CBSH 10-K & 10-Q changes, risk factors and insider trading
Commerce Bancshares Inc. · Nasdaq · State Commercial Banks · CIK 22356 · All filings on SEC.gov
At a glance
What changed in the latest 10-K
Risk Factors
New heading “Integrating FineMark into the Company may be more difficult, costly, or time consuming than expected and the anticipated benefits and cost savings of the Merger may not be realized.”
New heading “The Company has incurred and is expected to incur substantial costs related to the Merger.”
New heading “The Company may be unable to retain personnel successfully.”
Largest changes
“Integrating FineMark into the Company may be more difficult, costly, or time consuming than expected and the anticipated benefits and cost savings of the Merger may not be realized.”see in full comparison
•Insee in full comparison2024,2025, the United States ("U.S.") economyfacedexperienceda series of challenges, including decliningpositive butelevateduneveninflation.growth. The economy saw moderating but persistently elevated inflation, astrongsolid but slowingjoblabormarketmarket, and solid consumerspendingspending,fuelingparticularlyeconomiclatergrowth.in 2025. Uncertainties aboutglobaltariffgeopoliticalpoliciestensionsandcontinuedinternationalintrade2024,contributedastodidpricelingeringpressuressupplyandchain concerns.uncertainty. Looking ahead to2025,2026, inflationary pressures have eased but elevated living costs are still a concern for consumers, and uncertainty remains aroundtaxtariffs,reform,monetarytariffs,policy, andother monetary policy.unemployment.
“The success of the Company’s Merger with FineMark, including anticipated benefits and cost savings, will depend, in part, on the Company's ability to successfully combine and integrate the businesses of the Company and FineMark in a manner that permits growth opportunities and does not materially disrupt the existing customer relations nor result in decreased revenues due to loss of customers. …”see in full comparison
“The Company has incurred and is expected to incur substantial costs related to the Merger.”see in full comparison
“Additional unanticipated costs may be incurred in the integration of the Company’s business with the business of FineMark, and there are many factors beyond the Company’s control that could affect the total amount or timing of integration costs. Although the Company expects that the elimination of duplicative costs, as well as the realization of other efficiencies related to the integration of the businesses, may offset incremental transaction and acquisition-related costs over time, this net benefit may not be achieved in the near term, or at all.”see in full comparison
Full comparison: every changed paragraph (13)
•In 2024,2025, the United States ("U.S.") economy facedexperienced a series of challenges, including decliningpositive but elevateduneven inflation.growth. The economy saw moderating but persistently elevated inflation, a strongsolid but slowing joblabor marketmarket, and solid consumer spendingspending, fuelingparticularly economiclater growth.in 2025. Uncertainties about globaltariff geopoliticalpolicies tensionsand continuedinternational intrade 2024,contributed asto didprice lingeringpressures supplyand chain concerns.uncertainty. Looking ahead to 2025,2026, inflationary pressures have eased but elevated living costs are still a concern for consumers, and uncertainty remains around taxtariffs, reform,monetary tariffs,policy, and other monetary policy.unemployment.
•During recent years, there was a shift from in-office work to remote work. As a result, businesses continue to reevaluate their office space needs and, in some cases, reduce their leased office space, selling commercial office buildings, or leasing space no longer needed. The impact of this shift continues to be seen but could result in reduced demand for office space, lower lease rates for office space, and lower values of office buildings. These factors may contribute to higher delinquencies and net charge-offs for commercial office real estate loans. Additionally, businesses that cater to or are located near dense areas of office buildings may be adversely impacted, which could result in higher delinquencies and net charge-offs for certain commercial borrowers.
In recent years, federal, state and international lawmakers and regulators have increased their focus on financial institutions' and other companies' risk oversight, disclosures and practices in connection with climate change and other ESG matters. For example, the state of California, in which the Company does business, has enacted bills that would require the Company and other entities to report climate-related information such as greenhouse gas emissions and climate-related risks.risks, and other states have proposed climate disclosure legislation. The SEC has also announced plans to propose rules to require enhanced disclosure regarding human capital management and board diversity for public issuers. These additional disclosures and reporting would require increased time and expense for the Company related to information gathering and compliance.
To combat the high inflation experienced in 2022 and 2023, the Federal Reserve Board significantly increased the benchmark interest rate from nearly zero at the start of 2022 to between 4.25% and 4.50% at the end of 2022 and continued to raise interest rates at a more modest pace to between 5.25% and 5.50% by the end of July 2023. These elevated rates remained in effect for the first half of 2024 and drove an increase in unrealized losses in fixed rate asset portfolios. During September 2024, the Federal Reserve began reducing rates as inflation began to subside. Rates remained unchanged at 4.25% to 4.50% throughout the first eight months of 2025 until the Federal Reserve Board cut rates .25% in September 2025. By December 2025, the Federal Reserve had implemented 3 rate cuts for the year. Monetary policy led by the Federal Reserve in the coming year will play a crucial role in liquidity and interest rate risk. Future economic conditions or other factors could shift monetary policy resulting in additional increases or decreases in the benchmark rate. Furthermore, changes in interest rates could result in unanticipated changes to customer deposit balances and adversely affect the Company’s liquidity position.
Integrating FineMark into the Company may be more difficult, costly, or time consuming than expected and the anticipated benefits and cost savings of the Merger may not be realized.
The success of the Company’s Merger with FineMark, including anticipated benefits and cost savings, will depend, in part, on the Company's ability to successfully combine and integrate the businesses of the Company and FineMark in a manner that permits growth opportunities and does not materially disrupt the existing customer relations nor result in decreased revenues due to loss of customers. It is possible that the integration process could result in the disruption of either company’s ongoing businesses or inconsistencies in standards, controls, procedures, and policies that adversely affect the combined company’s ability to maintain relationships with clients, customers, depositors, and employees or to achieve the anticipated benefits and cost savings of the Merger. If the Company experiences difficulties with the integration process, the anticipated benefits of the Merger may not be realized fully or at all, or may take longer to realize than expected. Integration efforts will also divert management attention and resources. These integration matters could have an adverse effect on the Company for an undetermined period after completion of the Merger. An inability to realize the full extent of the anticipated benefits of the Merger and the other transactions contemplated by the Merger Agreement, as well as any delays encountered in the integration process, could have an adverse effect upon the revenues, levels of expenses and operating results of the Company following the completion of the Merger, which may adversely affect the value of the common stock of the Company following the completion of the Merger. Additionally, following consummation of the acquisition of FineMark, the Company made fair value estimates of certain assets and liabilities in recording the acquisition. Actual values of these assets and liabilities could differ from the estimates, which could impact regulatory capital ratios and result in the Company not achieving the anticipated benefits of the acquisition of FineMark.
There can be no assurances that the Company will be successful following the acquisition of FineMark or that it will realize the expected operating efficiencies, cost savings or other benefits currently anticipated from the acquisition of FineMark.
The Company has incurred and is expected to incur substantial costs related to the Merger.
The Company has incurred and is expected to continue to incur substantial expenses in connection with the Merger. These costs include legal, financial advisory, accounting, consulting, and other advisory fees, retention, severance, and employee benefit-related costs, public company filing fees and other regulatory fees, financial printing and other printing costs, closing, integration and other related costs.
Additional unanticipated costs may be incurred in the integration of the Company’s business with the business of FineMark, and there are many factors beyond the Company’s control that could affect the total amount or timing of integration costs. Although the Company expects that the elimination of duplicative costs, as well as the realization of other efficiencies related to the integration of the businesses, may offset incremental transaction and acquisition-related costs over time, this net benefit may not be achieved in the near term, or at all.
The Company may be unable to retain personnel successfully.
The success of the Merger will depend in part on the Company’s ability to retain the talent and dedication of key employees. It is possible that these employees may decide not to remain with the Company, and if the Company is unable to retain key employees, including management, who are critical to the successful integration and future operations of the companies, the Company could face disruptions in their operations, loss of existing customers, loss of key information, expertise or know-how and unanticipated additional recruitment costs. In addition, if key employees terminate their employment, the Company’s business activities may be adversely affected, as management’s attention may be diverted from successfully hiring suitable replacements and may not be able to locate or retain suitable replacements for any key employees who leave, all of which may cause the Company’s business to suffer.
The Company relies heavily on communications and information systems to conduct its business, and as part of its business, the Company maintains significant amounts of data about its customers and the products they use. The Company’s data is maintained on its own systems and on the systems of its vendors, business partners and third-party service providers. The Company relies on a layered system of security controls to secure collection, transmission, storage, and retrieval of data, including confidential data, in its computer systems and the systems of third parties. Information security risks continue to increase due to new technologies, the increasing use of the Internet and telecommunication technologies (including mobile devices) to conduct financial and other business transactions, and the increased sophistication and activities of organized crime, perpetrators of fraud, hackers, and others. These risks may also be intensified by factors such as an increased volume and complexity of cyber attacks during periods of heightened geopolitical tensions and emerging technological innovations, such as the use of artificial intelligence (“AI”) tools and quantum computing, that may enable malicious actors to develop more advanced social engineering attacks, circumvent security controls, evade detection and remove forensic evidence. These risks may also be intensified by factors such as an increased volume and complexity of cyber attacks during periods of heightened geopolitical tensions and emerging technological innovations, such as the use of artificial intelligence (“AI”) tools and quantum computing, that may enable malicious actors to develop more advanced social engineering attacks, circumvent security controls, evade detection and remove forensic evidence. The Company has faced security incidents, which have been minor in scope and impact, and it expects unauthorized parties to continue to attempt to gain access to its systems or information, as well as those of its business partners and service providers. The Company makes significant investments in various technology to identify and prevent intrusions into its information systems. The Company has policies, procedures and controls designed to identify, protect, detect, respond, and recover from security incidents. The Company also requires ongoing security awareness training for employees, hosts tabletop exercises to test response readiness, and performs regular audits using both internal and outside resources. However, there can be no assurance that any such failures, interruptions or security breaches will not occur, or if they do occur, that they will be adequately addressed. In addition to unauthorized access, denial-of-service attacks or other operational disruptions could prevent the Company from adequately serving customers. Should any of the Company's systems become compromised or customer information be obtained by unauthorized parties, the reputation of the Company could be damaged, relationships with existing customers may be impaired, and the Company could be subject to lawsuits, all of which could result in lost business and have a material adverse effect on the Company’s business, financial condition and results of operations.
Management's Discussion & Analysis (MD&A)
New heading “* Percentage of total principal outstanding of $368.9 million at December 31, 2025.”
New heading “** Percentage of total unused portion of available lines of $946.9 million at December 31, 2025.”
New heading “* Restated for the 5% stock dividend distributed in 2025.”
Removed heading “* Restated for the 5% stock dividend distributed in 2024.”
Largest changes
Insee in full comparison2023,2024, non-interest expense was$931.0$951.2million in 2023,million, an increase of$82.2$20.2 million, or9.7%,2.2%, over2022.2023. Salaries and benefits expense increased$30.0$23.8 million, or5.4%,4.1%, mainly due to higher costs for full-time salaries,healthcareincentiveexpensecompensation, payroll taxes andpayroll401(k)taxes,expense,partlyslightly offset by lowerincentivecontractcompensationlabor expense. Full-time equivalent employees totaled 4,693 at December 31, 2024, compared to 4,718 at December 31,2023, compared to 4,594 at December 31, 2022.2023. Data processing and software expense increased$8.1$8.6 million, or 7.3%, primarily due to increased costs for service providers and higher software expense and bank card processing fees. Net occupancy expenseincreaseddecreased$4.5$406million,thousand, or9.2%,.8%, mainly due to higherdepreciationexternalexpenserentand real estate taxes,income, partly offset by higherrentbuildingincome.depreciationDepositexpense. Professional and other services expense decreased $1.1 million, or 3.1%, mainly due to declines in other professional fees, loan collection fees, and pension plan expense, partly offset by an increase in legal fees. Marketing expense decreased $2.2 million, or 8.8%, while equipment expense increased $1.1 million, or 5.5%, mainly due to higher furniture and equipment depreciation expense. Supplies and communication expense decreased $129 thousand, or .7%, while deposit insurance expenseincreaseddecreased$22.6$16.7 million due to a $16.0 millionone-timeaccrual recorded in 2023 for a special assessmentaccrual recordedby thefourth quarter of 2023, mentioned above. Professional and other services expense increased $393 thousand, or 1.1%, mainly dueFDIC tohigherreplenishpensiontheplanDepositexpense,Insurancepartly offset by lower loan collection fees. Marketing expense increased $684 thousand, or 2.9%, while supplies and communication expense increased $1.3 million, or 7.3%, mainly due to higher postage expense, bank card reissuance fees and office supplies expense.Fund. Other non-interest expense increased$14.4$7.2 million, or53.0%,17.4%, mainly due tohigherlitigationcostssettlementforexpensetravelof $10.0 million andentertainmentaexpense (up $1.9 million), miscellaneous losses (up $2.1 million) and lower deferred origination costs (up $1.6 million). In addition, an increase of $6.4$5.0 million donation to a related charitable foundation, both recorded infair2024.valueTheseadjustmentsincreases wererecordedpartlyonoffsetthe Company's deferred compensation plan, andby deconversion costs of $2.1 millionrelating to the transition of Commerce Financial Advisors support to LPL Financial's Institution Services platform wererecorded in2023.2023, as well as decreases in swap fee amortization expense of $859 thousand, travel and entertainment expense of $687 thousand and recruiting expense of $489 thousand.
Non-interest expense wassee in full comparison$951.2$979.8 million in2024,2025, an increase of$20.2$28.6 million, or2.2%,3.0%, over the previous year. Salaries and benefits expense increased$23.8$20.6 million, or4.1%,3.4%, mainly due to highercosts forfull-time salaries, incentivecompensation, payroll taxescompensation and401(k) expense, slightly offset by lower contract laborhealthcare expense. Full-time equivalent employees totaled 4,667 at December 31, 2025, compared to 4,693 at December 31,2024, compared to 4,718 at December 31, 2023.2024. Data processing and software expense increased$8.6$6.6 million, or7.3%,5.2%, primarily due to increased costs for service providers and higher softwareexpense and bank card processing fees.expense. Net occupancy expensedecreasedincreased$406$1.1thousand,million, or.8%,2.1%, mainly due to higherexternalbuildingrentdepreciationincome,expense and demolition costs, partly offset by higherbuildingexternaldepreciationrentexpense.income. Professional and other services expensedecreasedincreased$1.1$13.8 million, or3.1%,39.3%, mainly due todeclineshigher legal, professional and loan recording fees. Professional and other services expense included acquisition related expense of $5.6 million inother professional fees, loan collection fees, and pension plan expense, partly offset by an increase in legal fees.2025. Marketing expensedecreasedincreased$2.2$2.3 million, or8.8%,10.4%,whileand equipment expense increased$1.1$889million,thousand, or5.5%,4.3%, mainly due to higher furniture and equipmentdepreciationrental and service contract expense. Supplies and communication expensedecreasedincreased$129$395 thousand, or.7%,2.0%, while deposit insurance expense decreased$16.7$6.4 million mainly due toa $16.0 millionaccrualrecordedadjustments in20232024foranda2025one-timerelated to the FDIC's special assessmentby the FDICto replenish the Deposit Insurance Fund. Other non-interest expenseincreaseddecreased$7.2$10.6 million, or17.4%,21.7%, mainly due to litigation settlement expense of $10.0millionmillion, net of insurance, and a $5.0 million donation to a related charitable foundation, both recorded in 2024. In addition, a $1.5 million reimbursement related to a litigation settlement was recorded in 2025. Theseincreasesdecreases were partly offset bydeconversion costs of $2.1 million recordedhigher in2023, as well as decreases in swap fee amortization expense of $859 thousand,travel and entertainment expense of$687$1.3thousandmillion, andrecruitinganexpenseincrease in fair value adjustments of$489$1.4thousand.million recorded on the Company's deferred compensation plan assets and liabilities.
“** Percentage of total unused portion of available lines of $946.9 million at December 31, 2025.”see in full comparison
“* Percentage of total principal outstanding of $368.9 million at December 31, 2025.”see in full comparison
Full comparison: every changed paragraph (101)
The Company operates as a super-community bank and offers a broad range of financial products to consumer, municipal, and commercial customers, delivered with a focus on high-quality, personalized service. The Company is headquartered in Missouri, with its principal offices in Kansas City and St. Louis, Missouri. Customers are served from 243236 locations primarily in Missouri, Kansas, Illinois, Oklahoma and Colorado and commercial offices throughout the nation's midsection. A variety of delivery platforms are utilized, including an extensive network of branches and ATM machines, full-featured online banking, a mobile application, and a centralized contact center.
• Total revenue — Total revenue is comprised of net interest income and non-interest income. Total revenue in 20242025 increased $84.6$108.3 million, or 5.4%,6.5%, from 2023,2024, as net interest income grew $42.1$71.6 million, and non-interest income increased $42.5$36.7 million. Growth in net interest income resulted principally from increases in interest income from loans,investment partlysecurities, offsetand bya an increasedecrease in interest expense on borrowings and deposits. The increase in non-interest income in 20242025 was mainly due to higher trust fees,fees supplemented by higherand deposit account feesfees, andpartly capitaloffset marketby lower bank card fees.
