Commerce Bancshares, Inc. Reports Second Quarter Earnings Per Share of $1.14

Commerce Bancshares, Inc. announced earnings of $1.14 per share for the three months ended June 30, 2025, compared to $1.03 per share in the same quarter last year and $.98 per share in the first quarter of 2025. Net income for the second quarter of 2025 amounted to $152.5 million, compared to $139.6 million in the second quarter of 2024 and $131.6 million in the prior quarter.

For the six months ended June 30, 2025, earnings per share totaled $2.12, compared to $1.85 for the first six months of 2024. Net income amounted to $284.1 million for the six months ended June 30, 2025, compared to $252.2 million in the comparable period last year. For the year to date, the return on average assets was 1.82%, and the return on average equity was 16.63%.

In making this announcement, John Kemper, Chief Executive Officer, said, "Commerce delivered a strong financial performance in the second quarter, one that reflected our diversified operating model and the talented team behind it. Our financial results were supported by loan growth, strong fee income, low credit costs and continued disciplined expense management, all key ingredients in our steady profit growth over time."

Mr. Kemper continued, "Our return on average assets was strong at 1.95%. Net interest income of $280 million was another record quarter for Commerce and reflects the continued benefits of fixed-rate asset repricing, higher loan demand, and our strong deposit franchise. Non-interest income was $166 million and made up 37.2% of total revenue, led by trust fees and bank card transaction fees. Credit quality of the loan portfolio remains excellent with non-accrual loans at .11% of total loans. Capital and liquidity levels remain strong."

On the FineMark announcement, Mr. Kemper, added, "In June, we announced our plans to acquire FineMark Holdings, a respected and well-established bank and trust company, headquartered in Fort Myers, Florida. With this acquisition, FineMark will bring new capabilities, specialized services for niche client segments, and extended market reach. Commerce will add scale and depth with resources, capital, operational infrastructure, regulatory experience, and long-term stability.

Looking ahead, our franchise is well-positioned to execute against our long-term strategies, serve our customers and deliver value to our shareholders."

Second Quarter 2025 Financial Highlights:

• Net interest income was $280.1 million, an $11.0 million increase over the prior quarter. The net yield on interest earning assets increased 14 basis points to 3.70%.
• Non-interest income totaled $165.6 million, an increase of $13.4 million, or 8.8%, over the same quarter last year.
• Trust fees grew $3.3 million, or 6.3%, compared to the same period last year, mostly due to higher private client fees.
• Non-interest expense totaled $244.4 million, an increase of $12.2 million, or 5.3%, over the same quarter last year.
• Average loan balances totaled $17.5 billion, an increase of $253.1 million, or 1.5%, over the prior quarter.
• Total average available for sale debt securities decreased $128.5 million compared to the prior quarter to $9.1 billion, at fair value.
• Total average deposits increased $63.0 million, or .3%, over the prior quarter. The average rate paid on interest bearing deposits declined five basis points to 1.67%, compared to the prior quarter.
• The ratio of annualized net loan charge-offs to average loans was .22% in the current quarter compared to .25% in the prior quarter.
• The allowance for credit losses on loans decreased $1.8 million during the second quarter of 2025 to $165.3 million, and the ratio of the allowance for credit losses on loans to total loans was .94% on June 30, 2025, compared to .96% at March 31, 2025.
• Total assets on June 30, 2025 were $32.3 billion, a decrease of $80.7 million, or .2%, from the prior quarter.
• For the quarter, the return on average assets was 1.95%, the return on average equity was 17.40%, and the efficiency ratio was 54.8%.

Commerce Bancshares, Inc. is a regional bank holding company offering a full line of banking services through its subsidiaries, including payment solutions, investment management and securities brokerage. One of its subsidiaries, Commerce Bank, leverages 160 years of proven strength and experience to help individuals and businesses solve financial challenges. In addition to offering payment solutions across the U.S., Commerce Bank currently operates full-service banking facilities across the Midwest including the St. Louis and Kansas City metropolitan areas, Springfield, Central Missouri, Central Illinois, Wichita, Tulsa, Oklahoma City, and Denver. Beyond the Midwest, Commerce also maintains commercial offices in Dallas, Houston, Cincinnati, Nashville, Des Moines, Indianapolis, and Grand Rapids and wealth offices in Dallas, Houston, and Naples. Commerce delivers high-touch service and sophisticated financial solutions at regional branches, commercial and wealth offices, ATMs, online, mobile and through a 24/7 customer service line.

