[10-Q] COMMERCE BANCSHARES INC /MO/ Quarterly Earnings Report
Filing Impact
Filing Sentiment
Form Type
10-Q
Commerce Bancshares (CBSH) reported Q3 2025 results showing steady profitability and stable balance sheet trends. Net income for the quarter was
For the nine months, net income reached
Positive
- None.
Negative
- None.
Insights
Core earnings steady; credit costs and deposit mix are key.
Commerce Bancshares delivered Q3 net income of
On the balance sheet, loans reached
Capital and liquidity appear stable: total equity increased to
Table of Contents
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
| (Mark One) | |||||
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE | |||||
| SECURITIES EXCHANGE ACT OF 1934 | |||||
________________________________________________________
For the quarterly period ended September 30, 2025
OR
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE | |||||
| SECURITIES EXCHANGE ACT OF 1934 | |||||
____________________________________________________________
For the transition period from to
Commission File No. 001-36502
| (Exact name of registrant as specified in its charter) | ||||||||
| (State of Incorporation) | (IRS Employer Identification No.) | ||||||||||
| (Address of principal executive offices) | (Zip Code) | ||||||||||
(816 ) 234-2000
(Registrant’s telephone number, including area code)
| Securities registered pursuant to Section 12(b) of the Act: | ||||||||
| Title of class | Trading symbol(s) | Name of exchange on which registered | ||||||
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes þ No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑
As of November 6, 2025, the registrant had outstanding 132,414,687 shares of its $5 par value common stock, registrant’s only class of common stock.
Commerce Bancshares, Inc. and Subsidiaries
Form 10-Q
| Page | |||||||||||
| INDEX | |||||||||||
Part I | Financial Information | ||||||||||
Item 1. | Financial Statements | ||||||||||
Consolidated Balance Sheets as of September 30, 2025 (unaudited) and December 31, 2024 | 3 | ||||||||||
Consolidated Statements of Income for the Three and Nine Months Ended September 30, 2025 and 2024 (unaudited) | 4 | ||||||||||
Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2025 and 2024 (unaudited) | 5 | ||||||||||
Consolidated Statements of Changes in Equity for the Three and Nine Months Ended September 30, 2025 and 2024 (unaudited) | 6 | ||||||||||
Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2025 and 2024 (unaudited) | 8 | ||||||||||
Notes to Consolidated Financial Statements | 9 | ||||||||||
Item 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations | 50 | |||||||||
Item 3. | Quantitative and Qualitative Disclosures about Market Risk | 76 | |||||||||
Item 4. | Controls and Procedures | 76 | |||||||||
Part II | Other Information | ||||||||||
Item 1. | Legal Proceedings | 77 | |||||||||
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 77 | |||||||||
Item 5. | Other Information | 77 | |||||||||
Item 6. | Exhibits | 77 | |||||||||
Signatures | 79 | ||||||||||
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PART I: FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
Commerce Bancshares, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
| September 30, 2025 | December 31, 2024 | ||||||||||
| (Unaudited) | |||||||||||
| (In thousands) | |||||||||||
| ASSETS | |||||||||||
| Loans | $ | $ | |||||||||
| Allowance for credit losses on loans | ( | ( | |||||||||
| Net loans | |||||||||||
Loans held for sale (including $ | |||||||||||
| Investment securities: | |||||||||||
Available for sale debt, at fair value (amortized cost of $ | |||||||||||
September 30, 2025 and December 31, 2024, respectively, and allowance for credit losses of $ | |||||||||||
at both September 30, 2025 and December 31, 2024) | |||||||||||
| Trading debt | |||||||||||
| Equity | |||||||||||
| Other | |||||||||||
| Total investment securities | |||||||||||
| Federal funds sold | |||||||||||
| Securities purchased under agreements to resell | |||||||||||
| Interest earning deposits with banks | |||||||||||
| Cash and due from banks | |||||||||||
| Premises and equipment – net | |||||||||||
| Goodwill | |||||||||||
| Other intangible assets – net | |||||||||||
| Other assets | |||||||||||
| Total assets | $ | $ | |||||||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||||||
| Deposits: | |||||||||||
| Non-interest bearing | $ | $ | |||||||||
| Savings, interest checking and money market | |||||||||||
| Certificates of deposit of less than $100,000 | |||||||||||
| Certificates of deposit of $100,000 and over | |||||||||||
| Total deposits | |||||||||||
| Federal funds purchased and securities sold under agreements to repurchase | |||||||||||
| Other borrowings | |||||||||||
| Other liabilities | |||||||||||
| Total liabilities | |||||||||||
| Commerce Bancshares, Inc. stockholders’ equity: | |||||||||||
Common stock, $ | |||||||||||
Authorized | |||||||||||
| Capital surplus | |||||||||||
| Retained earnings | |||||||||||
Treasury stock of | |||||||||||
and | ( | ( | |||||||||
| Accumulated other comprehensive income (loss) | ( | ( | |||||||||
| Total Commerce Bancshares, Inc. stockholders' equity | |||||||||||
| Non-controlling interest | |||||||||||
| Total equity | |||||||||||
| Total liabilities and equity | $ | $ | |||||||||
See accompanying notes to consolidated financial statements.
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Commerce Bancshares, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
| For the Three Months Ended September 30 | For the Nine Months Ended September 30 | ||||||||||||||||
| (In thousands, except per share data) | 2025 | 2024 | 2025 | 2024 | |||||||||||||
| (Unaudited) | |||||||||||||||||
| INTEREST INCOME | |||||||||||||||||
| Interest and fees on loans | $ | $ | $ | $ | |||||||||||||
| Interest and fees on loans held for sale | |||||||||||||||||
| Interest on investment securities | |||||||||||||||||
| Interest on federal funds sold | |||||||||||||||||
| Interest on securities purchased under agreements to resell | |||||||||||||||||
| Interest on deposits with banks | |||||||||||||||||
| Total interest income | |||||||||||||||||
| INTEREST EXPENSE | |||||||||||||||||
| Interest on deposits: | |||||||||||||||||
| Savings, interest checking and money market | |||||||||||||||||
| Certificates of deposit of less than $100,000 | |||||||||||||||||
| Certificates of deposit of $100,000 and over | |||||||||||||||||
| Interest on federal funds purchased | |||||||||||||||||
| Interest on securities sold under agreements to repurchase | |||||||||||||||||
| Interest on other borrowings | |||||||||||||||||
| Total interest expense | |||||||||||||||||
| Net interest income | |||||||||||||||||
| Provision for credit losses | |||||||||||||||||
| Net interest income after credit losses | |||||||||||||||||
| NON-INTEREST INCOME | |||||||||||||||||
| Trust fees | |||||||||||||||||
| Bank card transaction fees | |||||||||||||||||
| Deposit account charges and other fees | |||||||||||||||||
| Capital market fees | |||||||||||||||||
| Consumer brokerage services | |||||||||||||||||
| Loan fees and sales | |||||||||||||||||
| Other | |||||||||||||||||
| Total non-interest income | |||||||||||||||||
| INVESTMENT SECURITIES GAINS (LOSSES), NET | |||||||||||||||||
| NON-INTEREST EXPENSE | |||||||||||||||||
| Salaries and employee benefits | |||||||||||||||||
| Data processing and software | |||||||||||||||||
| Net occupancy | |||||||||||||||||
| Professional and other services | |||||||||||||||||
| Marketing | |||||||||||||||||
| Equipment | |||||||||||||||||
| Supplies and communication | |||||||||||||||||
| Deposit insurance | |||||||||||||||||
| Other | |||||||||||||||||
| Total non-interest expense | |||||||||||||||||
| Income before income taxes | |||||||||||||||||
| Less income taxes | |||||||||||||||||
| Net income | |||||||||||||||||
| Less non-controlling interest expense (income) | |||||||||||||||||
| Net income attributable to Commerce Bancshares, Inc. | $ | $ | $ | $ | |||||||||||||
| Net income per common share — basic | $ | $ | $ | $ | |||||||||||||
| Net income per common share — diluted | $ | $ | $ | $ | |||||||||||||
See accompanying notes to consolidated financial statements.
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Commerce Bancshares, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
| For the Three Months Ended September 30 | For the Nine Months Ended September 30 | ||||||||||||||||
| (In thousands) | 2025 | 2024 | 2025 | 2024 | |||||||||||||
| (Unaudited) | |||||||||||||||||
| Net income | $ | $ | $ | $ | |||||||||||||
| Other comprehensive income (loss), net of tax: | |||||||||||||||||
| Net unrealized gains (losses) on available for sale debt securities | |||||||||||||||||
| Change in pension loss | |||||||||||||||||
| Unrealized gains (losses) on cash flow hedge derivatives | ( | ( | ( | ||||||||||||||
| Other comprehensive income (loss), net of tax | |||||||||||||||||
| Comprehensive income (loss) | |||||||||||||||||
| Less non-controlling interest (income) expense | |||||||||||||||||
| Comprehensive income (loss) attributable to Commerce Bancshares, Inc. | $ | $ | $ | $ | |||||||||||||
See accompanying notes to consolidated financial statements.
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Commerce Bancshares, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Three Months Ended September 30, 2025 and 2024
| Commerce Bancshares, Inc. Shareholders | ||||||||||||||||||||||||||
(In thousands, except per share data) | Common Stock | Capital Surplus | Retained Earnings | Treasury Stock | Accumulated Other Comprehensive Income (Loss) | Non-Controlling Interest | Total | |||||||||||||||||||
| (Unaudited) | ||||||||||||||||||||||||||
Balance June 30, 2025 | $ | $ | $ | $ | ( | $ | ( | $ | $ | |||||||||||||||||
| Net income | ||||||||||||||||||||||||||
| Other comprehensive income (loss) | ||||||||||||||||||||||||||
| Distributions to non-controlling interest | ( | ( | ||||||||||||||||||||||||
| Purchases of treasury stock | ( | ( | ||||||||||||||||||||||||
| Issuance under stock purchase and equity compensation plans | ( | |||||||||||||||||||||||||
| Stock-based compensation | ||||||||||||||||||||||||||
Cash dividends paid on common stock ($ | ( | ( | ||||||||||||||||||||||||
Balance September 30, 2025 | $ | $ | $ | $ | ( | $ | ( | $ | $ | |||||||||||||||||
Balance June 30, 2024 | $ | $ | $ | $ | ( | $ | ( | $ | $ | |||||||||||||||||
| Net Income | ||||||||||||||||||||||||||
| Other comprehensive income (loss) | ||||||||||||||||||||||||||
| Distributions to non-controlling interest | ( | ( | ||||||||||||||||||||||||
| Purchases of treasury stock | ( | ( | ||||||||||||||||||||||||
| Issuance under stock purchase and equity compensation plans | ( | |||||||||||||||||||||||||
| Stock-based compensation | ||||||||||||||||||||||||||
Cash dividends paid on common stock ($ | ( | ( | ||||||||||||||||||||||||
Balance September 30, 2024 | $ | $ | $ | $ | ( | $ | ( | $ | $ | |||||||||||||||||
See accompanying notes to consolidated financial statements.
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Commerce Bancshares, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Nine Months Ended September 30, 2025 and 2024
| Commerce Bancshares, Inc. Shareholders | |||||||||||||||||||||||||||||
(In thousands, except per share data) | Common Stock | Capital Surplus | Retained Earnings | Treasury Stock | Accumulated Other Comprehensive Income (Loss) | Non-Controlling Interest | Total | ||||||||||||||||||||||
| (Unaudited) | |||||||||||||||||||||||||||||
Balance December 31, 2024 | $ | $ | $ | $ | ( | $ | ( | $ | $ | ||||||||||||||||||||
| Net income | |||||||||||||||||||||||||||||
| Other comprehensive income (loss) | |||||||||||||||||||||||||||||
| Distributions to non-controlling interest | ( | ( | |||||||||||||||||||||||||||
| Purchases of treasury stock | ( | ( | |||||||||||||||||||||||||||
| Issuance under stock purchase and equity compensation plans | ( | ( | |||||||||||||||||||||||||||
| Stock-based compensation | |||||||||||||||||||||||||||||
Cash dividends paid on common stock ($ | ( | ( | |||||||||||||||||||||||||||
Balance September 30, 2025 | $ | $ | $ | $ | ( | $ | ( | $ | $ | ||||||||||||||||||||
Balance December 31, 2023 | $ | $ | $ | $ | ( | $ | ( | $ | $ | ||||||||||||||||||||
| Net income | |||||||||||||||||||||||||||||
| Other comprehensive income (loss) | |||||||||||||||||||||||||||||
| Distributions to non-controlling interest | ( | ( | |||||||||||||||||||||||||||
| Purchases of treasury stock | ( | ( | |||||||||||||||||||||||||||
| Issuance under stock purchase and equity compensation plans | ( | ||||||||||||||||||||||||||||
| Stock-based compensation | |||||||||||||||||||||||||||||
Cash dividends paid on common stock ($ | ( | ( | |||||||||||||||||||||||||||
Balance September 30, 2024 | $ | $ | $ | $ | ( | $ | ( | $ | $ | ||||||||||||||||||||
See accompanying notes to consolidated financial statements.
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Commerce Bancshares, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
| For the Nine Months Ended September 30 | |||||||||||
| (In thousands) | 2025 | 2024 | |||||||||
| (Unaudited) | |||||||||||
| OPERATING ACTIVITIES: | |||||||||||
| Net income | $ | $ | |||||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||
| Provision for credit losses | |||||||||||
| Provision for depreciation and amortization | |||||||||||
| Amortization (accretion) of investment security premiums (discounts), net | ( | ||||||||||
| Investment securities (gains) losses, net (A) | ( | ( | |||||||||
| Net (gains) losses on sales of loans held for sale | ( | ( | |||||||||
| Originations of loans held for sale | ( | ( | |||||||||
| Proceeds from sales of loans held for sale | |||||||||||
| Net (increase) decrease in trading debt securities, excluding unsettled transactions | ( | ( | |||||||||
| Stock-based compensation | |||||||||||
| (Increase) decrease in interest receivable | ( | ( | |||||||||
| Increase (decrease) in interest payable | ( | ||||||||||
| Increase (decrease) in income taxes payable | ( | ||||||||||
| Other changes, net | ( | ||||||||||
| Net cash provided by (used in) operating activities | |||||||||||
| INVESTING ACTIVITIES: | |||||||||||
| Proceeds from sales of investment securities (A) | |||||||||||
| Proceeds from maturities/pay downs of investment securities (A) | |||||||||||
| Purchases of investment securities (A) | ( | ( | |||||||||
| Net (increase) decrease in loans | ( | ||||||||||
| Securities purchased under agreements to resell | ( | ( | |||||||||
| Repayments of securities purchased under agreements to resell | |||||||||||
| Purchases of premises and equipment | ( | ( | |||||||||
| Sales of premises and equipment | |||||||||||
| Net cash provided by (used in) investing activities | ( | ||||||||||
| FINANCING ACTIVITIES: | |||||||||||
| Net increase (decrease) in non-interest bearing, savings, interest checking and money market deposits | ( | ||||||||||
| Net increase (decrease) in certificates of deposit | ( | ||||||||||
| Net increase (decrease) in federal funds purchased and securities sold under agreements to repurchase | ( | ( | |||||||||
| Net increase (decrease) in other borrowings | |||||||||||
| Purchases of treasury stock | ( | ( | |||||||||
| Cash dividends paid on common stock and distributions to non-controlling interest | ( | ( | |||||||||
| Other, net | ( | ||||||||||
| Net cash provided by (used in) financing activities | ( | ( | |||||||||
| Increase (decrease) in cash, cash equivalents and restricted cash | ( | ||||||||||
| Cash, cash equivalents and restricted cash at beginning of year | |||||||||||
Cash, cash equivalents and restricted cash at September 30 | $ | $ | |||||||||
| Income tax payments, net | $ | $ | |||||||||
| Interest paid on deposits and borrowings | $ | $ | |||||||||
| Loans transferred to foreclosed real estate | $ | $ | |||||||||
(A) Available for sale debt securities, equity securities, and other securities.
See accompanying notes to consolidated financial statements.
Restricted cash is comprised of cash collateral posted by the Company to secure interest rate swap agreements. This balance is included in other assets in the consolidated balance sheets and totaled $112 thousand at September 30, 2025. The Company had $111 thousand in restricted cash at September 30, 2024.
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Commerce Bancshares, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2025 (Unaudited)
1. Principles of Consolidation and Presentation
The accompanying consolidated financial statements include the accounts of Commerce Bancshares, Inc. and all majority-owned subsidiaries (the Company). Most of the Company's operations are conducted by its subsidiary bank, Commerce Bank (the Bank). The consolidated financial statements in this report have not been audited by an independent registered public accounting firm, but in the opinion of management, all adjustments necessary to present fairly the financial position and the results of operations for the interim periods have been made. All such adjustments are of a normal recurring nature. All significant intercompany accounts and transactions have been eliminated. Certain reclassifications were made to 2024 data to conform to current year presentation. In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheets and revenues and expenses for the periods. Actual results could differ significantly from those estimates. Management has evaluated subsequent events for potential recognition or disclosure. The results of operations for the nine month period ended September 30, 2025 are not necessarily indicative of results to be attained for the full year or any other interim period.
The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (GAAP) for interim financial information and with the instructions to Form 10-Q adopted by the Securities and Exchange Commission. Accordingly, the financial statements do not include all of the information and footnotes required by GAAP for complete financial statements and should be read in conjunction with the Company's most recent Annual Report on Form 10-K, containing the latest audited consolidated financial statements and notes thereto.
2. Loans and Allowance for Credit Losses
Major classifications within the Company’s held for investment loan portfolio at September 30, 2025 and December 31, 2024 are as follows:
(In thousands) | September 30, 2025 | December 31, 2024 | |||||||||
| Commercial: | |||||||||||
| Business | $ | $ | |||||||||
| Real estate – construction and land | |||||||||||
| Real estate – business | |||||||||||
| Personal Banking: | |||||||||||
| Real estate – personal | |||||||||||
| Consumer | |||||||||||
| Revolving home equity | |||||||||||
| Consumer credit card | |||||||||||
| Overdrafts | |||||||||||
| Total loans | $ | $ | |||||||||
Accrued interest receivable totaled $73.7 million and $70.6 million at September 30, 2025 and December 31, 2024, respectively, and was included within other assets on the consolidated balance sheets. For the three months ended September 30, 2025, the Company wrote-off accrued interest by reversing interest income of $63 thousand and $1.5 million in the Commercial and Personal Banking portfolios, respectively. Similarly, for the nine months ended September 30, 2025, the Company wrote off accrued interest of $266 thousand and $4.8 million in the Commercial and Personal Banking portfolios, respectively. For the three months ended September 30, 2024, the Company reversed $56 thousand and $1.5 million in the Commercial and Personal Banking portfolios, respectively, and in the nine months ended September 30, 2024, reversed $491 thousand and $4.6 million in the Commercial and Personal Banking portfolios.
At September 30, 2025, loans of $3.5 billion were pledged at the Federal Home Loan Bank as collateral for borrowings and letters of credit obtained to secure public deposits. Additional loans of $2.7 billion were pledged at the Federal Reserve Bank as collateral for discount window borrowings.
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Allowance for credit losses
The allowance for credit losses is measured using an average historical loss model which incorporates relevant information about past events (including historical credit loss experience on loans with similar risk characteristics), current conditions, and reasonable and supportable forecasts that affect the collectability of the remaining cash flows over the contractual term of the loans. The allowance for credit losses is measured on a collective (pool) basis. Loans are aggregated into pools based on similar risk characteristics including borrower type, collateral type and expected credit loss patterns. Loans that do not share similar risk characteristics, primarily large loans on non-accrual status, are evaluated on an individual basis.
For loans evaluated for credit losses on a collective basis, average historical loss rates are calculated for each pool using the Company’s historical net charge-offs (combined charge-offs and recoveries by observable historical reporting period) and outstanding loan balances during a lookback period. Lookback periods can be different based on the individual pool and represent management’s credit expectations for the pool of loans over the remaining contractual life. In certain loan pools, if the Company’s own historical loss rate is not reflective of the loss expectations, the historical loss rate is augmented by industry and peer data. The calculated average net charge-off rate is then adjusted for current conditions and reasonable and supportable forecasts. These adjustments increase or decrease the average historical loss rate to reflect expectations of future losses given a single path economic forecast of key macroeconomic variables including GDP, disposable income, various interest rates, unemployment rate, consumer price index (CPI) inflation rate, housing price index (HPI), commercial real estate price index (CREPI) and market volatility. The adjustments are based on results from various regression models projecting the impact of the macroeconomic variables to loss rates. The forecast is used for a reasonable and supportable period before reverting back to historical averages using a straight-line method. The forecast-adjusted loss rate is applied to the amortized cost of loans over the remaining contractual lives, adjusted for expected prepayments. The contractual term excludes expected extensions (except for contractual extensions at the option of the customer), renewals and modifications. Credit cards and certain similar consumer lines of credit do not have stated maturities and therefore, for these loan classes, remaining contractual lives are determined by estimating future cash flows expected to be received from customers until payments have been fully allocated to outstanding balances. Additionally, the allowance for credit losses considers other qualitative factors not included in historical loss rates or macroeconomic forecast such as changes in portfolio composition, underwriting practices, or significant unique events or conditions.
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Key assumptions in the Company’s allowance for credit loss model include the economic forecast, the reasonable and supportable period, forecasted macro-economic variables, prepayment assumptions and qualitative factors applied for portfolio composition changes, underwriting practices, or significant unique events or conditions. The assumptions utilized in estimating the Company’s allowance for credit losses at September 30, 2025 and June 30, 2025 are discussed below.
| Key Assumption | September 30, 2025 | December 31, 2024 | ||||||
| Overall economic forecast | •The US economy faces significant downside risks, including a softer labor market •Includes an expected 25 basis point Federal Reserve rate cut in December and an additional three 25 basis point cuts in 2026 •Economy expected to expand by 2% in 2026 | •The United States economy will grow •Expansionary fiscal policy and less immigration cause the labor market to tighten, pushing the unemployment rate lower | ||||||
| Reasonable and supportable period and related reversion period | •Reasonable and supportable period of one year •Reversion to historical average loss rates within two quarters using a straight-line method | •Reasonable and supportable period of one year •Reversion to historical average loss rates within two quarters using a straight-line method | ||||||
| Forecasted macro-economic variables | •Unemployment rate of 4.4% during the supportable forecast period •Real GDP growth ranges from 1.6% to 2.2% •BBB corporate yield from 5.5% to 5.6% •Housing Price Index from 324.0 to 327.9 | •Unemployment rate ranges from 4.2% to 4.3% during the supportable forecast period •Real GDP growth ranges from 2.5% to 2.7% •BBB corporate yield from 5.2% to 5.3% •Housing Price Index from 324.8 to 335.4 | ||||||
| Prepayment assumptions | Commercial loans •5% for most loan pools Personal banking loans •Ranging from 8.2% to 23.8% for most loan pools •Consumer credit cards 66.8% | Commercial loans •5% for most loan pools Personal banking loans •Ranging from 8.9% to 23.1% for most loan pools •Consumer credit cards 66.5% | ||||||
| Qualitative factors | Added qualitative factors related to: •Changes in the composition of the loan portfolios •Certain industries experiencing stress or emerging concerns within the portfolio •Loans downgraded to special mention, substandard, or non-accrual status •Consumer credit card, auto, other vehicle and other consumer portfolios loss expectation adjustment •Certain portfolios where the model assumptions do not capture all identified loss risk | Added qualitative factors related to: •Changes in the composition of the loan portfolios •Certain industries experiencing stress or emerging concerns within the portfolio •Loans downgraded to special mention, substandard, or non-accrual status •Consumer auto portfolio •Certain portfolios where the model assumptions do not capture all identified loss risk | ||||||
The liability for unfunded lending commitments utilizes the same model as the allowance for credit losses on loans, however, the liability for unfunded lending commitments incorporates an assumption for the portion of unfunded commitments that are expected to be funded.
Sensitivity in the Allowance for Credit Loss model
The allowance for credit losses is an estimate that requires significant judgment including projections of the macro-economic environment. The forecasted macro-economic environment continuously changes which can cause fluctuations in the estimate of expected credit losses.
The current forecast includes projections on inflation, labor market trends, Federal Reserve monetary policy, and business growth. Economic, political, and social developments regionally, nationally, and even globally could significantly modify economic projections used in the estimation of the allowance for credit losses. Uncertainty around increased unemployment and other negative economic trends is heightened.