• Non-interest expense — Total non-interest expense increased 2.2%3.0% this year compared to 2023,2024, mainly due to higher salaries and employee benefits expense and professional and other services expense, partially offset by lower deposit insurance expense due to a special FDIC assessment accrued in 2023.expense.
• Asset quality — Net loan charge-offs totaled $38.9$40.7 million in 2024,2025, an increase of $7.8$1.8 million from those recorded in 2023,2024, and averaged .23% of loans in 2024,both as2025 comparedand to .19% of loans in 2023.2024. Total non-performing assets, which include non-accrual loans and foreclosed real estate, amounted to $17.0 million at December 31, 2025, compared to $18.6 million at December 31, 2024, compared to $7.6 million at December 31, 2023, and represented .11%.10% of loans outstanding at December 31, 2024.2025.
• Shareholder return — During 2024,2025, the Company paid cash dividends of $1.03$1.05 per share on its common stock, representing an increase of 5.0%6.9% over the previous year. In 2024,2025, the Company issued its 31st32nd consecutive annual 5% common stock dividend, and in February 2025,2026, the Company's Board of Directors authorized an increase of 7.0%5.0% in the common cash dividend. The Company purchased 2,875,3493,608,530 shares in 2024.2025. Total shareholder return, including the change in stock price and dividend reinvestment, was 5.1%,2.1%, 10.8%,9.1%, and 10.7%9.2% over the past 5, 10, and 15 years, respectively.
(4) The tangible common equity to tangible assets ratio is a measurement which management believes is a useful indicator of capital adequacy and utilization. It provides a meaningful basis for period to period and company to company comparisons, and also assistassists regulators, investors and analysts in analyzing the financial position of the Company. Tangible common equity and tangible assets are non-GAAP measures and should not be viewed as substitutes for, or superior to, data prepared in accordance with GAAP.
Net income attributable to Commerce Bancshares, Inc. (net income) for 20242025 was $526.3$566.3 million, an increase of $49.3$39.9 million, or 10.3%,7.6%, compared to $477.1$526.3 million in 2023.2024. Diluted income per common share was $3.87$4.04 in 2024,2025, compared to $3.46$3.69 in 2023.2024. The growth in net income resulted mainly from increases of $42.5 million in non-interest income and $42.1$71.6 million in net interest income and $36.7 million in non-interest income, partly offset by increases in non-interest expense and incomethe taxesprovision for credit losses of $20.2$28.6 million and $10.5$23.2 million, respectively. The return on average assets was 1.72%1.79% in 20242025 compared to 1.49%1.72% in 2023,2024, and the return on average common equity was 16.66%15.76% in 20242025 compared to 17.94%16.66% in 2023.2024. At December 31, 2024,2025, the ratio of tangible common equity to tangible assets increased to 9.92%,11.11%, compared to 8.85%9.92% at year end 2023.2024.
During 2024,2025, net interest income grew mainly due to an increase of $78.4$38.4 million in interest income earned on loans,investment mainlysecurities and $19.7 million in interest income on securities purchased under resell agreements, both due to higher average balances and rates, and a decrease of $43.9$39.7 million in interest expense on borrowings,deposits, mainly due to lower average balances,rates. These increases to net interest income were partly offset by ana increasedecrease of $26.3 million in interest expenseearned on deposits of $90.0 million, mainlyloans, due to lower average rates, partly offset by higher average rates paid.balances. Total rates earned on average interest earning assets increaseddecreased 52six basis points this year, while funding costs increaseddecreased 5228 basis points for deposits and decreased 2869 basis points for borrowings. The provision for credit losses increased mainly due to higher net loan charge-offs and an increase in the estimate of the allowance for credit losses on loans this year compared to last year. These increases were partlyslightly offset by a decrease in the liability for unfunded lending commitments. Net loan charge-offs increased $7.8$1.8 million, mainly due to higher consumer credit card and consumerbusiness loan net charge-offs in 2024, partly offset by a decrease in business loan net charge-offs.2025.
Non-interest income grew 6.0% in 2025, mainly due to increases in trust fees and deposit account fees. Net investment securities gains of $3.7 million were recorded in 2025 and were comprised mainly of fair value gains on the Company's private equity investment portfolio, partly offset by losses on sales of available for sale debt securities. Non-interest expense increased $28.6 million in 2025 compared to 2024, mainly due to higher salaries and benefits expense, data processing and software expense and professional and other services expense.
Net income for 2024 was $526.3 million, an increase of $49.3 million, or 10.3%, compared to $477.1 million in 2023. Diluted income per common share was $3.69 in 2024, compared to $3.30 in 2023. The growth in net income resulted mainly from increases of $42.5 million in non-interest income and $42.1 million in net interest income, partly offset by increases in non-interest expense and income taxes of $20.2 million and $10.5 million, respectively. The return on average assets was 1.72% in 2024 compared to 1.49% in 2023, and the return on average common equity was 16.66% in 2024 compared to 17.94% in 2023. At December 31, 2024, the ratio of tangible common equity to tangible assets increased to 9.92%, compared to 8.85% at year end 2023.
During 2024, net interest income grew mainly due to an increase of $78.4 million in interest income earned on loans, mainly due to higher average rates, and a decrease of $43.9 million in interest expense on borrowings, mainly due to lower average balances, partly offset by an increase in interest expense on deposits of $90.0 million, mainly due to higher average rates paid. Total rates earned on average interest earning assets increased 52 basis points in 2024, while funding costs increased 52 basis points for deposits and decreased 28 basis points for borrowings. The provision for credit losses increased mainly due to higher net loan charge-offs and an increase in the estimate of the allowance for credit losses on loans this year compared to 2023. These increases were partly offset by a decrease in the liability for unfunded lending commitments. Net loan charge-offs increased $7.8 million, mainly due to higher credit card and consumer loan net charge-offs in 2024, partly offset by a decrease in business loan net charge-offs.
Net income for 2023 was $477.1 million, a decrease of $11.3 million, or 2.3%, compared to $488.4 million in 2022. Diluted income per common share was $3.46 in 2023, compared to $3.50 in 2022. The decrease in net income resulted mainly from an increase of $82.2 million in non-interest expense, partly offset by increases in net interest income of $55.9 million and non-interest income of $26.5 million. The return on average assets was 1.49% in 2023 compared to 1.45% in 2022, and the return on average common equity was 17.94% in 2023 compared to 17.31% in 2022. At December 31, 2023, the ratio of tangible common equity to tangible assets increased to 8.85%, compared to 7.32% at year end 2022.
During 2023, net interest income grew mainly due to increases of $338.1 million in interest income earned on loans and $88.2 million in interest income earned on deposits with banks, mainly due to higher average rates, partly offset by increases in interest expense on deposits and borrowings of $215.7 million and $110.2 million, respectively, mainly due to higher average rates paid. Total rates earned on average interest earning assets increased 134 basis points in 2023, while funding costs for deposits and borrowings increased 156 basis points. The provision for credit losses increased mainly due to higher net loan charge-offs and an increase in the estimate of the allowance for credit losses in 2023 compared to 2022. Net loan charge-offs increased $12.0 million, mainly due to higher credit card, consumer and business loan net charge-offs in 2023.
Non-interest income grew 4.9% in 2023, mainly due to increases in bank card and trust fees. Net investment securities gains of $15.0 million were recorded in 2023 and were comprised mainly of net fair value gains on the Company's private equity investment portfolio, partly offset by losses on sales of available for sale securities. Non-interest expense increased $82.2 million in 2023 compared to 2022, mainly due to higher salaries and benefits expense and deposit insurance expense.
The Company distributed a 5% stock dividend for the 31st32nd consecutive year on December 18,16, 2024.2025. All per share and average share data in this report has been restated for the 20242025 stock dividend.
Assumptions, Judgments, and Uncertainties: The uncertainty in the estimation of the allowance for credit losses is created because key assumptions and judgementsjudgments are applied throughout the process. Key assumptions include segmentation of the portfolio into pools, calculations of life of a loan using a combination of contractual terms and expected prepayment speeds and forecast of macroeconomic conditions. The Company utilizes a third-party macro-economic forecast that continuously changes due to economic conditions and events. The single path economic forecast includes key macroeconomic variables including GDP, disposable income, unemployment rate, various interest rates, consumer price index (CPI) inflation rate, housing price index (HPI), commercial real estate price index (CREPI) and market volatility. Each reporting period, the base macroeconomic forecast scenario is evaluated to ensure it is not inconsistent with management’s expectations. Changes in the forecast cause fluctuations in the estimates of the allowance for credit losses on loans and the liability for unfunded lending commitments. Potential changes in any one economic variable may or may not affect the overall allowance because a variety of economic variables and inputs are considered in estimating the allowance, and changes in those variables and inputs may not occur at the same rate, may not be consistent across product types and may have offsetting impacts to other changing variables and inputs.
Net interest income totaled $1.1 billion in 2025, increasing $71.6 million, or 6.9%, compared to $1.0 billion in 2024, increasing $42.1 million, or 4.2%, compared to $998.1 million in 2023.2024. On a fully taxable-equivalent (FTE) basis, net interest income totaled $1.0$1.1 billion, and increased $42.8$72.0 million over 2023.2024. This growth was mainly due to increases of $79.6$38.4 million in interest earned on investment securities (FTE), due to higher average balances and rates earned and a decrease of $39.7 million in interest expense on interest bearing deposits, mainly due to lower average rates paid. These increases to income were partly offset by a decrease of $25.9 million in interest earned on loans (FTE), due to higherlower average rates and balances, and $18.2 million in interest earned on balances at the Federal Reserve, due to higher average balances, and a decrease of $44.8 million in interest expense on borrowings, mainly due to lower average balances. These increases to income were partly offset by an increase of $90.0 million in interest expense on deposits, mainly due to higher average rates paid, and lower interest earned on investment securities of $8.5 million, due to lower average balances,earned, partly offset by higher average rates.balances. The net yield on earning assets (FTE) was 3.47%3.63% in 20242025 compared with 3.16%3.47% in 2023.2024. The fully taxable-equivalent basis uses a federal income tax rate of 21%.
During 2024,2025, loan interest income (FTE) grewdeclined $79.6$25.9 million overfrom 20232024 mainly due to ana increasedecrease in rates earnedearned, forpartly alloffset loan categories andby growth of $310.2$387.3 million, or 1.8%,2.3%, in average loan balances. The average fully taxable-equivalent rate earned on the loan portfolio increaseddecreased 3629 basis points to 6.26%5.97% in 20242025 compared to 5.90%6.26% in 2023.2024. The higher rates earned on the loan portfolio were impacted by actions taken by the Federal Reserve in 2025 and 2024 to lower short-term interest rates, which caused most of the Company's variable rate loan portfolio to re-price lower and fixed rate loans to originate at lower interest rates than the weighted-average of the portfolio of fixed rate loans. IncreasedLower interest earned on business,construction consumer,and personalland, business real estate and business real estate loans was the main driver of overall higherlower loan interest income. BusinessInterest loanon interestconstruction incomeand increasedland $33.3loans decreased $15.7 million due to a 4096 basis point increasedecline in the average rate earned and a $26.0 million, or 1.8%, decrease in the average balance. Business real estate loan interest decreased $9.3 million as the average rate earned decreased 33 basis points, while the average balance increased $49.5 million, or 1.4%. Business loan interest income decreased $7.1 million due to a 39 basis point decrease in the average rate earned, partly offset by an increase of $164.3$279.8 million, or 2.84%,4.7%, in average balances. Interest earned on consumer credit card loans increasedwas $16.2lower by $4.0 million mainly due to ana increasedecrease of 7475 basis points in the average rate earned. PersonalConsumer loan interest income decreased $103 thousand mainly due to a decrease of 13 basis points in the average rate earned, mostly offset by an increase of $41.7 million, or 2.0%, in the average balance. The decreases in loan interest income were partly offset by an increase in personal real estate loan interest grewof $13.0$8.5 million in 2024 compared to 2023 as a result of an increase of 3526 basis points in the average rate earnedearned. andIn higheraddition, average balances of $63.8 million, or 2.14%. Interest on construction and land loans grew $1.3 million over the prior year due to growth in the average rate earned of 29 basis points, partly offset by a decrease of $35.0 million, or 2.4%, in average loan balances. Interest on business real estate loans increased $12.5 million as the average rate earned increased 21 basis points and the average balance grew $75.3 million, or 2.1%. Revolvingrevolving home equity loan interest increased $2.5$1.8 million mainly due to growth in average balances of $30.7$29.8 million, or 10.1%. Interest on consumer credit card loans was higher by $829 thousand due to an increase of 16 basis points in the average rate earned.8.9%.
Fully taxable-equivalent interest income on total investment securities decreasedincreased $8.5$38.4 million during 2024,2025, as average balances declined $1.9 billion, while the average rate earned increased 3443 basis points.points, while average balances declined $236.5 million. The average rate on the total investment securities portfolio was 2.63%3.06% in 20242025 compared to 2.29%2.63% in 2023,2024, while the average balance of the total investment securities portfolio (excluding unrealized fair value adjustments on available for sale debt securities) was $10.4$10.2 billion in 20242025 compared to an average balance of $12.4$10.4 billion in 2023.2024. The decreaseincrease in interest income was mainly due to lower interest income earned on mortgage-backed securities, asset-backed securities and state and municipal securities, partly offset by an higher interest income earned on U.S. government and asset-backed securities, partly offset by lower interest earned on mortgage-backed and state and municipal securities. Interest earned on U.S. government securities increased $53.6 million due to higher average balances of $1.2 billion, or 73.2%, and an increase in the average rate earned of 33 basis points. Contributing to the increase in interest earned on U.S. government securities was growth of $2.4 million in inflation income on treasury inflation-protected securities (TIPS). Interest earned on asset-backed securities increased $9.7 million, due to growth of 105 basis points in the average rate earned, partly offset by a decline in average balances of $230.5 million, or 13.2%. Interest earned on mortgage-backed securities decreased $16.2$19.1 million due to lower average balances of $878.4$808.5 million, slightlyor offset15.1%, byand ana increasedecrease of three basis points in the average rate earned. Interest earned on asset-backed securities decreased $12.8 million, due to a decline in average balances of $991.4 million, partly offset by an increase of 48four basis points in the average rate earned. The decrease of $10.9$4.6 million in interest earned on state and municipal securities was mainly due to a decrease of $497.5 million in average balances and a decline of seven$255.2 basismillion, pointsor 25.0%, in average rate earned. Interest earned on U.S. government securities increased $35.9 million mainly due to higher average balances of $601.7 million, or 60.0%, and an increase in average rate earned of 130 basis points. Interest earned on U.S. government securities was impacted by a decline of $2.5 million in inflation income on treasury inflation-protected securities (TIPS).balances.
Interest on securities purchased under resell agreements increased $19.7 million compared to 2024 due to a $412.9 million, or 97.9%, increase in average balances and growth of 79 basis points in the average rate earned. Interest income on balances at the Federal Reserve decreased $17.6 million from 2024, due to a decline in the average rate earned of 96 basis points, partly offset by an increase in average balances of $104.8 million, or 4.5%.
During 2025, interest expense on deposits decreased $39.7 million from 2024 and resulted from a 28 basis point decrease in the overall average rate paid on deposits, slightly offset by an increase in average balances of $475.8 million, or 2.8%. Interest expense on interest checking and money market accounts decreased $16.5 million due to lower rates paid, which declined 20 basis points, partly offset by growth in average balances of $646.1 million, or 4.8%. Interest expense on certificates of deposit declined $23.2 million, due to a 71 basis point decrease in the average rate paid, coupled with a $144.0 million decrease in average balances. The overall rate paid on total deposits decreased from 1.96% in 2024 to 1.68% in the current year. Interest expense on borrowings decreased $17.7 million mainly due to a 69 basis point decrease in the average rate paid. Interest expense on federal funds purchased decreased $6.7 million, due to a $100.2 million decline in average balances and a 106 basis point decrease in the average rate paid. Interest expense on securities sold under repurchase agreements decreased $11.0 million due to a 60 basis point decrease in the average rate earned, partly offset by an increase of $118.9 million in average balances. The overall average rate incurred on all interest bearing liabilities was 1.83% in 2025, compared to 2.17% in 2024.
Net interest income totaled $1.0 billion in 2024, increasing $42.1 million, or 4.2%, compared to $998.1 million in 2023. On an FTE basis, net interest income totaled $1.0 billion, and increased $42.8 million over 2023. This growth was due to increases of $79.6 million in interest earned on loans (FTE), due to higher average rates and balances, and $18.2 million in interest earned on balances at the Federal Reserve, due to higher average balances, and a decrease of $44.8 million in interest expense on borrowings, mainly due to lower average balances. These increases to income were partly offset by an increase of $90.0 million in interest expense on deposits, mainly due to higher average rates paid, and lower interest earned on investment securities of $8.5 million, due to lower average balances, partly offset by higher average rates. The net yield on earning assets (FTE) was 3.47% in 2024 compared with 3.16% in 2023.