This financial news release and the supplementary Earnings Highlights presentation are available on the Company's website at https://investor.commercebank.com/news-info/financial-news-releases/default.aspx.

COMMERCE BANCSHARES, INC.

Management Discussion of Second Quarter Results

June 30, 2025

For the quarter ended June 30, 2025, net income amounted to $152.5 million, compared to $131.6 million in the previous quarter and $139.6 million in the same quarter last year. The increase in net income compared to the previous quarter was primarily the result of higher net interest income, non-interest income, and net investment securities gains, coupled with lower provision for credit losses, partly offset by higher non-interest expense. The net yield on interest earning assets increased 14 basis points over the previous quarter to 3.70%. Average loans and deposits increased $253.1 million and $63.0 million, respectively, while average available for sale debt securities, at fair value, decreased $128.5 million compared to the prior quarter. For the quarter, the return on average assets was 1.95%, the return on average equity was 17.40%, and the efficiency ratio was 54.8%.

Balance Sheet Review

During the 2nd quarter of 2025, average loans totaled $17.5 billion, an increase of $253.1 million over the prior quarter, and an increase of $321.3 million over the same quarter last year. Compared to the previous quarter, average balances of business loans and consumer loans grew $141.1 million and $66.3 million, respectively. During the current quarter, the Company sold certain fixed rate personal real estate loans totaling $19.7 million, compared to $14.9 million in the prior quarter.

Total average available for sale debt securities decreased $128.5 million compared to the previous quarter to $9.1 billion, at fair value. The decrease in available for sale debt securities was mainly the result of lower average balances of mortgage-backed securities and asset-backed securities. During the 2nd quarter of 2025, the unrealized loss on available for sale debt securities decreased $68.5 million to $764.4 million, at period end. Also, during the 2nd quarter of 2025, purchases of available for sale debt securities totaled $24.7 million with a weighted average yield of approximately 4.01%, and sales, maturities and pay downs of available for sale debt securities were $451.5 million. On June 30, 2025, the duration of the available for sale investment portfolio was 4.2 years, and maturities and pay downs of approximately $1.3 billion are expected to occur during the next 12 months.

Total average deposits increased $63.0 million this quarter compared to the previous quarter. The increase in deposits mostly resulted from higher average demand deposit balances of $58.2 million. Compared to the previous quarter, total average wealth deposits grew $71.1 million. The average loans to deposits ratio was 70.2% in the current quarter and 69.4% in the prior quarter. The Company's average borrowings, which included average customer repurchase agreements of $2.4 billion, decreased $348.5 million to $2.5 billion in the 2nd quarter of 2025.

Net Interest Income

Net interest income in the 2nd quarter of 2025 amounted to $280.1 million, an increase of $11.0 million over the previous quarter. On a fully taxable-equivalent (FTE) basis, net interest income for the current quarter increased $11.0 million over the previous quarter to $282.4 million. The increase in net interest income was mostly due to higher interest income on loans and investment securities and lower interest expense on borrowings and deposits, partly offset by lower interest income on deposits with banks. The net yield (FTE) on earning assets increased to 3.70%, from 3.56% in the prior quarter.

Compared to the previous quarter, interest income on loans (FTE) increased $6.2 million, mostly due to higher average rates earned on commercial banking and personal real estate loans and higher average balances of commercial banking and consumer loans. The average yield (FTE) on the loan portfolio decreased one basis point to 6.01% this quarter.