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.
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A summary of the activity in the allowance for credit losses on loans and the liability for unfunded lending commitments for the three and nine months ended September 30, 2025 and 2024, respectively, follows:
For the Three Months Ended September 30, 2025 | For the Nine Months Ended September 30, 2025 | ||||||||||||||||||||||
| (In thousands) | Commercial | Personal Banking | Total | Commercial | Personal Banking | Total | |||||||||||||||||
| ALLOWANCE FOR CREDIT LOSSES ON LOANS | |||||||||||||||||||||||
| Balance at beginning of period | $ | $ | $ | $ | $ | $ | |||||||||||||||||
| Provision for credit losses on loans | |||||||||||||||||||||||
| Deductions: | |||||||||||||||||||||||
| Loans charged off | |||||||||||||||||||||||
| Less recoveries on loans | |||||||||||||||||||||||
| Net loan charge-offs (recoveries) | |||||||||||||||||||||||
| Balance September 30, 2025 | $ | $ | $ | $ | $ | $ | |||||||||||||||||
| LIABILITY FOR UNFUNDED LENDING COMMITMENTS | |||||||||||||||||||||||
| Balance at beginning of period | $ | $ | $ | $ | $ | $ | |||||||||||||||||
| Provision for credit losses on unfunded lending commitments | ( | ( | ( | ( | |||||||||||||||||||
| Balance September 30, 2025 | $ | $ | $ | $ | $ | $ | |||||||||||||||||
| ALLOWANCE FOR CREDIT LOSSES ON LOANS AND LIABILITY FOR UNFUNDED LENDING COMMITMENTS | $ | $ | $ | $ | $ | $ | |||||||||||||||||
For the Three Months Ended September 30, 2024 | For the Nine Months Ended September 30, 2024 | ||||||||||||||||||||||
| (In thousands) | Commercial | Personal Banking | Total | Commercial | Personal Banking | Total | |||||||||||||||||
| ALLOWANCE FOR CREDIT LOSSES ON LOANS | |||||||||||||||||||||||
| Balance at beginning of period | $ | $ | $ | $ | $ | $ | |||||||||||||||||
| Provision for credit losses on loans | ( | ( | |||||||||||||||||||||
| Deductions: | |||||||||||||||||||||||
| Loans charged off | |||||||||||||||||||||||
| Less recoveries on loans | |||||||||||||||||||||||
| Net loan charge-offs (recoveries) | |||||||||||||||||||||||
| Balance September 30, 2024 | $ | $ | $ | $ | $ | $ | |||||||||||||||||
| LIABILITY FOR UNFUNDED LENDING COMMITMENTS | |||||||||||||||||||||||
| Balance at beginning of period | $ | $ | $ | $ | $ | $ | |||||||||||||||||
| Provision for credit losses on unfunded lending commitments | ( | ( | ( | ( | ( | ( | |||||||||||||||||
| Balance September 30, 2024 | $ | $ | $ | $ | $ | $ | |||||||||||||||||
| ALLOWANCE FOR CREDIT LOSSES ON LOANS AND LIABILITY FOR UNFUNDED LENDING COMMITMENTS | $ | $ | $ | $ | $ | $ | |||||||||||||||||
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Delinquent and non-accrual loans
The Company considers loans past due on the day following the contractual repayment date, if the contractual repayment was not received by the Company as of the end of the business day. The following table provides aging information on the Company’s past due and accruing loans, in addition to the balances of loans on non-accrual status, at September 30, 2025 and December 31, 2024.
(In thousands) | Current or Less Than 30 Days Past Due | 30 – 89 Days Past Due | 90 Days Past Due and Still Accruing | Non-accrual | Total | ||||||||||||
| September 30, 2025 | |||||||||||||||||
| Commercial: | |||||||||||||||||
| Business | $ | $ | $ | $ | $ | ||||||||||||
| Real estate – construction and land | |||||||||||||||||
| Real estate – business | |||||||||||||||||
| Personal Banking: | |||||||||||||||||
| Real estate – personal | |||||||||||||||||
| Consumer | |||||||||||||||||
| Revolving home equity | |||||||||||||||||
| Consumer credit card | |||||||||||||||||
| Overdrafts | |||||||||||||||||
| Total | $ | $ | $ | $ | $ | ||||||||||||
| December 31, 2024 | |||||||||||||||||
| Commercial: | |||||||||||||||||
| Business | $ | $ | $ | $ | $ | ||||||||||||
| Real estate – construction and land | |||||||||||||||||
| Real estate – business | |||||||||||||||||
| Personal Banking: | |||||||||||||||||
| Real estate – personal | |||||||||||||||||
| Consumer | |||||||||||||||||
| Revolving home equity | |||||||||||||||||
| Consumer credit card | |||||||||||||||||
| Overdrafts | |||||||||||||||||
| Total | $ | $ | $ | $ | $ | ||||||||||||
At September 30, 2025, the Company had no non-accrual loans that had no allowance for credit loss, compared to $2.0 million in non-accrual loans that had no allowance for credit loss at December 31, 2024. The Company did not record any interest income on non-accrual loans during the nine months ended September 30, 2025 and 2024, respectively.
Credit quality indicators
The following table provides information about the credit quality of the Commercial loan portfolio. The Company utilizes an internal risk rating system comprised of a series of grades to categorize loans according to perceived risk associated with the expectation of debt repayment based on borrower specific information including, but not limited to, current financial information, historical payment experience, industry information, collateral levels and collateral types. The “pass” category consists of a range of loan grades that reflect increasing, though still acceptable, risk. A loan is assigned the risk rating at origination and then monitored throughout the contractual term for possible risk rating changes. Movement of risk through the various grade levels in the “pass” category is monitored for early identification of credit deterioration. The “special mention” rating is applied to loans where the borrower exhibits negative financial trends due to borrower specific or systemic conditions that, if left uncorrected, threaten its capacity to meet its debt obligations. The borrower is believed to have sufficient financial flexibility to react to and resolve its negative financial situation. It is a transitional grade that is closely monitored for improvement or deterioration. The “substandard” rating is applied to loans where the borrower exhibits well-defined weaknesses that jeopardize its continued performance and are of a severity that the distinct possibility of default exists. Loans are placed on “non-accrual” when management does not expect to collect payments consistent with acceptable and agreed upon terms of repayment.
All loans are analyzed for risk rating updates annually. For larger loans, rating assessments may be more frequent if relevant information is obtained earlier through debt covenant monitoring or overall relationship management. Smaller loans
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are monitored as identified by the loan officer based on the risk profile of the individual borrower or if the loan becomes past due related to credit issues. Loans rated special mention, substandard or non-accrual are subject to quarterly review and monitoring processes. In addition to the regular monitoring performed by the lending personnel and credit committees, loans are subject to review by a credit review department which verifies the appropriateness of the risk ratings for the loans chosen as part of its risk-based review plan.
The risk category of loans in the Commercial portfolio as of September 30, 2025 and December 31, 2024 are as follows:
| Term Loans Amortized Cost Basis by Origination Year | ||||||||||||||||||||||||||
| (In thousands) | 2025 | 2024 | 2023 | 2022 | 2021 | Prior | Revolving Loans Amortized Cost Basis | Total | ||||||||||||||||||
| September 30, 2025 | ||||||||||||||||||||||||||
| Business | ||||||||||||||||||||||||||
| Risk Rating: | ||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Special mention | ||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||
| Non-accrual | ||||||||||||||||||||||||||
| Total Business: | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
Gross write-offs for the nine months ended September 30, 2025 | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Real estate-construction | ||||||||||||||||||||||||||
| Risk Rating: | ||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Special mention | ||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||
| Non-accrual | ||||||||||||||||||||||||||
| Total Real estate-construction: | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
Gross write-offs for the nine months ended September 30, 2025 | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Real estate-business | ||||||||||||||||||||||||||
| Risk Rating: | ||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Special mention | ||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||
| Non-accrual | ||||||||||||||||||||||||||
| Total Real estate-business: | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
Gross write-offs for the nine months ended September 30, 2025 | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Commercial loans | ||||||||||||||||||||||||||
| Risk Rating: | ||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Special mention | ||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||
| Non-accrual | ||||||||||||||||||||||||||
| Total Commercial loans: | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
Gross write-offs for the nine months ended September 30, 2025 | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
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| Term Loans Amortized Cost Basis by Origination Year | ||||||||||||||||||||||||||
| (In thousands) | 2024 | 2023 | 2022 | 2021 | 2020 | Prior | Revolving Loans Amortized Cost Basis | Total | ||||||||||||||||||
| December 31, 2024 | ||||||||||||||||||||||||||
| Business | ||||||||||||||||||||||||||
| Risk Rating: | ||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Special mention | ||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||
| Non-accrual | ||||||||||||||||||||||||||
| Total Business: | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Gross write-offs for the year ended December 31, 2024 | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Real estate-construction | ||||||||||||||||||||||||||
| Risk Rating: | ||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Special mention | ||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||
| Non-accrual | ||||||||||||||||||||||||||
| Total Real estate-construction: | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Gross write-offs for the year ended December 31, 2024 | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Real estate- business | ||||||||||||||||||||||||||
| Risk Rating: | ||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Special mention | ||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||
| Non-accrual | ||||||||||||||||||||||||||
| Total Real-estate business: | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Gross write-offs for the year ended December 31, 2024 | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Commercial loans | ||||||||||||||||||||||||||
| Risk Rating: | ||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Special mention | ||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||
| Non-accrual | ||||||||||||||||||||||||||
| Total Commercial loans: | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Gross write-offs for the year ended December 31, 2024 | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
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The credit quality of Personal Banking loans is monitored primarily on the basis of aging/delinquency, and this information is provided as of September 30, 2025 and December 31, 2024 below.
| Term Loans Amortized Cost Basis by Origination Year | ||||||||||||||||||||||||||
| (In thousands) | 2025 | 2024 | 2023 | 2022 | 2021 | Prior | Revolving Loans Amortized Cost Basis | Total | ||||||||||||||||||
| September 30, 2025 | ||||||||||||||||||||||||||
| Real estate-personal | ||||||||||||||||||||||||||
| Current to 90 days past due | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Over 90 days past due | ||||||||||||||||||||||||||
| Non-accrual | ||||||||||||||||||||||||||
| Total Real estate-personal: | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
Gross write-offs for the nine months ended September 30, 2025 | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Consumer | ||||||||||||||||||||||||||
| Current to 90 days past due | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Over 90 days past due | ||||||||||||||||||||||||||
| Total Consumer: | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
Gross write-offs for the nine months ended September 30, 2025 | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Revolving home equity | ||||||||||||||||||||||||||
| Current to 90 days past due | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Over 90 days past due | ||||||||||||||||||||||||||
| Total Revolving home equity: | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
Gross write-offs for the nine months ended September 30, 2025 | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Consumer credit card | ||||||||||||||||||||||||||
| Current to 90 days past due | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Over 90 days past due | ||||||||||||||||||||||||||
| Total Consumer credit card: | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
Gross write-offs for the nine months ended September 30, 2025 | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Overdrafts | ||||||||||||||||||||||||||
| Current to 90 days past due | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Total Overdrafts: | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
Gross write-offs for the nine months ended September 30, 2025 | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Personal banking loans | ||||||||||||||||||||||||||
| Current to 90 days past due | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Over 90 days past due | ||||||||||||||||||||||||||
| Non-accrual | ||||||||||||||||||||||||||
| Total Personal banking loans: | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
Gross write-offs for the nine months ended September 30, 2025 | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
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| Term Loans Amortized Cost Basis by Origination Year | ||||||||||||||||||||||||||
| (In thousands) | 2024 | 2023 | 2022 | 2021 | 2020 | Prior | Revolving Loans Amortized Cost Basis | Total | ||||||||||||||||||
| December 31, 2024 | ||||||||||||||||||||||||||
| Real estate-personal | ||||||||||||||||||||||||||
| Current to 90 days past due | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Over 90 days past due | ||||||||||||||||||||||||||
| Non-accrual | ||||||||||||||||||||||||||
| Total Real estate-personal: | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Gross write-offs for the year ended December 31, 2024 | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Consumer | ||||||||||||||||||||||||||
| Current to 90 days past due | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Over 90 days past due | ||||||||||||||||||||||||||
| Total Consumer: | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Gross write-offs for the year ended December 31, 2024 | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Revolving home equity | ||||||||||||||||||||||||||
| Current to 90 days past due | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Over 90 days past due | ||||||||||||||||||||||||||
| Non-accrual | $ | |||||||||||||||||||||||||
| Total Revolving home equity: | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Gross write-offs for the year ended December 31, 2024 | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Consumer credit card | ||||||||||||||||||||||||||
| Current to 90 days past due | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Over 90 days past due | ||||||||||||||||||||||||||
| Total Consumer credit card: | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Gross write-offs for the year ended December 31, 2024 | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Overdrafts | ||||||||||||||||||||||||||
| Current to 90 days past due | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Total Overdrafts: | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Gross write-offs for the year ended December 31, 2024 | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Personal banking loans | ||||||||||||||||||||||||||
| Current to 90 days past due | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Over 90 days past due | ||||||||||||||||||||||||||
| Non-accrual | ||||||||||||||||||||||||||
| Total Personal banking loans: | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Gross write-offs for the year ended December 31, 2024 | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
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Collateral-dependent loans
The Company's collateral-dependent loans are comprised of large loans on non-accrual status. The Company requires that collateral-dependent loans are either over-collateralized or carry collateral equal to the amortized cost of the loan. The following table presents the amortized cost basis of collateral-dependent loans as of September 30, 2025 and December 31, 2024.
| (In thousands) | Real Estate | Total | |||||||||||||||
| September 30, 2025 | |||||||||||||||||
| Commercial: | |||||||||||||||||
| Real estate - business | $ | $ | |||||||||||||||
| Total | $ | $ | |||||||||||||||
| December 31, 2024 | |||||||||||||||||
| Commercial: | |||||||||||||||||
| Real estate - business | $ | $ | |||||||||||||||
| Personal Banking: | |||||||||||||||||
| Revolving home equity | |||||||||||||||||
| Total | $ | $ | |||||||||||||||
Modifications for borrowers experiencing financial difficulty
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.
The Company's modifications of loans to borrowers experiencing financial difficulty are generally in the form of term extensions, repayment plans, payment deferrals, forbearance agreements, interest rate reductions, forgiveness of interest and/or fees, or any combination thereof. Commercial loans modified to borrowers experiencing financial difficulty are primarily loans that are substandard or non-accrual, where the maturity date was extended. Modifications on personal real estate loans are primarily those placed on forbearance plans, repayment plans, or deferral plans where monthly payments are suspended for a period of time or past due amounts are paid off over a certain period of time in the future or set up as a balloon payment at maturity. Modifications to certain credit card and other small consumer loans are often modified under debt counseling programs that can reduce the contractual rate or, in certain instances, forgive certain fees and interest charges. Other consumer loans modified to borrowers experiencing financial difficulty consist of various other workout arrangements with consumer customers.
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The following tables present the amortized cost at September 30, 2025 of loans that were modified during the three and nine months ended September 30, 2025 and the amortized cost at September 30, 2024 of loans that were modified during the three and nine months ended September 30, 2024.
| For the Three Months Ended September 30, 2025 | |||||||||||||||||||||||
(Dollars in thousands) | Term Extension | Payment Delay | Interest Rate Reduction | Total | % of Total Loan Category | ||||||||||||||||||
| September 30, 2025 | |||||||||||||||||||||||
| Commercial: | |||||||||||||||||||||||
| Business | $ | $ | $ | $ | % | ||||||||||||||||||
| Real estate – business | |||||||||||||||||||||||
| Personal Banking: | |||||||||||||||||||||||
| Real estate – personal | |||||||||||||||||||||||
| Consumer | |||||||||||||||||||||||
| Consumer credit card | |||||||||||||||||||||||
| Total | $ | $ | $ | $ | % | ||||||||||||||||||
| For the Nine Months Ended September 30, 2025 | |||||||||||||||||||||||
| September 30, 2025 | |||||||||||||||||||||||
| Commercial: | |||||||||||||||||||||||
| Business | $ | $ | $ | $ | % | ||||||||||||||||||
| Real estate – business | |||||||||||||||||||||||
| Personal Banking: | |||||||||||||||||||||||
| Real estate – personal | |||||||||||||||||||||||
| Consumer | |||||||||||||||||||||||
| Consumer credit card | |||||||||||||||||||||||
| Total | $ | $ | $ | $ | % | ||||||||||||||||||
| For the Three Months Ended September 30, 2024 | |||||||||||||||||||||||
(Dollars in thousands) | Term Extension | Payment Delay | Interest Rate Reduction | Other | Total | % of Total Loan Category | |||||||||||||||||
| September 30, 2024 | |||||||||||||||||||||||
| Commercial: | |||||||||||||||||||||||
| Business | $ | $ | $ | $ | $ | % | |||||||||||||||||
| Real estate – construction and land | |||||||||||||||||||||||
| Real estate – business | |||||||||||||||||||||||
| Personal Banking: | |||||||||||||||||||||||
| Real estate – personal | |||||||||||||||||||||||
| Consumer | |||||||||||||||||||||||
| Consumer credit card | |||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | % | |||||||||||||||||
| For the Nine Months Ended September 30, 2024 | |||||||||||||||||||||||
| September 30, 2024 | |||||||||||||||||||||||
| Commercial: | |||||||||||||||||||||||
| Business | $ | $ | $ | $ | $ | % | |||||||||||||||||
| Real estate – construction and land | |||||||||||||||||||||||
| Real estate – business | |||||||||||||||||||||||
| Personal Banking: | |||||||||||||||||||||||
| Real estate – personal | |||||||||||||||||||||||
| Consumer | |||||||||||||||||||||||
| Consumer credit card | |||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | % | |||||||||||||||||
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The estimate of lifetime expected losses utilized in the allowance for credit losses model is developed using average historical experience on loans with similar risk characteristics, which includes losses from modifications of loans to borrowers experiencing financial difficulty. As a result, a change to the allowance for credit losses is generally not recorded upon modification. For modifications to loans made to borrowers experiencing financial difficulty that are placed on non-accrual status, the Company determines the allowance for credit losses on an individual evaluation, using the same process that it utilizes for other loans on non-accrual status. Modifications made to commercial loans which are not on non-accrual status for borrowers experiencing financial difficulty are collectively evaluated based on internal risk rating, loan type, delinquency, historical experience, and current economic factors. Modifications made to borrowers experiencing financial difficulty for personal banking loans which are not on non-accrual status are collectively evaluated based on loan type, delinquency, historical experience, and current economic factors.
If a loan to a borrower experiencing financial difficulty is modified and subsequently deemed uncollectible, the allowance for credit losses continues to be based on individual evaluation, if that loan is already on non-accrual status. For those loans, the allowance for credit losses is estimated using discounted expected cash flows or the fair value of collateral. If an accruing loan made to a borrower experiencing financial difficulty is modified and subsequently deemed uncollectible, the loan's risk rating is downgraded to non-accrual status and the loan's related allowance for credit losses is determined based on individual evaluation, or if necessary, the loan is charged off and collection efforts begin.
The following tables summarize the financial impact of loan modifications and payment deferrals during the three and nine months ended September 30, 2025 and September 30, 2024.
| Term Extension | ||||||||
| Three Months Ended September 30, 2025 | Three Months Ended September 30, 2024 | |||||||
| Commercial: | ||||||||
| Business | Extended maturity by a weighted average of | Extended maturity by a weighted average of | ||||||
| Real estate – construction and land | — | Extended maturity by a weighted average of 2 months. | ||||||
| Real estate – business | Extended maturity by a weighted average of | Extended maturity by a weighted average of | ||||||
| Personal Banking: | ||||||||
| Real estate – personal | Extended maturity by a weighted average of | Extended maturity by a weighted average of | ||||||
| Nine Months Ended September 30, 2025 | Nine Months Ended September 30, 2024 | |||||||
| Commercial: | ||||||||
| Business | Extended maturity by a weighted average of | Extended maturity by a weighted average of | ||||||
| Real estate – construction and land | — | Extended maturity by a weighted average of 2 months. | ||||||
| Real estate – business | Extended maturity by a weighted average of | Extended maturity by a weighted average of | ||||||
| Personal Banking: | ||||||||
| Real estate – personal | Extended maturity by a weighted average of | Extended maturity by a weighted average of | ||||||
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| Payment Delay | ||||||||
| Three Months Ended September 30, 2025 | Three Months Ended September 30, 2024 | |||||||
| Personal Banking: | ||||||||
| Real estate – personal | Deferred certain payments by a weighted average of | Deferred certain payments by a weighted average of | ||||||
| Consumer | — | Deferred certain payments by a weighted average of | ||||||
| Nine Months Ended September 30, 2025 | Nine Months Ended September 30, 2024 | |||||||
| Personal Banking: | ||||||||
| Real estate – personal | Deferred certain payments by a weighted average of | Deferred certain payments by a weighted average of | ||||||
| Consumer | Deferred certain payments by a weighted average of | Deferred certain payments by a weighted average of | ||||||
| Interest Rate Reduction | ||||||||
| Three Months Ended September 30, 2025 | Three Months Ended September 30, 2024 | |||||||
| Personal Banking: | ||||||||
| Consumer | ||||||||
| Consumer credit card | ||||||||
| Nine Months Ended September 30, 2025 | Nine Months Ended September 30, 2024 | |||||||
| Personal Banking: | ||||||||
| Consumer | ||||||||
| Consumer credit card | ||||||||
The Company had commitments of $13.0 million and $14.9 million at September 30, 2025 and December 31, 2024, respectively, to lend additional funds to borrowers experiencing financial difficulty and for whom the Company has modified the terms of loans in the form of an interest rate reduction; an other-than-insignificant payment delay; forgiveness of principal, interest, or fees; or a term extension during the current reporting period.
The following tables provide the amortized cost basis at September 30, 2025 of loans to borrowers experiencing financial difficulty that had a payment default during the three and nine months ended September 30, 2025 and were modified within the 12 months preceding the payment default, as well as the amortized cost basis at September 30, 2024 of loans to borrowers experiencing financial difficulty that had a payment default during the three and nine months ended September 30, 2024 and had been modified within the 12 months preceding the payment default. For purposes of this disclosure, the Company considers "default" to mean 90 days or more past due as to interest or principal.
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| For the Three Months Ended September 30, 2025 | For the Nine Months Ended September 30, 2025 | ||||||||||||||||||||||||||||||||||||||||
(Dollars in thousands) | Term Extension | Payment Delay | Interest Rate Reduction | Interest/Fees Forgiven | Total | Term Extension | Payment Delay | Interest Rate Reduction | Interest/Fees Forgiven | Total | |||||||||||||||||||||||||||||||
| September 30, 2025 | |||||||||||||||||||||||||||||||||||||||||
| Commercial: | |||||||||||||||||||||||||||||||||||||||||
| Business | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||
| Real estate – business | |||||||||||||||||||||||||||||||||||||||||
| Personal Banking: | |||||||||||||||||||||||||||||||||||||||||
| Real estate – personal | |||||||||||||||||||||||||||||||||||||||||
| Consumer | |||||||||||||||||||||||||||||||||||||||||
| Consumer credit card | |||||||||||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||
| For the Three Months Ended September 30, 2024 | For the Nine Months Ended September 30, 2024 | ||||||||||||||||||||||||||||||||||||||||
(Dollars in thousands) | Term Extension | Payment Delay | Interest Rate Reduction | Interest/Fees Forgiven | Total | Term Extension | Payment Delay | Interest Rate Reduction | Interest/Fees Forgiven | Total | |||||||||||||||||||||||||||||||
| September 30, 2024 | |||||||||||||||||||||||||||||||||||||||||
| Commercial: | |||||||||||||||||||||||||||||||||||||||||
| Business | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||
| Personal Banking: | |||||||||||||||||||||||||||||||||||||||||
| Real estate – personal | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||
| Consumer | |||||||||||||||||||||||||||||||||||||||||
| Consumer credit card | |||||||||||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||
The following tables present the amortized cost basis at September 30, 2025 of loans to borrowers experiencing financial difficulty that had been modified within the previous 12 months as well as the amortized cost basis at September 30, 2024 of loans to borrowers experiencing financial difficulty that had been modified within the 12 months preceding September 30, 2024.
