of CBSH common stock for each share of FNBT[28] - FineMark has approximately $8 billion in Assets Under Administration (AUA) and $4 billion in banking assets[9] Financial Impact - The deal is expected to be approximately 6% accretive to 2026 consensus GAAP earnings[9] - Tangible book value per share (TBVPS) earnback is projected at 1.6 years[9] - The pro forma CET1 ratio is expected to be around 17% after the transaction[9] - Cost savings are estimated at 15%[9] FineMark Overview - FineMark has $7.7 billion in total trust assets under administration[15] - Total deposits for FineMark are $3.1 billion[15] - Total loans amount to $2.6 billion[15] - FineMark's CET1 ratio stands at 16%[15]