During 2024, loan interest income (FTE) grew $79.6 million over 2023 mainly due to an increase in rates earned for all loan categories and growth of $310.2 million, or 1.8%, in average loan balances. The average fully taxable-equivalent rate earned on the loan portfolio increased 36 basis points to 6.26% in 2024 compared to 5.90% in 2023. Increased interest earned on business, consumer, personal real estate and business real estate loans was the main driver of overall higher loan interest income. Business loan interest income increased $33.3 million due to a 40 basis point increase in the average rate earned and an increase of $164.3 million, or 2.84%, in average balances. Interest earned on consumer loans increased $16.2 million mainly due to an increase of 74 basis points in the average rate earned. Personal real estate loan interest grew $13.0 million in 2024 compared to 2023 as a result of an increase of 35 basis points in the average rate earned and higher average balances of $63.8 million, or 2.14%. Interest on construction and land loans grew $1.3 million over 2023 due to growth in the average rate earned of 29 basis points, partly offset by a decrease of $35.0 million, or 2.4%, in average loan balances. Interest on business real estate loans increased $12.5 million as the average rate earned increased 21 basis points and the average balance grew $75.3 million, or 2.1%. Revolving home equity loan interest increased $2.5 million mainly due to growth in average balances of $30.7 million, or 10.1%. Interest on consumer credit card loans was higher by $829 thousand due to an increase of 16 basis points in the average rate earned.
Fully taxable-equivalent interest income on total investment securities decreased $8.5 million during 2024, as average balances declined $1.9 billion, while the average rate earned increased 34 basis points. The average rate on the total investment securities portfolio was 2.63% in 2024 compared to 2.29% in 2023, while the average balance of the total investment securities portfolio (excluding unrealized fair value adjustments on available for sale debt securities) was $10.4 billion in 2024 compared to an average balance of $12.4 billion in 2023. The decrease in interest income was mainly due to lower interest income earned on mortgage-backed, asset-backed and state and municipal securities, partly offset by higher interest income earned on U.S. government securities. Interest earned on mortgage-backed securities decreased $16.2 million due to lower average balances of $878.4 million, slightly offset by an increase of three basis points in the average rate earned. Interest earned on asset-backed securities decreased $12.8 million, due to a decline in average balances of $991.4 million, partly offset by an increase of 48 basis points in the average rate earned. The decrease of $10.9 million in interest earned on state and municipal securities was due to a decrease of $497.5 million in average balances and a decline of seven basis points in the average rate earned. Interest earned on U.S. government securities increased $35.9 million mainly due to higher average balances of $601.7 million, or 60.0%, and an increase in the average rate earned of 130 basis points. Interest earned on U.S. government securities was impacted by a decline of $2.5 million in inflation TIPS income.
During 2024, interest expense on deposits increased $90.0 million over 2023 and resulted mainly from a 52 basis point increase in the overall average rate paid on deposits. Interest expense on interest checking and money market accounts increased $80.5 million due to higher rates paid, which grew 59 basis points, and growth in average balances of $226.3 million, or 1.7%. Interest expense on certificates of deposit grew $9.5 million, due to a 33 basis point increase in the average rate paid, coupled with a $33.1 million increase in average balances. The overall rate paid on total deposits increased from 1.44% in 2023 to 1.96% in the current year.2024. Interest expense on borrowings decreased $44.8 million mainly due to a $975.0 million decrease in average balances. Interest expense on federal funds purchased decreased $13.0 million, mainly due to a $265.7 million decline in average balances, while interest expense on securities sold under repurchase agreements increased $7.7 million due to a 26 basis point increase in the average rate earned and an increase of $47.4 million in average balances. Interest expense on Federal Home Loan Bank (FHLB) borrowings declined $39.5 million due to a decline of $756.7 million in average balances. The Company did not have any outstanding FHLB borrowings at December 31, 2024. The overall average rate incurred on all interest bearing liabilities was 2.17% in 2024, compared to 1.86% in 2023.
Net interest income totaled $998.1 million in 2023, increasing $55.9 million, or 5.9%, compared to $942.2 million in 2022. On a FTE basis, net interest income totaled $1.0 billion, and increased $54.9 million over 2022. This growth was mainly due to increases of $339.4 million in interest earned on loans and $88.2 million in interest earned on balances at the Federal Reserve, both mainly due to higher average rates earned. These increases were partly offset by an increase of $325.9 million in interest expense on deposits and borrowings, mainly due to higher average rates paid, and lower interest earned on investment securities of $38.0 million, mainly due to lower average balances. The net yield on earning assets (FTE) was 3.16% in 2023 compared with 2.85% in 2022.
During 2023, loan interest income (FTE) grew $339.4 million over 2022 mainly due to an increase in rates earned for all loan categories and a $1.2 billion, or 7.8%, increase in average loan balances. The average fully taxable-equivalent rate earned on the loan portfolio increased 172 basis points to 5.90% in 2023 compared to 4.18% in 2022. The higher rates earned on the loan portfolio were partly related to actions taken by the Federal Reserve to raise short-term interest rates during 2022 and 2023, which caused most of the Company's variable rate loan portfolio to re-price higher. Additionally, fixed rate loans were generally originated in 2023 at higher interest rates than the weighted-average of the portfolio of fixed rate loans. Increased interest earned on business, business real estate and construction and land loans was the main driver of overall higher interest income. Business loan interest income increased $128.3 million due to a 196 basis point increase in the average rate earned and an increase of $405.2 million, or 7.5%, in average balances. Business real estate loan interest grew $80.2 million in 2023 compared to 2022 as a result of an increase of 181 basis points in the average rate earned and higher average balances of $372.0 million, or 11.6%. Interest earned on construction and land loans increased $55.3 million due to an increase of 292 basis points in the average rate earned and growth of $243.8 million, or 19.8%, in average balances. Interest on personal real estate loans increased $15.9 million as the average rate earned increased 38 basis points and the average balance grew $137.4 million. Interest on consumer loans grew $37.3 million over 2022 as the average rate earned increased 174 basis points. Revolving home equity loan interest increased $10.2 million due to an increase of 301 basis points in the average rate earned and growth in average balances of $22.7 million. Interest on consumer credit card loans was higher by $12.4 million due to an increase of 191 basis points in the average rate earned and a $14.0 million increase in average balances.
Fully taxable-equivalent interest income on total investment securities decreased $38.0 million during 2023, as average balances declined $2.6 billion, while the average rate earned increased 14 basis points. The average rate on the total investment securities portfolio was 2.29% in 2023 compared to 2.15% in 2022, while the average balance of the total investment securities portfolio (excluding unrealized fair value adjustments on available for sale debt securities) was $12.4 billion in 2023 compared to an average balance of $14.9 billion in 2022. The decrease in interest income was mainly due to lower interest income earned on U.S. government securities, state and municipal securities and mortgage-backed securities. Interest earned on U.S. government securities decreased $16.2 million mainly due to lower TIPS interest income of $14.3 million. Average balances of U.S. government securities decreased $96.0 million and the average rate earned declined 125 basis points. The decrease of $15.8 million in interest earned on state and municipal securities was due to a decrease of $542.8 million in average balances and a decline of 23 basis points in average rate earned. Interest earned on mortgage-backed securities decreased $7.0 million due to a lower average balances of $742.6 million, partly offset by an increase of 12 basis points in the average rate earned. Interest earned on asset-backed securities decreased $398 thousand, due to a decline in average balances of $1.2 billion, mostly offset by an increase of 62 basis points in the average rate earned.
Interest on securities purchased under resell agreements decreased $9.0 million compared to 2022 due to a decrease in average balances of $793.8 million, partly offset by growth of 43 basis points in the average rate. Interest income on balances at the Federal Reserve increased $88.2 million over 2022, mainly due to a 416 basis point increase in the average rate earned and growth in average balances of $597.3 million.
During 2023, interest expense on deposits increased $215.7 million over 2022 and resulted mainly from a 126 basis point increase in the overall average rate paid on deposits. Interest expense on interest checking and money market accounts increased $121.3 million mainly due to higher rates paid, which grew 94 basis points, slightly offset by lower average balances of $1.4 billion. Interest expense on certificates of deposit grew $94.4 million, mainly due to a 350 basis point increase in the average rate paid, coupled with a $1.4 billion increase in average balances. The overall rate paid on total deposits increased from .18% in 2022 to 1.44% in 2023. Interest expense on borrowings increased $110.2 million mainly due to a 210 basis point increase in the rate paid on securities sold under repurchase agreements and an increase in $711.3 million in average FHLB borrowings. The Company did not have any outstanding FHLB borrowings at December 31, 2023. The overall average rate incurred on all interest bearing liabilities was 1.86% in 2023, compared to .30% in 2022.
The provision for credit losses is comprised of provisions for credit losses on loans and unfunded lending commitments and is recorded to adjust the allowance for credit losses on loans and the liability for unfunded lending commitments to a level deemed adequate by management based on the factors mentioned in the “Allowance for Credit Losses on Loans and Liability for Unfunded Lending Commitments” section of this discussion. The provision for credit losses was $32.9$56.1 million in 2024,2025, aan decreaseincrease of $2.5$23.2 million from the 20232024 provision.
The provision for credit losses on loans for the year ended December 31, 20242025 was $39.2$57.4 million, compared to $43.3$39.2 million in 2023.2024. The allowance for credit losses on loans totaled $162.7$179.5 million at December 31, 2024,2025, an increase of $347$16.7 thousandmillion compared to the prior year, and represented .95%1.01% of loans at year end 2024,2025, compared to .94%.95% at December 31, 2023.2024.
Non-interest income totaled $615.6$652.3 million, an increase of $42.5$36.7 million, or 7.4%,6.0%, compared to $573.0$615.6 million in 2023.2024. Trust fee income increased $23.5$18.3 million, or 12.3%,8.5%, mainly as a result of higher private client trust fees (up 13.1%9.1%), which comprised 81.0%81.4% of trust fee income in 2024.2025. The market value of total customer trust assets totaled $74.8$81.6 billion at year end 2024,2025, which was an increase of 8.6%9.1% over year end 20232024 balances. Bank card fees decreased $1.4$5.5 million, or .7%,2.9%, from the prior year, mainly due to a decreasedecreases in net corporate card fees of $4.0$3.9 million, partly offset by increases in net credit card fees of $1.6 million,million and net debit card fees of $636$488 thousandthousand, andpartly offset by an increase in net merchant fees of $407$528 thousand. The decline in net corporate card fees from the prior year was mainly due to lower interchange income coupled with higher rewards expense. Net debit card fees increaseddecreased mainly due to higherlower interchange income, while net credit card fees increaseddecreased due to lowerhigher rewards expense. Net merchant fees increased mainly due to higherlower merchantinterchange discountand fees,royalty fee expense, partly offset by lower interchangemerchant fees.discount fee revenue. Deposit account fees increased $9.3$7.9 million, or 10.3%,7.9%, mainly due to higher corporate cash management fees of $8.5$7.4 million and other deposit fees of $894 thousand.million. In 2024,2025, corporate cash management fees comprised 64.6%66.7% of total deposit fees, while overdraft fees comprised 11.5%10.7% of total deposit fees. Capital markets fees increased $5.7 million, or 40.3%, mainly due to higher trading securities income of $4.1 million and underwriting income of $2.4 million. Revenue from consumer brokerage services increased $918$3.9 thousand,million, or 5.3%,21.6%, mainly due to higher annuity fees, advisory fees and life insurance income. Capital markets fees increased $879 thousand, or 4.4%, mainly due to higher gains on trading securities, while loan fees and sales increased $1.7$992 million,thousand, or 15.5%,7.7%, mainly due to higher loan commitment fees and mortgage banking revenue. Other non-interest income increased $2.7$10.3 million, or 4.8%,17.1%, over the prior year mainly due to higher gains on asset sales of $2.5$3.8 million, tax credit sales fees of $2.2 million, cash sweep commissions of $2.2$2.0 million and tax credit sales income of $2.1 million. These increases were partly offset by lower letter of creditinternational fees of $2.3$802 thousand. Additionally, an increase in fair value adjustments of $1.4 million was recorded on the Company's deferred compensation plan assets and swapliabilities, feeswhich ofaffect $1.2both million.other income and other expense.
During 2023,2024, non-interest income totaled $573.0$615.6 million, an increase of $26.5$42.5 million, or 4.9%,7.4%, compared to $546.5$573.0 million in 2022. Bank card fees increased $15.0 million, or 8.5%, over 2022, mainly due to increases in net corporate card fees of $10.6 million, net debit card fees of $2.9 million and net merchant fees of $1.6 million. The growth in net corporate card fees over 2022 was mainly due to lower rewards and network expense coupled with higher interchange income. Net debit card fees increased mainly due to lower network expense, while net merchant fees increased mainly due to higher merchant discount fees.2023. Trust fee income increased $6.2$23.5 million, or 3.4%,12.3%, mainly as a result of higher private client trust fees (up 4.3%13.1%), which comprised 80.4%81.0% of trust fee income in 2023.2024. The market value of total customer trust assets totaled $68.9$74.8 billion at year end 2023,2024, which was an increase of 14.2%8.6% over year end 20222023 balances. DepositBank accountcard fees decreased $3.4$1.4 million, or 3.6%,.7%, from 2023, mainly due to a decrease in net corporate card fees of $4.0 million, partly offset by increases in net credit card fees of $1.6 million, net debit card fees of $636 thousand and net merchant fees of $407 thousand. The decline in net corporate card fees from 2023 was mainly due to lower overdraftinterchange andincome returncoupled itemwith higher rewards expense. Net debit card fees ofincreased $8.3mainly million,due to higher interchange income, while net credit card fees increased due to lower rewards expense. Net merchant fees increased mainly due to higher merchant discount fees, partly offset by growthlower ininterchange fees. Deposit account fees increased $9.3 million, or 10.3%, mainly due to higher corporate cash management fees of $3.8$8.5 million.million and other deposit fees of $894 thousand. In 2023,2024, corporate cash management fees comprised 61.9%64.6% of total deposit fees, while overdraft fees comprised 12.8%11.5% of total deposit fees. Capital markets fees increased $5.7 million, or 40.3%, mainly due to higher trading securities income of $4.1 million and underwriting income of $2.4 million. Revenue from consumer brokerage services decreasedincreased $1.9$918 million,thousand, or 9.9%,5.3%, mainly due to lowerhigher annuity fees, while loan fees and sales decreasedincreased $2.0$1.7 million, or 15.0%,15.5%, mainly due to lowerhigher loan commitment fees and mortgage banking revenue. Other non-interest income increased $12.7$2.7 million, or 28.2%,4.8%, over 20222023 mainly due to higher lettergains on asset sales of credit fees of $3.2$2.5 million, cash sweep commissions of $2.9$2.2 million,million gainsand ontax thecredit salesales of real estatefees of $2.1 million and swap fees of $1.1 million. In addition, increases of $6.4 million in fair value adjustments were recorded on the Company's deferred compensation plan, which are held in a trust and recorded as both an asset and a liability, affecting both other income and other expense. These increases were partly offset by lower taxletter of credit sales incomefees of $2.4$2.3 million and swap fees of $1.2 million.
Net securities gains of $3.7 million were recorded in 2025, which included net gains of $11.7 million in fair value adjustments on private equity investments and net gains of $1.4 million on equity securities. These gains were offset by net losses of $8.4 million realized on sales of available for sale debt securities resulting from the Company's sale of approximately $78.6 million (book value) in bonds, mainly non-agency mortgage-backed securities and asset-backed securities, and net losses of $1.0 million on sales of private equity investments.
Net securities gains of $20.5 million were recorded in 2022, which included net gains of $43.8 million in fair value adjustments on private equity investments. This increase was partly offset by losses of $20.3 million realized on sales of available for sale debt securities resulting from the Company's sale of approximately $105 million (book value) in bonds, mainly mortgage-backed and corporate bond securities, net losses of $2.1 million on sales of private equity investments, and net losses of $926 thousand on equity securities.
Non-interest expense was $951.2$979.8 million in 2024,2025, an increase of $20.2$28.6 million, or 2.2%,3.0%, over the previous year. Salaries and benefits expense increased $23.8$20.6 million, or 4.1%,3.4%, mainly due to higher costs for full-time salaries, incentive compensation, payroll taxescompensation and 401(k) expense, slightly offset by lower contract laborhealthcare expense. Full-time equivalent employees totaled 4,667 at December 31, 2025, compared to 4,693 at December 31, 2024, compared to 4,718 at December 31, 2023.2024. Data processing and software expense increased $8.6$6.6 million, or 7.3%,5.2%, primarily due to increased costs for service providers and higher software expense and bank card processing fees.expense. Net occupancy expense decreasedincreased $406$1.1 thousand,million, or .8%,2.1%, mainly due to higher externalbuilding rentdepreciation income,expense and demolition costs, partly offset by higher buildingexternal depreciationrent expense.income. Professional and other services expense decreasedincreased $1.1$13.8 million, or 3.1%,39.3%, mainly due to declineshigher legal, professional and loan recording fees. Professional and other services expense included acquisition related expense of $5.6 million in other professional fees, loan collection fees, and pension plan expense, partly offset by an increase in legal fees.2025. Marketing expense decreasedincreased $2.2$2.3 million, or 8.8%,10.4%, whileand equipment expense increased $1.1$889 million,thousand, or 5.5%,4.3%, mainly due to higher furniture and equipment depreciationrental and service contract expense. Supplies and communication expense decreasedincreased $129$395 thousand, or .7%,2.0%, while deposit insurance expense decreased $16.7$6.4 million mainly due to a $16.0 million accrual recordedadjustments in 20232024 forand a2025 one-timerelated to the FDIC's special assessment by the FDIC to replenish the Deposit Insurance Fund. Other non-interest expense increaseddecreased $7.2$10.6 million, or 17.4%,21.7%, mainly due to litigation settlement expense of $10.0 millionmillion, net of insurance, and a $5.0 million donation to a related charitable foundation, both recorded in 2024. In addition, a $1.5 million reimbursement related to a litigation settlement was recorded in 2025. These increasesdecreases were partly offset by deconversion costs of $2.1 million recordedhigher in 2023, as well as decreases in swap fee amortization expense of $859 thousand, travel and entertainment expense of $687$1.3 thousandmillion, and recruitingan expenseincrease in fair value adjustments of $489$1.4 thousand.million recorded on the Company's deferred compensation plan assets and liabilities.