(In thousands) | Current | 30-89 Days Past Due | 90 Days Past Due | Total | ||||||||||
| September 30, 2025 | ||||||||||||||
| Commercial: | ||||||||||||||
| Business | $ | $ | $ | $ | ||||||||||
| Real estate – business | ||||||||||||||
| Personal Banking: | ||||||||||||||
| Real estate – personal | ||||||||||||||
| Consumer | ||||||||||||||
| Consumer credit card | ||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||
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(In thousands) | Current | 30-89 Days Past Due | 90 Days Past Due | Total | ||||||||||
| September 30, 2024 | ||||||||||||||
| Commercial: | ||||||||||||||
| Business | $ | $ | $ | $ | ||||||||||
| Real estate – construction and land | ||||||||||||||
| Real estate – business | ||||||||||||||
| Personal Banking: | ||||||||||||||
| Real estate – personal | ||||||||||||||
| Consumer | ||||||||||||||
| Consumer credit card | ||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||
Loans held for sale
The Company designates certain long-term fixed rate personal real estate loans as held for sale, and the Company has elected the fair value option for these loans. The election of the fair value option aligns the accounting for these loans with the related economic hedges discussed in Note 11. The loans are primarily sold to Federal Home Loan Mortgage Corporation (FHLMC) and Federal National Mortgage Association (FNMA). At September 30, 2025, the fair value of these loans was $2.2 million, and the unpaid principal balance was $2.1 million.
At September 30, 2025, none
Foreclosed real estate/repossessed assets
The Company’s holdings of foreclosed real estate totaled $790 thousand and $343 thousand at September 30, 2025 and December 31, 2024, respectively, and included in those amounts were $790 thousand and $343 thousand at September 30, 2025 and December 31, 2024, respectively, of foreclosed residential real estate properties held as a result of obtaining physical possession. Personal property acquired in repossession, generally autos, totaled $2.6 million and $2.2 million at September 30, 2025 and December 31, 2024. Upon acquisition, these assets are recorded at fair value less estimated selling costs at the date of foreclosure, establishing a new cost basis. They are subsequently carried at the lower of this cost basis or fair value less estimated selling costs.
3. Investment Securities
Investment securities consisted of the following at September 30, 2025 and December 31, 2024.
| (In thousands) | September 30, 2025 | December 31, 2024 | ||||||
| Available for sale debt securities | $ | $ | ||||||
| Trading debt securities | ||||||||
| Equity securities: | ||||||||
| Readily determinable fair value | ||||||||
| No readily determinable fair value | ||||||||
| Other: | ||||||||
| Federal Reserve Bank stock | ||||||||
| Federal Home Loan Bank stock | ||||||||
| Private equity investments | ||||||||
Total investment securities (1) | $ | $ | ||||||
Most of the Company’s investment securities are classified as available for sale debt securities, and this portfolio is discussed in more detail below. The Company’s equity securities are also discussed below. Other investment securities include Federal Reserve Bank (FRB) stock, Federal Home Loan Bank (FHLB) stock, and investments in portfolio concerns held by the Company’s private equity subsidiary. FRB stock and FHLB stock are held for liquidity management and regulatory purposes. Investment in FRB stock is based on the capital structure of the investing bank, and investment in FHLB stock is tied to the
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asset size of the borrowing bank and the level of borrowings from the FHLB. These holdings are carried at cost. The Company’s private equity investments are carried at estimated fair value.
Equity Securities
The Company’s equity securities portfolio includes mutual funds, common stock, and preferred stock with readily determinable fair values as well as equity securities with no readily determinable fair value. The Company has elected to measure equity securities with no readily determinable fair value at cost minus impairment, if any, plus or minus changes resulting from observable price changes for the identical or similar investment of the same issuer. At March 31, 2024, this portfolio included the Company’s 823,447 shares of Visa Inc. (“Visa”) Class B-1 common stock (formerly Class B common stock), which were held by Commerce Bancshares, Inc. The Company’s Visa Class B-1 shares had a carrying value of zero at March 31, 2024, as there had not been observable price changes in orderly transactions for identical or similar investments of the same issuer.
On April 8, 2024, Visa announced the commencement of a public offering to permit the exchange of its Class B-1 common stock for a combination of shares of its Class B-2 common stock and its Class C common stock (“Exchange Offer”). The Company tendered all of its Visa Class B-1 shares pursuant to the Exchange Offer. On May 3, 2024, the Exchange Offer closed, and in exchange for its 823,447 shares of Visa Class B-1 common stock, the Company received 411,723 shares of Visa Class B-2 common stock (which will be convertible under certain circumstances, as further described below, into Visa’s publicly traded Class A common stock at an initial rate of 1.5875 shares of Class A common for each share of Class B-2 common stock, subject to adjustment) and 163,404 shares of Visa Class C common stock which automatically convert into four shares of Visa's Class A common stock (subject to future adjustments for any stock splits, recapitalizations or similar transactions) upon any transfer to a person other than a Visa member or an affiliate of a Visa member.
As a condition of participating in the exchange, the Company entered into a Makewhole Agreement with Visa that provides for cash payments to Visa to the extent (if any) that future adjustments to the conversion ratio for the Visa Class B-2 common stock to Class A common stock cause such ratio to fall below zero. Changes to the conversion ratio occur when Visa deposits funds to a litigation escrow established by Visa to pay settlements for certain covered litigation that pre-dated Visa’s initial public offering, for which Visa has been effectively indemnified by Visa USA members through reductions to the conversion ratio for its Class B-1 common stock. The purpose of the Makewhole Agreement is to preserve the economic benefit of these adjustments to the Class B-1 conversion ratio for the benefit of Visa’s Class A and Class C common stockholders following the exchange. As further described in Visa’s related Issuer Tender Offer Statement on Schedule TO and Prospectus, each dated April 8, 2024, publicly filed with the U. S. Securities and Exchange Commission, both the Makewhole Agreement and the related escrow fund and transfer restrictions on Visa’s Class B-1 common stock and the new Class B-2 common stock will terminate whenever the covered litigation is ultimately resolved, at which future date outstanding shares of Visa Class B-2 common stock will be convertible into shares of its Class A common stock at the then-applicable conversion ratio.
As a result of the exchange, the Company elected the measurement alternative approach for its Visa Class C common stock and marked the stock to fair value, recording a gain based on the conversion privilege of the Visa Class C common stock and the closing price of Visa Class A common stock. During the second quarter of 2024, the Company sold 436 thousand shares of Visa Class A common stock at an average price of $274.91 , resulting in proceeds of $119.8 million. During the third quarter of 2024, the Company sold 218 thousand Visa Class A shares at an average price of $260.56 , resulting of proceeds of $56.8 million. The Company sold all of the Visa Class C shares during the second and third quarters of 2024. The Company’s Visa Class B-2 common stock will continue to be carried at cost of $0 as the Company elected the measurement alternative approach for these shares as well, and there are not observable price changes in orderly transactions for identical or similar investments of the same issuer for the Visa Class B-2 shares held by the Company.
Changes in equity investments with no readily determinable fair value for each period of 2024 were as follows:
| Three Months Ended September 30 | Nine Months Ended September 30 | ||||||||||||||||
| (In thousands) | 2024 | 2024 | |||||||||||||||
| Balance at beginning of period | $ | $ | |||||||||||||||
| Observable upward price adjustments | |||||||||||||||||
| Observable downward price adjustments | ( | ( | |||||||||||||||
| Impairment charges | |||||||||||||||||
| Sales of securities and other activity | ( | ( | |||||||||||||||
| Balance at end of period | $ | $ | |||||||||||||||
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Net gains and losses for the Company's equity securities portfolio for the nine months ended September 30, 2024 were as follows:
| Nine Months Ended September 30 | |||||||||||||||||
| (In thousands) | 2024 | ||||||||||||||||
| Net gains (losses) recognized during the period on equity securities | $ | ||||||||||||||||
| Less: Net (gains) losses recognized during the period on equity securities sold during the period | ( | ||||||||||||||||
| Net unrealized gains (losses) recognized during the reporting period on equity securities still held at the reporting date | $ | ||||||||||||||||
Available for sale debt securities portfolio
The majority of the Company’s investment portfolio is comprised of available for sale debt securities, which are carried at fair value with changes in fair value reported in accumulated other comprehensive income (AOCI). A summary of the available for sale debt securities by maturity groupings as of September 30, 2025 is shown below. The investment portfolio includes agency mortgage-backed securities, which are guaranteed by agencies such as FHLMC, FNMA, and Government National Mortgage Association (GNMA), in addition to non-agency mortgage-backed securities, which have no guarantee but are collateralized by commercial and residential mortgages. Also included are certain other asset-backed securities, which are primarily collateralized by credit cards, automobiles, student loans, and commercial loans. These securities differ from traditional debt securities primarily in that they may have uncertain maturity dates and are priced based on estimated prepayment rates on the underlying collateral.
| (In thousands) | Amortized Cost | Fair Value | ||||||
| U.S. government and federal agency obligations: | ||||||||
| Within 1 year | $ | $ | ||||||
| After 1 but within 5 years | ||||||||
| After 5 but within 10 years | ||||||||
| After 10 years | ||||||||
| Total U.S. government and federal agency obligations | ||||||||
| Government-sponsored enterprise obligations: | ||||||||
| After 5 but within 10 years | ||||||||
| After 10 years | ||||||||
| Total government-sponsored enterprise obligations | ||||||||
| State and municipal obligations: | ||||||||
| Within 1 year | ||||||||
| After 1 but within 5 years | ||||||||
| After 5 but within 10 years | ||||||||
| After 10 years | ||||||||
| Total state and municipal obligations | ||||||||
| Mortgage and asset-backed securities: | ||||||||
| Agency mortgage-backed securities | ||||||||
| Non-agency mortgage-backed securities | ||||||||
| Asset-backed securities | ||||||||
| Total mortgage and asset-backed securities | ||||||||
| Other debt securities: | ||||||||
| Within 1 year | ||||||||
| After 1 but within 5 years | ||||||||
| After 5 but within 10 years | ||||||||
| After 10 years | ||||||||
| Total other debt securities | ||||||||
| Total available for sale debt securities | $ | $ | ||||||
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Investments in U.S. government and federal agency obligations include U.S. Treasury inflation-protected securities, which totaled $419.3 million, at fair value, at September 30, 2025. Interest earned on these securities increases with inflation and decreases with deflation, as measured by the non-seasonally adjusted Consumer Price Index (CPI-U). At maturity, the principal paid is the greater of an inflation-adjusted principal or the original principal.
Allowance for credit losses on available for sale debt securities
Securities for which fair value is less than amortized cost are reviewed for impairment. Special emphasis is placed on securities whose credit rating has fallen below Baa3 (Moody's) or BBB- (Standard & Poor's), whose fair values have fallen more than 20 % below purchase price, or those which have been identified based on management’s judgment. These securities are placed on a watch list and cash flow analyses are prepared on an individual security basis. Certain securities are analyzed using a projected cash flow model, discounted to present value, and compared to the current amortized cost bases of the securities. The model uses input factors such as cash flow projections, contractual payments required, expected delinquency rates, credit support from other tranches, prepayment speeds, collateral loss severity rates (including loan to values), and various other information related to the underlying collateral. Securities not analyzed using the cash flow model are analyzed by reviewing credit ratings, credit support agreements, and industry knowledge to project future cash flows and any possible credit impairment.
At September 30, 2025, the fair value of securities on this watch list was $969.4 million compared to $1.6 billion at December 31, 2024. Almost all of the securities included on the Company's watch list in the current quarter were experiencing unrealized loss positions due to the increase in interest rates since their purchase and were analyzed outside of the cash flow model. At September 30, 2025, the securities on the Company's watch list that were not deemed to be solely related to increasing interest rates were securities backed by government-guaranteed student loans and are expected to perform as contractually required. As of September 30, 2025, the Company did not identify any securities for which a credit loss exists, and for the nine months ended September 30, 2025 and 2024, the Company did not recognize a credit loss expense on any available for sale debt securities.
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The table below summarizes debt securities available for sale in an unrealized loss position, aggregated by length of loss period, for which an allowance for credit losses has not been recorded at September 30, 2025 and December 31, 2024. Unrealized losses on these available for sale securities have not been recognized into income because after review, the securities were deemed not to be impaired. The unrealized losses on these securities are primarily attributable to changes in interest rates and current market conditions. At September 30, 2025, the Company does not intend to sell the securities, nor is it anticipated that it would be required to sell any of these securities at a loss.
| Less than 12 months | 12 months or longer | Total | ||||||||||||||||||||||||
(In thousands) | Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | ||||||||||||||||||||
| September 30, 2025 | ||||||||||||||||||||||||||
| U.S. government and federal agency obligations | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||
| Government-sponsored enterprise obligations | ||||||||||||||||||||||||||
| State and municipal obligations | ||||||||||||||||||||||||||
| Mortgage and asset-backed securities: | ||||||||||||||||||||||||||
| Agency mortgage-backed securities | ||||||||||||||||||||||||||
| Non-agency mortgage-backed securities | ||||||||||||||||||||||||||
| Asset-backed securities | ||||||||||||||||||||||||||
| Total mortgage and asset-backed securities | ||||||||||||||||||||||||||
| Other debt securities | ||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||
| December 31, 2024 | ||||||||||||||||||||||||||
| U.S. government and federal agency obligations | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||
| Government-sponsored enterprise obligations | ||||||||||||||||||||||||||
| State and municipal obligations | ||||||||||||||||||||||||||
| Mortgage and asset-backed securities: | ||||||||||||||||||||||||||
| Agency mortgage-backed securities | ||||||||||||||||||||||||||
| Non-agency mortgage-backed securities | ||||||||||||||||||||||||||
| Asset-backed securities | ||||||||||||||||||||||||||
| Total mortgage and asset-backed securities | ||||||||||||||||||||||||||
| Other debt securities | ||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||
The entire available for sale debt portfolio included $6.1 billion of securities that were in a loss position at September 30, 2025, compared to $8.1 billion at December 31, 2024. The total amount of unrealized loss on these securities was $731.4 million at September 30, 2025, a decrease of $263.2 million compared to the unrealized loss at December 31, 2024. Securities with significant unrealized losses are discussed in the "Allowance for credit losses on available for sale debt securities" section above.
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For debt securities classified as available for sale, the following table shows the amortized cost, fair value, and allowance for credit losses of securities available for sale at September 30, 2025 and December 31, 2024, and the corresponding amounts of gross unrealized gains and losses (pre-tax) in AOCI, by security type.
(In thousands) | Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Allowance for Credit Losses | Fair Value | ||||||||||||
| September 30, 2025 | |||||||||||||||||
| U.S. government and federal agency obligations | $ | $ | $ | ( | $ | $ | |||||||||||
| Government-sponsored enterprise obligations | ( | ||||||||||||||||
| State and municipal obligations | ( | ||||||||||||||||
| Mortgage and asset-backed securities: | |||||||||||||||||
| Agency mortgage-backed securities | ( | ||||||||||||||||
| Non-agency mortgage-backed securities | ( | ||||||||||||||||
| Asset-backed securities | ( | ||||||||||||||||
| Total mortgage and asset-backed securities | ( | ||||||||||||||||
| Other debt securities | ( | ||||||||||||||||
| Total | $ | $ | $ | ( | $ | $ | |||||||||||
| December 31, 2024 | |||||||||||||||||
| U.S. government and federal agency obligations | $ | $ | $ | ( | $ | $ | |||||||||||
| Government-sponsored enterprise obligations | ( | ||||||||||||||||
| State and municipal obligations | ( | ||||||||||||||||
| Mortgage and asset-backed securities: | |||||||||||||||||
| Agency mortgage-backed securities | ( | ||||||||||||||||
| Non-agency mortgage-backed securities | ( | ||||||||||||||||
| Asset-backed securities | ( | ||||||||||||||||
| Total mortgage and asset-backed securities | ( | ||||||||||||||||
| Other debt securities | ( | ||||||||||||||||
| Total | $ | $ | $ | ( | $ | $ | |||||||||||
The following table presents proceeds from sales of securities and the components of investment securities gains and losses which have been recognized in earnings.
| For the Nine Months Ended September 30 | ||||||||
| (In thousands) | 2025 | 2024 | ||||||
Proceeds from sales of securities: | ||||||||
Available for sale debt securities | $ | $ | ||||||
Equity securities | ||||||||
Other investments | ||||||||
Total proceeds | $ | $ | ||||||
| Investment securities gains (losses), net: | ||||||||
| Available for sale debt securities: | ||||||||
| Gains realized on sales | $ | $ | ||||||
| Losses realized on sales | ( | ( | ||||||
Equity securities: | ||||||||
| Gains (losses) on equity securities, net | ||||||||
Other: | ||||||||
Gains realized on sales | ||||||||
Losses realized on sales | ( | ( | ||||||
| Fair value adjustments, net | ||||||||
| Total investment securities gains (losses), net | $ | $ | ||||||
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Net gains on investment securities for the nine months ended September 30, 2025 were mainly comprised of net gains in fair value of $3.8 million on private equity investments and net gains of $1.7 million on equity investments. These gains were largely offset by net losses of $4.2 million on sales of available for sale securities.
During 2024, the Company executed a plan to to reposition a portion of its available for sale debt securities portfolio through the sale of securities with an amortized cost of $1.2 2.1 179.1 928.8 4.6
Pledged securities
At September 30, 2025, securities totaling $6.7 billion in fair value were pledged to secure public fund deposits, securities sold under agreements to repurchase, trust funds, and borrowings at the FRB and FHLB, compared to $6.9 billion at December 31, 2024. Excluding obligations of various government-sponsored enterprises such as FNMA, FHLB and FHLMC, no 10
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4. Goodwill and Other Intangible Assets
The following table presents information about the Company's intangible assets which have estimable useful lives.
| September 30, 2025 | December 31, 2024 | ||||||||||||||||||||||||||||
(In thousands) | Gross Carrying Amount | Accumulated Amortization | Valuation Allowance | Net Amount | Gross Carrying Amount | Accumulated Amortization | Valuation Allowance | Net Amount | |||||||||||||||||||||
| Amortizable intangible assets: | |||||||||||||||||||||||||||||
| Core deposit premium | $ | $ | ( | $ | $ | $ | $ | ( | $ | $ | |||||||||||||||||||
| Mortgage servicing rights | ( | ( | |||||||||||||||||||||||||||
| Total | $ | $ | ( | $ | $ | $ | $ | ( | $ | $ | |||||||||||||||||||
Aggregate amortization expense on intangible assets was $310 thousand and $318 thousand for the three month periods ended September 30, 2025 and 2024, respectively and was $954 thousand and $969 thousand for the nine months ended September 30, 2025 and 2024, respectively. The following table shows the estimated annual amortization expense for the next five fiscal years. This expense is based on existing asset balances and the interest rate environment as of September 30, 2025. The Company’s actual amortization expense in any given period may be different from the estimated amounts depending upon the acquisition of intangible assets, changes in mortgage interest rates, prepayment rates and other market conditions.
| (In thousands) | |||||
| 2025 | $ | ||||
| 2026 | |||||
| 2027 | |||||
| 2028 | |||||
| 2029 | |||||
Changes in the carrying amount of goodwill and other intangible assets for the nine month period ended September 30, 2025 are as follows:
| (In thousands) | Goodwill | Easement | Core Deposit Premium | Mortgage Servicing Rights | ||||||||||
Balance January 1, 2025 | $ | $ | $ | $ | ||||||||||
| Originations, net of disposals | ||||||||||||||
| Amortization | ( | ( | ||||||||||||
| Balance September 30, 2025 | $ | $ | $ | $ | ||||||||||
Goodwill allocated to the Company’s operating segments at September 30, 2025 and December 31, 2024 is shown below.
| (In thousands) | September 30, 2025 | December 31, 2024 | ||||||
| Consumer segment | $ | $ | ||||||
| Commercial segment | ||||||||
| Wealth segment | ||||||||
| Total goodwill | $ | $ | ||||||
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5. Guarantees
The Company, as a provider of financial services, routinely issues financial guarantees in the form of financial and performance standby letters of credit. Standby letters of credit are contingent commitments issued by the Company generally to guarantee the payment or performance obligation of a customer to a third party. While these represent a potential outlay by the Company, a significant amount of the commitments may expire without being drawn upon. The Company has recourse against the customer for any amount it is required to pay to a third party under a standby letter of credit. The letters of credit are subject to the same credit policies, underwriting standards and approval process as loans made by the Company. Most of the standby letters of credit are secured, and in the event of nonperformance by customers, the Company has rights to the underlying collateral, which could include commercial real estate, physical plant and property, inventory, receivables, cash and marketable securities.
Upon issuance of standby letters of credit, the Company recognizes a liability for the fair value of the obligation undertaken, which is estimated to be equivalent to the amount of fees received from the customer over the life of the agreement. At September 30, 2025, that net liability was $4.2 million, which will be accreted into income over the remaining life of the respective commitments. The contractual amount of these letters of credit, which represents the maximum potential future payments guaranteed by the Company, was $643.6 million at September 30, 2025.
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6. Leases
The Company has net investments in direct financing and sales-type leases to commercial, industrial, and tax-exempt entities. These leases are included within business loans on the Company's consolidated balance sheets. The Company primarily leases various types of equipment, trucks and trailers, and office furniture and fixtures. Lease agreements may include options for the lessee to renew or purchase the leased equipment at the end of the lease term. The Company has elected to adopt the lease component expedient in which the lease and nonlease components are combined into the total lease receivable. The Company also leases office space to third parties, and these leases are classified as operating leases. The leases may include options to renew or expand the leased space, and currently the leases have remaining terms of 1 month to 13 years.
The following table provides the components of lease income.
| For the Three Months Ended September 30 | For the Nine Months Ended September 30 | ||||||||||||||||
| (in thousands) | 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Direct financing and sales-type leases | $ | $ | $ | $ | |||||||||||||
Operating leases(a) | |||||||||||||||||
| Total lease income | $ | $ | $ | $ | |||||||||||||
(a) Includes rent from Tower Properties Company, a related party, of $0 and $20 thousand for the three month periods ended September 30, 2025 and 2024, respectively, and $0 and $58 thousand for the nine month periods ended September 30, 2025 and 2024, respectively. Tower Properties Company was no longer a lessee of the Company as of January 1, 2025.
7. Pension
The amount of net pension cost is shown in the table below:
| For the Three Months Ended September 30 | For the Nine Months Ended September 30 | ||||||||||||||||
| (In thousands) | 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Service cost | $ | $ | $ | $ | |||||||||||||
| Interest cost on projected benefit obligation | |||||||||||||||||
| Expected return on plan assets | ( | ( | ( | ( | |||||||||||||
| Amortization of prior service cost | ( | ( | |||||||||||||||
| Amortization of unrecognized net loss (gain) | |||||||||||||||||
| Net periodic pension cost | $ | $ | $ | $ | |||||||||||||
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8. Common Stock *
Presented below is a summary of the components used to calculate basic and diluted income per share. The Company applies the two-class method of computing income per share, as nonvested share-based awards that pay nonforfeitable common stock dividends are considered securities which participate in undistributed earnings with common stock. The two-class method requires the calculation of separate income per share amounts for the nonvested share-based awards and for common stock. Income per share attributable to common stock is shown in the table below. Nonvested share-based awards are further discussed in Note 13.
| For the Three Months Ended September 30 | For the Nine Months Ended September 30 | ||||||||||||||||
| (In thousands, except per share data) | 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Basic income per common share: | |||||||||||||||||
| Net income attributable to Commerce Bancshares, Inc. | $ | $ | $ | $ | |||||||||||||
| Less income allocated to nonvested restricted stock | |||||||||||||||||
| Net income allocated to common stock | $ | $ | $ | $ | |||||||||||||
| Weighted average common shares outstanding | |||||||||||||||||
| Basic income per common share | $ | $ | $ | $ | |||||||||||||
| Diluted income per common share: | |||||||||||||||||
| Net income attributable to Commerce Bancshares, Inc. | $ | $ | $ | $ | |||||||||||||
| Less income allocated to nonvested restricted stock | |||||||||||||||||
| Net income allocated to common stock | $ | $ | $ | $ | |||||||||||||
| Weighted average common shares outstanding | |||||||||||||||||
| Net effect of the assumed exercise of stock-based awards - based on the treasury stock method using the average market price for the respective periods | |||||||||||||||||
| Weighted average diluted common shares outstanding | |||||||||||||||||
| Diluted income per common share | $ | $ | $ | $ | |||||||||||||
Unexercised stock appreciation rights of 237 thousand and 378 thousand for the three month periods ended September 30, 2025 and 2024, respectively, and 230 thousand and 410 thousand for the six month periods ended September 30, 2025 and 2024, respectively, were excluded from the computation of diluted income per common share because their inclusion would have been anti-dilutive.