Interest income on investment securities (FTE) increased $3.6 million over the prior quarter, mostly due to higher average balances and rates earned on U.S. government and federal agency securities and higher rates on asset-backed securities and other securities, partially offset by lower average balances of mortgage- and asset-backed securities. Interest income earned on U.S. government and federal agency securities included the impact of $1.5 million in higher inflation income from Treasury inflation-protected securities compared to previous quarter. Interest on other securities included $1.8 million of dividend and non-accrual interest income related to a private equity investment. Additionally, the Company recorded a $1.0 million adjustment to premium amortization on June 30, 2025, which increased interest income to reflect slower forward prepayment speed estimates on mortgage-backed securities. This increase was higher than the $539 thousand adjustment that increased interest income in the prior quarter. The average yield (FTE) on total investment securities was 3.16% in the current quarter, compared to 2.98% in the previous quarter.

Compared to the previous quarter, interest income on deposits with banks decreased $3.6 million, due to lower average balances. Additionally, interest earned on securities purchased under agreements to resell increased $1.1 million due to higher average balances and rates.

Interest expense decreased $3.8 million compared to the previous quarter, mainly due to lower average rates paid on deposits and lower average balances of borrowings. Interest expense on borrowings decreased $2.3 million mostly due to a decline of $352.2 million in average securities sold under repurchase agreement balances. Interest expense on deposits decreased $1.5 million mostly due to lower average rates. The average rate paid on interest bearing deposits totaled 1.67% in the current quarter compared to 1.72% in the prior quarter. The overall rate paid on interest bearing liabilities was 1.83% in the current quarter and 1.89% in the prior quarter.

Non-Interest Income

In the 2nd quarter of 2025, total non-interest income amounted to $165.6 million, an increase of $13.4 million, or 8.8%, over the same period last year and an increase of $6.7 million over the prior quarter. The increase in non-interest income compared to the same period last year was mainly due to higher trust fees and gains on sales of assets. The increase in non-interest income compared to the prior quarter was mainly due to higher gains on sales of assets of $3.3 million.

Total net bank card fees in the current quarter decreased $1.1 million, or 2.3%, compared to the same period last year, and increased $769 thousand compared to the prior quarter. Net corporate card fees decreased $270 thousand compared to the same quarter of last year mainly due to lower interchange fees, mostly offset by lower rewards expense. Net merchant fees increased $68 thousand, or 1.2%, due to lower network expense. Net debit card fees decreased $123 thousand, or 1.1%, while net credit card fees decreased $791 thousand, or 19.6%, mostly due to higher rewards expense. Total net bank card fees this quarter were comprised of fees on corporate card ($25.9 million), debit card ($11.3 million), merchant ($5.9 million) and credit card ($3.2 million) transactions.

In the current quarter, trust fees increased $3.3 million, or 6.3%, over the same period last year, mostly resulting from higher private client fees. Compared to the same period last year, deposit account fees increased $923 thousand, or 3.6%, mostly due to higher corporate cash management fees, while capital market fees increased $1.4 million, or 29.7%, mostly due to higher trading securities income.

Other non-interest income increased over the same period last year primarily due to higher gains on sales of assets of $5.5 million and higher tax credit sales income of $956 thousand. Additionally, higher fair value adjustments of $1.3 million were recorded this quarter compared to the 2nd quarter of 2024 on the Company's deferred compensation plan assets and liabilities, which affect both other income and other expense. For the 2nd quarter of 2025, non-interest income comprised 37.2% of the Company's total revenue.

Investment Securities Gains and Losses

The Company recorded net securities gains of $437 thousand in the current quarter, compared to losses of $7.6 million in the prior quarter and gains of $3.2 million in the 2nd quarter of 2024. Net securities gains in the current quarter mostly resulted from net fair value adjustments of $4.4 million, partly offset by losses of $4.2 million on sales of available for sale debt securities.

Non-Interest Expense

Non-interest expense for the current quarter amounted to $244.4 million, compared to $232.2 million in the same period last year and $238.4 million in the prior quarter. The increase in non-interest expense over the same period last year was mainly due to higher salaries and benefits expense, data processing and software, and professional and other services expense, partly offset by lower contribution expense. The increase in non-interest expense compared to the prior quarter was mainly due to higher salaries expense and professional and other services expense, partly offset by lower employee benefits expense.