In 2023,2024, non-interest expense was $931.0$951.2 million in 2023,million, an increase of $82.2$20.2 million, or 9.7%,2.2%, over 2022.2023. Salaries and benefits expense increased $30.0$23.8 million, or 5.4%,4.1%, mainly due to higher costs for full-time salaries, healthcareincentive expensecompensation, payroll taxes and payroll401(k) taxes,expense, partlyslightly offset by lower incentivecontract compensationlabor expense. Full-time equivalent employees totaled 4,693 at December 31, 2024, compared to 4,718 at December 31, 2023, compared to 4,594 at December 31, 2022.2023. Data processing and software expense increased $8.1$8.6 million, or 7.3%, primarily due to increased costs for service providers and higher software expense and bank card processing fees. Net occupancy expense increaseddecreased $4.5$406 million,thousand, or 9.2%,.8%, mainly due to higher depreciationexternal expenserent and real estate taxes,income, partly offset by higher rentbuilding income.depreciation Depositexpense. Professional and other services expense decreased $1.1 million, or 3.1%, mainly due to declines in other professional fees, loan collection fees, and pension plan expense, partly offset by an increase in legal fees. Marketing expense decreased $2.2 million, or 8.8%, while equipment expense increased $1.1 million, or 5.5%, mainly due to higher furniture and equipment depreciation expense. Supplies and communication expense decreased $129 thousand, or .7%, while deposit insurance expense increaseddecreased $22.6$16.7 million due to a $16.0 million one-timeaccrual recorded in 2023 for a special assessment accrual recordedby the fourth quarter of 2023, mentioned above. Professional and other services expense increased $393 thousand, or 1.1%, mainly dueFDIC to higherreplenish pensionthe planDeposit expense,Insurance partly offset by lower loan collection fees. Marketing expense increased $684 thousand, or 2.9%, while supplies and communication expense increased $1.3 million, or 7.3%, mainly due to higher postage expense, bank card reissuance fees and office supplies expense.Fund. Other non-interest expense increased $14.4$7.2 million, or 53.0%,17.4%, mainly due to higherlitigation costssettlement forexpense travelof $10.0 million and entertainmenta expense (up $1.9 million), miscellaneous losses (up $2.1 million) and lower deferred origination costs (up $1.6 million). In addition, an increase of $6.4$5.0 million donation to a related charitable foundation, both recorded in fair2024. valueThese adjustmentsincreases were recordedpartly onoffset the Company's deferred compensation plan, andby deconversion costs of $2.1 million relating to the transition of Commerce Financial Advisors support to LPL Financial's Institution Services platform were recorded in 2023.2023, as well as decreases in swap fee amortization expense of $859 thousand, travel and entertainment expense of $687 thousand and recruiting expense of $489 thousand.
Income tax expense was $161.1 million in 2025, compared to $145.1 million in 2024,2024 compared toand $134.5 million in 2023 and $132.4 million in 2022.2023. The effective tax rate, including the effect of non-controlling interest, was 22.2% in 2025 compared to 21.6% in 2024 compared toand 22.0% in 2023 and 21.3% in 2022.2023. The decreaseincrease in the effective tax rate in 20242025 compared to the rate for 20232024 was mostly due to lowerhigher state and local income taxes. Additional information about income tax expense is provided in Note 9 to the consolidated financial statements.
Total loans at December 31, 20242025 were $17.2$17.8 billion, an increase of $14.6$551.2 million, or 0.1%,3.2%, over balances at December 31, 2023.2024. The increase in loans during 20242025 occurred mainly due to an increase in revolving home equity, business loans and personal real estate loans, partly offset by decreasesgrowth in business real estate and constructionconsumer loans. Business loans increased $34.8$385.6 million, or 0.6%,6.4%, mainly due to a $68.0 million increaseincreases in commercial and industrial loans and a $23.1 million increase in tax-advantaged lending, partly offset by a $73.9 million decrease in commercial card loans.loans Leaseof loans,$290.2 includedmillion withinand business$92.5 loans,million, also increased during 2024.respectively. Construction loans decreasedincreased $36.9$28.1 million, or 2.5%,2.0%, mainly due to aan declineincrease in commercial construction lending. Business real estate loans decreasedincreased $58.1$13.3 million, or 1.6%,.4%, mainly due mainly to decreasesan increase in industrial and retail lending, whilepartly owner-occupied,offset multi-familyby anda hoteldecline lendingin grew.senior living lending. Personal real estate loans increaseddecreased $32.2$4.8 million, or 1.1%..2%. The Company sells certain long-term fixed rate mortgage loans to the secondary market, and loan sales in 20242025 totaled $70.0$92.2 million, compared to $29.9$70.0 million in 2023.2024. Consumer loans decreasedincreased $4.6$123.7 million, or .2%,6.0%, mainly due to aan decline in consumer auto lending. Fixed rate home equity and other vehicle and equipment loans also decreased combined with continued run off of marine and recreational vehicle loan balances, offset by growthincrease in private banking and health services financing.lending. Consumer credit card loans increaseddecreased $6.0$6.2 million, or 1.0%, andwhile revolving home equity loan balances increased $36.8$18.5 million, or 11.5%,5.2%, compared to balances at year end 2023.2024.
Total business loans amounted to $6.1$6.4 billion at December 31, 20242025 and includes loans used mainly to fund customer accounts receivable, inventories, and capital expenditures. The business loan portfolio includes tax-advantaged loans and leases which carry tax-free interest rates. These loans totaled $689.2$702.1 million at December 31, 2024,2025, an increase of $23.1$12.9 million, or 3.5%,1.9%, fromover December 31, 20232024 balances. In addition to tax-advantaged leases, the business loan portfolio also includes other direct financing and sales type leases totaling $727.4$717.3 million at December 31, 2024,2025, ana increasedecrease of $17.6$10.0 million, or 2.5%,1.4%, from December 31, 2023.2024. These loans are used by commercial customers to finance capital purchases ranging from computer equipment to office and transportation equipment. Additionally, the Company has $330.5$296.6 million of outstanding loans included within its $338.0$303.0 million oil and gas energy-related loan portfolio at December 31, 2024,2025, which is further discussed within the Oil and Gas Energy Lending section of the Risk Elements of the Loan Portfolio section located within Management's Discussion and Analysis of Financial Condition and Results of Operations. Also included in the business portfolio are corporate card loans, which totaled $332.1$424.6 million at December 31, 20242025 and are made in conjunction with the Company’s corporate card business for corporate trade purchases. Corporate card loans are made to corporate, non-profit and government customers nationwide, but have very short-term maturities, which limits credit risk.
Business loans, excluding corporate card loans, are made primarily to customers in the regional trade area of the Company, generally the central Midwest, encompassing the states of Missouri, Kansas, Illinois, and nearby Midwestern markets, including Iowa, Oklahoma, Colorado, Texas, Tennessee, Michigan, Indiana, and Ohio. This portfolio is diversified from an industry standpoint and includes businesses engaged in manufacturing, wholesaling, retailing, agribusiness, insurance, financial services, public utilities, health care, and other service businesses. Emphasis is upon middle-market and community businesses with known local management and financial stability. Consistent with management’s strategy and emphasis upon relationship banking, most borrowing customers also maintain deposit accounts and utilize other banking services. Net loan charge-offs in this category totaled $1.5 million in 2025 compared to $1.1 million in 2024 compared to $3.1 million in 2023.2024. Non-accrual business loans were $101$123 thousand (less than .1% of business loans) at December 31, 20242025 compared to $3.6$101 millionthousand at December 31, 2023.2024.
The portfolio of loans in this category amounted to $1.4 billion at December 31, 2024,2025, aan decreaseincrease of $36.9$28.1 million, or 2.5%,2.0%, fromover the prior year and comprised 8.2%8.1% of the Company’s total loan portfolio. Commercial construction and land development loans totaled $1.2$1.3 billion, or 87.8%88.3% of total construction loans at December 31, 2024.2025. These loans decreasedincreased $36.0$31.2 million fromover 20232024 year end balances, driving the declineincrease in the total construction portfolio. Commercial construction loans are made during the construction phase for small and medium-sized office and medical buildings, manufacturing and warehouse facilities, apartment complexes, shopping centers, hotels and motels, and other commercial properties. Commercial land development loans relate to land owned or developed for use in conjunction with business properties. Residential construction and land development loans at December 31, 20242025 totaled $172.2$169.2 million, or 12.2%11.7% of total construction loans. ANet stableloan constructioncharge-offs marketin hasthis contributedcategory totaled $40 thousand in 2025 compared to low loss rates on these loans, with no net loan charge-offs and net loan recoveries of $115 thousand in 2024 and 2023, respectively.2024.
Total business real estate loans were $3.7 billion at December 31, 20242025 and comprised 21.3%20.7% of the Company’s total loan portfolio. This category includes mortgage loans for small and medium-sized office and medical buildings, manufacturing and warehouse facilities, distribution facilities, multi-family housing, farms, shopping centers, hotels and motels, churches, and other commercial properties. The business real estate borrowers and/or properties are generally located in local and regional markets where Commerce does business, and emphasis is placed on owner-occupied lending (33.8%34.0% of this portfolio), which presents lower risk levels. Additional information about business real estate loans by borrower is disclosed within the Real Estate - Business Loans section of the Risk Elements of the Loan Portfolio section located within Management's Discussion and Analysis of Financial Condition and Results of Operations. At December 31, 2024,2025, balances of non-accrual loans amounted to $15.0$14.8 million, or .4% of business real estate loans, updown from $60$169 thousand atfrom year end 2023.2024. The Company experienced net loan recoveries of $106$95 thousand in 2024,2025, compared to net loan charge-offsrecoveries of $104$106 thousand in 2023.2024.
The Company originates certain mortgage loans with the intent to sell to the secondary market, generally FNMA or FHLMC conforming fixed rate loans. The remaining loans are originated with the intent to hold to maturity. Of the $453.0$455.3 million of mortgage loans originated in 2024,2025, $70.0$92.2 million were sold to the secondary market. This compares to $510.0$453.0 million of mortgage loans originated and $29.9$70.0 million of loans sold to the secondary market in 2023.2024. The increase in loan sales during 20242025 compared to 20232024 was mainly due to a shift incontinued demand for fixed rate mortgage loans. Net loan charge-offs in 20242025 totaled $239$556 thousand, andcompared to net loan recoveriescharge-offs wereof $37$239 thousand in 2023.2024. Balances of non-accrual loans in this category were $1.0$842 millionthousand at December 31, 2024,2025, compared to $1.7$1.0 million at year end 2023.2024.
Consumer loans consist of private banking, automobile, motorcycle, marine, tractor/trailer, recreational vehicle (RV), fixed rate home equity, patient health care financing and other types of consumer loans. These loans totaled $2.1$2.2 billion at December 31, 2024.2025. Approximately 38%35% of the consumer portfolio consists of automobile loans, 35%40% in private banking loans, 11%9% in fixed rate home equity loans, and 11% in patient healthcare financing loans. Total consumer loans decreasedincreased $4.6$123.7 million at year end 20242025 compared to year end 2023.2024, Amainly declinedue to increases of $43.5$154.2 million in autoprivate banking loans wasand supplemented$8.9 million in patient healthcare financing. These increases in consumer loan balances were partly offset by decreasesdeclines of $13.6 million and $12.7$16.2 million in fixed rate home equity loans and $7.3 million in other vehicle and equipment loans, respectively. These decreases in consumer loan balances were partially offset by growth of $63.0 million in private banking loans and $11.9 million in patient healthcare financing.loans. Net charge-offs on total consumer loans were $9.8 million in both 2025 and 2024, compared to $6.2 million in 2023, averaging .46% and .30% of consumer loans in 2024both 2025 and 2023, respectively.2024.
Revolving home equity loans, of which 100% are adjustable rate loans, totaled $356.7$375.2 million at year end 2024.2025. An additional $947.9$946.9 million was available in unused lines of credit, which can be drawn at the discretion of the borrower. Home equity loans are secured mainly by second mortgages (and less frequently, first mortgages) on residential property of the borrower. The underwriting terms for the home equity line product permit borrowing availability, in the aggregate, generally up to 80% or 90% of the appraised value of the collateral property at the time of origination. Net loan recoveriescharge-offs were $166$5 thousand in 2024,2025, compared to net loan recoveries of $57$166 thousand in 2023.2024.
Total consumer credit card loans amounted to $595.9$589.7 million at December 31, 20242025 and comprised 3.5%3.3% of the Company’s total loan portfolio. The credit card portfolio is concentrated within regional markets served by the Company. The Company offers a variety of credit card products, including affinity cards, rewards cards, and standard and premium credit cards, and emphasizes its credit card relationship product, Special Connections. Approximately 36% of the households that own a Commerce credit card product also maintain a deposit relationship with the subsidiary bank. Approximately 95%96% of the outstanding credit card loan balances had a floating interest rate at year end 2024,2025, unchangedcompared fromto 95% at year end 2023.2024. Net charge-offs amounted to $26.0$27.1 million in 2024,2025, an increase of $6.9$1.0 million fromover $19.1$26.0 million in 2023.2024.
At December 31, 2024,2025, the allowance for credit losses on loans was $162.7$179.5 million, compared to $162.4$162.7 million at December 31, 2023.2024. The allowance for credit losses relatedrelating to commercial loans decreasedand $1.4personal banking loans increased $10.1 million and $6.6 million, respectively, during 2024,2025. dueThe to a decrease in loan balances and the impact of a continued positive economic forecast. Offsetting this decreaseincrease in the allowance for credit losses on commercial loans was aprimarily $1.8due millionto increaseweakness in thesoft allowancecommodity forprices creditimpacting lossescertain industries and model enhancements related to personalthe bankingforecast, loans.while Thethe allowance for credit losses on personal banking loans increased over the December 31, 20232024 allowance due to recent increased loan net charge-offscharge-off trends impacting expected loss rate assumptions for the consumer credit card, automobile, and pastother duenon-real trendsestate inconsumer portfolios along with forecast model enhancements targeted at the consumer credit card and auto portfolios, partially offset by an increase in the prepayment speeds of personal real estate loans.portfolio. The percentage of allowance to loans increased to 1.01% at December 31, 2025, compared to .95% at December 31, 2024, compared to .94% at December 31, 2023.2024. See Note 2 to the consolidated financial statements for the various model assumptions utilized in the Company's CECL estimate at December 31, 2024.2025.
Net loan charge-offs totaled $38.9$40.7 million in 2024,2025, representing a $7.8$1.8 million increase compared to net charge-offs of $31.1$38.9 million in 2023.2024. The increase was largely due to higher net charge-offs of $7.0$1.0 millionmillion, $432 thousand and $3.5$317 millionthousand on consumer credit cardcard, loansbusiness and consumerpersonal real estate loans, respectively, during 2024,2025. andThese increases were partially offset by a $2.0$240 millionthousand decrease in net charge-offs on businessoverdraft loans in 20242025 compared to 2023.2024. Consumer credit card loan net charge-offs were 4.64%4.81% of average consumer credit card loans in 2024,2025, compared to 3.40%4.64% in 2023,2024, and consumer loan net charge-offs were .46% of average consumer loans in 2024,both compared2025 toand .30% in 2023.2024. The ratio of net loan charge-offs to total average loans outstanding was .33% in 2025 and .23% in 2024 and .19% in 2023.2024.
Total loans delinquent 90 days or more and still accruing were $24.5$24.7 million at December 31, 2024,2025, an increase of $2.7$143 millionthousand compared to year end 2023.2024. Non-accrual loans at December 31, 20242025 were $18.3$15.8 million, ana increasedecrease of $11.0$2.5 million from the prior year, mainly due to ana increasedecrease in businessnon-accrual realrevolving estatehome non-accrualequity loans of $15.0$2.0 million, partly offset by a decrease of $3.5 million in business non-accrual loans.million. The allowance for credit losses as a percentage of non-accrual loans was 1,139.5% at December 31, 2025, compared to 890.4% at December 31, 2024, compared to 2,220.9% at December 31, 2023.2024. The decreaseincrease in the ratio of the allowance to non-accrual loans was driven by the increasedecrease in non-accrual loans outstanding.outstanding and the increase in the allowance for credit losses, as described above. The 20242025 year-end balance of non-accrual loans was comprised of $101$123 thousand of business loans, $220$842 thousand of construction real estate loans, $1.0 million of personal real estate loans, $2.0 million of revolving home equity loans,loans and $15.0$14.8 million of business real estate loans.