* All prior year share and per share amounts in this note have been restated for the 5% common stock dividend distributed in December 2024.
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9. Accumulated Other Comprehensive Income
The table below shows the activity and accumulated balances for components of other comprehensive income. Information about unrealized gains and losses on securities can be found in Note 3, and information about unrealized gains and losses on cash flow hedge derivatives is located in Note 11.
| Unrealized Gains (Losses) on Securities (1) | Pension Loss | Unrealized Gains (Losses) on Cash Flow Hedge Derivatives (2) | Total Accumulated Other Comprehensive Income (Loss) | |||||||||||||||||
| (In thousands) | ||||||||||||||||||||
Balance January 1, 2025 | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||
| Other comprehensive income (loss) before reclassifications to current earnings | ||||||||||||||||||||
| Amounts reclassified to current earnings from accumulated other comprehensive income | ( | ( | ||||||||||||||||||
| Current period other comprehensive income (loss), before tax | ( | |||||||||||||||||||
| Income tax (expense) benefit | ( | ( | ( | |||||||||||||||||
| Current period other comprehensive income (loss), net of tax | ( | |||||||||||||||||||
Balance September 30, 2025 | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||
Balance January 1, 2024 | $ | ( | $ | ( | $ | $ | ( | |||||||||||||
| Other comprehensive income (loss) before reclassifications to current earnings | ( | |||||||||||||||||||
| Amounts reclassified to current earnings from accumulated other comprehensive income | ( | |||||||||||||||||||
| Current period other comprehensive income (loss), before tax | ( | |||||||||||||||||||
| Income tax (expense) benefit | ( | ( | ( | |||||||||||||||||
| Current period other comprehensive income (loss), net of tax | ( | |||||||||||||||||||
Balance September 30, 2024 | $ | ( | $ | ( | $ | $ | ( | |||||||||||||
(1) The pre-tax amounts reclassified from accumulated other comprehensive income to current earnings are included in "investment securities gains (losses), net" in the consolidated statements of income.
(2) The pre-tax amounts reclassified from accumulated other comprehensive income to current earnings are included in "interest and fees on loans" in the consolidated statements of income.
10. Segments
The Company segregates financial information for use in assessing its performance and allocating resources among three operating segments: Consumer, Commercial and Wealth. The Consumer segment consists of various consumer loan and deposit products offered through its retail branch network of approximately 140 locations. This segment also includes residential mortgage, indirect and other consumer loan financing businesses, along with debit and credit card loan and fee businesses. The Commercial segment provides corporate lending (including the Small Business Banking product line within the branch network), leasing, and international services, along with business and governmental deposit products and commercial cash management services. This segment also includes both merchant and commercial bank card products as well as the Commercial Tradable Products division, which sells fixed income securities, underwrites municipal bonds, and provides securities safekeeping and accounting services to its business and correspondent bank customers. The Wealth segment provides traditional trust and estate planning, advisory and discretionary investment management, and brokerage services. This segment also provides various loan and deposit related services to its private banking customers.
The Company’s chief executive officer is its chief operating decision maker ("CODM"). The CODM is the primary individual in control of resource allocation, and the allocation determinations are made in consultation with the Company’s executive management committee, of which the CODM is a member. The Company’s CODM primarily utilizes net income before taxes to evaluate each segment’s performance and allocate resources (including employees, financial, or capital resources), primarily through the Company’s annual budgeting process and periodic segment performance reviews. To manage operations and make decisions regarding resource allocations, the CODM is regularly provided and reviews total non-interest expense at a consolidated level and total non-interest expense for each segment.
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The following table presents selected financial information by segment and reconciliations of combined segment totals to consolidated totals. There were no
(In thousands) | Consumer | Commercial | Wealth | Other/Elimination | Consolidated Totals | |||||||||||||||
| Three Months Ended September 30, 2025 | ||||||||||||||||||||
| Net interest income | $ | $ | $ | $ | ( | $ | ||||||||||||||
| Provision for credit losses | ( | ( | ( | ( | ||||||||||||||||
| Non-interest income | ||||||||||||||||||||
| Investment securities gains (losses), net | ||||||||||||||||||||
| Non-interest expense | ( | ( | ( | ( | ( | |||||||||||||||
| Income before income taxes | $ | $ | $ | $ | ( | $ | ||||||||||||||
| Nine Months Ended September 30, 2025 | ||||||||||||||||||||
| Net interest income | $ | $ | $ | $ | ( | $ | ||||||||||||||
| Provision for credit losses | ( | ( | ( | ( | ( | |||||||||||||||
| Non-interest income | ||||||||||||||||||||
| Investment securities gains (losses), net | ||||||||||||||||||||
| Non-interest expense | ( | ( | ( | ( | ( | |||||||||||||||
| Income before income taxes | $ | $ | $ | $ | ( | $ | ||||||||||||||
| Three Months Ended September 30, 2024 | ||||||||||||||||||||
| Net interest income | $ | $ | $ | $ | ( | $ | ||||||||||||||
| Provision for loan losses | ( | ( | ( | |||||||||||||||||
| Non-interest income | ||||||||||||||||||||
| Investment securities gains (losses), net | ||||||||||||||||||||
| Non-interest expense | ( | ( | ( | ( | ( | |||||||||||||||
| Income before income taxes | $ | $ | $ | $ | ( | $ | ||||||||||||||
| Nine Months Ended September 30, 2024 | ||||||||||||||||||||
| Net interest income | $ | $ | $ | $ | ( | $ | ||||||||||||||
| Provision for credit losses | ( | ( | ( | |||||||||||||||||
| Non-interest income | ||||||||||||||||||||
| Investment securities gains (losses), net | ||||||||||||||||||||
| Non-interest expense | ( | ( | ( | ( | ( | |||||||||||||||
| Income before income taxes | $ | $ | $ | $ | ( | $ | ||||||||||||||
Non-interest expense for the Consumer, Commercial, and Wealth segments above is primarily comprised of salaries, incentives, benefits, and allocated overhead costs for service and support. Non-interest expense for the segments also includes expense for data processing and software, occupancy, and professional and other services.
The information presented above was derived from the internal profitability reporting system used by management to monitor and manage the financial performance of the Company. This information is based on internal management accounting procedures and methods, which have been developed to reflect the underlying economics of the businesses. The methodologies are applied in connection with funds transfer pricing and assignment of overhead costs among segments. Funds transfer pricing was used in the determination of net interest income by assigning a standard cost (credit) for funds used (provided by) assets and liabilities based on their maturity, prepayment and/or repricing characteristics.
The segment activity, as shown above, includes both direct and allocated items. Amounts in the “Other/Elimination” column include activity not related to the segments, such as that relating to administrative functions, the investment securities portfolio, and the effect of certain expense allocations to the segments. The provision for credit losses in this category contains the difference between net loan charge-offs assigned directly to the segments and the recorded provision for credit loss expense. Included in this category’s net interest income are earnings of the investment portfolio, which are not allocated to a segment. Additionally, interest expense on the Company's brokered certificates of deposit is included in this column, as the Company's brokered certificates of deposit are not allocated to a segment.
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The performance measurement of the operating segments is based on the management structure of the Company and is not necessarily comparable with similar information for any other financial institution. The information is also not necessarily indicative of the segments' financial condition and results of operations if they were independent entities.
11. Derivative Instruments
The notional amounts of the Company’s derivative instruments are shown in the table below. These contractual amounts, along with other terms of the derivative, are used to determine amounts to be exchanged between counterparties and are not a measure of loss exposure. The Company's derivatives are not accounted for as accounting hedges except for the interest rate floors, as discussed below.
(In thousands) | September 30, 2025 | December 31, 2024 | ||||||
| Interest rate swaps | $ | $ | ||||||
| Interest rate floors | ||||||||
| Interest rate caps | ||||||||
| Credit risk participation agreements | ||||||||
| Foreign exchange contracts | ||||||||
Mortgage loan commitments | ||||||||
| Mortgage loan forward sale contracts | ||||||||
| Forward TBA contracts | ||||||||
| Total notional amount | $ | $ | ||||||
Interest rate swap contracts are sold to commercial customers who wish to modify their interest rate sensitivity. The customers are engaged in a variety of businesses, including real estate, manufacturing, retail product distribution, education, and retirement communities. These interest rate swap contracts with customers are offset by matching interest rate swap contracts purchased by the Company from other financial institutions (dealers). Contracts with dealers that require central clearing are novated to a clearing agency who becomes the Company's counterparty. Because of the matching terms of the offsetting contracts, in addition to collateral provisions which mitigate the impact of non-performance risk, changes in fair value subsequent to initial recognition have a minimal effect on earnings.
Many of the Company’s interest rate swap contracts with large financial institutions contain contingent features relating to debt ratings or capitalization levels. Under these provisions, if the Company’s debt rating falls below investment grade or if the Company ceases to be “well-capitalized” under risk-based capital guidelines, certain counterparties can require immediate and ongoing collateralization on interest rate swaps in net liability positions or instant settlement of the contracts. The Company maintains debt ratings and capital well above these minimum requirements.
| Strike Rate | Effective Date | Maturity Date | ||||||
| % | ||||||||
| % | ||||||||
| % | ||||||||
| % | ||||||||
The premium paid for the floors totaled $90.2 million. At September 30, 2025, the maximum length of time over which the Company is hedging its exposure to lower rates is approximately 5.8 years. These interest rate floors qualified and were designated as cash flow hedges and were assessed for effectiveness using regression analysis. The change in the fair value of these interest rate floors is recorded in AOCI, net of the amortization of the premiums paid, which are recorded against interest and fees on loans in the consolidated statements of income. As of September 30, 2025, net deferred losses on the interest rate floors totaled $21.3 million (pre-tax) and were recorded in AOCI in the consolidated balance sheet. As of September 30, 2025,
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it is expected that $11.6 million (pre-tax) interest rate floor premium amortization will be reclassified from AOCI into earnings over the next 12 months for the outstanding interest rate floors.
During the year ended December 31, 2020, the Company monetized three interest rate floors that were previously classified as cash flow hedges with a combined notional balance of $1.5 billion and an asset fair value of $163.2 million. As of September 30, 2025, the total realized gains on the monetized cash flow hedges remaining in AOCI was $13.8 million (pre-tax), which will be reclassified into interest income over the next 1.2 years. The estimated amount of net gains related to the cash flow hedges remaining in AOCI at September 30, 2025 that is expected to be reclassified into income within the next 12 months is $12.5 million.
The Company also contracts with other financial institutions, as a guarantor or beneficiary, to share credit risk associated with certain interest rate swaps through risk participation agreements. The Company’s risks and responsibilities as guarantor are further discussed in Note 5 on Guarantees. In addition, the Company enters into foreign exchange contracts, which are mainly comprised of contracts with customers to purchase or deliver specific foreign currencies at specific future dates.
Under its program to sell residential mortgage loans in the secondary market, the Company designates certain newly-originated residential mortgage loans as held for sale. Derivative instruments arising from this activity include mortgage loan commitments and forward loan sale contracts. Changes in the fair values of the loan commitments and funded loans prior to sale that are due to changes in interest rates are economically hedged with forward contracts to sell residential mortgage-backed securities in the to-be-announced (TBA) market. These forward TBA contracts are also considered to be derivatives and are settled in cash at the security settlement date.
The fair values of the Company's derivative instruments, whose notional amounts are listed above, are shown in the table below. Information about the valuation methods used to determine fair value is provided in Note 15 on Fair Value Measurements.
The Company's policy is to present its derivative assets and derivative liabilities on a gross basis on its consolidated balance sheets, and these are reported in other assets and other liabilities. In prior years, certain collateral posted to and from the Company's clearing counterparty has been applied to the fair values of the cleared swap. There was no reduction to positive or negative fair values of cleared swaps at September 30, 2025 and December 31, 2024.
| Asset Derivatives | Liability Derivatives | ||||||||||||||||
| Sept. 30, 2025 | Dec. 31, 2024 | Sept. 30, 2025 | Dec. 31, 2024 | ||||||||||||||
(In thousands) | Fair Value | Fair Value | |||||||||||||||
| Derivatives designated as hedging instruments: | |||||||||||||||||
| Interest rate floors | $ | $ | $ | $ | |||||||||||||
| Total derivatives designated as hedging instruments | $ | $ | $ | $ | |||||||||||||
| Derivative instruments not designated as hedging instruments: | |||||||||||||||||
| Interest rate swaps | $ | $ | $ | ( | $ | ( | |||||||||||
| Interest rate caps | ( | ( | |||||||||||||||
| Credit risk participation agreements | ( | ( | |||||||||||||||
| Foreign exchange contracts | ( | ( | |||||||||||||||
| Mortgage loan commitments | ( | ||||||||||||||||
| Mortgage loan forward sale contracts | |||||||||||||||||
| Forward TBA contracts | ( | ( | |||||||||||||||
| Total derivatives not designated as hedging instruments | $ | $ | $ | ( | $ | ( | |||||||||||
| Total | $ | $ | $ | ( | $ | ( | |||||||||||
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The Company made an election to exclude the initial premiums paid on the interest rate floors from the hedge effectiveness measurement. Those initial premiums are amortized over the periods between the premium payment month and the contract maturity month. The pre-tax effects of the gains and losses (both the included and excluded amounts for hedge effectiveness assessment) recognized in the other comprehensive income from the cash flow hedging instruments and the amounts reclassified from accumulated other comprehensive income into income (both included and excluded amounts for hedge effectiveness measurement) are shown in the table below.
Amount of Gain or (Loss) Recognized in OCI | Location of Gain (Loss) Reclassified from AOCI into Income | Amount of Gain (Loss) Reclassified from AOCI into Income | ||||||||||||||||||||||||
| (In thousands) | Total | Included Component | Excluded Component | Total | Included Component | Excluded Component | ||||||||||||||||||||
| For the Three Months Ended September 30, 2025 | ||||||||||||||||||||||||||
| Derivatives in cash flow hedging relationships: | ||||||||||||||||||||||||||
| Interest rate floors | $ | ( | $ | ( | $ | ( | Interest and fees on loans | $ | $ | $ | ( | |||||||||||||||
| Total | $ | ( | $ | ( | $ | ( | Total | $ | $ | $ | ( | |||||||||||||||
| For the Nine Months Ended September 30, 2025 | ||||||||||||||||||||||||||
| Derivatives in cash flow hedging relationships: | ||||||||||||||||||||||||||
| Interest rate floors | $ | $ | $ | ( | Interest and fees on loans | $ | $ | $ | ( | |||||||||||||||||
| Total | $ | $ | $ | ( | Total | $ | $ | $ | ( | |||||||||||||||||
For the Three Months Ended September 30, 2024 | ||||||||||||||||||||||||||
| Derivatives in cash flow hedging relationships: | ||||||||||||||||||||||||||
| Interest rate floors | $ | $ | $ | Interest and fees on loans | $ | $ | $ | ( | ||||||||||||||||||
| Total | $ | $ | $ | Total | $ | $ | $ | ( | ||||||||||||||||||
For the Nine Months Ended September 30, 2024 | ||||||||||||||||||||||||||
| Derivatives in cash flow hedging relationships: | ||||||||||||||||||||||||||
| Interest rate floors | $ | ( | $ | $ | ( | Interest and fees on loans | $ | $ | $ | ( | ||||||||||||||||
| Total | $ | ( | $ | $ | ( | Total | $ | $ | $ | ( | ||||||||||||||||
The gain and loss recognized through various derivative instruments on the consolidated statements of income are shown in the table below.
| Location of Gain or (Loss) Recognized in Consolidated Statements of Income | Amount of Gain or (Loss) Recognized in Income on Derivatives | |||||||||||||||||||
| For the Three Months Ended September 30 | For the Nine Months Ended September 30 | |||||||||||||||||||
| (In thousands) | 2025 | 2024 | 2025 | 2024 | ||||||||||||||||
| Derivative instruments: | ||||||||||||||||||||
| Interest rate swaps | Other non-interest income | $ | $ | $ | $ | |||||||||||||||
| Credit risk participation agreements | Other non-interest income | ( | ( | |||||||||||||||||
| Foreign exchange contracts | Other non-interest income | ( | ( | ( | ||||||||||||||||
| Mortgage loan commitments | Loan fees and sales | ( | ||||||||||||||||||
| Mortgage loan forward sale contracts | Loan fees and sales | ( | ||||||||||||||||||
| Forward TBA contracts | Loan fees and sales | ( | ( | ( | ( | |||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||||||
The following table shows the extent to which assets and liabilities relating to derivative instruments have been offset in the consolidated balance sheets. It also provides information about these instruments which are subject to an enforceable master netting arrangement, irrespective of whether they are offset, and the extent to which the instruments could potentially be offset. Also shown is collateral received or pledged in the form of other financial instruments, which is generally cash or marketable securities. The collateral amounts in this table are limited to the outstanding balances of the related asset or liability (after netting is applied); thus, amounts of excess collateral are not shown. Most of the derivatives in the following table were transacted under master netting arrangements that contain a conditional right of offset, such as close-out netting, upon default.
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While the Company is party to master netting arrangements with most of its swap derivative counterparties, the Company does not offset derivative assets and liabilities under these agreements on its consolidated balance sheets. Collateral exchanged between the Company and dealer bank counterparties is generally subject to thresholds and transfer minimums, and usually consists of marketable securities. By contract, these may be sold or re-pledged by the secured party until recalled at a subsequent valuation date by the pledging party. For those swap transactions requiring central clearing, the Company posts cash or securities to its clearing agent. Collateral positions are valued daily, and adjustments to amounts received and pledged by the Company are made as appropriate to maintain proper collateralization for these transactions. Swap derivative transactions with customers are generally secured by rights to non-financial collateral, such as real and personal property, which is not shown in the table below.
| Gross Amounts Not Offset in the Balance Sheet | ||||||||||||||||||||
| (In thousands) | Gross Amount Recognized | Gross Amounts Offset in the Balance Sheet | Net Amounts Presented in the Balance Sheet | Financial Instruments Available for Offset | Collateral Received/ Pledged | Net Amount | ||||||||||||||
| September 30, 2025 | ||||||||||||||||||||
| Assets: | ||||||||||||||||||||
Derivatives subject to master netting agreements | $ | $ | $ | $ | ( | $ | ( | $ | ||||||||||||
Derivatives not subject to master netting agreements | ||||||||||||||||||||
| Total derivatives | $ | $ | $ | |||||||||||||||||
| Liabilities: | ||||||||||||||||||||
Derivatives subject to master netting agreements | $ | $ | $ | $ | ( | $ | $ | |||||||||||||
Derivatives not subject to master netting agreements | ||||||||||||||||||||
| Total derivatives | $ | $ | $ | |||||||||||||||||
| December 31, 2024 | ||||||||||||||||||||
| Assets: | ||||||||||||||||||||
Derivatives subject to master netting agreements | $ | $ | $ | $ | ( | $ | ( | $ | ||||||||||||
Derivatives not subject to master netting agreements | ||||||||||||||||||||
| Total derivatives | $ | $ | $ | |||||||||||||||||
| Liabilities: | ||||||||||||||||||||
Derivatives subject to master netting agreements | $ | $ | $ | $ | ( | $ | $ | |||||||||||||
Derivatives not subject to master netting agreements | ||||||||||||||||||||
| Total derivatives | $ | $ | $ | |||||||||||||||||
12. Resale and Repurchase Agreements
The Company regularly enters into resale and repurchase agreement transactions with other financial institutions and with its own customers. Resale and repurchase agreements are agreements to purchase/sell securities subject to an obligation to resell/repurchase the same or similar securities. They are accounted for as secured lending and collateralized borrowing (e.g. financing transactions), not as true sales and purchases of the underlying collateral securities. Some of the resale and repurchase agreements were transacted under master netting arrangements that contain a conditional right of offset, such as close-out netting, upon default. The security collateral accepted or pledged in resale and repurchase agreements with other financial institutions may be sold or re-pledged by the secured party, but is usually delivered to and held by third party trustees. The Company generally retains custody of securities pledged for repurchase agreements with its customers.
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The following table shows the extent to which resale agreement assets and repurchase agreement liabilities with the same counterparty have been offset on the consolidated balance sheets, in addition to the extent to which they could potentially be offset. Also shown is collateral received or pledged, which consists of marketable securities. The collateral amounts in the table are limited to the outstanding balances of the related asset or liability (after offsetting is applied); thus amounts of excess collateral are not shown.
| Gross Amounts Not Offset in the Balance Sheet | ||||||||||||||||||||
| (In thousands) | Gross Amount Recognized | Gross Amounts Offset in the Balance Sheet | Net Amounts Presented in the Balance Sheet | Financial Instruments Available for Offset | Securities Collateral Received/Pledged | Unsecured Amount | ||||||||||||||
| September 30, 2025 | ||||||||||||||||||||
Total resale agreements, subject to master netting arrangements | $ | $ | $ | $ | $ | ( | $ | |||||||||||||
Total repurchase agreements, subject to master netting arrangements | ( | |||||||||||||||||||
| December 31, 2024 | ||||||||||||||||||||
Total resale agreements, subject to master netting arrangements | $ | $ | $ | $ | $ | ( | $ | |||||||||||||
Total repurchase agreements, subject to master netting arrangements | ( | |||||||||||||||||||
The table below shows the remaining contractual maturities of repurchase agreements outstanding at September 30, 2025 and December 31, 2024, in addition to the various types of marketable securities that have been pledged by the Company as collateral for these borrowings.
| Remaining Contractual Maturity of the Agreements | ||||||||||||||
| (In thousands) | Overnight and continuous | Up to 90 days | Greater than 90 days | Total | ||||||||||
| September 30, 2025 | ||||||||||||||
| Repurchase agreements, secured by: | ||||||||||||||
| U.S. government and federal agency obligations | $ | $ | $ | $ | ||||||||||
| Government-sponsored enterprise obligations | ||||||||||||||
| Agency mortgage-backed securities | ||||||||||||||
| Non-agency mortgage-backed securities | ||||||||||||||
| Asset-backed securities | ||||||||||||||
| Other debt securities | ||||||||||||||
| Total repurchase agreements, gross amount recognized | $ | $ | $ | $ | ||||||||||
| December 31, 2024 | ||||||||||||||
| Repurchase agreements, secured by: | ||||||||||||||
| U.S. government and federal agency obligations | $ | $ | $ | $ | ||||||||||
| Government-sponsored enterprise obligations | ||||||||||||||
| Agency mortgage-backed securities | ||||||||||||||
| Non-agency mortgage-backed securities | ||||||||||||||
| Asset-backed securities | ||||||||||||||
| Other debt securities | ||||||||||||||
| Total repurchase agreements, gross amount recognized | $ | $ | $ | $ | ||||||||||
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13. Stock-Based Compensation
The Company issues stock-based compensation in the form of nonvested restricted stock and stock appreciation rights (SARs). Historically, most of the awards have been issued during the first quarter of each year. The stock-based compensation expense charged against income was $4.4 million and $4.3 million in the three months ended September 30, 2025 and 2024 respectively, and $12.9 million and $12.7 million in the nine months ended September 30, 2025 and 2024, respectively.
Nonvested stock awards granted generally vest in 4 to 7 years and contain restrictions as to transferability, sale, pledging, or assigning, among others, prior to the end of the vesting period. Dividend and voting rights are conferred upon grant. A summary of the status of the Company’s nonvested share awards as of September 30, 2025, and changes during the nine month period then ended, is presented below.
| Shares | Weighted Average Grant Date Fair Value | |||||||
| Nonvested at January 1, 2025 | $ | |||||||
| Granted | ||||||||
| Vested | ( | |||||||
| Forfeited | ( | |||||||
| Nonvested at September 30, 2025 | $ | |||||||
SARs are granted with exercise prices equal to the market price of the Company’s stock at the date of grant. SARs vest ratably over 4 years of continuous service and have contractual terms of 10 years. All SARs must be settled in stock under provisions of the plan. In determining compensation cost, the Black-Scholes option-pricing model is used to estimate the fair value of SARs on date of grant. The current year per share average fair value and the model assumptions are shown in the table below.
| Weighted per share average fair value at grant date | $ | ||||
| Assumptions: | |||||
Dividend yield | % | ||||
Volatility | % | ||||
Risk-free interest rate | % | ||||
Expected term | |||||
A summary of SAR activity during the first nine months of 2025 is presented below.
