merce Bancshares(CBSH) - 2025 Q2 - Quarterly Results

Earnings Release and Highlights Commerce Bancshares reported strong Q2 2025 financial results, highlighted by increased earnings and the strategic acquisition of FineMark Holdings Performance Summary 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] Key Financial Highlights (Q2 2025) 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] - 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] Strategic Developments: FineMark Acquisition 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] - 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] Financial Statements This section presents Commerce Bancshares' detailed financial statements, including income, balance sheets, and credit quality, demonstrating overall financial health and performance Financial Highlights Summary 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 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 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 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 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] Management's Discussion and Analysis (MD&A) 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 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] - 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] - 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] Net Interest Income Analysis 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] - The net yield on earning assets (FTE) increased to 3.70% from 3.56% in the prior quarter[29] - 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] Non-Interest Income Analysis 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] - Trust fees grew by $3.3 million (6.3%) over the same period last year, primarily from higher private client fees[36] - Other non-interest income increased YoY due to higher gains on asset sales (+$5.5M) and higher tax credit sales income (+$956k)[37] Non-Interest Expense Analysis 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] - 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][40][41] - Professional and other services expense included $1.9 million of acquisition-related legal and professional services costs[41] Credit Quality Analysis 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] - 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] - Total non-accrual loans decreased by $3.7 million from the previous quarter to $18.9 million, representing 0.11% of loans outstanding[46] Other Corporate Actions 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] - During the quarter, the company purchased 171,899 shares of treasury stock at an average price of $60.54[47]