Non-accrual loans totaled $18.3$15.8 million at year end 2024,2025, ana increasedecrease of $11.0$2.5 million from the balance at year end 2023.2024. The increasedecrease from December 31, 20232024 occurred mainly in businessrevolving realhome estate,equity, which increaseddecreased $14.9 million. This increase was partially offset by a decrease in business loans of $3.5$2.0 million. At December 31, 2024,2025, non-accrual loans were comprised of business real estate (81.8%), revolving home equity (10.8%93.9%), personal real estate (5.6%), construction and land real estate (1.2%5.3%), and business (0.6%0.8%) loans. Foreclosed real estate totaled $343$1.2 thousandmillion at December 31, 2024,2025, an increase of $73$875 thousand when compared to December 31, 2023.2024. Total non-performing assets remain low compared to the overall banking industry in 2024,2025, with the non-performing assets to total loans ratio at .11%.1% at December 31, 2024.2025. Total loans past due 90 days or more and still accruing interest were $24.5$24.7 million as of December 31, 2024,2025, an increase of $2.7$143 millionthousand when compared to December 31, 2023.2024. Balances by class for non-accrual loans and loans past due 90 days and still accruing interest are shown in the "Delinquent and non-accrual loans" section of Note 2 to the consolidated financial statements.
In addition to the non-performing and past due loans mentioned above, the Company also has identified loans for which management has concerns about the ability of the borrowers to meet existing repayment terms. They are classified as substandard under the Company’s internal rating system. The loans are generally secured by either real estate or other borrower assets, reducing the potential for loss should they become non-performing. Although these loans are generally identified as potential problem loans, they may never become non-performing. Such loans totaled $264.9 million at December 31, 2025, compared with $330.3 million at December 31, 2024, compared with $216.4 million at December 31, 2023, resulting in ana increasedecrease of $113.9$65.4 million or 52.7%.19.8%. The increasedecrease in potential problem loans was largely driven by a $56.8$89.9 million increase in business loans and a $55.2 million increasedecrease in business real estate loans and a $19.5 million decrease in business loans, partly offset by a $44.0 million increase in construction and land loans.
The Company’s portfolio of construction and land loans, as shown in the table below, amounted to 8.2%8.1% of total loans outstanding at December 31, 2024.2025. The largest component of construction and land loans was commercial construction, which decreasedincreased $25.7$29.1 million during the year ended December 31, 2024.2025. At December 31, 2024,2025, multi-family residential construction loans totaled approximately $526.6$553.1 million, or 44.0%,45.1%, of the commercial construction loan portfolio.
Total business real estate loans were $3.7 billion at December 31, 20242025 and comprised 21.3%20.7% of the Company’s total loan portfolio. These loans include properties such as manufacturing and warehouse buildings, distribution facilities, small office and medical buildings, churches, hotels and motels, shopping centers, and other commercial properties, which have historically resulted in lower net charge-off rates than non-owner-occupied commercial real estate loans.properties. Approximately 33.8%34.0% of these loans were for owner-occupied real estate properties, which have historically resulted in lower net charge-off rates than non-owner-occupied commercial real estate loans.
* Percentage of total principal outstanding of $368.9 million at December 31, 2025.
** Percentage of total unused portion of available lines of $946.9 million at December 31, 2025.
** Percentage of total principalunused outstandingportion of $319.9available lines of $947.9 million at December 31, 2023.2024.
The Company's consumer loans totaledcategory $2.1is billionmostly comprised of private banking loans and comprisedautomobile 12%loans. ofPrivate total loans outstanding at December 31, 2024. Within the consumer loan portfolio are several direct and indirect product lines comprised mainly of loans secured by automobiles, motorcycles, marine, and RVs. Autobanking loans comprised 38%40.4% of the consumer loan portfolio at December 31, 2024,2025. The Company's private banking loans are mostly executive lines of credit, which are secured primarily by assets held by the Company's trust department, and insurance premium finance loans, which are primarily secured by life insurance policies. Automobile loans, which include direct and indirect product lines, comprised 35.2% of the consumer loan portfolio at December 31, 2025, and outstanding balances in thefor auto loan portfolioloans were $776.7$773.6 million and $820.3$776.7 million at December 31, 20242025 and 2023,2024, respectively. The balances over 30 days past due amounted to $14.4$11.0 million at December 31, 2024,2025, compared to $9.5$14.4 million at the end of 2023,2024, and comprised 1.9%1.4% of the outstanding balances of these loans at December 31, 20242025 compared to 1.2%1.9% at 2023.2024. For the year ended December 31, 2024,2025, $319.5$365.9 million of new auto loans were originated, compared to $364.9$319.5 million during 2023.2024. At December 31, 2024,2025, the automobile loan portfolio had a weighted average FICO score of 755,758, and net charge-offs on auto loans were .7%.9% of average auto loans.
The Company's consumer loan portfolio also includes fixed rate home equity loans, typically for home repair or remodeling, and these loans comprised 11%9.4% of the consumer loan portfolio at December 31, 2024.2025. Losses on these loans have historically been low, and the Company had net recoveries of $97$137 thousand in 2024. Private banking loans comprised 35% of the consumer loan portfolio at December 31, 2024. The Company's private banking loans are generally well-collateralized and at December 31, 2024 were secured primarily by assets held by the Company's trust department.2025. The remaining portion of the Company's consumer loan portfolio is comprised of health serviceshealthcare financing, motorcycles,boat, marineRV, motorcycle, other equipment, and RVunsecured consumer loans. Net charge-offs on private banking, health services financing, motorcycle and marine and RV loans totaled $4.3 million in 2024 and were .4% of the average balances of these loans at December 31, 2024.
What changed in the latest 10-Q
Risk Factors
The section titled Risk Factors in Part I, Item 1A of the Company’s 2025 Annual Report on Form 10-K included a discussion of the many risks and uncertainties that the Company faces, any one or more of which could have a material adverse effect on its business, results of operations, financial condition (including capital and liquidity), prospects, or the value of or return on an investment in the Company. There are no material changes to the risk factors as previously described under Item 1A of the Company’s 2025 Annual Report on Form 10-K.
No wording changes found in this section.
Full comparison: every changed paragraph (0)
Management's Discussion & Analysis (MD&A)
New heading “AVERAGE BALANCE SHEETS — AVERAGE RATES AND YIELDS”
New heading “Six Months Ended June 30, 2026 and 2025”
New heading “(A) Stated on a fully taxable-equivalent basis using a federal income tax rate of 21%.”
Removed heading “Visa Class B-2 common shares exchange offer”
Largest changes
“Net income for the first six months of 2026 totaled $301.4 million, an increase of $17.3 million, or 6.1% from the same period last year. Diluted earnings per common share was $2.06, an increase of 1.98% compared to $2.02 per share in the same period last year. For the first six months of 2026, the annualized return on average assets was 1.73%, the annualized return on average equity was 13.96%, and the efficiency ratio was 59.19%. Net interest income increased $65.7 million, or 12.0%, over the same period last year. …”see in full comparison
“As described in Note 4 "Investment Securities," the Company previously entered into a Makewhole Agreement with Visa related to its participation in the 2024 Exchange Offer. …”see in full comparison
“Non-interest expense amounted to $588.2 million for the first six months of 2026, an increase of $105.4 million, or 21.8%, over the first six months of 2025. Salaries and benefits expense increased $52.6 million, or 17.1%, mainly due to an accrual for retention bonuses, acquisition-related compensation payments and the onboarding of FineMark's team members. Salaries and benefits expense included acquisition-related costs of $10.3 million for the first six months of 2026. …”see in full comparison
“Total interest income (FTE) for the first six months of 2026 increased $65.8 million over the same period last year mainly due to higher interest income on loans (FTE), securities purchased under agreements to resell and deposit balances at the Federal Reserve, slightly offset by lower interest income on investment securities (FTE). Loan interest income (FTE) increased $65.5 million, or 12.6%, due to a $3.1 billion, or 17.6%, increase in average loan balances, partly offset by a decline of 25 basis points in the average rate earned. …”see in full comparison
“(A) Stated on a fully taxable-equivalent basis using a federal income tax rate of 21%.”see in full comparison
see in full comparisonAt March 31, 2026, theThe allowance for credit lossesincreaseddecreased$19.1$3.2 million compared totheprior quarter. The allowance for credit losses in the commercial portfolio decreased $1.6 million primarily due to decreases in the allowance on construction loansatdueDecemberto31,continued2025.lowThelossmostratessignificantanddriverlowerofoutstandingtheloanincreasebalances. Additionally, decreases in the allowance for credit lossesisin business loans lowered the overall allowance for credit losses in the commercial portfolio, due to lower business loan balances in certain industries and improvement in certain economic indicators, partially offset by an overall increase in outstanding business loanbalances as a result of the acquisition of FineMark, as the initial allowance for FineMark loans acquired was $22.8 million.balances. The allowance for credit losses onloans increased $8.4 million inthecommercial portfolio, and the allowance for credit losses on the Company'spersonal banking portfolioincreasedalso$10.8decreasedmillion.$1.6 million primarily due to a decrease in the allowance on the personal real estate loans, mostly due to improvements in home sale trends in certain markets. The decrease in allowance caused the allowance as a percentage of outstanding loansdecreasedto decrease compared to the priorquarter due to the change in mix of loans, as the acquired loan portfolio included more personal real estate loans which carry a lower allowance for credit losses than other classes.quarter. The forecast utilized to estimate the allowance for credit losses on loans atMarchJune31,30, 2026 assumesa slow but continuedslowing economicexpansion,expansion and stable unemployment, and changes in the forecast utilized to estimate the allowance atMarchJune31,30, 2026 did not significantly change the allowance estimate during the quarter.The allowance for credit losses on loans was $198.6 million at March 31, 2026 and was .97%, 1.01% and .96% of total loans at March 31, 2026, December 31, 2025 and March 31, 2025, respectively.
Full comparison: every changed paragraph (72)
The following discussion and analysis should be read in conjunction with the consolidated financial statements and related notes and with the statistical information and financial data appearing in this report as well as the Company's 2025 Annual Report on Form 10-K. Results of operations for the three and six months ended MarchJune 31,30, 2026 are not necessarily indicative of results to be attained for any other period.
Visa Class B-2 common shares exchange offer
On April 13, 2026, Visa, Inc. (“Visa”) announced the commencement of a public offering to exchange Class B-2 common stock for a combination of shares of Class B-3 common stock and Class C common stock (“2026 Exchange Offer”). The Company tendered all of its Visa Class B-2 shares and is awaiting notification of acceptance of that tender and the closing of the 2026 Exchange Offer. If the Company’s tendered shares are accepted and the exchange occurs in the second quarter of 2026, the Company expects to record a significant gain during the second quarter of 2026 based on the conversion privilege of the Class C common stock and the closing price of Visa Class A common stock. A full description of the terms of the 2026 Exchange Offer is set forth in Visa’s related Issuer Tender Offer Statement on Schedule TO and Prospectus, each dated April 6, 2026, publicly filed with the U. S. Securities and Exchange Commission.
As described in Note 4 "Investment Securities," the Company previously entered into a Makewhole Agreement with Visa related to its participation in the 2024 Exchange Offer. In order to continue preserving the economic benefit of those same adjustments for Visa's Class A and Class C common stockholders in relation to the Class B-2 and Class B-3 conversion ratios following the 2026 Exchange Offer, and as a condition of participating in the 2026 Exchange Offer, the Company entered into a Makewhole Agreement (2026 Makewhole Agreement) with Visa that provides for similar cash payments to Visa under the same circumstances as described above for the 2024 Makewhole Agreement. As further described in Visa’s related Issuer Tender Offer Statement on Schedule TO and Prospectus, each dated April 13, 2026, publicly filed with the U. S. Securities and Exchange Commission, both the 2026 Makewhole Agreement and the related escrow fund and transfer restrictions on Visa’s Class B-2 common stock and the new Class B-3 common stock will terminate whenever the covered litigation is ultimately resolved, at which future date outstanding shares of Visa Class B-3 common stock will be convertible into shares of its Class A common stock at the then-applicable conversion ratio. The 2026 Makewhole Agreement also includes limited transfer restrictions, such that the Company may only transfer up to one-third of the shares of Visa Class C common stock received in the exchange within the first 45 days following the 2026 Exchange Offer acceptance date, and may only transfer up to two-thirds of the Class C common stock received within the first 90 days following the 2026 Exchange Offer acceptance date.
Additionally, if the Company’s tendered shares are accepted and the exchange occurs in the second quarter of 2026, the Company may consider a plan to reposition a portion of its available for sale debt securities portfolio through the sale of securities, which may result in a significant loss during the second quarter of 2026. The timing and amount of the loss ultimately realized on the available for sale debt securities and the reinvestment assumptions may depend on many considerations, including market conditions, the amount of the gain recognized on the conversion privilege of the Visa shares, and other factors.
For the quarter ended MarchJune 31,30, 2026, net income attributable to Commerce Bancshares, Inc. (net income) amounted to $141.6$159.8 million, an increase of $10.0$7.3 million, or 7.6%,4.8%, compared to the firstsecond quarter of the previous year. For the current quarter, the annualized return on average assets was 1.62%,1.84%, the annualized return on average equity was 13.22%,14.70%, and the efficiency ratio was 60.00%.58.40%. Diluted earnings per common share was $.96$1.10 per share in the current quarter, an increase of 3.2%.92% compared to $.93$1.09 per share in the firstsecond quarter of 2025, and decreasedincreased 5.0%14.6% compared to $1.01$.96 per share in the previous quarter.
Compared to the firstsecond quarter of last year, net interest income increased $30.7$34.9 million, or 11.4%,12.5%, mainly due to increases in interest income on loans and securities purchased under agreements to resell (“resale agreements”) of $34.2 million and $1.0 million, respectively, partly offset by a decrease in interest income on investment securities of $4.2$31.0 million.million and $2.7. million, respectively. Interest expense on deposits increased $4.1$3.3 million, while interest expense on borrowings decreased $2.7$2.5 million. The provision for credit losses decreasedincreased $3.5$3.1 million compared to the same quarter in the prior year. Non-interest income increased $16.9$18.2 million, or 10.6%,11.0%, compared to the firstsecond quarter of 2025, mainly due to increases in trust fees,fees and deposit account fees and brokerage fees of $14.5 million, $2.0$15.9 million and $659$3.0 thousand,million, respectively. Net gains on investment securities totaled $11.6$12.8 million in the current quarter compared to net lossesgains of $7.6$437 millionthousand in the same quarter of last year. Securities gains in the current quarter primarily resulted from net gains in fair value of $10.9$114.1 million recorded on private equity investments.securities, largely offset by net losses of $97.7 million on sales of available for sale debt securities. Non-interest expense increased $52.8$52.6 million, or 22.1%,21.5%, over the firstsecond quarter of 2025, mainly due to higher salaries and benefits expense of $27.7$24.9 million, primarily a result of onboarding FineMark team members at the beginning of 2026. Data processing and acquisition-relatedsoftware compensationexpense payments.and Professionalprofessional and other services expense also increased $8.8$5.3 million and $3.5 million, whichrespectively. includedAdditionally, $4.7 million in acquisition-related legal and professional services expense. Otherother non-interest expense increased $6.4$15.6 million, primarily due anto increase$12.0 ofmillion in litigation expense and $5.4 million in intangible amortization expense related to the FineMark acquisition. Data processing expense expense increased $5.1 million compared to the same quarter of last year.
Net income for the first six months of 2026 totaled $301.4 million, an increase of $17.3 million, or 6.1% from the same period last year. Diluted earnings per common share was $2.06, an increase of 1.98% compared to $2.02 per share in the same period last year. For the first six months of 2026, the annualized return on average assets was 1.73%, the annualized return on average equity was 13.96%, and the efficiency ratio was 59.19%. Net interest income increased $65.7 million, or 12.0%, over the same period last year. This growth was largely due to an increase in interest income on loans of $65.2 million. Interest expense on deposits increased $7.4 million, while interest expense on borrowings decreased $5.2 million, over the same period last year. The provision for credit losses was $19.7 million for the first six months of 2026, compared to a provision of $20.1 million in the same period last year. Non-interest income increased $35.1 million, or 10.8%, from the first six months of last year largely due to increases in trust fees and deposit account fees, partly offset by lower gains of sales on assets. Non-interest expense increased $105.4 million, or 21.8%, over the first six months of last year, mainly due to higher salaries and benefits expense of $52.6 million, primarily a result of onboarding FineMark team members at the beginning of 2026. Professional and other services expense increased $12.3 million, partly due to acquisition-related legal and professional fees, while data processing and software expense increased $11.4 million. Additionally, other non-interest expense increased $22.6 million over the same period in the prior year, mainly due to $12.0 million in litigation expense and an increase of $10.7 million in acquisition-related intangible amortization expense.