(Dollars in thousands, except per share data) | Rights | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term | Aggregate Intrinsic Value | ||||||||||
| Outstanding at January 1, 2025 | $ | |||||||||||||
| Granted | ||||||||||||||
| Forfeited | ( | |||||||||||||
| Expired | ( | |||||||||||||
| Exercised | ( | |||||||||||||
Outstanding at September 30, 2025 | $ | $ | ||||||||||||
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14. Revenue from Contracts with Customers
Revenue from contracts with customers, Accounting Standard Codification 606 ("ASC 606"), requires revenue recognition for the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. For the nine months ended September 30, 2025, approximately 63 % of the Company’s total revenue was comprised of net interest income, which is not within the scope of this guidance. Of the remaining revenue, those items that were subject to this guidance mainly included fees for bank card, trust, deposit account services and consumer brokerage services.
The following table disaggregates revenue from contracts with customers by major product line.
| Three Months Ended September 30 | Nine Months Ended September 30 | ||||||||||||||||
| (In thousands) | 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Trust fees | $ | $ | $ | $ | |||||||||||||
| Bank card transaction fees | |||||||||||||||||
| Deposit account charges and other fees | |||||||||||||||||
| Consumer brokerage services | |||||||||||||||||
| Other non-interest income | |||||||||||||||||
| Total non-interest income from contracts with customers | |||||||||||||||||
Other non-interest income (1) | |||||||||||||||||
| Total non-interest income | $ | $ | $ | $ | |||||||||||||
(1) This revenue is not within the scope of ASC 606, and includes fees relating to bond trading activities, loan fees and sales, derivative instruments, standby letters of credit and various other transactions.
For bank card transaction fees, nearly all debit and credit card fees were earned in the Consumer segment, while corporate card and merchant fees were earned in the Commercial segment. The Consumer and Commercial segments contributed approximately 28 % and 71 %, respectively, of the Company's deposit account charge revenue. All trust fees and nearly all consumer brokerage services income were earned in the Wealth segment.
The following table presents the opening and closing receivable balances for the nine month periods ended September 30, 2025 and 2024 for the Company’s significant revenue from contracts with customers.
| (In thousands) | September 30, 2025 | December 31, 2024 | September 30, 2024 | December 31, 2023 | ||||||||||
| Bank card transaction fees | $ | $ | $ | $ | ||||||||||
| Trust fees | ||||||||||||||
| Deposit account charges and other fees | ||||||||||||||
| Consumer brokerage services | ||||||||||||||
For these revenue categories, none of the transaction price has been allocated to performance obligations that are unsatisfied as of the end of a reporting period.
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15. Fair Value Measurements
The Company uses fair value measurements to record fair value adjustments to certain financial and nonfinancial assets and liabilities and to determine fair value disclosures. Various financial instruments such as available for sale debt securities, equity securities, trading debt securities, certain investments relating to private equity activities, and derivatives are recorded at fair value on a recurring basis. Additionally, from time to time, the Company may be required to record at fair value other assets and liabilities on a nonrecurring basis, such as mortgage servicing rights and certain other investment securities. These nonrecurring fair value adjustments typically involve lower of cost or fair value accounting or write-downs of individual assets.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Depending on the nature of the asset or liability, the Company uses various valuation techniques and assumptions when estimating fair value. For accounting disclosure purposes, a three-level valuation hierarchy of fair value measurements has been established. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. The three levels are defined as follows:
•Level 1 – inputs to the valuation methodology are quoted prices for identical assets or liabilities in active markets.
•Level 2 – inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, and inputs that are observable for the assets or liabilities, either directly or indirectly (such as interest rates, yield curves, and prepayment speeds).
•Level 3 – inputs to the valuation methodology are unobservable and significant to the fair value. These may be internally developed, using the Company’s best information and assumptions that a market participant would consider.
The valuation methodologies for assets and liabilities measured at fair value on a recurring and non-recurring basis are described in the Fair Value Measurements note in the Company's 2024 Annual Report on Form 10-K. There have been no significant changes in these methodologies since then.
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Instruments Measured at Fair Value on a Recurring Basis
The table below presents the September 30, 2025 and December 31, 2024 carrying values of assets and liabilities measured at fair value on a recurring basis. There were no transfers among levels during the first nine months of 2025 or the year ended December 31, 2024.
| Fair Value Measurements Using | ||||||||||||||
| (In thousands) | Total Fair Value | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | ||||||||||
| September 30, 2025 | ||||||||||||||
| Assets: | ||||||||||||||
| Residential mortgage loans held for sale | $ | $ | $ | $ | ||||||||||
| Available for sale debt securities: | ||||||||||||||
| U.S. government and federal agency obligations | ||||||||||||||
| Government-sponsored enterprise obligations | ||||||||||||||
| State and municipal obligations | ||||||||||||||
| Agency mortgage-backed securities | ||||||||||||||
| Non-agency mortgage-backed securities | ||||||||||||||
| Asset-backed securities | ||||||||||||||
| Other debt securities | ||||||||||||||
| Trading debt securities | ||||||||||||||
| Equity securities | ||||||||||||||
| Private equity investments | ||||||||||||||
| Derivatives * | ||||||||||||||
| Assets held in trust for deferred compensation plan | ||||||||||||||
| Total assets | ||||||||||||||
| Liabilities: | ||||||||||||||
Derivatives * | ||||||||||||||
Liabilities held in trust for deferred compensation plan | ||||||||||||||
| Total liabilities | $ | $ | $ | $ | ||||||||||
| December 31, 2024 | ||||||||||||||
| Assets: | ||||||||||||||
| Residential mortgage loans held for sale | $ | $ | $ | $ | ||||||||||
| Available for sale debt securities: | ||||||||||||||
| U.S. government and federal agency obligations | ||||||||||||||
| Government-sponsored enterprise obligations | ||||||||||||||
| State and municipal obligations | ||||||||||||||
| Agency mortgage-backed securities | ||||||||||||||
| Non-agency mortgage-backed securities | ||||||||||||||
| Asset-backed securities | ||||||||||||||
| Other debt securities | ||||||||||||||
| Trading debt securities | ||||||||||||||
| Equity securities | ||||||||||||||
| Private equity investments | ||||||||||||||
| Derivatives * | ||||||||||||||
| Assets held in trust for deferred compensation plan | ||||||||||||||
| Total assets | ||||||||||||||
| Liabilities: | ||||||||||||||
Derivatives * | ||||||||||||||
Liabilities held in trust for deferred compensation plan | ||||||||||||||
| Total liabilities | $ | $ | $ | $ | ||||||||||
* The fair value of each class of derivative is shown in Note 11.
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The changes in the Company's Level 3 assets and liabilities measured at fair value on a recurring basis are summarized as follows:
Fair Value Measurements Using Significant Unobservable Inputs (Level 3) | ||||||||||||||
(In thousands) | State and Municipal Obligations | Private Equity Investments | Total | |||||||||||
| For the three months ended September 30, 2025 | ||||||||||||||
Balance June 30, 2025 | $ | $ | $ | |||||||||||
| Total gains (losses) realized/unrealized: | ||||||||||||||
| Included in earnings | ||||||||||||||
| Included in other comprehensive income * | ||||||||||||||
| Purchases of private equity investments | ||||||||||||||
| Sale/pay down of private equity investments | ( | ( | ||||||||||||
| Capitalized interest/dividends | ||||||||||||||
| Balance September 30, 2025 | $ | $ | $ | |||||||||||
Total gains (losses) for the three months included in earnings attributable to the change in unrealized gains or losses relating to assets still held at September 30, 2025 | $ | $ | $ | |||||||||||
*Total gains (losses) for the three months included in other comprehensive income attributable to the change in unrealized gains or losses relating to assets still held at September 30, 2025 | $ | $ | $ | |||||||||||
| For the nine months ended September 30, 2025 | ||||||||||||||
Balance January 1, 2025 | $ | $ | $ | |||||||||||
| Total gains (losses) realized/unrealized: | ||||||||||||||
| Included in earnings | ||||||||||||||
| Included in other comprehensive income * | ( | ( | ||||||||||||
| Discount accretion | ||||||||||||||
| Purchases of private equity investments | ||||||||||||||
| Sale/pay down of private equity investments | ( | ( | ||||||||||||
| Capitalized interest/dividends | ||||||||||||||
| Balance September 30, 2025 | $ | $ | $ | |||||||||||
Total gains (losses) for the nine months included in earnings attributable to the change in unrealized gains or losses relating to assets still held at September 30, 2025 | $ | $ | $ | |||||||||||
*Total gains (losses) for the nine months included in other comprehensive income attributable to the change in unrealized gains or losses relating to assets still held at September 30, 2025 | $ | ( | $ | $ | ( | |||||||||
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Fair Value Measurements Using Significant Unobservable Inputs (Level 3) | ||||||||||||||
(In thousands) | State and Municipal Obligations | Private Equity Investments | Total | |||||||||||
| For the three months ended September 30, 2024 | ||||||||||||||
Balance June 30, 2024 | $ | $ | $ | |||||||||||
| Total gains (losses) realized/unrealized: | ||||||||||||||
| Included in earnings | ||||||||||||||
| Included in other comprehensive income * | ( | ( | ||||||||||||
| Purchases of private equity investments | ||||||||||||||
| Sale/pay down of private equity investments | ( | ( | ||||||||||||
| Capitalized interest/dividends | ( | ( | ||||||||||||
| Balance at September 30, 2024 | $ | $ | $ | |||||||||||
Total gains (losses) for the three months included in earnings attributable to the change in unrealized gains or losses relating to assets still held at September 30, 2024 | $ | $ | $ | |||||||||||
*Total gains (losses) for the three months included in other comprehensive income attributable to the change in unrealized gains or losses relating to assets still held at September 30, 2024 | $ | ( | $ | $ | ( | |||||||||
| For the nine months ended September 30, 2024 | ||||||||||||||
Balance January 1, 2024 | $ | $ | $ | |||||||||||
| Total gains (losses) realized/unrealized: | ||||||||||||||
| Included in earnings | ||||||||||||||
| Included in other comprehensive income * | ||||||||||||||
| Discount accretion | ||||||||||||||
| Purchases of private equity investments | ||||||||||||||
| Sale/pay down of private equity investments | ( | ( | ||||||||||||
| Capitalized interest/dividends | ( | ( | ||||||||||||
| Balance at September 30, 2024 | $ | $ | $ | |||||||||||
Total gains (losses) for the nine months included in earnings attributable to the change in unrealized gains or losses relating to assets still held at September 30, 2024 | $ | $ | $ | |||||||||||
*Total gains (losses) for the nine months included in other comprehensive income attributable to the change in unrealized gains or losses relating to assets still held at September 30, 2024 | $ | $ | $ | |||||||||||
* Included in "net unrealized gains (losses) on available for sale debt securities" in the consolidated statements of comprehensive income.
Gains and losses included in earnings for the Company's Level 3 assets and liabilities in the previous table are reported in the following line items in the consolidated statements of income:
| (In thousands) | Investment Securities Gains (Losses), Net | |||||||||||||
For the three months ended September 30, 2025 | ||||||||||||||
| Total gains or losses included in earnings | $ | |||||||||||||
Change in unrealized gains or losses relating to assets still held at September 30, 2025 | $ | |||||||||||||
For the nine months ended September 30, 2025 | ||||||||||||||
| Total gains or losses included in earnings | $ | |||||||||||||
Change in unrealized gains or losses relating to assets still held at September 30, 2025 | $ | |||||||||||||
For the three months ended September 30, 2024 | ||||||||||||||
| Total gains or losses included in earnings | $ | |||||||||||||
Change in unrealized gains or losses relating to assets still held at September 30, 2024 | $ | |||||||||||||
For the nine months ended September 30, 2024 | ||||||||||||||
| Total gains or losses included in earnings | $ | |||||||||||||
Change in unrealized gains or losses relating to assets still held at September 30, 2024 | $ | |||||||||||||
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Level 3 Inputs
The Company's Level 3 measurements at September 30, 2025, which employ unobservable inputs that are readily quantifiable, pertain to investments in portfolio concerns held by the Company's private equity subsidiaries. Information about these inputs is presented in the table below.
| Quantitative Information about Level 3 Fair Value Measurements | Weighted | ||||||||||||||||||||||
| Valuation Technique | Unobservable Input | Range | Average* | ||||||||||||||||||||
| Private equity investments | EBITDA multiple | - | |||||||||||||||||||||
* Unobservable inputs were weighted by the relative fair value of the instruments.
Instruments Measured at Fair Value on a Nonrecurring Basis
For assets measured at fair value on a nonrecurring basis during the first nine months of 2025 and 2024, and still held as of September 30, 2025 and 2024, the following table provides the adjustments to fair value recognized during the respective periods, the level of valuation inputs used to determine each adjustment, and the carrying value of the related individual assets or portfolios at September 30, 2025 and 2024.
| Fair Value Measurements Using | |||||||||||||||||
| (In thousands) | Fair Value | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total Gains (Losses) Recognized During the Nine Months Ended September 30 | ||||||||||||
| September 30, 2025 | |||||||||||||||||
| Collateral dependent loans | $ | $ | $ | $ | $ | ( | |||||||||||
| Long-lived assets | ( | ||||||||||||||||
| September 30, 2024 | |||||||||||||||||
| Collateral dependent loans | $ | $ | $ | $ | $ | ( | |||||||||||
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16. Fair Value of Financial Instruments
The carrying amounts and estimated fair values of financial instruments held by the Company are set forth below. Fair value estimates are made at a specific point in time based on relevant market information. They do not reflect any premium or discount that could result from offering for sale at one time the Company’s entire holdings of a particular financial instrument. Because no market exists for many of the Company’s financial instruments, fair value estimates are based on judgments regarding future expected loss experience, risk characteristics and economic conditions. These estimates are subjective, involve uncertainties, and cannot be determined with precision. Changes in assumptions could significantly affect the estimates.
The estimated fair values of the Company’s financial instruments and the classification of their fair value measurement within the valuation hierarchy are as follows at September 30, 2025 and December 31, 2024:
| Carrying Amount | Estimated Fair Value at September 30, 2025 | |||||||||||||||||||
(In thousands) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||
| Financial Assets | ||||||||||||||||||||
| Loans: | ||||||||||||||||||||
| Business | $ | $ | $ | $ | $ | |||||||||||||||
Real estate - construction and land | ||||||||||||||||||||
Real estate - business | ||||||||||||||||||||
Real estate - personal | ||||||||||||||||||||
Consumer | ||||||||||||||||||||
| Revolving home equity | ||||||||||||||||||||
| Consumer credit card | ||||||||||||||||||||
Overdrafts | ||||||||||||||||||||
| Total loans | ||||||||||||||||||||
| Loans held for sale | ||||||||||||||||||||
| Investment securities | ||||||||||||||||||||
| Securities purchased under agreements to resell | ||||||||||||||||||||
| Interest earning deposits with banks | ||||||||||||||||||||
| Cash and due from banks | ||||||||||||||||||||
| Derivative instruments | ||||||||||||||||||||
| Assets held in trust for deferred compensation plan | ||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | |||||||||||||||
| Financial Liabilities | ||||||||||||||||||||
| Non-interest bearing deposits | $ | $ | $ | $ | $ | |||||||||||||||
| Savings, interest checking and money market deposits | ||||||||||||||||||||
| Certificates of deposit | ||||||||||||||||||||
| Federal funds purchased | ||||||||||||||||||||
| Securities sold under agreements to repurchase | ||||||||||||||||||||
| Other borrowings | ||||||||||||||||||||
| Derivative instruments | ||||||||||||||||||||
| Liabilities held in trust for deferred compensation plan | ||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | |||||||||||||||
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| Carrying Amount | Estimated Fair Value at December 31, 2024 | |||||||||||||||||||
(In thousands) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||
| Financial Assets | ||||||||||||||||||||
| Loans: | ||||||||||||||||||||
| Business | $ | $ | $ | $ | $ | |||||||||||||||
Real estate - construction and land | ||||||||||||||||||||
Real estate - business | ||||||||||||||||||||
Real estate - personal | ||||||||||||||||||||
Consumer | ||||||||||||||||||||
| Revolving home equity | ||||||||||||||||||||
| Consumer credit card | ||||||||||||||||||||
Overdrafts | ||||||||||||||||||||
| Total loans | ||||||||||||||||||||
| Loans held for sale | ||||||||||||||||||||
| Investment securities | ||||||||||||||||||||
| Federal funds sold | ||||||||||||||||||||
| Securities purchased under agreements to resell | ||||||||||||||||||||
| Interest earning deposits with banks | ||||||||||||||||||||
| Cash and due from banks | ||||||||||||||||||||
| Derivative instruments | ||||||||||||||||||||
| Assets held in trust for deferred compensation plan | ||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | |||||||||||||||
| Financial Liabilities | ||||||||||||||||||||
| Non-interest bearing deposits | $ | $ | $ | $ | $ | |||||||||||||||
| Savings, interest checking and money market deposits | ||||||||||||||||||||
| Certificates of deposit | ||||||||||||||||||||
| Federal funds purchased | ||||||||||||||||||||
| Securities sold under agreements to repurchase | ||||||||||||||||||||
| Derivative instruments | ||||||||||||||||||||
| Liabilities held in trust for deferred compensation plan | ||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | |||||||||||||||
17. Legal and Regulatory Proceedings
The Company has various legal proceedings pending at September 30, 2025, arising in the normal course of business. While some matters pending against the Company specify damages claimed by plaintiffs, others do not seek a specified amount of damages or are at early stages of the legal process. The Company records a loss accrual for all legal and regulatory matters for which it deems a loss is probable and can be reasonably estimated. Some matters, which are in the early stages, have not yet progressed to the point where a loss amount can be determined to be probable and estimable.
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Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
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 2024 Annual Report on Form 10-K. Results of operations for the three and nine months ended September 30, 2025 are not necessarily indicative of results to be attained for any other period.
Pending Acquisition
On June 16, 2025, the Company and FineMark Holdings, Inc. ("FineMark") announced they entered into a definitive merger agreement ("Merger Agreement") in which the Company will acquire all outstanding shares of FineMark in an all-stock transaction ("Merger"). Immediately after the merger, FineMark's wholly-owned subsidiary, FineMark National Bank & Trust will merge into the Bank ("Bank Merger"). FineMark is headquartered in Fort Meyers, Florida and has 13 banking offices in Florida, Arizona, and South Carolina. As of June 30, 2025, FineMark disclosed that it had total assets of $3.9 billion (including $2.6 billion in loans), $3.5 billion of total liabilities (including $3.1 billion in deposits), and $373 million of total shareholders' equity. Under the terms of the agreement, the shareholders of FineMark will receive a fixed exchange ratio of .690 shares of Company common stock for each share of FineMark common stock. The transaction is valued at approximately $585 million (with the price based on the closing price of the Company's common shares as of June 13, 2025, the last trading day before the public announcement of the merger). The transaction has been approved by the Federal Reserve Bank of Kansas City, the Missouri Division of Finance, and FineMark shareholders. The transaction remains subject to customary closing conditions and is anticipated to close on January 1, 2026.
In connection with the acquisition, the Company incurred merger-related expenses consisting predominantly of professional services for investment banking, legal, and other services associated with the pending transaction that totaled $3.1 million through the third quarter of 2025.
Forward-Looking Information
This report may contain "forward-looking statements" that are subject to risks and uncertainties and include information about possible or assumed future results of operations. Many possible events or factors could affect the future financial results and performance of the Company. This could cause results or performance to differ materially from those expressed in the forward-looking statements. Words such as "expects", "anticipates", "believes", "estimates", variations of such words and other similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in, or implied by, such forward-looking statements. Readers should not rely solely on the forward-looking statements and should consider all uncertainties and risks discussed throughout this report. Forward-looking statements speak only as of the date they are made. The Company does not undertake to update forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements are made or to reflect the occurrence of unanticipated events. Such possible events or factors include: changes in economic conditions in the Company's market area; changes in policies by regulatory agencies; governmental legislation and regulation; fluctuations in interest rates; changes in liquidity requirements; demand for loans in the Company's market area; changes in accounting and tax principles, estimates made on income taxes, competition with other entities that offer financial services, cybersecurity threats; risks related to the proposed Merger with FineMark including, among others, (i) failure to complete the Merger or unexpected delays related to the merger or either party’s inability to satisfy closing conditions required to complete the Merger, (ii) certain restrictions during the pendency of the proposed Merger that may impact the parties’ ability to pursue certain business opportunities or strategic transactions, (iii) diversion of management’s attention from ongoing business operations and opportunities, (iv) cost savings and any revenue synergies from the Merger may not be fully realized or may take longer than anticipated to be realized, (v) deposits attrition, customer or employee loss and/or revenue loss as a result of the proposed Merger, and (vi) expenses related to the proposed Merger being greater than expected; and such other factors as discussed in Part I Item 1A - "Risk Factors" and Part II Item 7 - "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's 2024 Annual Report on Form 10-K and Part II, Item 1A. - "Risk Factors" in this report.
Critical Accounting Estimates and Related Policies
The Company has identified certain policies as being critical because they require management to make particularly difficult, subjective and/or complex judgments about matters that are inherently uncertain and because of the likelihood that materially different amounts would be reported under different conditions or using different assumptions. These estimates and
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related policies are the Company's allowance for credit losses and fair value measurement policies. A discussion of these estimates and related policies can be found in the sections captioned "Critical Accounting Policies" and "Allowance for Credit Losses on Loans and Liability for Unfunded Lending Commitments" in Management's Discussion and Analysis of Financial Condition and Results of Operations included in the Company's 2024 Annual Report on Form 10-K. There have been no changes in the Company's application of critical accounting policies since December 31, 2024.
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Selected Financial Data
| Three Months Ended September 30 | Nine Months Ended September 30 | ||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||
| Per Share Data | |||||||||||||||||
| Net income per common share — basic | $ | 1.06 | $ | 1.02 | * | $ | 3.18 | $ | 2.87 | * | |||||||
| Net income per common share — diluted | 1.06 | 1.01 | * | 3.18 | 2.86 | * | |||||||||||
| Cash dividends on common stock | .275 | .257 | * | .825 | .771 | * | |||||||||||
| Book value per common share | 28.51 | 25.62 | * | ||||||||||||||
| Market price | 59.76 | 56.57 | * | ||||||||||||||
| Selected Ratios | |||||||||||||||||
| (Based on average balance sheets) | |||||||||||||||||
Loans to deposits (1) | 70.61 | % | 69.93 | % | 70.08 | % | 70.17 | % | |||||||||
| Non-interest bearing deposits to total deposits | 29.64 | 29.92 | 29.51 | 29.98 | |||||||||||||
Equity to loans (1) | 21.03 | 19.18 | 20.23 | 18.02 | |||||||||||||
| Equity to deposits | 14.85 | 13.41 | 14.18 | 12.65 | |||||||||||||
| Equity to total assets | 11.67 | 10.68 | 11.21 | 10.11 | |||||||||||||
| Return on total assets | 1.78 | 1.80 | 1.81 | 1.71 | |||||||||||||
| Return on equity | 15.26 | 16.81 | 16.15 | 16.92 | |||||||||||||
| (Based on end-of-period data) | |||||||||||||||||
Non-interest income to revenue (2) | 36.63 | 37.74 | 36.97 | 37.30 | |||||||||||||
Efficiency ratio (3) | 55.26 | 56.31 | 55.21 | 57.92 | |||||||||||||
| Tier I common risk-based capital ratio | 17.46 | 16.70 | |||||||||||||||
Tier I risk-based capital ratio | 17.46 | 16.70 | |||||||||||||||
| Total risk-based capital ratio | 18.26 | 17.47 | |||||||||||||||
Tangible common equity to tangible assets ratio (4) | 11.27 | 10.47 | |||||||||||||||
Tier I leverage ratio | 12.95 | 12.31 | |||||||||||||||
* Restated for the 5% stock dividend distributed in December 2024.
(1) Includes loans held for sale.
(2) Revenue includes net interest income and non-interest income.
(3) The efficiency ratio is calculated as non-interest expense (excluding intangibles amortization) as a percent of revenue.
(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 assists 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.