Compared to the 2nd quarter of 2024, salaries and employee benefits expense increased $5.9 million, or 4.0%, mostly due to higher full-time salaries of $2.1 million, incentive compensation of $2.2 million and healthcare expense of $2.3 million. Full-time equivalent employees totaled 4,658 and 4,724 on June 30, 2025 and 2024, respectively.

Compared to the same period last year, deposit insurance expense increased $958 thousand, mostly due to a $1.2 million accrual adjustment that lowered expense in the prior year from a one-time special assessment by the FDIC to replenish the Deposit Insurance Fund. Data processing and software expense increased $1.4 million due to higher costs for service providers and software. Professional and other services, which increased $4.4 million compared to the 2nd quarter of 2024, included $1.9 million of acquisition related legal and professional services expense. Other non-interest expense decreased mainly due to a $5.0 million donation to a related charitable foundation in 2024 that did not reoccur.

Income Taxes

The effective tax rate for the Company was 21.8% in the current quarter, 21.9% in the prior quarter, and 21.7% in the 2nd quarter of 2024.

Credit Quality

Net loan charge-offs in the 2nd quarter of 2025 amounted to $9.7 million, compared to $10.8 million in the prior quarter, and $9.8 million in the same period last year. The ratio of annualized net loan charge-offs to total average loans was .22% in the current quarter, .25% in the previous quarter, and .23% in the same quarter of last year. Compared to the prior quarter, net loan charge-offs on consumer loans and business real estate loans decreased $684 thousand and $802 thousand, respectively.

In the 2nd quarter of 2025, annualized net loan charge-offs on average consumer credit card loans were 5.08%, compared to 5.04% in the previous quarter and 4.91% in the same quarter last year. Consumer loan net charge-offs were .40% of average consumer loans in the current quarter, .56% in the prior quarter, and .34% in the same quarter last year.

On June 30, 2025, the allowance for credit losses on loans totaled $165.3 million, or .94% of total loans, and decreased $1.8 million compared to the prior quarter. Additionally, the liability for unfunded lending commitments on June 30, 2025 was $16.0 million, a decrease of $2.3 million compared to the liability on March 31, 2025.

On June 30, 2025, total non-accrual loans amounted to $18.9 million, a decrease of $3.7 million compared to the previous quarter. On June 30, 2025, the balance of non-accrual loans, which represented .11% of loans outstanding, included business loans of $410 thousand, revolving home equity loans of $2.0 million, personal real estate loans of $948 thousand, construction loans of $426 thousand, and business real estate loans of $15.1 million. Loans more than 90 days past due and still accruing interest totaled $25.3 million on June 30, 2025.

Other

During the 2nd quarter of 2025, the Company paid a cash dividend of $.275 per common share, representing a 7.0% increase over the same period last year. The Company purchased 171,899 shares of treasury stock during the current quarter at an average price of $60.54.

On June 16, 2025, the Company announced that it has entered into a definitive merger agreement to acquire FineMark Holdings, Inc. (OTCQX:FNBT) ("FineMark"), Ft. Meyers, Florida, with 13 banking locations in Florida, Arizona, and South Carolina. As of March 31, 2025, FineMark had loans and deposits of $2.6 billion and $3.1 billion, respectively, and $7.7 billion of investment and trust assets under administration. It is expected that this transaction will close on January 1, 2026.

Forward Looking Information

This information contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements include future financial and operating results, expectations, intentions, and other statements that are not historical facts. Such statements are based on current beliefs and expectations of the Company's management and are subject to significant risks and uncertainties. Actual results may differ materially from those set forth in the forward-looking statements. Additional information about risks and uncertainties is included in the "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" sections within the Company's Annual Report on Form 10-K.

View source version on businesswire.com: https://www.businesswire.com/news/home/20250715967721/en/

Matt Burkemper, Investor Relations

(314) 746-7485

www.commercebank.com

[email protected]