Net interest income in the firstsecond quarter of 2026 was $299.8$315.1 million, an increase of $30.7$34.9 million over the firstsecond quarter of 2025. On a fully taxable-equivalent (FTE) basis, net interest income totaled $302.2$317.5 million in the firstsecond quarter of 2026, up $30.8$35.0 million over the same period last year and up $16.4$15.3 million over the previous quarter. The increase in net interest income compared to the firstsecond quarter of 2025 was mainly due to an increase in average loan balances in connection with the acquisition of FineMark on January 1, 2026. Accretion income on FineMark's loans resulting from purchase accounting adjustments totaled $6.9$6.2 million.million in the second quarter of 2026. Interest income earned on loans (FTE) increased over the same period in the prior year mainly due to higher average loan balances, partly offset by lower average rates earned. The decrease in totalTotal interest earned on investment securities (FTE) wasincreased mainly thedue resultto of lowerhigher average rates earnedearned, onwhile U.S. government and federal agency obligations and lower average balances of asset-backed and mortgage-backed securities. Thethe increase in deposit interest expense was mainly due to higher average balances, partly offset by lower average rates paid. Interest expense on securities sold under agreements to repurchase decreased mainly due to lower average rates paid. The Company's net yield on earning assets (FTE) was 3.59%3.77% in the current quarter compared to 3.56%3.70% in the firstsecond quarter of 2025.
Total interest income (FTE) increased $32.2$35.8 million over the firstsecond quarter of 2025. Interest income on loans (FTE) was $290.3$293.3 million during the firstsecond quarter of 2026, an increase of $34.3$31.2 million, or 13.4%,11.9%, over the same quarter last year. The increase in loan interest income over the same quarter of last year was primarily due to growth of $3.1$3.0 billion, or 18.0%,17.3%, in average loan balancesbalances, andpartly higheroffset by lower average rates earnedearned, onwhich personaldeclined real28 estatebasis loans.points. Most of the increase in interest income was due to the acquisition of FineMark, which added $2.7 billion in loan balances. The largest increase to interest income occurred in personal real estate loan interest, which grew $20.4$19.6 million due to a $1.4$1.3 billion, or 45.0%,43.9%, increase in average balances coupled with a 5449 basis point increase in the average rate earned. Revolving home equity loan interest income increased $4.6$4.7 million mainly due to a $252.4$267.7 million, or 70.4%,73.9%, increase in average balances. Business real estate loan interest income increased $4.2$3.3 million due to higher average balances of $377.8$370.3 million, or 10.3%,10.0%, partly offset by a decrease of 1322 basis points in the average rate earned. The $3.6$3.3 million increase in consumer loan interest income was due to a $339.2$324.3 million, or 16.3%,15.1%, increase in average balances, partly offset by a decline of 3231 basis points in the average rate earned. Business loan interest income grew $2.6$3.2 million due to higher average balances of $580.9$617.1 million, or 9.5%,9.9%, partly offset by a 34 basis point decrease in the average rate earned. Interest income on construction and land loans increased $402 thousand mainly due to growth in average balances of $177.0 million, or 12.5%, partly offset by a 7133 basis point decrease in the average rate earned. These increases in interest income were slightly offset by a decreasedecreases in construction and land loan and consumer credit card loan interest income. Interest income ofon $1.3construction and land loans decreased $1.7 million mainly due to ana 8599 basis point decrease in the average rate earned.earned, partly offset by an increase in average balances of $114.9 million, or 8.0%. Consumer credit card loan interest income declined $1.3 million due to a 60 basis point decrease in the average rate earned and a $15.2 million, or 2.7% decrease in the average balance.
Interest income on investment securities (FTE) was $72.8$83.2 million during the firstsecond quarter of 2026, which was aan decreaseincrease of $4.3$2.6 million fromover the same quarter last year. The largest decreasesincrease in interest income occurred in interest earned on U.S. government and federal agency obligations, which grew $11.9 million, driven by higher average balances of $741.1 million, or 28.2%, and an increase of 48 basis points in the average rate earned. Interest income related to the Company's U.S. Treasury inflation-protected securities (TIPS), which is tied to the non-seasonally adjusted Consumer Price Index (CPI-U), increased $5.0 million over the same quarter last year. During the second quarter of 2026, the Company sold its TIPS portfolio as part of its available for sale debt securities portfolio repositioning. The increase in interest income was partly offset by a decline in interest income earned on asset-backed and mortgage-backed securities, which declined $2.9$4.8 million and $2.6$3.1 million, respectively. Interest income earned on asset-backed securities declined due to a $454.5$528.4 millionmillion, or 33.3%, decrease in average balances, partly offset by a 34 basis point increase in the average rate earned.balances. A decrease of $577.0$626.0 million, or 12.1%,13.5%, in average balances led to the decline in interest income on mortgage-backed securities. In addition, the Company recorded a $940$1.1 thousandmillion adjustment to premium amortization at MarchJune 31,30, 2026, which increased interest income and reflected slower forward prepayment speed estimates on mortgage-backed securities. This increase was higher than the $539$1.0 thousandmillion adjustment increasing income in the same quarter last year. These decreases to interest income were partly offset by growth of $2.3 million in interest income on U.S. government and federal agency obligations, driven by higher average balances of $603.9 million, or 23.3%, partly offset by a decline of 49 basis points in the average rate earned. Interest income related to the Company's U.S. Treasury inflation-protected securities, which is tied to the non-seasonally adjusted Consumer Price Index (CPI-U), decreased $3.1 million from the same quarter last year. The average balance of the total investment portfolio (excluding unrealized fair value adjustments on available for sale debt securities) was $9.9$9.8 billion in the firstsecond quarter of 2026 and $10.5$10.2 billion in the firstsecond quarter of 2025.
Interest income on securities purchased under agreements to resell increased $1.0$876 millionthousand over the same quarter last year, mainly due to an increase of 22 basis points in the average rate earned and growth of $61.1$84.6 million in the average balance. These resale agreements were structured with floor spreads to protect against falling interest rates. Interest income on deposits at the Federal Reserve increased $1.1 million due to an increase of $608.8$539.2 million in the average balance, partly offset by a decline of 76 basis points in the average rate earned.
The average fully taxable-equivalent yield on total interest earning assets was 4.74%4.87% in the firstsecond quarter of 2026, down from 4.81%4.90% in the firstsecond quarter of 2025.
Total interest expense increased $1.4$757 millionthousand compared to the firstsecond quarter of 2025 due an increase of $4.1$3.3 million in interest expense on interest bearing deposits, partly offset by a decrease of $2.7$2.5 million in interest expense on borrowings. The increase in deposit interest expense was primarily due to the acquisition of FineMark, which added $2.7 billion in interest bearing deposit balances. Compared to the same quarter last year, interest expense on interest checking and money market deposit balances increased $6.1$5.3 million due to growth of $2.1$1.9 billion, or 15.2%,13.4%, in average balances, partly offset by a four basis point decline in the average rate paid. Interest expense on certificate of deposit accounts decreased $2.1 million due to a 5645 basis point decline in average rates paid, partly offset by an increase of $144.8$69.4 million, or 6.1%,2.9%, in average balances. The overall rate paid on total deposits decreased 11ten basis points from the same quarter last year. Interest expense on customer repurchase agreements decreased $3.4 million due to a 4750 basis point decline in the average rate paid and a decrease of $48.7$71.9 million, or 1.8%,3.0%, in the average balance. The overall average rate incurred on all interest bearing liabilities was 1.72%1.68% and 1.89%1.83% in the firstsecond quarters of 2026 and 2025, respectively.
Total interest income (FTE) for the first six months of 2026 increased $65.8 million over the same period last year mainly due to higher interest income on loans (FTE), securities purchased under agreements to resell and deposit balances at the Federal Reserve, slightly offset by lower interest income on investment securities (FTE). Loan interest income (FTE) increased $65.5 million, or 12.6%, due to a $3.1 billion, or 17.6%, increase in average loan balances, partly offset by a decline of 25 basis points in the average rate earned. Most of the increase in interest income was due to loan balances acquired in the FineMark acquisition. Increases in interest income occurred in the personal real estate, revolving home equity, business real estate, business and consumer loan categories, while decreases occurred in the construction and land and consumer credit card loan categories. Interest income on investment securities (FTE) decreased $1.6 million mainly due to decreases in average balances of asset-backed securities and mortgage-backed securities, partly offset by an increase in average balances of U.S. government and federal agency obligations. Interest earned on asset-backed securities decreased $7.6 million mainly due to a decline in average balances of $491.7 million, while interest earned on mortgage-backed securities decreased $5.7 million mainly due to lower average balances of $601.7 million. These decreases in interest income on investment securities were partly offset by increases in interest earned on U.S. government and federal agency securities of $14.2 million due to higher average balances of $672.9 million, or 25.8%. Higher interest income of $1.9 million was earned on securities purchased under agreements to resell, which saw growth in both average balances and rates earned. Interest income on balances at the Federal Reserve increased $2.2 million due to a $573.8 million increase in the average balance invested, partly offset by a 76 basis point decline in the average rate earned.
Total interest expense for the first six months of 2026 increased $2.2 million compared to the same period last year. Interest expense on deposits increased $7.4 million, due to a $2.1 billion increase in average balances, partly offset by an 11 basis point decline in the average rate paid. Interest expense on borrowings decreased $5.2 million, due to lower interest expense on securities sold under agreements to repurchase of $6.8 million resulting from lower average rates paid and average balances. This decrease was partly offset by higher interest expense on federal funds purchased of $770 thousand, mainly due to lower average rates paid, partly offset by an increase in average balances, while interest expense on other borrowings increased $845 thousand mainly due to higher average balances. The overall cost of total interest bearing liabilities decreased to 1.70% compared to 1.87% in the same period last year.
The table below is a summary of net bank card transaction fees for the threesix month periods ended MarchJune 31,30, 2026 and 2025.
For the firstsecond quarter of 2026, total non-interest income amounted to $175.9$183.8 million compared to $158.9$165.6 million in the same quarter last year, which was an increase of $16.9$18.2 million, or 10.6%.11.0%. The increase was mainly due to higher trust fees and deposit account fees. Trust fees increased $14.5$15.9 million, or 25.5%,28.7%, mainly due to growth of $13.5$14.9 million in private client trust fees. Bank card transaction fees for the current quarter wereincreased flat$1.8 million, or 3.8%, over the same period last year, mainly due to growth in net corporate card and net credit card fees. Net corporate card fees increased $811 thousand compared to the same period last year.year primarily due to higher interchange fees. Net credit card fees decreasedincreased $173$804 thousand mainly due to higherlower rewards expense and nethigher interchange fees. Net merchant fees decreasedincreased $184$212 thousand.thousand Netmainly corporate card fees were flat compareddue to thelower sameroyalty periodexpense lastand year,lower network expense, while net debit card fees increaseddeclined $301$68 thousand mainly due to higher interchange income.thousand. Compared to the firstsecond quarter of last year, deposit account fees increased $2.0$3.0 million, or 7.3%,11.5%, mainly due to higher corporate cash management fees of $1.5$2.7 million. Capital market fees increased $226 thousand, or 4.4%, while consumerConsumer brokerage service fees increased $659$479 thousand, or 13.8%,8.9%, mainly due to higher advisory fees.fees, while capital market fees decreased $508 thousand, or 8.2%, mainly due to lower underwriting income. Other non-interest income decreased $227$2.3 thousand,million, or 1.3%,10.3%, mainly due to a decreasedecreases of $911$4.7 thousandmillion in gains on the sales of assets and a decrease of $1.3$1.0 million in fairtax valuecredit adjustmentssales recorded on the Company's deferred compensation plan assets and liabilities.fees. These decreases were partly offset by an increase of $1.2 millionincreases in cash sweep commissions.commissions and interest rate swap fees of $1.3 million and $577 thousand, respectively.
Non-interest income for the first six months of 2026 was $359.7 million compared to $324.6 million in the first six months of 2025, which was an increase of $35.1 million, or 10.8%. The increase was mainly due to higher trust fees, deposit account fees and bank card fees. Trust fees increased $30.4 million, or 27.1%, mainly due to higher private client and institutional trust fees. Bank card transaction fees for the current year increased $1.8 million, or 1.9%, over the same period last year, mainly due to growth of $859 thousand in net corporate card fees, $631 thousand in net credit card fees and $233 thousand in net debit card fees. Deposit account fees increased $5.0 million, or 9.4%, mainly due to higher corporate cash management and overdraft and return item fees. Consumer brokerage service fees increased $1.1 million, or 11.2%, mainly due to higher advisory fees. Capital market fees decreased $282 thousand, or 2.5%, while loan fees and sales decreased $306 thousand, or 4.5%, mainly due to lower loan commitment fees. Other non-interest income decreased $2.5 million, or 6.5%, mainly due to decreases of $5.7 million in gains on the sales of assets and $1.4 million in tax credit sales fees. In addition, a decrease in fair value adjustments of $723 thousand was recorded on the Company's deferred compensation plan assets and liabilities. These decreases were partly offset by increases in cash sweep commissions of $2.4 million, bank-owned life insurance income of $936 thousand, and ACH network fees of $814 thousand.
Net gains and losses on investment securities, which were recognized in earnings during the three months ended June 30, 2026 and 2025, are shown in the table above. Net securities gains of $12.8 million were reported in the second quarter of 2026, compared to net gains of $437 thousand in the same period last year. The net gains in the second quarter of 2026 were mainly comprised of net gains of $114.1 million on equity securities, primarily related to gains recorded on the Company's shares of Visa, as described in Note 4, Investment Securities. The $114.1 million gain on equity securities during the second quarter of 2026 was mainly comprised of $34.5 million in gains on sales of the Company's Visa common stock and gains in fair value of $71.0 million recorded on the Company's Visa common stock still held at June 30 2026. Additionally, the Company recorded $8.6 million in net gains on other equity securities. These gains were largely offset by net losses of $97.7 million on sales of available for sale debt securities, related to the Company's available for sale debt portfolio repositioning, in which the Company sold bonds with an amortized cost of $904.7 million and subsequently reinvested the proceeds into higher yielding available for sale debt securities. Additional information about the Company's available for sale debt portfolio repositioning transactions is discussed in Note 4, Investment Securities. In addition to losses on available for sale debt securities, losses in fair value of $4.0 million were recorded on private equity investments during the second quarter of 2026. During the second quarter of 2025, the net gains on investment securities were primarily comprised of net gains in fair value of $4.4 million recorded on private equity investments and net gains of $1.9 million on equity investments, mostly offset by net losses of $4.2 million on sales of available for sale debt securities.
Net gains and losses on investment securities,securities whichof $24.5 million were recognized in earnings duringfor the threesix months ended MarchJune 31, 2026 and 2025, are shown in the table above. Net securities gains of $11.6 million were reported in the first quarter of30, 2026, compared to net losses of $7.6$7.2 million infor the same period lastin year.2025. The netNet gains in the first quarterhalf of 2026 were mainly comprised of net gains of $114.3 million on equity securities, mainly Visa common stock as described above, and net gains in fair value of $10.9$6.9 million recorded on private equity investmentsinvestments, andpartially offset by net gainslosses of $597$97.7 thousandmillion on sales of privateavailable equityfor investments.sale Thedebt securities related to the available for sale debt securities portfolio repositioning. Net losses in the first half of 2025 were mainly comprised of net losses of $4.2 million on investmentsales of available for sale debt securities for the same quarter last year were primarily comprised ofand net losses in fair value of $8.5$4.1 million recorded on private equity investments, partly offset by net gains of $1.0$1.8 million on sales of private equity investments.securities. The portion of private equity activity attributable to minority interests is reported as non-controlling interest in the consolidated statements of income and resulted in expense of $2.3$1.6 million during the first threesix months of 2026 and income of $1.5$943 millionthousand during the first threesix months of 2025.
Non-interest expense for the firstsecond quarter of 2026 amounted to $291.1$297.1 million, an increase of $52.8$52.6 million, or 22.1%,21.5%, compared to expense of $238.4$244.4 million in the firstsecond quarter of last year. The current quarter included $14.0 million in acquisition-related expense, as well as acquisition-related intangible amortization expense of $5.4 million. The increase in expense over the same period last year was mainly due to higher salaries and employee benefits expense, data processing and software expense, professional and other services expense, litigation expense and intangible amortization expense. Salaries and employee benefits expense increased $27.7$24.9 million, or 18.1%,16.1%, mainly due to an accrual for retention bonuses, acquisition-related compensation payments and the onboarding of FineMark's team members.members Salariesat the beginning of 2026. Acquisition-related salaries and benefits expense includedwas acquisition-related costs of $6.6$3.7 million in the current quarter. Full-time salaries, incentive compensation and healthcare expense increased $13.4 million, $7.7 million and $2.2 million, respectively, over the prior year. Full-time equivalent employees totaled 4,9604,976 at MarchJune 31,30, 2026, compared to 4,6624,658 at MarchJune 31,30, 2025. Data processing and software expense increased $6.1$5.3 million, or 18.9%,16.2%, mainly due to higher costs for service providers and software. Professional and other services expense, which increased $8.8$3.5 million, or 87.4%,27.2%, included $4.7$1.5 million of acquisition-related legal and professional services expense. Net occupancy expense increased $1.3$984 million,thousand, or 9.2%,7.2%, and equipment expense increased $713 thousand, or 13.8%, both mainly due to higher buildingdepreciation depreciationexpense. Supplies and communication expense increased $522 thousand, or 10.5%, mainly due to higher supplies and postage and courier expense. Other non-interest expense increased $7.0$15.6 million, or 76.6%, mainly due to increases of $12.0 million in litigation expense and $5.4 million in intangible amortization expense related to the FineMark acquisition and $2.0 million in other acquisition-related expense. In addition, travel and entertainment expense increased $1.0 million, while a decrease in fair value adjustments of $1.3 million was recorded on the Company's deferred compensation plan assets and liabilities.acquisition.