The following table is a reconciliation of the GAAP financial measures of total equity and total assets to the non-GAAP measures of total tangible common equity and total tangible assets.
| September 30 | ||||||||
| (Dollars in thousands) | 2025 | 2024 | ||||||
| Total equity | $ | 3,793,047 | $ | 3,453,539 | ||||
| Less non-controlling interest | 21,382 | 21,458 | ||||||
| Less goodwill | 146,539 | 146,539 | ||||||
| Less intangible assets* | 3,750 | 3,904 | ||||||
| Total tangible common equity (a) | $ | 3,621,376 | $ | 3,281,638 | ||||
| Total assets | $ | 32,288,688 | $ | 31,493,592 | ||||
| Less goodwill | 146,539 | 146,539 | ||||||
| Less intangible assets* | 3,750 | 3,904 | ||||||
| Total tangible assets (b) | $ | 32,138,399 | $ | 31,343,149 | ||||
| Tangible common equity to tangible assets ratio (a)/(b) | 11.27 | % | 10.47 | % | ||||
* Intangible assets other than mortgage servicing rights.
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Results of Operations
Summary
| Three Months Ended September 30 | Nine Months Ended September 30 | ||||||||||||||||||||||||||||||||||
| (Dollars in thousands) | 2025 | 2024 | % change | 2025 | 2024 | % change | |||||||||||||||||||||||||||||
| Net interest income (expense) | $ | 279,457 | $ | 262,351 | 6.5 | % | $ | 828,706 | $ | 773,599 | 7.1 | % | |||||||||||||||||||||||
| Provision for credit losses | (20,061) | (9,140) | 119.5 | (40,145) | (19,395) | 107.0 | |||||||||||||||||||||||||||||
| Non-interest income | 161,511 | 159,025 | 1.6 | 486,073 | 460,117 | 5.6 | |||||||||||||||||||||||||||||
| Investment securities gains (losses), net | 7,885 | 3,872 | N.M. | 731 | 6,846 | (89.3) | |||||||||||||||||||||||||||||
| Non-interest expense | (244,018) | (237,600) | 2.7 | (726,831) | (715,511) | 1.6 | |||||||||||||||||||||||||||||
| Income taxes | (41,152) | (38,245) | 7.6 | (120,516) | (108,499) | 11.1 | |||||||||||||||||||||||||||||
| Non-controlling interest income (expense) | (2,104) | (2,256) | (6.7) | (2,429) | (6,934) | (65.0) | |||||||||||||||||||||||||||||
| Net income attributable to Commerce Bancshares, Inc. | $ | 141,518 | $ | 138,007 | 2.5 | % | $ | 425,589 | $ | 390,223 | 9.1 | % | |||||||||||||||||||||||
For the quarter ended September 30, 2025, net income attributable to Commerce Bancshares, Inc. (net income) amounted to $141.5 million, an increase of $3.5 million, or 2.5%, compared to the third quarter of the previous year. For the current quarter, the annualized return on average assets was 1.78%, the annualized return on average equity was 15.26%, and the efficiency ratio was 55.26%. Diluted earnings per common share was $1.06 per share in the current quarter, an increase of 5.0% compared to $1.01 per share in the third quarter of 2024, and decreased 7.0% compared to $1.14 per share in the previous quarter.
Compared to the third quarter of last year, net interest income increased $17.1 million, or 6.5%, mainly due to increases in interest income on investment securities and securities purchased under agreements to resell ("resale agreements") of $11.8 million and $4.4 million, respectively, partly offset by a decrease in interest income on loans of $6.2 million. Interest expense on deposits and interest expense on borrowings also decreased $10.9 million and $4.2 million, respectively. The provision for credit losses increased $10.9 million compared to the same quarter in the prior year. Non-interest income increased $2.5 million, or 1.6%, compared to the third quarter of 2024, mainly due to increases in trust fees, brokerage fees and deposit account fees of $3.7 million, $2.1 million, and $2.0 million, respectively. These increases were partly offset by a decrease in bankcard fee income and a decrease in capital market fees of $2.0 million and $857 thousand, respectively. Net gains on investment securities totaled $7.9 million in the current quarter compared to net gains of $3.9 million in the same quarter of last year. Securities gains in the current quarter primarily resulted from net gains in fair value of $8.0 million recorded on private equity investments. Non-interest expense increased $6.4 million, or 2.7%, over the third quarter of 2024, mainly due to higher salaries expense, professional and other services expense, and data processing and software expense of $4.3 million, $2.5 million, and $1.2 million, respectively, partly offset by non-recurring litigation settlement expense during the third quarter of the prior year.
Net income for the first nine months of 2025 totaled $425.6 million, an increase of $35.4 million, or 9.1% from the same period last year. Diluted earnings per common share was $3.18, an increase of 11.2% compared to $2.86 per share in the same period last year. For the first nine months of 2025, the annualized return on average assets was 1.81%, the annualized return on average equity was 16.15% and the efficiency ratio was 55.21%. Net interest income increased $55.1 million, or 7.1%, over the same period last year. This growth was largely due to increases in interest income on investment securities and securities purchased under agreements to resell ("resale agreements") of $31.5 million and $16.2 million, respectively, partly offset by a decrease in interest income on loans of $23.7 million. Interest expense on deposits and interest expense on borrowings also decreased $31.2 million and $14.0 million, respectively, over the same period last year. The provision for credit losses was $40.1 million for the first nine months of 2025, compared to a provision of $19.4 million in the same period last year. Non-interest income increased $26.0 million, or 5.6%, from the first nine months of last year largely due to increases in trust fees, deposit fees, and brokerage fees of $12.5 million, $5.4 million, and $3.4 million, respectively. Non-interest expense increased $11.3 million, or 1.6%, over the first nine months of last year mainly due to increases in salaries and benefits expense and professional and other services expense of $11.5 million and $8.2 million, respectively, partly offset by non-recurring litigation settlement expense of $10 million and non-recurring charitable donations of $5.0 million during the prior year.
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Net Interest Income
The following table summarizes the changes in net interest income on a fully taxable-equivalent basis, by major category of interest earning assets and interest bearing liabilities, identifying changes related to volumes and rates. Changes not solely due to volume or rate are allocated to rate.
Analysis of Changes in Net Interest Income
| Three Months Ended September 30, 2025 vs. 2024 | Nine Months Ended September 30, 2025 vs. 2024 | ||||||||||||||||||||||
| Change due to | Change due to | ||||||||||||||||||||||
| (In thousands) | Average Volume | Average Rate | Total | Average Volume | Average Rate | Total | |||||||||||||||||
| Interest income, fully taxable equivalent basis: | |||||||||||||||||||||||
| Loans: | |||||||||||||||||||||||
| Business | $ | 4,411 | $ | (7,064) | $ | (2,653) | $ | 12,448 | $ | (18,909) | $ | (6,461) | |||||||||||
| Real estate - construction and land | (76) | (3,694) | (3,770) | (2,120) | (11,129) | (13,249) | |||||||||||||||||
| Real estate - business | 2,134 | (3,229) | (1,095) | 1,606 | (10,178) | (8,572) | |||||||||||||||||
| Real estate - personal | 128 | 1,979 | 2,107 | 312 | 6,272 | 6,584 | |||||||||||||||||
| Consumer | 521 | (1,078) | (557) | 858 | (1,311) | (453) | |||||||||||||||||
| Revolving home equity | 485 | 245 | 730 | 1,872 | (417) | 1,455 | |||||||||||||||||
| Consumer credit card | 139 | (1,077) | (938) | 300 | (3,125) | (2,825) | |||||||||||||||||
| Overdrafts | — | — | — | — | — | — | |||||||||||||||||
| Total interest on loans | 7,742 | (13,918) | (6,176) | 15,276 | (38,797) | (23,521) | |||||||||||||||||
| Loans held for sale | (6) | 3 | (3) | (50) | 24 | (26) | |||||||||||||||||
| Investment securities: | |||||||||||||||||||||||
| U.S. government and federal agency securities | 7,461 | 2,608 | 10,069 | 36,990 | 7,694 | 44,684 | |||||||||||||||||
| Government-sponsored enterprise obligations | (3) | (2) | (5) | (9) | (3) | (12) | |||||||||||||||||
| State and municipal obligations | (509) | 93 | (416) | (4,539) | 343 | (4,196) | |||||||||||||||||
| Mortgage-backed securities | (3,052) | 669 | (2,383) | (13,724) | (851) | (14,575) | |||||||||||||||||
| Asset-backed securities | (394) | 3,850 | 3,456 | (4,285) | 13,088 | 8,803 | |||||||||||||||||
| Other securities | (350) | 1,375 | 1,025 | (2,476) | (942) | (3,418) | |||||||||||||||||
| Total interest on investment securities | 3,153 | 8,593 | 11,746 | 11,957 | 19,329 | 31,286 | |||||||||||||||||
| Federal funds sold | — | — | — | 1 | (7) | (6) | |||||||||||||||||
| Securities purchased under agreements to resell | 3,337 | 1,026 | 4,363 | 10,102 | 6,140 | 16,242 | |||||||||||||||||
| Interest earning deposits with banks | (1,954) | (5,913) | (7,867) | 3,278 | (17,322) | (14,044) | |||||||||||||||||
| Total interest income | 12,272 | (10,209) | 2,063 | 40,564 | (30,633) | 9,931 | |||||||||||||||||
| Interest expense: | |||||||||||||||||||||||
| Deposits: | |||||||||||||||||||||||
| Savings | (4) | (54) | (58) | (13) | (101) | (114) | |||||||||||||||||
| Interest checking and money market | 3,089 | (7,851) | (4,762) | 11,030 | (23,907) | (12,877) | |||||||||||||||||
| Certificates of deposit of less than $100,000 | (437) | (2,299) | (2,736) | 182 | (6,255) | (6,073) | |||||||||||||||||
| Certificates of deposit of $100,000 and over | (118) | (3,227) | (3,345) | (3,472) | (8,628) | (12,100) | |||||||||||||||||
| Total interest on deposits | 2,530 | (13,431) | (10,901) | 7,727 | (38,891) | (31,164) | |||||||||||||||||
| Federal funds purchased | (1,031) | (333) | (1,364) | (5,535) | (1,017) | (6,552) | |||||||||||||||||
| Securities sold under agreements to repurchase | 1,506 | (4,312) | (2,806) | 4,279 | (11,739) | (7,460) | |||||||||||||||||
| Other borrowings | 14 | (12) | 2 | 25 | (4) | 21 | |||||||||||||||||
| Total interest expense | 3,019 | (18,088) | (15,069) | 6,496 | $ | (51,651) | $ | (45,155) | |||||||||||||||
| Net interest income, fully taxable-equivalent basis | $ | 9,253 | $ | 7,879 | $ | 17,132 | $ | 34,068 | $ | 21,018 | $ | 55,086 | |||||||||||
Net interest income in the third quarter of 2025 was $279.5 million, an increase of $17.1 million over the third quarter of 2024. On a fully taxable-equivalent (FTE) basis, net interest income totaled $281.8 million in the third quarter of 2025, up $17.1 million over the same period last year and down $658 thousand from the previous quarter. The increase in net interest
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income compared to the third quarter of 2024 was mainly due to higher interest income earned on investment securities (FTE) of $11.7 million and lower deposit interest expense of $10.9 million, partly offset by lower interest income earned on loans (FTE) of $6.1 million and deposits at the Federal Reserve of $7.9 million. The increase in total interest earned on investment securities (FTE) was mainly the result of higher average balances and rates earned on U.S. government and federal agency securities and higher average rates earned on asset-backed securities. The decrease in deposit interest expense was mainly due to lower average rates paid, while the decrease in interest earned on deposits at the Federal Reserve was mainly due to lower rates earned. Interest income earned on loans (FTE) decreased mainly due to lower average rates, partly offset by higher average balances. The Company's net yield on earning assets (FTE) was 3.64% in the current quarter compared to 3.50% in the third quarter of 2024.
Total interest income (FTE) increased $2.1 million over the third quarter of 2024. Interest income on loans (FTE) was $265.6 million during the third quarter of 2025, a decrease of $6.2 million, or 2.3%, from the same quarter last year. The decrease in loan interest income from the same quarter of last year was primarily due to a decline of 33 basis points in the average rate earned, partly offset by growth of $468.5 million, or 2.8%, in average loan balances. Most of the decrease in interest income occurred in the construction and land, business and business real estate loan categories. The largest decrease to interest income occurred in construction and land loan interest, which declined $3.8 million due to a 107 basis point decrease in the average rate earned. Business loan interest income declined $2.7 million due to a 45 basis point decrease in the average rate earned, partly offset by higher average balances of $263.2 million, or 4.4%. Business real estate loan interest income decreased $1.1 million due to a decrease of 36 basis points in the average rate earned, partly offset by higher average balances of $134.8 million, or 3.8%. Consumer credit card loan interest income declined $938 thousand mainly due to an 80 basis point decrease in the average rate earned. These decreases in interest income were partly offset by an increase in personal real estate loan interest income of $2.1 million mainly due to a 24 basis point increase in the average rate earned.
Interest income on investment securities (FTE) was $75.0 million during the third quarter of 2025, which was an increase of $11.7 million over the same quarter last year. The increase in interest income occurred mainly in interest earned on U.S. government and federal agency securities, which grew $10.1 million due to an $804.3 million increase in average balances and a 38 basis point increase 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), increased $1.6 million over the same quarter last year. Interest income earned on asset-backed securities grew $3.5 million due to a 103 basis point increase in the average rate earned, partly offset by a decrease in average balances of $58.8 million, or 3.9%. Interest earned on other securities increased $1.0 million mainly due to the receipt of $1.3 million in non-accrual interest income from a private equity investment in the third quarter of 2025. These increases to interest income were partly offset by a decline in interest income on mortgage-backed securities of $2.4 million, driven by lower average balances of $621.0 million, or 12.2%. In addition, the Company recorded a $314 thousand adjustment to premium amortization at September 30, 2025, which increased interest income and reflected slower forward prepayment speed estimates on mortgage-backed securities. This increase was higher than the $286 thousand adjustment decreasing income in the same quarter last year. Interest income earned on state and municipal obligations declined $416 thousand mainly due to a $100.5 million, or 11.7%, decrease in average balances. Additionally, the average rate earned on investment securities during the three months ended September 30, 2025 increased 47 basis points over the same period in the prior year. The average balance of the total investment portfolio (excluding unrealized fair value adjustments on available for sale debt securities) was $10.0 billion in both the third quarters of 2025 and 2024.
Interest income on securities purchased under agreements to resell increased $4.4 million over the same quarter last year, due to an increase of 47 basis points in the average rate earned and growth of $375.0 million in the average balance. Interest income on deposits at the Federal Reserve decreased $7.9 million due to declines of 98 basis points in average rate earned and $142.7 million in the average balance.
The average fully taxable-equivalent yield on total interest earning assets was 4.86% in the third quarter of 2025, down from 4.96% in the third quarter of 2024.
Total interest expense decreased $15.1 million compared to the third quarter of 2024 due to decreases of $10.9 million in interest expense on interest bearing deposits and $4.2 million in interest expense on borrowings. The decrease in deposit interest expense resulted mainly from lower interest expense on certificates of deposit balances of $6.1 million due to an 81 basis point decline in the average rate paid and a decrease of $111.4 million, or 4.4%, in average balances. Interest expense on interest checking and money market deposit accounts decreased $4.8 million due to a 20 basis point decline in average rates paid, partly offset by an increase of $498.4 million, or 3.8%, in average balances. The overall rate paid on total deposits decreased 29 basis points from the same quarter last year. Interest expense on federal funds purchased decreased $1.4 million due to lower average balances of $76.0 million and a 104 basis point decline in the average rate paid. Interest expense on customer repurchase agreements decreased $2.8 million due to a 68 basis point decline in the average rate paid, partly offset by
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growth of $167.8 million, or 7.1%, in the average balance. The overall average rate incurred on all interest bearing liabilities was 1.87% and 2.22% in the third quarters of 2025 and 2024, respectively.
Net interest income (FTE) for the first nine months of 2025 was $835.6 million compared to $780.5 million for the same period in 2024. For the first nine months of 2025, the net interest margin was 3.63% compared to 3.46% for the same period in 2024.
Total interest income (FTE) for the first nine months of 2025 increased $9.9 million over the same period last year mainly due to higher interest income on investment securities (FTE) and securities purchased under agreements to resell, partly offset by lower interest income on loans (FTE) and deposit balances at the Federal Reserve. Loan interest income (FTE) decreased $23.5 million, or 2.9%, due to a 29 basis point decrease in the average rate earned, partly offset by a $318.6 million, or 1.9%, increase in average loan balances. The decrease in interest earned occurred in the construction and land, business real estate, business and consumer credit card loan categories, partly offset by an increase in interest income the personal real estate loan category. Interest income on investment securities (FTE) increased $31.3 million mainly due to a 47 basis point increase in the average rate earned and an increase of $1.3 billion in average balances of U.S. government and federal agency securities. Interest earned on U.S. government and federal agency securities increased $44.7 million due to higher average balances and an increase in the average rate earned, while interest earned on asset-backed securities increased $8.8 million due to higher average rates earned, partly offset by a decrease in average balances. These increases in interest income on investment securities were partly offset by decreases in interest earned on mortgage-backed securities and state and municipal obligations of $14.6 million and $4.2 million, respectively, mainly due to decreases in average balances. Interest earned on other securities decreased $3.4 million due to a decline in average balances. Higher interest income of $16.2 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 decreased $14.0 million due to a 101 basis point decline in the average rate earned, partly offset by an $80.3 million increase in the average balance invested.
Total interest expense for the first nine months of 2025 decreased $45.2 million compared to the same period last year. Interest expense on deposits decreased $31.2 million, due to a 29 basis point decline in the average rate paid, partly offset by a $458.2 million increase in average balances. Interest expense on borrowings decreased $14.0 million due lower interest expense on federal funds purchased of $6.6 million, resulting from lower average balances and rates, while interest expense on securities sold under agreements to repurchase declined $7.5 million due to lower average rates paid, partly offset by higher average balances. The overall cost of total interest bearing liabilities decreased to 1.86% compared to 2.21% in the same period last year.
Summaries of average assets and liabilities and the corresponding average rates earned/paid appear on the last page of this discussion.
Non-Interest Income
| Three Months Ended September 30 | Increase (Decrease) | Nine Months Ended September 30 | Increase (Decrease) | |||||||||||||||||||||||||||||||||||||||||||||||
| (Dollars in thousands) | 2025 | 2024 | Amount | % change | 2025 | 2024 | Amount | % change | ||||||||||||||||||||||||||||||||||||||||||
| Trust fees | $ | 58,412 | $ | 54,689 | $ | 3,723 | 6.8 | % | $ | 170,575 | $ | 158,085 | $ | 12,490 | 7.9 | % | ||||||||||||||||||||||||||||||||||
| Bank card transaction fees | 45,551 | 47,570 | (2,019) | (4.2) | 137,506 | 141,977 | (4,471) | (3.1) | ||||||||||||||||||||||||||||||||||||||||||
| Deposit account charges and other fees | 27,427 | 25,380 | 2,047 | 8.1 | 80,297 | 74,856 | 5,441 | 7.3 | ||||||||||||||||||||||||||||||||||||||||||
| Capital market fees | 5,138 | 5,995 | (857) | (14.3) | 16,425 | 14,647 | 1,778 | 12.1 | ||||||||||||||||||||||||||||||||||||||||||
| Consumer brokerage services | 6,698 | 4,619 | 2,079 | 45.0 | 16,866 | 13,505 | 3,361 | 24.9 | ||||||||||||||||||||||||||||||||||||||||||
| Loan fees and sales | 3,465 | 3,444 | 21 | .6 | 10,288 | 10,016 | 272 | 2.7 | ||||||||||||||||||||||||||||||||||||||||||
| Other | 14,820 | 17,328 | (2,508) | (14.5) | 54,116 | 47,031 | 7,085 | 15.1 | ||||||||||||||||||||||||||||||||||||||||||
| Total non-interest income | $ | 161,511 | $ | 159,025 | $ | 2,486 | 1.6 | % | $ | 486,073 | $ | 460,117 | $ | 25,956 | 5.6 | % | ||||||||||||||||||||||||||||||||||
| Non-interest income as a % of total revenue* | 36.6 | % | 37.7 | % | 37.0 | % | 37.3 | % | ||||||||||||||||||||||||||||||||||||||||||
* Total revenue includes net interest income and non-interest income.
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The table below is a summary of net bank card transaction fees for the nine month periods ended September 30, 2025 and 2024.
| Three Months Ended September 30 | Nine Months Ended September 30 | |||||||||||||||||||||||||||||||||||||||||||
| (Dollars in thousands) | 2025 | 2024 | $ change | % change | 2025 | 2024 | $ change | % change | ||||||||||||||||||||||||||||||||||||
| Net debit card fees | $ | 11,270 | $ | 11,377 | $ | (107) | (.9) | % | $ | 32,818 | $ | 33,165 | $ | (347) | (1.0) | % | ||||||||||||||||||||||||||||
| Net credit card fees | 3,621 | 3,957 | (336) | (8.5) | 10,471 | 11,762 | (1,291) | (11.0) | ||||||||||||||||||||||||||||||||||||
| Net merchant fees | 5,570 | 5,481 | 89 | 1.6 | 17,271 | 16,593 | 678 | 4.1 | ||||||||||||||||||||||||||||||||||||
| Net corporate card fees | 25,090 | 26,755 | (1,665) | (6.2) | 76,946 | 80,457 | (3,511) | (4.4) | ||||||||||||||||||||||||||||||||||||
| Total bank card transaction fees | $ | 45,551 | $ | 47,570 | $ | (2,019) | (4.2) | % | $ | 137,506 | $ | 141,977 | $ | (4,471) | (3.1) | % | ||||||||||||||||||||||||||||
For the third quarter of 2025, total non-interest income amounted to $161.5 million compared to $159.0 million in the same quarter last year, which was an increase of $2.5 million, or 1.6%. The increase was mainly due to higher trust fees, consumer brokerage service fees and deposit account fees. Trust fees increased $3.7 million, or 6.8%, mainly due to growth of $3.2 million in private client trust fees. Bank card transaction fees for the current quarter declined $2.0 million, or 4.2%, from the same period last year. Net corporate card fees declined $1.7 million mainly due to higher rewards expense, partly offset by higher interchange income. Net credit card fees decreased $336 thousand mainly due to higher rewards expense. Net debit card fees decreased $107 thousand, while net merchant fees increased $89 thousand. Compared to the third quarter of last year, deposit account fees increased $2.0 million, or 8.1%, mainly due to higher corporate cash management fees of $1.8 million. Capital market fees decreased $857 thousand, or 14.3%, mainly due to lower underwriting and trading securities income, while consumer brokerage service fees increased $2.1 million, or 45.0%, mainly due to higher life insurance income and annuity fees. Other non-interest income decreased $2.5 million, or 14.5%, mainly due to lower gains of $4.7 million on the sales of assets, partly offset by increases in cash sweep commissions, tax credit sales income and international fees of $677 thousand, $625 thousand and $408 thousand, respectively.
Non-interest income for the first nine months of 2025 was $486.1 million compared to $460.1 million in the first nine months of 2024, which was an increase of $26.0 million, or 5.6%. The increase was mainly due to higher trust fees, deposit account fees and gains on the sales of assets. Trust fees increased $12.5 million, or 7.9%, mainly due to higher private client and institutional trust fees. Bank card transaction fees for the current year declined $4.5 million, or 3.1%, from the same period last year, mainly due to decreases of $3.5 million in net corporate card fees and $1.3 million in net credit card fees, partly offset by an increase in net merchant fees of $678 thousand. Deposit account fees increased $5.4 million, or 7.3%, mainly due to higher corporate cash management fees. Capital market fees increased $1.8 million, or 12.1%, mainly due to higher trading securities and underwriting income. Consumer brokerage service fees increased $3.4 million, or 24.9%, mainly due to higher life insurance income, annuity fees and advisory fees. Other non-interest income increased $7.1 million, or 15.1%, mainly due to increases of $3.3 million in gains on the sales of assets, $1.4 million in tax credit sales income and $1.2 million in cash sweep commissions. In addition, an increase in fair value adjustments of $777 thousand was recorded on the Company's deferred compensation plan assets and liabilities.
