Commerce Bancshares Beats Q2 EPS by 9%
Key Points
- Earnings per share (EPS, GAAP) surpassed analyst expectations at $1.14, beating estimates by 9.3 %.
- Revenue (GAAP) grew to $445.8 million, outpacing GAAP forecasts.
- FineMark acquisition announced, expanding reach but not yet impacting current period results.
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Commerce Bancshares (NASDAQ:CBSH), a regional banking group known for its super-community banking model, reported results for the second quarter on July 16, 2025. The company posted GAAP EPS of $1.14, exceeding the $1.04 GAAP analyst estimate. Revenue (GAAP) totaled $445.8 million, beating the consensus GAAP revenue estimate of $434.4 million. Compared to the same period last year, both GAAP earnings and revenue saw steady growth. The quarter saw a new record for net interest income (GAAP) and healthy balance sheet metrics, though rising expenses and a shrinking investment securities portfolio added some caution. Overall, it was a solid quarter, highlighted by the strategic announcement of the FineMark acquisition and continued loan and deposit growth.
| Metric | Q2 2025 | Q2 2025 Estimate | Q2 2024 | Y/Y Change |
|---|---|---|---|---|
| EPS (GAAP) | $1.14 | $1.04 | $1.03 | 10.7% |
| Revenue (GAAP) | $445.8 million | $434.4 million | $414.5 million | 7.6% |
| Net Interest Income | $280.1 million | $262.2 million | 6.8% | |
| Non-Interest Income | $165.6 million | $152.2 million | 8.8% | |
| Non-Interest Expense | $244.4 million | $232.2 million | 5.3% |
Source: Analyst estimates for the quarter provided by FactSet.
Company Overview and Success Factors
Commerce Bancshares is a regional bank holding company offering a full suite of banking, lending, payment processing, wealth management, and trust services. It operates primarily in the Midwest, with a strong presence in Kansas City and St. Louis. The bank follows a super-community banking model, combining broad product offerings typical of large banks with local market knowledge.
Key factors for the company's success include a strong compliance framework, capital strength, prudent risk management, and customer focus. Regulatory compliance—ensuring adherence to legislation like the Dodd-Frank Act and Basel III rules—is crucial.
Quarterly Highlights: Growth and Strategic Moves
Net interest income, a measure of the earnings from core lending and investment activities after paying interest expenses, reached a new high. This increase in net interest income reflected ongoing repricing of fixed-rate assets and demand for loans. The net yield on interest-earning assets rose to 3.70%. Non-interest income—a group of revenues from sources like trust services, deposit charges, and card transaction fees—grew by 8.8%. Trust fees, linked to wealth management and estate administration, rose 6.3% year over year, and deposit account fee income climbed 3.6%. Capital market fees increased 29.7% compared to the same period last year, while bank card transaction fees slipped by 2.3% year-over-year.
Expansion of the loan book continued, with average total loans reaching $17.5 billion—up both sequentially and year over year. Business loans and consumer loans accounted for most of this gain. On the deposit side, balances grew modestly, with average deposits at $24.9 billion. The proportion of non-interest-bearing deposits—a relatively cheap and stable source of funding—remained significant. Despite growth areas, the investment securities portfolio continued to contract; investment securities at fair value declined to $9.1 billion, mainly from lower balances in mortgage-backed and asset-backed securities.
Cost management remained in focus, although non-interest expense ticked up 5.3% from the prior year (GAAP). Salary and benefit costs increased, mostly due to higher full-time salaries, incentive compensation, and healthcare expenses, even as Headcount dropped slightly to 4,658 from 4,724 as of June 30, 2025 and 2024, respectively. Data processing and professional services expenses were higher, the latter including $1.9 million of one-time costs tied to the planned acquisition of FineMark. Strong gains in overall efficiency were still recorded—the efficiency ratio, showing how much of every dollar of revenue is eaten up by expenses, improved to 54.8% compared to 55.95% a year ago. This indicates some positive movement on cost control relative to revenue growth.
Net loan charge-offs—the portion of loans deemed unlikely to be collected—remained low at 0.22% of average loans. Non-accrual loans—those not currently generating interest but still carried on the books—were a slim 0.11% of total loans as of June 30, 2025. The allowance for credit losses, which acts as a reserve for potential future defaults, was $165.3 million, or 0.94% of all outstanding loans (GAAP).
The most significant strategic announcement came with the planned acquisition of FineMark, which has $2.6 billion in loans and $3.1 billion in deposits. Although this deal will not close or affect earnings until January 2026, it signals an intention by Commerce Bancshares to grow its footprint in Florida, Arizona, and South Carolina and add scale to its wealth and trust business lines.
The quarterly dividend was raised 7.0% to $0.275 per share. In addition, the company repurchased 171,899 shares at an average price of $60.54, reducing outstanding share count and returning cash to shareholders.
Looking Ahead: Outlook and Priorities
Management did not provide explicit financial guidance for the next quarter or full year in the release. However, the commentary emphasized ongoing priorities: disciplined expense management, loan growth, and continued focus on the company's strengths in capital and customer service. Management's tone suggested confidence in the bank's positioning for the remainder of fiscal 2025, but no concrete forecasts or numbers were given.
For investors, key watch areas remain the pace of loan and deposit growth, credit quality, and how efficiently the company manages rising costs, especially with additional spending tied to integration and regulatory compliance. The shrinking investment securities portfolio and trends in non-interest income—particularly around card-related revenues—warrant ongoing attention as well.
Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.
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