Non-interest expense amounted to $588.2 million for the first six months of 2026, an increase of $105.4 million, or 21.8%, over the first six months of 2025. Salaries and benefits expense increased $52.6 million, or 17.1%, mainly due to an accrual for retention bonuses, acquisition-related compensation payments and the onboarding of FineMark's team members. Salaries and benefits expense included acquisition-related costs of $10.3 million for the first six months of 2026. Full-time salaries, incentive compensation and stock compensation expense increased $28.2 million, $12.9 million and $4.3 million, respectively, over the prior year. Data processing and software expense increased $11.4 million, or 17.5%, due to increased costs for service providers and software expense. Professional and other services expense increased $12.3 million, or 53.5%, and included $6.1 million in acquisition-related legal and professional fees. Occupancy expense increased $2.3 million, or 8.2%, and equipment expense increased $1.1 million, or 10.9%, both mainly due to higher depreciation expense. Marketing expense increased $1.6 million, or 13.1%, and supplies and communication expense increased $714 thousand, or 7.1%, mainly due to higher supplies and data network expense. Other non-interest expense increased $22.6 million, mainly due to increases of $12.0 million in litigation expense, $10.7 million in acquisition-related intangible amortization expense and $1.2 million in travel an entertainment expense.
Net loan charge-offs in the firstsecond quarter of 2026 amounted to $15.0$9.5 million, compared to $9.9$15.0 million in the prior quarter and $10.8$9.7 million in the firstsecond quarter of last year. Compared to the same period last year, net loan charge-offs in the firstsecond quarter of 2026 increaseddecreased $4.2$149 million,thousand and increaseddecreased $5.1$5.4 million from the previous quarter. The increasedecrease from the prior year was mainly driven by ana increasedecrease of $5.0$418 millionthousand in business real estate loan net charge-offs,recoveries, offset by a decrease of $1.1$570 millionthousand in consumer loan net charge-offs. The increasedecrease in net loan charge-offs for the three months ended MarchJune 31,30, 2026 from the previous quarter was driven by increasesdecreases of $5.4 millionmillion, $110 thousand and $651$170 thousand in net charge-offs on business real estate andestate, consumer credit cardcard, and consumer loans, respectively, partially offset by aan decreaseincrease of $730$201 thousand in net charge-offs on consumerpersonal real estate loans.
For the three months ended MarchJune 31,30, 2026, annualized net charge-offs on average consumer credit card loans were 5.21%,5.18%, compared to 4.55%5.21% in the previous quarter and 5.04%5.08% in the same period last year. Consumer loan annualized net charge-offs in the current quarter amounted to .30%,.26%, compared to .45%.30% in the prior quarter and .56%.40% in the same period last year. In the firstsecond quarter of 2026, total annualized net loan charge-offs were .30%,.19%, compared to .22%.30% in the previous quarter and .25%.22% in the same period last year.
For the six months ended June 30, 2026 and June 30, 2025, total annualized net loan charge-offs were .24% for each period. Net loan charge-offs were $24.5 million in the first six months of 2026, an increase of $4.0 million over net loan charge-offs of $20.5 million in the first six months of 2025. The increase in net loan charge-offs during the first six months of 2026 was mainly driven by higher net charge-offs business real estate loans.
For the three months ended MarchJune 31,30, 2026, the provision for credit losses on loans was $11.3$6.3 million, which was a decrease of $2.4$5.0 million from the provision recorded in the prior quarter. Compared to the same period in the prior year, the provision for credit losses on loans for the three months ended MarchJune 31,30, 2026 decreased $3.8$1.6 million. For the six months ended June 30, 2026, the provision for credit losses on loans was $17.6 million, which was a $5.4 million decrease from the $23.0 million provision recorded in the same period last year. Changes in the provision are driven by changes in the estimate for the allowance for credit losses on loans.
At March 31, 2026, theThe allowance for credit losses increaseddecreased $19.1$3.2 million compared to theprior quarter. The allowance for credit losses in the commercial portfolio decreased $1.6 million primarily due to decreases in the allowance on construction loans atdue Decemberto 31,continued 2025.low Theloss mostrates significantand driverlower ofoutstanding theloan increasebalances. Additionally, decreases in the allowance for credit losses isin business loans lowered the overall allowance for credit losses in the commercial portfolio, due to lower business loan balances in certain industries and improvement in certain economic indicators, partially offset by an overall increase in outstanding business loan balances as a result of the acquisition of FineMark, as the initial allowance for FineMark loans acquired was $22.8 million.balances. The allowance for credit losses on loans increased $8.4 million in the commercial portfolio, and the allowance for credit losses on the Company's personal banking portfolio increasedalso $10.8decreased million.$1.6 million primarily due to a decrease in the allowance on the personal real estate loans, mostly due to improvements in home sale trends in certain markets. The decrease in allowance caused the allowance as a percentage of outstanding loans decreasedto decrease compared to the prior quarter due to the change in mix of loans, as the acquired loan portfolio included more personal real estate loans which carry a lower allowance for credit losses than other classes.quarter. The forecast utilized to estimate the allowance for credit losses on loans at MarchJune 31,30, 2026 assumes a slow but continuedslowing economic expansion,expansion and stable unemployment, and changes in the forecast utilized to estimate the allowance at MarchJune 31,30, 2026 did not significantly change the allowance estimate during the quarter. The allowance for credit losses on loans was $198.6 million at March 31, 2026 and was .97%, 1.01% and .96% of total loans at March 31, 2026, December 31, 2025 and March 31, 2025, respectively.
At June 30, 2026, the allowance for credit losses increased $15.9 million compared to the allowance for credit losses on loans at December 31, 2025. The most significant driver of the increase in the allowance for credit losses is due to an increase in loan balances as a result of the acquisition of FineMark, as the initial allowance for FineMark loans acquired was $22.8 million. This increase was partially offset by a decrease in the allowance on the consumer and consumer credit card loan portfolios. The allowance as a percentage of outstanding loans decreased compared to December 31, 2025 due to the change in mix of loans caused by the acquisition which included more personal real estate loans that carry a lower allowance for credit losses than other classes. The allowance for credit losses on loans was $195.4 million at June 30, 2026 and was .94%, .97%, and 1.01% of total loans at June 30, 2026, March 31, 2026, and December 31, 2025, respectively.
In the current quarter, the provision for credit losses on unfunded lending commitments was a$2.4 benefit of $323 thousand,million, compared to a benefit of $608$2.3 thousandmillion for the three months ended MarchJune 31,30, 2025. At MarchJune 31,30, 2026, the liability for unfunded lending commitments was $17.7$20.1 million, compared to $17.7 million at December 31, 2025 and $18.3$16.0 million at MarchJune 31,30, 2025. At MarchJune 31,30, 2026, the liability for unfunded lending commitments remained largely unchangedconsistent fromwith the liability as of December 31, 2025, because the initial liability recorded related to the FineMark acquisition of $362 thousand was largely offset by a decrease in the provision for the liability for unfunded lending commitments.2025. The Company's unfunded lending commitments primarily relate to construction loans, and the Company's estimate for credit losses in its unfunded lending commitments utilizes the same model and forecast as its estimate for credit losses on loans. See Note 3 for further discussion of the model inputs utilized in the Company's estimate of credit losses.
The Company considers the allowance for credit losses on loans and the liability for unfunded commitments adequate to cover losses expected in the loan portfolio, including unfunded commitments, at MarchJune 31,30, 2026.
Non-accrual loans totaled $10.9$11.6 million at MarchJune 31,30, 2026, a decrease of $4.8$4.1 million from the balance at December 31, 2025. The decrease occurred mainly in business real estate non-accrual loans, which decreased $5.4 million. At MarchJune 31,30, 2026, non-accrual loans were comprised of business real estate (85.8%80.6%), personal real estate (12.1%), business (1.8%18.3%), and revolvingbusiness home equityloans (0.3%0.8%) loans.. Foreclosed real estate totaled $678$1.2 thousandmillion at MarchJune 31,30, 2026, a decrease of $540$7 thousand compared to December 31, 2025. Total loans past due 90 days or more and still accruing interest totaled $22.8$23.7 million as of MarchJune 31,30, 2026, a decrease of $1.8$956 millionthousand from December 31, 2025. Balances by class for non-accrual loans and loans past due 90 days and still accruing interest are shown in the "Delinquent and non-accrual loans" section in Note 3 to the consolidated financial statements.
In addition to the non-performing and past due loans mentioned above, the Company also has identified loans for which management has concerns about the ability of the borrowers to meet existing repayment terms. They are classified as substandard under the Company's internal rating system. The loans are generally secured by either real estate or other borrower assets, reducing the potential for loss should they become non-performing. Although these loans are generally identified as potential problem loans, they may never become non-performing. Such loans totaled $296.2$316.6 million at MarchJune 31,30, 2026 compared to $264.9 million at December 31, 2025, resulting in an increase of $31.3$51.8 million, or 11.8%.19.5%.
When borrowers are experiencing financial difficulty, the Company may agree to modify the contractual terms of a loan to a borrower in order to assist the borrower in repaying principal and interest owed to the Company. At MarchJune 31,30, 2026, the Company held $66.9$110.9 million of loans that had been modified during the threesix months ended MarchJune 31,30, 2026. These loans are further discussed in the "Modifications for borrowers experiencing financial difficulty" section in Note 3 to the consolidated financial statements.
The Company's portfolio of construction and land loans, as shown in the table below, amounted to 7.7%7.2% of total loans outstanding at MarchJune 31,30, 2026. The largest component of construction and land loans was commercial construction, which decreased $26.6$87.8 million during the threesix months ended MarchJune 31,30, 2026. At MarchJune 31,30, 2026, multi-family residential construction loans totaled approximately $529.5$493.8 million, or 44.1%,43.4%, of the commercial construction loan portfolio, compared to $553.1 million, or 45.1%, at December 31, 2025.
Total business real estate loans were $4.1 billion at MarchJune 31,30, 2026 and comprised 19.8%19.5% of the Company's total loan portfolio. These loans include properties such as manufacturing and warehouse buildings, small office and medical buildings, churches, hotels and motels, shopping centers, and other commercial properties. At MarchJune 31,30, 2026, 37.1%35.5% of business real estate loans were for owner-occupied real estate properties, which have historically resulted in lower net charge-off rates than non-owner-occupied commercial real estate loans.
Information about the credit quality of the Company's business real estate loan portfolio as of MarchJune 31,30, 2026 and December 31, 2025 is provided in the table below.
The Company had $619.2$649.3 million in revolving home equity loans at MarchJune 31,30, 2026 that were collateralized by residential real estate. Most of these loans (94.9%96.2%) are written with terms requiring interest-only monthly payments. These loans are offered in three main product lines: LTV up to 80%, 80% to 90%, and 90% to 100%. As of MarchJune 31,30, 2026, the outstanding principal of loans with an original LTV higher than 80% was $78.6$85.2 million, or 12.6%13.1% of the portfolio, compared to $27.7 million as of December 31, 2025. Total revolving home equity loan balances over 30 days past due were $4.8$2.1 million at MarchJune 31,30, 2026 and $1.9 million at December 31, 2025, and the outstanding balance for revolving home equity loans on non-accrual status was $34$33 thousand at MarchJune 31,30, 2026 compared to no balance at December 31, 2025. The weighted average FICO score for the total portfolio balance at MarchJune 31,30, 2026 is 776.778. At maturity, the accounts are re-underwritten, and if they qualify under the Company's credit, collateral and capacity policies, the borrower is given the option to renew the line of credit or convert the outstanding balance to an amortizing loan. If criteria are not met, amortization is required, or the borrower may pay off the loan. During the remainder of 2026 through 2029, approximately 20.5%19.5% of the Company's current outstanding balances are expected to mature. Of these balances, approximately 83.2%84.0% have a FICO score of 700 or higher. The Company does not expect a significant increase in losses as these loans mature, due to their high FICO scores, low LTVs, and low historical loss levels.
The consumer loans category is mostly comprised of private banking loans and automobile loans. Private banking loans comprised of 48.2%49.3% of the consumer loan portfolio at MarchJune 31,30, 2026. The Company's private banking loans are mostly executive lines of credit, which are secured primarily by assets held by the Company's trust department, and insurance premium finance loans, which are primarily secured by life insurance policies. Automobile loans, which include direct and indirect product lines, comprised 30.5%29.5% of the consumer loan portfolio at MarchJune 31,30, 2026, and outstanding balances for auto loans were $754.3$744.3 million and $773.6 million at MarchJune 31,30, 2026 and December 31, 2025, respectively. The balances over 30 days past due amounted to $8.4$8.2 million at MarchJune 31,30, 2026 and $11.0 million at December 31, 2025, respectively, and comprised 1.1% of the outstanding balances of these loans at MarchJune 31,30, 2026 and 1.4% at December 31, 2025. For the threesix months ended MarchJune 31,30, 2026, $88.2$173.4 million of new auto loans were originated, compared to $98.0$190.2 million during the first threesix months of 2025. At MarchJune 31,30, 2026, the automobile loan portfolio had a weighted average FICO score of 759,763, and net charge-offs on auto loans were .5% of average auto loans.
The Company's consumer loan portfolio also includes fixed rate home equity loans, typically for home repair or remodeling, and these loans comprised 8.5%8.0% of the consumer loan portfolio at MarchJune 31,30, 2026. Losses on these loans have historically been low, and the Company saw net recoveriescharge offs of $591$9 thousand for the first threesix months of 2026. The remaining portion of the Company's consumer loan portfolio is comprised of healthcare financing, boat, RV, motorcycle, other equipment, and unsecured consumer loans. Net charge-offs on consumer loans, other than automobile and fixed rate home equity loans, totaled $755$1.4 thousandmillion in the first threesix months of 2026 and were .2% of the average balances of these loans at MarchJune 31,30, 2026.
The Company offers low promotional rates on selected consumer credit card products. Out of a portfolio at MarchJune 31,30, 2026 of $557.7$561.3 million in consumer credit card loans outstanding, approximately $120.5$119.5 million, or 21.6%,21.3%, carried a low promotional rate. Within the next six months, $54.5$54.7 million of these loans are scheduled to convert to the ongoing higher contractual rate. To mitigate some of the risk involved with this credit card product, the Company performs credit checks and detailed analysis of the customer borrowing profile before approving the loan application. Management believes that the risks in the consumer loan portfolio are reasonable and the anticipated loss ratios are within acceptable parameters.
The Company's energy lending portfolio is comprised of lending to the petroleum and natural gas sectors and totaled $369.6$373.0 million, or 1.8% of total loans at MarchJune 31,30, 2026, an increase of $66.5$69.9 million from December 31, 2025, as shown in the table below.
The Company participates in credits of large, publicly traded companies which are defined by regulation as shared national credits, or SNCs. Regulations define SNCs as loans exceeding $100 million that are shared by three or more financial institutions. The Company typically participates in these loans when business operations are maintained in the local communities or regional markets and opportunities to provide other banking services are present. The balance of SNC loans totaled $1.7$1.6 billion at MarchJune 31,30, 2026 and $1.5 billion December 31, 2025. Additional unfunded commitments at MarchJune 31,30, 2026 totaled $2.4$2.7 billion.
Income tax expense was $45.8 million in the second quarter of 2026, compared to $40.9 million in the first quarter of 2026,2026 comparedand to $40.6$42.4 million in the fourth quarter of 2025 and $37.0 million in the firstsecond quarter of 2025. The Company's effective tax rate, including the effect of non-controlling interest, was 22.3% in the second quarter of 2026, 22.4% in the first quarter of 2026, 22.4%and 21.8% in the fourth quarter of 2025, and 21.9% in the firstsecond quarter of 2025.
Total assets of the Company were $35.7$35.3 billion at MarchJune 31,30, 2026 and $32.9 billion at December 31, 2025. Earning assets (excluding the allowance for credit losses on loans and fair value adjustments on available for sale debt securities) amounted to $34.3$33.6 billion at MarchJune 31,30, 2026 and $31.4 billion at December 31, 2025, and consisted of 60%62% in loans and 28% in investment securities at MarchJune 31,30, 2026.
DuringAt theJune first quarter of30, 2026, averagetotal loans totaledwere $20.3$20.8 billion, an increase of $2.7 billion over the prior quarter, and an increase of $3.1 billion overcompared theto samebalances quarterat lastDecember year.31, 2025. The increase in average balances over both periods was primarily due to the acquisition of FineMark, which added $2.7 billion in loan balances. Compared to the previous quarter, averageThe balances of personal real estate, business, business real estate, and revolving home equity loans grew $1.3 billion, $676.6 million, $389.7 million, and $274.2 million, respectively, compared to December 31, 2025. Consumer loans, which includes automobile, marine and RV, fixed rate home equity and other consumer loansloans, grewincreased $1.4 billion, $369.3$330.6 million, $315.0mainly million, $238.9 million and $221.0 million, respectively. During the current quarter, the Company sold certain fixed rate personal real estate loans totaling $26.2 million, compareddue to $27.0 milliongrowth in theother priorconsumer quarter.loans.