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Investment Securities Gains (Losses), Net
| Three Months Ended September 30 | Nine Months Ended September 30 | ||||||||||||||||
| (In thousands) | 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Net gains (losses) on sales of available for sale debt securities | $ | — | $ | (5,395) | $ | (4,214) | $ | (192,938) | |||||||||
| Net gains (losses) on equity securities | (111) | (208) | 1,666 | 178,098 | |||||||||||||
| Net gains (losses) on sales of private equity investments | 43 | 2,047 | (563) | 1,481 | |||||||||||||
| Fair value adjustments on private equity investments | 7,953 | 7,428 | 3,842 | 20,205 | |||||||||||||
| Total investment securities gains (losses), net | $ | 7,885 | $ | 3,872 | $ | 731 | $ | 6,846 | |||||||||
Net gains and losses on investment securities, which were recognized in earnings during the three months ended September 30, 2025 and 2024, are shown in the table above. Net securities gains of $7.9 million were reported in the third quarter of 2025, compared to net gains of $3.9 million in the same period last year. The net gains in the third quarter of 2025 were mainly comprised of net gains in fair value of $8.0 million recorded on private equity investments. These gains were partially offset by net losses of $111 thousand on equity investments. The net gains on investment securities for the same quarter last year were primarily comprised of net gains in fair value of $7.4 million recorded on private equity investments and net gains of $2.0 million on sales of private equity investments. These gains were largely offset by net losses of $5.4 million on the sale of available for sale securities as part of the planned portfolio repositioning. Additional information about the sale of Visa Class C shares and the Company's available for sale debt portfolio repositioning transactions is discussed in Note 3, Investment Securities.
Net gains on investment securities of $731 thousand were recognized in earnings for the nine months ended September 30, 2025, compared to net gains of $6.8 million for the same period in 2024. Net gains in the first nine months of 2025 were mainly comprised of net gains in fair value of $3.8 million recorded on private equity investments and net gains of $1.7 million on equity securities. These gains were largely offset by net losses of $4.2 million on the sale of available for sale securities. Net gains in the first nine months of 2024 were mainly comprised of net gains of $178.1 million on equity investments and net gains in fair value of $20.2 million recorded on private equity investments, largely offset by net losses of $192.9 million on sales of available for sale 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 $656 thousand during the first nine months of 2025 and expense of $3.4 million during the first nine months of 2024.
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Non-Interest Expense
| Three Months Ended September 30 | Increase (Decrease) | Nine Months Ended September 30 | Increase (Decrease) | |||||||||||||||||||||||||||||||||||||||||||||||
| (Dollars in thousands) | 2025 | 2024 | Amount | % change | 2025 | 2024 | Amount | % change | ||||||||||||||||||||||||||||||||||||||||||
| Salaries and employee benefits | $ | 157,461 | $ | 153,122 | $ | 4,339 | 2.8 | % | $ | 465,564 | $ | 454,043 | $ | 11,521 | 2.5 | % | ||||||||||||||||||||||||||||||||||
| Data processing and software | 33,555 | 32,194 | 1,361 | 4.2 | 98,697 | 94,876 | 3,821 | 4.0 | ||||||||||||||||||||||||||||||||||||||||||
| Net occupancy | 13,474 | 13,411 | 63 | .5 | 41,148 | 39,529 | 1,619 | 4.1 | ||||||||||||||||||||||||||||||||||||||||||
| Professional and other services | 11,284 | 8,830 | 2,454 | 27.8 | 34,283 | 26,095 | 8,188 | 31.4 | ||||||||||||||||||||||||||||||||||||||||||
| Marketing | 6,670 | 7,278 | (608) | (8.4) | 18,487 | 16,670 | 1,817 | 10.9 | ||||||||||||||||||||||||||||||||||||||||||
| Equipment | 5,421 | 5,286 | 135 | 2.6 | 15,826 | 15,387 | 439 | 2.9 | ||||||||||||||||||||||||||||||||||||||||||
| Supplies and communication | 4,837 | 4,963 | (126) | (2.5) | 14,845 | 14,343 | 502 | 3.5 | ||||||||||||||||||||||||||||||||||||||||||
| Deposit insurance | 3,074 | 2,930 | 144 | 4.9 | 10,130 | 13,301 | (3,171) | (23.8) | ||||||||||||||||||||||||||||||||||||||||||
| Other | 8,242 | 9,586 | (1,344) | (14.0) | 27,851 | 41,267 | (13,416) | (32.5) | ||||||||||||||||||||||||||||||||||||||||||
| Total non-interest expense | $ | 244,018 | $ | 237,600 | $ | 6,418 | 2.7 | % | $ | 726,831 | $ | 715,511 | $ | 11,320 | 1.6 | % | ||||||||||||||||||||||||||||||||||
Non-interest expense for the third quarter of 2025 amounted to $244.0 million, an increase of $6.4 million, or 2.7%, compared to expense of $237.6 million in the third quarter of last year. The increase in expense over the same period last year was mainly due to higher salaries and employee benefits expense, professional and other services expense and data processing and software expense. Salaries and employee benefits expense increased $4.3 million, or 2.8%, mainly due to higher full-time salaries expense of $3.0 million and higher incentive compensation expense of $1.4 million, partly offset by lower healthcare expense of $805 thousand. Full-time equivalent employees totaled 4,666 at September 30, 2025, compared to 4,711 at September 30, 2024. Data processing and software expense increased $1.4 million, or 4.2%, mainly due to higher costs for service providers and software. Professional and other services expense, which increased $2.5 million, or 27.8%, included $1.1 million of acquisition related legal and professional services expense. Other non-interest expense decreased $1.3 million, or 14.0%, mainly due to a $1.5 million reimbursement during the third quarter of 2025 related to a litigation settlement.
Non-interest expense amounted to $726.8 million for the first nine months of 2025, an increase of $11.3 million, or 1.6%, over the first nine months of 2024. Salaries and benefits expense increased $11.5 million, or 2.5%, mainly due to higher full-time salaries expense and incentive compensation expense. Data processing and software expense increased $3.8 million, or 4.0%, due to increased costs for service providers and software expense. Professional and other services expense increased $8.2 million, or 31.4%, and included $3.1 million in acquisition related legal and professional fees. Occupancy expense increased $1.6 million, or 4.1%, mainly due to higher building depreciation expense and demolition costs. Marketing expense increased $1.8 million, or 10.9%, and equipment expense increased $439 thousand, or 2.9%. Supplies and communication expense increased $502 thousand, or 3.5%, mainly due to higher bank card reissuance costs. Deposit insurance decreased $3.2 million, or 23.8%, mainly due to accrual adjustments in 2024 and 2025 to the special assessment by the FDIC. Other non-interest expense decreased $13.4 million, or 32.5%, mainly due to litigation settlement expense of $10.0 million, 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 was recorded in the third quarter of 2025 related to a litigation settlement. These decreases were partly offset by higher travel and entertainment expense of $837 thousand and an increase in fair value adjustments of $777 thousand recorded on the Company's deferred compensation plan assets and liabilities.
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Provision and Allowance for Credit Losses on Loans and Liability for Unfunded Lending Commitments
| Three Months Ended | Nine Months Ended September 30 | |||||||||||||||||||
| (In thousands) | Sept. 30, 2025 | June 30, 2025 | Sept. 30, 2024 | 2025 | 2024 | |||||||||||||||
| ALLOWANCE FOR CREDIT LOSSES ON LOANS | ||||||||||||||||||||
| Balance at beginning of period | $ | 165,260 | $ | 167,031 | $ | 158,557 | $ | 162,742 | $ | 162,395 | ||||||||||
| Provision for credit losses on loans | 20,739 | 7,919 | 11,861 | $ | 43,753 | $ | 26,657 | |||||||||||||
| Net loan charge-offs (recoveries): | ||||||||||||||||||||
| Commercial: | ||||||||||||||||||||
| Business | 826 | 432 | 114 | 1,304 | 759 | |||||||||||||||
| Real estate-construction and land | — | 24 | — | 24 | — | |||||||||||||||
| Real estate-business | (23) | (425) | (7) | (71) | (156) | |||||||||||||||
| Commercial net loan charge-offs (recoveries) | 803 | 31 | 107 | 1,257 | 603 | |||||||||||||||
| Personal Banking: | ||||||||||||||||||||
| Real estate-personal | 269 | 35 | 128 | 376 | 231 | |||||||||||||||
| Consumer | 2,310 | 2,168 | 2,759 | 7,330 | 6,546 | |||||||||||||||
| Revolving home equity | (1) | 11 | (152) | 7 | (163) | |||||||||||||||
| Consumer credit card | 6,515 | 7,085 | 6,273 | 20,567 | 19,454 | |||||||||||||||
| Overdrafts | 432 | 360 | 464 | 1,287 | 1,542 | |||||||||||||||
| Personal banking net loan charge-offs (recoveries) | 9,525 | 9,659 | 9,472 | 29,567 | 27,610 | |||||||||||||||
| Total net loan charge-offs (recoveries) | 10,328 | 9,690 | 9,579 | 30,824 | 28,213 | |||||||||||||||
| Balance at end of period | $ | 175,671 | $ | 165,260 | $ | 160,839 | $ | 175,671 | $ | 160,839 | ||||||||||
| LIABILITY FOR UNFUNDED LENDING COMMITMENTS | ||||||||||||||||||||
| Balance at beginning of period | $ | 16,005 | $ | 18,327 | $ | 20,705 | $ | 18,935 | $ | 25,246 | ||||||||||
| Provision for credit losses on unfunded lending commitments | (678) | (2,322) | (2,721) | (3,608) | (7,262) | |||||||||||||||
| Balance at end of period | 15,327 | 16,005 | 17,984 | 15,327 | 17,984 | |||||||||||||||
| ALLOWANCE FOR CREDIT LOSSES ON LOANS AND LIABILITY FOR UNFUNDED LENDING COMMITMENTS | $ | 190,998 | $ | 181,265 | $ | 178,823 | $ | 190,998 | $ | 178,823 | ||||||||||
| Three Months Ended | Nine Months Ended September 30 | |||||||||||||||||||
| Sept. 30, 2025 | June 30, 2025 | Sept. 30, 2024 | 2025 | 2024 | ||||||||||||||||
| Annualized net loan charge-offs (recoveries)*: | ||||||||||||||||||||
| Commercial: | ||||||||||||||||||||
| Business | .05 | % | .03 | % | .01 | % | .03 | % | .02 | % | ||||||||||
| Real estate-construction and land | — | .01 | — | — | — | |||||||||||||||
| Real estate-business | — | (.05) | — | — | (.01) | |||||||||||||||
| Commercial net loan charge-offs (recoveries) | .03 | — | — | .01 | .01 | |||||||||||||||
| Personal Banking: | ||||||||||||||||||||
| Real estate-personal | .03 | — | .02 | .02 | .01 | |||||||||||||||
| Consumer | .42 | .40 | .52 | .46 | .41 | |||||||||||||||
| Revolving home equity | — | .01 | (.18) | — | (.07) | |||||||||||||||
| Consumer credit card | 4.59 | 5.08 | 4.46 | 4.90 | 4.65 | |||||||||||||||
| Overdrafts | 24.36 | 25.50 | 33.81 | 27.79 | 34.32 | |||||||||||||||
| Personal banking net loan charge-offs (recoveries) | .61 | .63 | .62 | .65 | .61 | |||||||||||||||
| Total annualized net loan charge-offs (recoveries) | .23 | % | .22 | % | .22 | % | .24 | % | .22 | % | ||||||||||
* as a percentage of average loans (excluding loans held for sale)
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The following schedule provides a breakdown of the allowance for credit losses on loans (ACL) by loan class and the percentage of the allowance for credit losses to the related loan class at period end.
| Sept. 30, 2025 | June 30, 2025 | Sept. 30, 2024 | ||||||||||||||||||||||||
(Dollars in thousands) | Credit Loss Allowance Allocation | % of ACL to Loan Category | Credit Loss Allowance Allocation | % of ACL to Loan Category | Credit Loss Allowance Allocation | % of ACL to Loan Category | ||||||||||||||||||||
| Business | $ | 50,715 | .79 | % | $ | 46,472 | .73 | % | $ | 43,710 | .72 | % | ||||||||||||||
| RE — construction and land | 28,585 | 1.99 | 28,152 | 2.00 | 29,736 | 2.15 | ||||||||||||||||||||
| RE — business | 33,624 | .90 | 32,230 | .86 | 33,601 | .94 | ||||||||||||||||||||
| RE — personal | 11,839 | .39 | 10,753 | .35 | 10,426 | .34 | ||||||||||||||||||||
| Consumer | 16,530 | .76 | 14,853 | .69 | 11,309 | .54 | ||||||||||||||||||||
| Revolving home equity | 1,877 | .52 | 1,868 | .51 | 1,859 | .54 | ||||||||||||||||||||
| Consumer credit card | 32,386 | 5.63 | 30,796 | 5.35 | 30,047 | 5.23 | ||||||||||||||||||||
| Overdrafts | 115 | 1.03 | 136 | .83 | 151 | 3.53 | ||||||||||||||||||||
| Total | $ | 175,671 | .99 | % | $ | 165,260 | .94 | % | $ | 160,839 | .94 | % | ||||||||||||||
To determine the amount of the allowance for credit losses on loans and the liability for unfunded lending commitments, the Company has an established process which assesses the risks and losses expected in its portfolios. This process provides an allowance based on estimates of allowances for pools of loans and unfunded lending commitments, as well as a second, smaller component based on certain individually evaluated loans and unfunded lending commitments. The Company's policies and processes for determining the allowance for credit losses on loans and the liability for unfunded lending commitments are discussed in Note 1 to the consolidated financial statements and in the "Allowance for Credit Losses" discussion within Critical Accounting Estimates and Related Policies in Item 7 of the 2024 Annual Report on Form 10-K.
Net loan charge-offs in the third quarter of 2025 amounted to $10.3 million, compared to $9.7 million in the prior quarter and $9.6 million in the third quarter of last year. Compared to the same period last year, net loan charge-offs in the third quarter of 2025 increased $749 thousand, and increased $638 thousand from the previous quarter. The increase from the prior year was mainly driven by increases of $712 thousand and $242 thousand in business and consumer credit card loan net charge-offs, respectively, offset by a decrease of $449 thousand in consumer loan net charge-offs. The increase in net loan charge-offs for the three months ended September 30, 2025 from the previous quarter was driven by increases of $402 thousand and $394 thousand in net charge-offs on business real estate and business loans, respectively, partially offset by a decrease of $570 thousand in net charge-offs on consumer credit card loans.
For the three months ended September 30, 2025, annualized net charge-offs on average consumer credit card loans were 4.59%, compared to 5.08% in the previous quarter and 4.46% in the same period last year. Consumer loan annualized net charge-offs in the current quarter amounted to .42%, compared to .40% in the prior quarter and .52% in the same period last year. In the third quarter of 2025, total annualized net loan charge-offs were .23%, compared to .22% in the previous quarter and .22% in the same period last year.
For the nine months ended September 30, 2025, total annualized net loan charge-offs were .24%, compared to .22% in the same period last year. Net loan charge-offs were $30.8 million in the first nine months of 2025, an increase of $2.6 million over net loan charge-offs of $28.2 million in the first nine months of 2024. The increase in net loan charge-offs during the first nine months of 2025 was mainly driven by higher net charge-offs on consumer credit card, consumer, and business loans.
For the three months ended September 30, 2025, the provision for credit losses on loans was $20.7 million, which was an increase of $12.8 million from the provision recorded in the prior quarter. The provision for the three months ended September 30, 2025 was the result of an increase in the allowance for credit losses on loans. Compared to the same period in the prior year, the provision for credit losses on loans for the three months ended September 30, 2025 increased $8.9 million. For the nine months ended September 30, 2025, the provision for credit losses on loans was $43.8 million, which was a $17.1 million increase over the $26.7 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 September 30, 2025, the allowance for credit losses increased $12.9 million compared to the allowance for credit losses on loans at December 31, 2024. The allowance for credit losses on loans increased $6.2 million in the commercial portfolio primarily due to weakness in soft commodity prices impacting certain industries, partially offset by improvement in loss rate assumptions for the Company's construction loans. The allowance for credit losses on the Company's personal banking
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portfolio increased $6.8 million due to recent increases in charge-off trends impacting expected loss rate assumptions for the consumer credit card, automobile, and other non-real estate consumer portfolios. The forecast utilized to estimate the allowance for credit losses at September 30, 2025 was more pessimistic than the forecast utilized at December 31, 2024 and reflected a slight decline in key macroeconomic variables. The forecast did not assume a recession. The allowance for credit losses on loans was $175.7 million at September 30, 2025 and was .99%, .95% and .94% of total loans at September 30, 2025, December 31, 2024 and September 30, 2024, respectively.
In the current quarter, the provision for credit losses on unfunded lending commitments was a benefit of $678 thousand, compared to a benefit of $2.7 million for the three months ended September 30, 2024. At September 30, 2025, the liability for unfunded lending commitments was $15.3 million, compared to $18.9 million at December 31, 2024 and $18.0 million at September 30, 2024. The liability decreased primarily due to decreases in unfunded lending commitment balances, coupled with improvement in loss rate assumptions for the Company's construction loans. 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 2 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 September 30, 2025.
The allowance for credit losses on loans and the liability for unfunded lending commitments are estimates that require significant judgment including projections of the macro-economic environment. The Company utilizes a third-party macro-economic forecast that continuously changes due to economic conditions and events. These changes in the forecast cause fluctuations in the allowance for credit losses on loans and the liability for unfunded lending commitments. The Company uses judgment to assess the macro-economic forecast and internal loss data in estimating the allowance for credit losses on loans and the liability for unfunded lending commitments. These estimates are subject to periodic refinement based on changes in the underlying external and internal data.
Risk Elements of Loan Portfolio
The following table presents non-performing assets and loans which are past due 90 days and still accruing interest. Non-performing assets include non-accruing loans and foreclosed real estate. Loans are placed on non-accrual status when management does not expect to collect payments consistent with acceptable and agreed upon terms of repayment. Loans that are 90 days past due as to principal and/or interest payments are generally placed on non-accrual, unless they are both well-secured and in the process of collection, or they are personal banking loans that are exempt under regulatory rules from being classified as non-accrual.
(Dollars in thousands) | September 30, 2025 | December 31, 2024 | ||||||
| Non-accrual loans | $ | 16,253 | $ | 18,278 | ||||
| Foreclosed real estate | 790 | 343 | ||||||
| Total non-performing assets | $ | 17,043 | $ | 18,621 | ||||
| Non-performing assets as a percentage of total loans | .10 | % | .11 | % | ||||
| Non-performing assets as a percentage of total assets | .05 | % | .06 | % | ||||
| Total loans past due 90 days and still accruing interest | $ | 21,536 | $ | 24,516 | ||||
Non-accrual loans totaled $16.3 million at September 30, 2025, a decrease of $2.0 million from the balance at December 31, 2024. The decrease occurred mainly in revolving home equity non-accrual loans, which decreased $2.0 million. At September 30, 2025, non-accrual loans were comprised of business real estate (91.9%), personal real estate (5.3%) business (1.6%), and construction and land (1.2%) loans. Foreclosed real estate totaled $790 thousand at September 30, 2025, an increase of $447 thousand compared to December 31, 2024. Total loans past due 90 days or more and still accruing interest totaled $21.5 million as of September 30, 2025, a decrease of $3.0 million from December 31, 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 in Note 2 to the consolidated financial statements.
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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 $274.6 million at September 30, 2025 compared to $330.3 million at December 31, 2024, resulting in a decrease of $55.7 million, or 16.9%.
(In thousands) | September 30, 2025 | December 31, 2024 | ||||||
| Potential problem loans: | ||||||||
| Business | $ | 115,317 | $ | 131,527 | ||||
| Real estate – construction and land | 20,694 | 2,662 | ||||||
| Real estate – business | 138,463 | 196,030 | ||||||
| Real estate – personal | 94 | 96 | ||||||
| Total potential problem loans | $ | 274,568 | $ | 330,315 | ||||
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 September 30, 2025, the Company held $168.3 million of loans that had been modified during the nine months ended September 30, 2025. These loans are further discussed in the "Modifications for borrowers experiencing financial difficulty" section in Note 2 to the consolidated financial statements.
Loans with Special Risk Characteristics
Management relies primarily on an internal risk rating system, in addition to delinquency status, to assess risk in the loan portfolio, and these statistics are presented in Note 2 to the consolidated financial statements. However, certain types of loans are considered at high risk of loss due to their terms, location, or special conditions. Additional information about the major types of loans in these categories and their risk features are provided below. Information based on loan-to-value (LTV) ratios was generally calculated with valuations at loan origination date. The Company normally obtains an updated appraisal or valuation at the time a loan is renewed or modified, or if the loan becomes significantly delinquent or is in the process of being foreclosed upon.
Real Estate – Construction and Land Loans
The Company's portfolio of construction and land loans, as shown in the table below, amounted to 8.1% of total loans outstanding at September 30, 2025. The largest component of construction and land loans was commercial construction, which increased $24.9 million during the nine months ended September 30, 2025. At September 30, 2025, multi-family residential construction loans totaled approximately $556.3 million, or 45.5%, of the commercial construction loan portfolio, compared to $526.6 million, or 44.0%, at December 31, 2024.
| (Dollars in thousands) | September 30, 2025 | % of Total | % of Total Loans | December 31, 2024 | % of Total | % of Total Loans | ||||||||||||||
| Commercial construction | $ | 1,222,165 | 85.2 | % | 6.9 | % | $ | 1,197,278 | 84.9 | % | 7.0 | % | ||||||||
| Residential construction | 102,663 | 7.2 | .6 | 106,884 | 7.6 | .6 | ||||||||||||||
| Residential land and land development | 66,948 | 4.7 | .4 | 65,342 | 4.6 | .4 | ||||||||||||||
| Commercial land and land development | 41,876 | 2.9 | .2 | 40,397 | 2.9 | .2 | ||||||||||||||
| Total real estate - construction and land loans | $ | 1,433,652 | 100.0 | % | 8.1 | % | $ | 1,409,901 | 100.0 | % | 8.2 | % | ||||||||
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Real Estate – Business Loans
Total business real estate loans were $3.7 billion at September 30, 2025 and comprised 21.1% 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 September 30, 2025, 32.5% 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.
| (Dollars in thousands) | September 30, 2025 | % of Total | % of Total Loans | December 31, 2024 | % of Total | % of Total Loans | ||||||||||||||
| Owner-occupied | $ | 1,218,769 | 32.5 | % | 6.9 | % | $ | 1,237,265 | 33.8 | % | 7.2 | % | ||||||||
| Office | 543,599 | 14.5 | 3.1 | 520,715 | 14.2 | 3.0 | ||||||||||||||
| Industrial | 654,164 | 17.5 | 3.7 | 485,250 | 13.3 | 2.8 | ||||||||||||||
| Hotels | 308,027 | 8.2 | 1.7 | 334,479 | 9.1 | 1.9 | ||||||||||||||
| Multi-family | 364,630 | 9.7 | 2.1 | 310,806 | 8.5 | 1.8 | ||||||||||||||
| Retail | 278,288 | 7.4 | 1.6 | 309,431 | 8.5 | 1.8 | ||||||||||||||
| Farm | 194,776 | 5.2 | 1.1 | 189,794 | 5.2 | 1.1 | ||||||||||||||
| Senior living | 95,528 | 2.6 | .5 | 183,695 | 5.0 | 1.1 | ||||||||||||||
| Other | 87,219 | 2.4 | .4 | 89,783 | 2.4 | .6 | ||||||||||||||
| Total real estate - business loans | $ | 3,745,000 | 100.0 | % | 21.1 | % | $ | 3,661,218 | 100.0 | % | 21.3 | % | ||||||||
Information about the credit quality of the Company's business real estate loan portfolio as of September 30, 2025 and December 31, 2024 is provided in the table below.
| (Dollars in thousands) | Pass | Special Mention | Substandard | Non-Accrual | Total | ||||||||||||
| September 30, 2025 | |||||||||||||||||
| Owner-occupied | $ | 1,166,454 | $ | 21,108 | $ | 31,083 | $ | 124 | $ | 1,218,769 | |||||||
| Office | 458,285 | 27,631 | 57,683 | — | 543,599 | ||||||||||||
| Industrial | 654,164 | — | — | — | 654,164 | ||||||||||||
| Hotels | 308,027 | — | — | 308,027 | |||||||||||||
| Multi-family | 315,723 | 37,994 | 10,913 | — | 364,630 | ||||||||||||
| Retail | 278,288 | — | — | — | 278,288 | ||||||||||||
| Farm | 193,920 | 494 | 54 | 308 | 194,776 | ||||||||||||
| Senior living | 42,370 | — | 38,650 | 14,508 | 95,528 | ||||||||||||
| Other | 85,278 | 1,941 | — | — | 87,219 | ||||||||||||
| Total | $ | 3,502,509 | $ | 89,168 | $ | 138,383 | $ | 14,940 | $ | 3,745,000 | |||||||
| December 31, 2024 | |||||||||||||||||
| Owner-occupied | $ | 1,203,019 | $ | 3,362 | $ | 30,598 | $ | 286 | $ | 1,237,265 | |||||||
| Office | 451,189 | 11,980 | 57,546 | — | 520,715 | ||||||||||||
| Industrial | 485,250 | — | — | — | 485,250 | ||||||||||||
| Hotels | 334,479 | — | — | — | 334,479 | ||||||||||||
| Multi-family | 299,825 | 10,981 | — | — | 310,806 | ||||||||||||
| Retail | 308,730 | — | 701 | — | 309,431 | ||||||||||||
| Farm | 185,998 | 642 | 3,154 | — | 189,794 | ||||||||||||
| Senior living | 65,366 | — | 103,661 | 14,668 | 183,695 | ||||||||||||
| Other | 89,577 | 206 | — | — | 89,783 | ||||||||||||
| Total | $ | 3,423,433 | $ | 27,171 | $ | 195,660 | $ | 14,954 | $ | 3,661,218 | |||||||
Revolving Home Equity Loans
The Company had $364.2 million in revolving home equity loans at September 30, 2025 that were collateralized by residential real estate. Most of these loans (94.4%) 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 September 30, 2025, the
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outstanding principal of loans with an original LTV higher than 80% was $28.6 million, or 8.0% of the portfolio, compared to $31.9 million as of December 31, 2024. Total revolving home equity loan balances over 30 days past due were $1.4 million at September 30, 2025 and $5.6 million at December 31, 2024, and there was no outstanding balance for revolving home equity loans on non-accrual status at September 30, 2025 compared to $2.0 million at December 31, 2024. The weighted average FICO score for the total portfolio balance at September 30, 2025 is 777. 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 2025 through 2028, approximately 12.3% of the Company's current outstanding balances are expected to mature. Of these balances, approximately 86.6% 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.