Total averageavailable for sale debt securities, excluding fair value adjustments, decreased $801.0 million at June 30, 2026 compared to December 31, 2025. Sales, maturities and pay downs of available for sale debt securities decreasedduring $269.0this millionperiod fromtotaled the previous quarter to $8.9$1.2 billion, atpartly fairoffset value.by purchases of $810.0 million. The decreasedecline in available for sale debt securities was mainly the result of lower average balances of mortgage-backed securities and asset-backed securities.securities, Duringwhich decreased $742.7 million and $255.6 million, respectively, at June 30, 2026 compared to December 31, 2025. These decreases were partly offset by an increase of $246.1 million in the first quarterbalance of 2026,U.S. the unrealized loss on available for sale debt securities increased $40.7 million to $687.5 million, at period end. Also, during the first quarter of 2026, maturitiesgovernment and payfederal downsagency of available for sale debt securities were $410.7 million.obligations. At MarchJune 31,30, 2026, the duration of the available for sale investment portfolio was 4.2 years, and maturities and pay downs of approximately $1.2$1.1 billion are expected to occur during the next 12 months.
Average interestInterest earning deposits with banks increaseddecreased $210.4$484.2 million overfrom averageDecember balances31, in the previous quarter,2025 and the average balance withinof other assets increased $374.4$176.2 million mainly due to increases in goodwill, intangible assets,assets and premises and equipment related to the Company’sCompany's acquisition of FineMark. These increases were partly offset by a decline in the cash and due from banks balance.
Total average deposits increasedat $2.1June 30, 2026 amounted to $27.9 billion, an increase of $2.2 billion overcompared theto previousDecember quarter.31, 2025. The balance increase in average balances was primarily due to the FineMark acquisition, which added $2.7 billion in interest bearing and $425 million in non-interest bearing deposit balances. Shortly after the acquisition, the Company moved $1.0 billion of FineMark’s high-cost, money market deposit balances off-balance sheet. Compared to theDecember prior31, quarter, average2025, interest checking and money market deposits and demand deposits increased $1.7 billion and $282.1 million, respectively. Additionally, average balances of certificates of deposit of $100,000 and over increased $76.0 million compared to the prior quarter, mainly due to deposit balances acquired from FineMark. Compared to the previous quarter, total average wealth and retail banking deposits grewincreased $2.3 billion and $251.0 million, respectively, while commercial deposits declined $408.3 million. The average loans to deposits ratio was 73.4% in the current quarter and 69.0% in the prior quarter.billion. The Company’s average borrowings, which included average customer repurchase agreements of $2.7$2.3 billion, increasedtotaled $345.7$2.5 billion at June 30, 2026, a decrease of $547.9 million tofrom $2.9balances billionat inDecember the31, first quarter of 2026.2025. Federal Home Loan Bank advances of $350.0 million, which the Company acquired from the FineMark acquisition, were paid off in January 2026.
Interest earning balances at the Federal Reserve Bank, which have overnight maturities and are used for general liquidity purposes, totaled $3.3$2.3 billion at MarchJune 31,30, 2026 and increaseddecreased $526$484.2 million from December 31, 2025. At MarchJune 31,30, 2026, the Company's balance of federal funds sold totaled $630$2.0 thousand,million, which are funds lent to the Company's correspondent bank customers with overnight maturities. The fair value of the available for sale debt portfolio was $8.6$8.3 billion at MarchJune 31,30, 2026 and included an unrealized net loss of $687.5$618.6 million. The total net unrealized loss included net losses of $620.0$535.0 million on mortgage-backed and asset-backed securities and $51.0$49.7 million on state and municipal obligations.
The Company holds securities purchased under agreements to resell (“resale agreements”) which totaled $850.0$1.2 millionbillion at MarchJune 31,30, 2026, with maturities in 2028 through 2030.2031. Under these agreements, the Company lends funds to upstream financial institutions and holds marketable securities, safe-kept by a third-party custodian, as collateral. This collateral totaled $871.1$1.2 millionbillion in fair value at MarchJune 31,30, 2026.
The Company's available for sale debt securities portfolio has a diverse mix of high quality and liquid investment securities with a duration of 4.2 years at MarchJune 31,30, 2026. Approximately $1.2$1.1 billion of the Company's available for sale debt portfolio is expected to mature or pay down during the next 12 months, and these funds offer substantial resources to meet either new loan demand or offset potential reductions in the Company's deposit funding base. The Company pledges portions of its investment securities portfolio to secure public fund deposits, securities sold under agreements to repurchase, trust funds, letters of credit issued by the FHLB, and borrowing capacity at the FHLB and the Federal Reserve Bank. Total investment securities pledged for these purposes were as follows:
The average loans to deposits ratio is a measure of a bank's liquidity, and the Company’s average loans to deposits ratio was 73.4%73.9% for the threesix months ended MarchJune 31,30, 2026. Core customer deposits, defined as non-interest bearing, interest checking, savings, and money market deposit accounts totaled $25.9$25.5 billion and represented 91.4%91.5% of the Company's total deposits at MarchJune 31,30, 2026. These core deposits are normally less volatile, as they are often with customer relationships tied to other products offered by the Company, promoting long lasting relationships and stable funding sources. Core deposits increased $2.7$2.2 billion at MarchJune 31,30, 2026 compared to December 31, 2025, primarily due to an increase in wealth deposits from the acquisition of FineMark$1.8 Holdings, Inc.billion. While the Company considers core retail banking and wealth deposits less volatile, corporate deposits could decline if interest rates increase significantly, encouraging corporate customers to increase investing activities, or if the economy deteriorates and companies experience lower cash inflows, reducing deposit balances. If these corporate deposits decline, the Company's funding needs may be met by liquidity supplied by investment security maturities and pay downs expected to total $1.2$1.1 billion over the next year, as noted above. In addition, as shown in the table of collateral available for future advances below, the Company has borrowing capacity of $6.9$6.4 billion through advances from the FHLB and the Federal Reserve.
Certificates of deposit of $100,000 or greater totaled $1.4 billion at MarchJune 31,30, 2026. These deposits are normally considered more volatile and higher costing, and comprised 5.0%4.9% of total deposits at MarchJune 31,30, 2026.
Federal funds purchased, which totaled $129.7$121.8 million at MarchJune 31,30, 2026, are unsecured overnight borrowings obtained mainly from upstream correspondent banks with which the Company maintains approved lines of credit. At MarchJune 31,30, 2026, the Company had approved lines of credit totaling $4.4$4.2 billion. Since these borrowings are unsecured and limited by market trading activity, their availability may be less certain than collateralized sources of borrowings. Retail repurchase agreements are offered to customers wishing to earn interest in highly liquid balances and are used by the Company as a funding source considered to be stable, but short-term in nature. Repurchase agreements are collateralized by securities in the Company's investment portfolio. Total repurchase agreements at MarchJune 31,30, 2026 were comprised of non-insured customer funds totaling $2.4$2.3 billion, and securities pledged as collateral for these retail agreements totaled $2.5$2.4 billion at MarchJune 31,30, 2026. The Company also borrows on a secured basis through advances from the FHLB. The advances are generally short-term, fixed interest rate borrowings. There were no advances outstanding from the FHLB at MarchJune 31,30, 2026.
The Company pledges certain assets, including loans and investment securities, to both the FRB and the FHLB as security to establish lines of credit and borrow from these entities. Based on the amount and type of collateral pledged, the FHLB establishes a collateral value from which the Company may draw advances against the collateral. Additionally, this collateral is used to enable the FHLB to issue letters of credit in favor of public fund depositors of the Company. The FRB also establishes a collateral value of assets pledged and permits borrowings from the discount window. The following table reflects the collateral value of assets pledged, borrowings, and letters of credit outstanding, in addition to the estimated future funding capacity available to the Company at MarchJune 31,30, 2026.
The cash flows from the operating, investing and financing activities of the Company resulted in a net increasedecrease in cash, cash equivalents and restricted cash of $295.6$639.8 million during the first threesix months of 2026, as reported in the consolidated statements of cash flows in this report. Operating activities, consisting mainly of net income adjusted for certain non-cash items, provided cash flow of $684.8$866.7 million and have historically been a stable source of funds. Investing activities, which occur mainly in the loan and investment securities portfolios, provided cash of $859.2$532.3 million. This growth is primarily due to the cash assumedActivity in the acquisitioninvestment securities portfolio provided cash of FineMark$791.2 Holdings,million Inc., andfrom sales, maturities, and pay downs (net of purchases) of investment securities,securities. whichThese providedgains cashwere partially offset by a net increase in loans of $428.9$443.7 million and purchases of securities under agreements to resell (net of repayments) of $300.0 million. Investing activities are somewhat unique to financial institutions in that, while large sums of cash flow are normally used to fund growth in investment securities, loans, or other bank assets, they are normally dependent on the financing activities described below. Financing activities used cash of $1.2$2.0 billion, largely resulting from decreases in deposits and federal funds purchased and securities sold under agreements to repurchase of $795.0 million and $624.4 million, respectively, and repayments of FHLB borrowings (assumed in the FineMark acquisition), which used cash of $600.0 million, federal funds purchased and securities sold under agreements to repurchase, which used cash of $475.9 million, and a decrease of $287.7$603.9 million in deposits during the first threesix months of 2026. Cash dividend payments (including distributions to non-controlling interest) and purchases of treasury stock used cash of $41.9$82.6 million and $84.3$196.3 million, respectively.
TheUnder Basel III capital guidelines, the Company met all capital adequacy requirements and had regulatory capital ratios in excess of the levels established for well-capitalized institutions at MarchJune 31,30, 2026 and December 31, 2025, as shown in the following table.
The Company maintains a treasury stock buyback program under authorizations by its Board of Directors (the Board) and periodicallyroutinely purchases stock in the open market. On April 24, 2026, the share repurchase authorization was increased to 7,500,000 shares. During the threesix months ended MarchJune 31,30, 2026, the Company purchased 1,624,8403,712,347 shares at an average price of $51.56$52.39 in open market purchases and stock-based compensation transactions. At MarchJune 31,30, 2026, 1,634,0005,425,828 shares remained available for purchase under the Board authorization in place at that date. On April 24, 2026, the share repurchase authorization was increased to 7,500,000 shares.
The Company's common stock dividend policy reflects its earnings outlook, desired payout ratios, the need to maintain adequate capital levels and alternative investment options. The Company paid a $.275 per share cash dividend on its common stock in the firstsecond quarter of 2026, which was a 5.0% increase compared to its 2025 quarterly dividend.
CBSH insider buying and selling (Form 4)
Since 2026-04-11, insiders reported open-market purchases in 0 Form 4 filings and open-market sales in 8 filings (8 insiders, 8 trade dates, 33,980 shares, about $2.0M). Net open-market shares: -33,980 (purchases minus sales); net value about -$2.0M.Totals add up every open-market (code P and S) line in those filings, using the prices reported in the filings. Awards, option exercises, tax withholding and gifts are listed below but not counted.
| Trade date | Insider | Transaction | Shares | Price | Value |
|---|---|---|---|---|---|
| 2026-09-22 | Kemper David W |
Grant/award | 128 | $56.64 | $7.2K |
| 2026-09-22 | Barth Kevin G |
Grant/award | 118 | $56.64 | $6.7K |
| 2026-09-04 | Upton Jennifer B |
Shares withheld for tax | 23 | $58.51 | $1.3K |
| 2026-09-04 | Upton Jennifer B |
Disposition to issuer | 148 | $58.52 | $8.7K |
| 2026-09-04 | Upton Jennifer B |
Disposition to issuer | 143 | $58.51 | $8.4K |
| 2026-09-04 | Upton Jennifer B |
Shares withheld for tax | 21 | $58.52 | $1.2K |
| 2026-09-04 | Upton Jennifer B |
Option exercise | 220 | $39.14 | $8.6K |
| 2026-09-04 | Upton Jennifer B |
Option exercise | 220 | $37.91 | $8.3K |
| 2026-08-27 | Neff Douglas D |
Option exercise | 1,393 | $37.91 | $52.8K |
| 2026-08-27 | Neff Douglas D |
Disposition to issuer | 1,850 | $58.10 | $107.5K |
| 2026-08-27 | Neff Douglas D |
Shares withheld for tax | 273 | $58.10 | $15.9K |
| 2026-08-27 | Neff Douglas D |
Option exercise | 1,396 | $39.14 | $54.6K |
| 2026-08-27 | Neff Douglas D |
Open-market sale | 666 | $58.15 | $38.7K |
| 2026-08-14 | Orf David L |
Option exercise | 1,194 | $37.91 | $45.3K |
| 2026-08-14 | Orf David L |
Disposition to issuer | 1,630 | $60.31 | $98.3K |
| 2026-08-14 | Orf David L |
Shares withheld for tax | 275 | $60.31 | $16.6K |
| 2026-08-14 | Orf David L |
Option exercise | 1,353 | $39.14 | $53.0K |
| 2026-08-14 | Orf David L |
Open-market sale | 642 | $60.35 | $38.7K |
| 2026-08-04 | Roller David L. |
Option exercise | 3,507 | $39.90 | $139.9K |
| 2026-08-04 | Roller David L. |
Shares withheld for tax | 357 | $60.32 | $21.5K |
| 2026-08-04 | Roller David L. |
Open-market sale | 830 | $60.28 | $50.0K |
| 2026-08-04 | Roller David L. |
Disposition to issuer | 2,320 | $60.32 | $139.9K |
| 2026-07-30 | Holmes Robert S |
Open-market sale | 5,000 | $60.20 | $301.0K |
| 2026-07-29 | Kemper John W |
Shares withheld for tax | 1,618 | $60.68 | $98.2K |
| 2026-07-29 | Kemper John W |
Shares withheld for tax | 2,165 | $60.63 | $131.3K |
| 2026-07-29 | Kemper John W |
Disposition to issuer | 6,179 | $60.68 | $374.9K |
| 2026-07-29 | Kemper John W |
Open-market sale | 5,830 | $60.58 | $353.2K |
| 2026-07-29 | Kemper John W |
Option exercise | 16,097 | $39.90 | $642.3K |
| 2026-07-29 | Kemper John W |
Disposition to issuer | 10,594 | $60.63 | $642.3K |
| 2026-07-29 | Kemper John W |
Option exercise | 10,289 | $36.44 | $374.9K |
| 2026-07-28 | Brooks Derrick |
Open-market sale | 1,041 | $59.64 | $62.1K |
| 2026-07-27 | Brooks Derrick |
Shares withheld for tax | 427 | $59.00 | $25.2K |
| 2026-07-27 | Kim Charles G |
Option exercise | 9,662 | $36.44 | $352.1K |
| 2026-07-27 | Kim Charles G |
Open-market sale | 19,771 | $59.18 | $1.2M |
| 2026-07-27 | Kim Charles G |
Disposition to issuer | 5,925 | $59.43 | $352.1K |
| 2026-07-27 | Kim Charles G |
Shares withheld for tax | 1,646 | $59.43 | $97.8K |
| 2026-07-01 | Kim Charles G |
Grant/award | 44,262 | $58.74 | $2.6M |
| 2026-07-01 | Barth Kevin G |
Grant/award | 44,262 | $58.74 | $2.6M |
| 2026-06-23 | Kemper David W |
Grant/award | 131 | $55.29 | $7.2K |
| 2026-06-23 | Barth Kevin G |
Grant/award | 120 | $55.29 | $6.6K |
| 2026-06-16 | Fowler June Mcallister |
Open-market sale | 200 | $55.04 | $11.0K |
| 2026-05-29 | Taylor Christine B |
Grant/award | 646 | $52.22 | $33.7K |
| 2026-05-29 | Schnuck Todd R |
Grant/award | 790 | $52.22 | $41.3K |
| 2026-05-29 | Macia Alaina G |
Grant/award | 646 | $52.22 | $33.7K |
| 2026-05-29 | Fowler June Mcallister |
Grant/award | 646 | $52.22 | $33.7K |
| 2026-05-29 | Dunn Timothy S |
Grant/award | 718 | $52.22 | $37.5K |
| 2026-05-29 | Daniel Karen L |
Grant/award | 886 | $52.22 | $46.3K |
| 2026-05-29 | Chapman William Kyle |
Grant/award | 646 | $52.22 | $33.7K |
| 2026-05-29 | Brauer Blackford F |
Grant/award | 718 | $52.22 | $37.5K |
| 2026-05-29 | Bassham Terry D |
Grant/award | 718 | $52.22 | $37.5K |
Well-known investors holding CBSH (13F)
| Investor | Quarter | Shares | Reported value | % of their 13F | Change vs prior quarter |
|---|---|---|---|---|---|
| AQR Capital Management (Cliff Asness) | 2026-06-30 | 6,544,830 | $378.0M | 0.13% | Added 251% |
| Citadel Advisors (Ken Griffin) | 2026-06-30 | 2,075,423 | $119.9M | 0.07% | Added 178% |
| Renaissance Technologies | 2026-06-30 | 978,626 | $56.5M | 0.08% | Reduced 5% |
| Two Sigma Investments | 2026-06-30 | 702,104 | $40.5M | 0.03% | Added 44% |
| Point72 Asset Management (Steve Cohen) | 2026-06-30 | 556,267 | $32.1M | 0.05% | Reduced 9% |
| Millennium Management (Israel Englander) | 2026-06-30 | 440,252 | $25.4M | 0.02% | Reduced 32% |
| D. E. Shaw & Co. | 2026-06-30 | 413,978 | $23.9M | 0.01% | Reduced 39% |