Consumer Loans
The consumer loans category is mostly comprised of private banking loans and automobile loans. Private banking loans comprised of 39.2% of the consumer loan portfolio at September 30, 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 35.8% of the consumer loan portfolio at September 30, 2025, and outstanding balances for auto loans were $778.2 million and $776.7 million at September 30, 2025 and December 31, 2024, respectively. The balances over 30 days past due amounted to $9.3 million at September 30, 2025 and $14.4 million at December 31, 2024, respectively, and comprised 1.2% of the outstanding balances of these loans at September 30, 2025 and 1.9% at December 31, 2024. For the nine months ended September 30, 2025, $282.9 million of new auto loans were originated, compared to $260.6 million during the first nine months of 2024. At September 30, 2025, the automobile loan portfolio had a weighted average FICO score of 756, and net charge-offs on auto loans were .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 9.7% of the consumer loan portfolio at September 30, 2025. Losses on these loans have historically been low, and the Company saw net recoveries of $135 thousand for the first nine months of 2025. 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 loans, totaled $2.3 million in the first nine months of 2025 and were .3% of the average balances of these loans at September 30, 2025.
Consumer Credit Card Loans
The Company offers low promotional rates on selected consumer credit card products. Out of a portfolio at September 30, 2025 of $575.3 million in consumer credit card loans outstanding, approximately $125.2 million, or 21.8%, carried a low promotional rate. Within the next six months, $51.8 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.
| September 30, 2025 | December 31, 2024 | |||||||
FICO score: | ||||||||
Under 600 | 5.3 | % | 5.1 | % | ||||
600 – 659 | 12.4 | 11.9 | ||||||
660 – 719 | 27.9 | 28.3 | ||||||
720 – 779 | 26.9 | 26.3 | ||||||
780 and over | 27.5 | 28.4 | ||||||
Total | 100.0 | % | 100.0 | % | ||||
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Oil and Gas Energy Lending
The Company's energy lending portfolio is comprised of lending to the petroleum and natural gas sectors and totaled $302.0 million, or 1.7% of total loans at September 30, 2025, a decrease of $36.0 million from December 31, 2024, as shown in the table below.
(In thousands) | September 30, 2025 | December 31, 2024 | Unfunded commitments at September 30, 2025 | |||||||||||
| Upstream activities | $ | 225,141 | $ | 274,265 | $ | 156,158 | ||||||||
| Mid-stream activities | 32,239 | 36,801 | 110,431 | |||||||||||
| Downstream activities | 16,085 | 9,757 | 28,392 | |||||||||||
| Support activities | 28,539 | 17,226 | 13,211 | |||||||||||
| Total energy lending portfolio | $ | 302,004 | $ | 338,049 | $ | 308,192 | ||||||||
Shared National Credits
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 $1.6 billion at both September 30, 2025 and December 31, 2024. Additional unfunded commitments at September 30, 2025 totaled $2.4 billion.
Income Taxes
Income tax expense was $41.2 million in the third quarter of 2025, compared to $42.4 million in the second quarter of 2025 and $38.2 million in the third quarter of 2024. The Company's effective tax rate, including the effect of non-controlling interest, was 22.5% in the third quarter of 2025, 21.8% in the second quarter of 2025, and 21.7% in the third quarter of 2024. The increase in the effective tax rate compared to the prior quarter was mostly due to state tax law changes enacted in the prior quarter that decreased the effective tax rate. The increase in the effective tax rate compared to the third quarter of 2024 was mostly due to higher state and local income taxes.
On July 4, 2025, the One Big Beautiful Act ("OBBBA") was enacted in the United States. The OBBBA includes significant provisions, such as the permanent extension of certain expiring provisions of the Tax Cut and Jobs Act, modifications to the international tax framework and the restoration of favorable tax treatment for certain business provisions. The legislation has multiple effective dates, with certain provisions effective in 2025 and others implemented through 2027. We do not expect these items to have a significant impact on our financial statements, though we expect that some minor operational changes may be necessary to support new information reporting requirements.
Financial Condition
Balance Sheet
Total assets of the Company were $32.3 billion at September 30, 2025 and $32.0 billion at December 31, 2024. Earning assets (excluding the allowance for credit losses on loans and fair value adjustments on available for sale debt securities) amounted to $31.1 billion at September 30, 2025 and $30.9 billion at December 31, 2024, and consisted of 57% in loans and 32% in investment securities at September 30, 2025.
At September 30, 2025, total loans increased $566.7 million or 3.3%, compared to balances at December 31, 2024. The increase was mainly due to growth in business, business real estate, and construction loans of $361.0 million, $83.8 million, and $23.8 million, respectively. The increase in business loans was mainly due to growth in commercial and industrial, commercial credit card and tax-free lending. In addition, consumer loans increased $98.5 million, mainly due to growth in private banking loans. These increases were partially offset by a decrease in consumer credit card loans of $20.6 million.
Total available for sale debt securities, excluding fair value adjustments, decreased $440.3 million at September 30, 2025 compared to December 31, 2024. Available for sale debt security sales, maturities and pay downs during this period totaled $1.5 billion, partly offset by purchases of available for sale debt securities during this period of $991.7 million. The decline in available for sale debt securities was mainly the result of lower balances of mortgage-backed securities, asset-backed securities and state and municipal obligations, which decreased $450.6 million, $186.1 million and $74.2 million, respectively, at
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September 30, 2025 compared to December 31, 2024. These decreases were partly offset by growth of $309.0 million in U.S. government and federal agency obligations. At September 30, 2025, the duration of the available for sale investment portfolio was 4.4 years, and maturities and pay downs of approximately $1.3 billion are expected to occur during the next 12 months.
Total deposits at September 30, 2025 amounted to $25.5 billion, an increase of $164.4 million compared to December 31, 2024. The increase in deposits largely resulted from an increase in interest checking and money market deposit balances of $807.9 million. This increase was partly offset by a decrease in demand deposits of $661.0 million, mainly in business demand deposits (decrease of $688.3 million). The Company’s borrowings totaled $2.5 billion at September 30, 2025, a decrease of $444.5 million from balances at December 31, 2024, mainly due to a decline in customer repurchase agreement balances.
Liquidity and Capital Resources
Liquidity Management
The Company’s most liquid assets include balances at the Federal Reserve Bank, federal funds sold, and available for sale debt securities, as follows:
(In thousands) | September 30, 2025 | September 30, 2024 | December 31, 2024 | ||||||||||||||
| Liquid assets: | |||||||||||||||||
| Balances at the Federal Reserve Bank | $ | 2,477,668 | $ | 2,642,048 | $ | 2,624,553 | |||||||||||
| Federal funds sold | — | 10 | 3,000 | ||||||||||||||
| Available for sale debt securities | 8,998,586 | 9,167,681 | 9,136,853 | ||||||||||||||
| Total | $ | 11,476,254 | $ | 11,809,739 | $ | 11,764,406 | |||||||||||
Interest earning balances at the Federal Reserve Bank, which have overnight maturities and are used for general liquidity purposes, totaled $2.5 billion at September 30, 2025 and decreased $147 thousand from December 31, 2024. At September 30, 2025, the Company did not have a balance of federal funds sold, 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 $9.0 billion at September 30, 2025 and included an unrealized net loss of $688.5 million. The total net unrealized loss included net losses of $640.7 million on mortgage-backed and asset-backed securities and $52.9 million on state and municipal obligations.
The Company's available for sale debt securities portfolio has a diverse mix of high quality and liquid investment securities with a duration of 4.4 years at September 30, 2025. Approximately $1.3 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:
(In thousands) | September 30, 2025 | September 30, 2024 | December 31, 2024 | |||||||||||
| Investment securities pledged for the purpose of securing: | ||||||||||||||
| Federal Reserve Bank borrowings | $ | 575,311 | $ | 917,340 | $ | 840,771 | ||||||||
| FHLB borrowings and letters of credit | 2,021,043 | 1,238,975 | 1,473,691 | |||||||||||
| Securities sold under agreements to repurchase * | 2,402,124 | 2,122,196 | 2,866,468 | |||||||||||
| Other deposits and swaps | 1,738,808 | 1,876,968 | 1,755,335 | |||||||||||
| Total pledged securities | 6,737,286 | 6,155,479 | 6,936,265 | |||||||||||
| Unpledged and available for pledging | 2,260,338 | 2,986,267 | 2,175,800 | |||||||||||
| Ineligible for pledging | 962 | 25,935 | 24,788 | |||||||||||
| Total available for sale debt securities, at fair value | $ | 8,998,586 | $ | 9,167,681 | $ | 9,136,853 | ||||||||
* Includes securities pledged for collateral swaps outstanding at each period end shown in the table.
The average loans to deposits ratio is a measure of a bank's liquidity, and the Company’s average loans to deposits ratio was 70.1% for the nine months ended September 30, 2025. Core customer deposits, defined as non-interest bearing, interest checking, savings, and money market deposit accounts totaled $23.0 billion and represented 90.5% of the Company's total deposits at September 30, 2025. 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 $136.2 million at September 30, 2025 compared to December 31, 2024, primarily due to an increase in commercial
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deposits of $451.4 million, partly offset by a decrease in consumer deposits of $265.9 million. While the Company considers core consumer and wealth management 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 $1.3 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 $6.5 billion through advances from the FHLB and the Federal Reserve.
The Company also holds securities sold under agreements to repurchase ("resale agreements") which are an additional source of liquidity. At September 30, 2025, the Company's resale agreements totaled $850.0 million and mature from 2028 through 2030. 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 $875.1 million in fair value at September 30, 2025.
Certificates of deposit of $100,000 or greater totaled $1.4 billion at September 30, 2025. These deposits are normally considered more volatile and higher costing, and comprised 5.6% of total deposits at September 30, 2025.
(In thousands) | September 30, 2025 | September 30, 2024 | December 31, 2024 | |||||||||||
| Core deposit base: | ||||||||||||||
| Non-interest bearing | $ | 7,489,645 | $ | 7,396,153 | $ | 8,150,669 | ||||||||
| Interest checking | 7,954,187 | 7,761,976 | 7,301,288 | |||||||||||
| Savings and money market | 7,597,612 | 7,454,581 | 7,453,283 | |||||||||||
| Total | $ | 23,041,444 | $ | 22,612,710 | $ | 22,905,240 | ||||||||
During the third quarter of 2024, the Company issued $100.0 million of short-term brokered certificates of deposit, which all matured by December 31, 2024. The Company may occasionally issue brokered certificates of deposit to test the reliability of this potential funding source. While it is not clear how many brokered certificates of deposit the market would allow the Company to issue, the Company believes brokered certificates of deposits may be an additional, reliable source of liquidity during periods of stress in the banking industry.
Other important components of liquidity are the level of borrowings from third party sources and the availability of future credit. During 2025, the Company's outside borrowings have mainly been comprised of federal funds purchased and repurchase agreements, as follows:
(In thousands) | September 30, 2025 | September 30, 2024 | December 31, 2024 | |||||||||||
| Borrowings: | ||||||||||||||
| Federal funds purchased | $ | 137,660 | $ | 113,630 | $ | 123,715 | ||||||||
| Securities sold under agreements to repurchase | 2,335,405 | 2,068,599 | 2,803,043 | |||||||||||
| Other debt | 9,270 | 10,201 | 56 | |||||||||||
| Total | $ | 2,482,335 | $ | 2,192,430 | $ | 2,926,814 | ||||||||
Federal funds purchased, which totaled $137.7 million at September 30, 2025, are unsecured overnight borrowings obtained mainly from upstream correspondent banks with which the Company maintains approved lines of credit. At September 30, 2025, the Company had approved lines of credit totaling $4.6 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 September 30, 2025 were comprised of non-insured customer funds totaling $2.3 billion, and securities pledged as collateral for these retail agreements totaled $2.4 billion at September 30, 2025. 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 September 30, 2025.
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
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value of assets pledged, borrowings, and letters of credit outstanding, in addition to the estimated future funding capacity available to the Company at September 30, 2025.
| September 30, 2025 | |||||||||||
| (In thousands) | FHLB | Federal Reserve | Total | ||||||||
| Total collateral value established by FHLB and FRB | $ | 3,921,515 | $ | 2,722,775 | $ | 6,644,290 | |||||
| Letters of credit issued | (102,600) | — | (102,600) | ||||||||
| Available for future advances | $ | 3,818,915 | $ | 2,722,775 | $ | 6,541,690 | |||||
The Company receives outside ratings from both Standard & Poor’s and Moody’s on the consolidated company and its subsidiary bank, Commerce Bank. These ratings are as follows:
| Standard & Poor’s | Moody’s | |||||||
Commerce Bancshares, Inc. | ||||||||
| Issuer rating | A- | |||||||
| Rating outlook | Stable | |||||||
Commerce Bank | ||||||||
| Issuer rating | A | A3 | ||||||
| Baseline credit assessment | a2 | |||||||
| Short-term rating | A-1 | P-1 | ||||||
| Rating outlook | Stable | Stable | ||||||
The Company considers these ratings to be indications of a sound capital base and strong liquidity and believes that these ratings would help ensure the ready marketability of its commercial paper, should the need arise. No commercial paper has been outstanding during the past ten years. The Company has no subordinated or hybrid debt instruments which would affect future borrowing capacity. Because of its lack of significant long-term debt, the Company believes that through its Commercial Tradable Products division or in other public debt markets, it could generate additional liquidity from sources such as jumbo certificates of deposit, privately placed corporate notes or other forms of debt.
The cash flows from the operating, investing and financing activities of the Company resulted in a net decrease in cash, cash equivalents and restricted cash of $421.8 million during the first nine months of 2025, 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 $378.8 million and have historically been a stable source of funds. Investing activities, which occur mainly in the loan and investment securities portfolios, used cash of $400.3 million. Growth in the loan portfolio used cash of $598.9 million and purchases of securities under agreements to resell (net of repayments) used cash of $225.0 million. These uses of cash were partly balanced by sales, maturities, and pay downs (net of purchases) of investment securities, which provided cash of $462.5 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 $400.3 million, largely resulting from federal funds purchased and securities sold under agreements to repurchases, which used cash of $453.7 million during the first nine months of 2025, partly offset by a net increase of $250.4 million in deposits. Cash dividend payments (including distributions to non-controlling interest) and purchases of treasury stock used cash of $114.0 million and $92.3 million, respectively.
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Capital Management
The Company met all capital adequacy requirements and had regulatory capital ratios in excess of the levels established for well-capitalized institutions at September 30, 2025 and December 31, 2024, as shown in the following table.
| (Dollars in thousands) | September 30, 2025 | December 31, 2024 | Minimum Capital Requirement | Capital Conservation Buffer | Minimum Ratios Requirement including Capital Conservation Buffer | Minimum Ratios for Well-Capitalized Banks * | ||||||||||||||
| Risk-adjusted assets | $ | 23,841,648 | $ | 23,500,396 | ||||||||||||||||
| Tier I common risk-based capital | 4,163,019 | 3,926,446 | ||||||||||||||||||
| Tier I risk-based capital | 4,163,019 | 3,926,446 | ||||||||||||||||||
| Total risk-based capital | 4,354,017 | 4,108,270 | ||||||||||||||||||
| Tier I common risk-based capital ratio | 17.46 | % | 16.71 | % | 4.50 | % | 2.50 | % | 7.00 | % | 6.50 | % | ||||||||
| Tier I risk-based capital ratio | 17.46 | 16.71 | 6.00 | 2.50 | 8.50 | 8.00 | ||||||||||||||
| Total risk-based capital ratio | 18.26 | 17.48 | 8.00 | 2.50 | 10.50 | 10.00 | ||||||||||||||
| Tier I leverage ratio | 12.95 | 12.26 | 4.00 | N/A | 4.00 | 5.00 | ||||||||||||||
*Under Prompt Corrective Action requirements
The Company is subject to a 2.5% capital conservation buffer, which is an amount above the minimum ratios under capital adequacy guidelines, and is intended to absorb losses during periods of economic stress. Failure to maintain the buffer will result in constraints on dividends, share repurchases, and executive compensation.
In the first quarter of 2020, the interim final rule of the Federal Reserve Bank and other U.S. banking agencies became effective, providing banks that adopted CECL (ASU 2016-13) during the 2020 calendar year the option to delay recognizing the estimated impact on regulatory capital until after a two year deferral period, followed by a three year transition period. In connection with the adoption of CECL on January 1, 2020, the Company elected to utilize this option. As a result, the two year deferral period for the Company extended through December 31, 2021. Beginning on January 1, 2022, the Company was required to phase in 25% of the previously deferred estimated capital impact of CECL, with an additional 25% to be phased in at the beginning of each subsequent year until fully phased in, which was during the first quarter of 2025.
The Company maintains a treasury stock buyback program under authorizations by its Board of Directors (the Board) and periodically purchases stock in the open market. During the nine months ended September 30, 2025, the Company purchased 1,862,967 shares at an average price of $62.85 in open market purchases and through stock-based compensation transactions. At September 30, 2025, 1,486,812 shares remained available for purchase under the Board authorization in place at that date. On October 31, 2025, the share repurchase authorization was increased to 5,000,000 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 third quarter of 2025, which was a 7.0% increase compared to its 2024 quarterly dividend.
Material Cash Requirements, Commitments, Off-Balance Sheet Arrangements and Contingencies
The Company's material cash requirements include commitments for contractual obligations (both short-term and long-term), commitments to extend credit, and off-balance sheet arrangements. The Company's material cash requirements for the next 12 months are primarily to fund loan growth. Additionally, the Company will utilize cash to fund deposit maturities and withdrawals that may occur in the next 12 months. Other contractual obligations, purchase commitments, lease obligations, and unfunded commitments may require cash payments by the Company within the next 12 months, and these are further discussed in the Company's 2024 Annual Report on Form 10-K. Further discussion of the Company's longer-term material cash obligations and sources for fulfilling those obligations is below.
In the normal course of business, various commitments and contingent liabilities arise that are not required to be recorded on the balance sheet. The most significant of these are loan commitments, which at September 30, 2025 totaled $16.2 billion (including $6.0 billion in unused, approved credit card lines). In addition, the Company enters into standby and commercial letters of credit. The contractual amount of standby and commercial letters of credit totaled $631.8 million and $1.8 million, respectively, at September 30, 2025. As many commitments expire unused or only partially used, these totals do not necessarily reflect future cash requirements. The allowance for these commitments is recorded in the Company’s liability for unfunded lending commitments within other liabilities on its consolidated balance sheets. At September 30, 2025, the liability
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for unfunded lending commitments totaled $15.3 million. See further discussion of the liability for unfunded lending commitments in Note 2 to the consolidated financial statements.
The Company regularly purchases various state tax credits arising from third party property redevelopment. These credits are either resold to third parties at a profit or retained for use by the Company. During the first nine months of 2025, purchases and sales of tax credits amounted to $160.2 million and $125.4 million, respectively. Fees from sales of tax credits were $4.9 million for the nine months ended September 30, 2025, compared to $3.5 million in the same period last year. At September 30, 2025, the Company expected to fund outstanding purchase commitments of $16.7 million during the remainder of 2025 and had purchase commitments of $545.8 million that it expects to fund from 2026 through 2029.
The Company continued to maintain a strong liquidity position throughout the first nine months of 2025. Through the various sources of liquidity described above, the Company maintains a liquidity position that it believes will adequately satisfy its financial obligations.
Segment Results
The table below is a summary of segment pre-tax income results for the first nine months of 2025 and 2024.
(Dollars in thousands) | Consumer | Commercial | Wealth | Segment Totals | Other/ Elimination | Consolidated Totals | ||||||||||||||
| Nine Months Ended September 30, 2025 | ||||||||||||||||||||
| Net interest income | $ | 378,958 | $ | 393,453 | $ | 67,729 | $ | 840,140 | $ | (11,434) | $ | 828,706 | ||||||||
| Provision for credit losses | (29,241) | (1,548) | (17) | (30,806) | (9,339) | (40,145) | ||||||||||||||
| Non-interest income | 73,055 | 211,388 | 195,985 | 480,428 | 5,645 | 486,073 | ||||||||||||||
| Investment securities gains (losses), net | — | — | — | — | 731 | 731 | ||||||||||||||
| Non-interest expense | (250,968) | (319,258) | (124,356) | (694,582) | (32,249) | (726,831) | ||||||||||||||
| Income before income taxes | $ | 171,804 | $ | 284,035 | $ | 139,341 | $ | 595,180 | $ | (46,646) | $ | 548,534 | ||||||||
| Nine Months Ended September 30, 2024 | ||||||||||||||||||||
| Net interest income | $ | 384,278 | $ | 380,476 | $ | 66,390 | $ | 831,144 | $ | (57,545) | $ | 773,599 | ||||||||
| Provision for credit losses | (27,451) | (952) | 150 | (28,253) | 8,858 | (19,395) | ||||||||||||||
| Non-interest income | 74,424 | 195,669 | 179,840 | 449,933 | 10,184 | 460,117 | ||||||||||||||
| Investment securities gains (losses), net | — | — | — | — | 6,846 | 6,846 | ||||||||||||||
| Non-interest expense | (245,834) | (303,959) | (118,512) | (668,305) | (47,206) | (715,511) | ||||||||||||||
| Income before income taxes | $ | 185,417 | $ | 271,234 | $ | 127,868 | $ | 584,519 | $ | (78,863) | $ | 505,656 | ||||||||
| Increase (decrease) in income before income taxes: | ||||||||||||||||||||
| Amount | $ | (13,613) | $ | 12,801 | $ | 11,473 | $ | 10,661 | $ | 32,217 | $ | 42,878 | ||||||||
| Percent | (7.3) | % | 4.7 | % | 9.0 | % | 1.8 | % | (40.9) | % | 8.5 | % | ||||||||
Consumer
For the nine months ended September 30, 2025, income before income taxes for the Consumer segment decreased $13.6 million, or 7.3%, compared to the first nine months of 2024. The decrease in income before income taxes was due to declines in net interest income of $5.3 million, or 1.4%, and non-interest income of $1.4 million, or 1.8%, and increases in non-interest expense of $5.1 million, or 2.1%, and the provision for credit losses of $1.8 million. Net interest income declined due to lower net allocated funding credits assigned to the Consumer segment's loan and deposit portfolios of $11.7 million and loan interest income of $1.1 million. These decreases were partly offset by lower deposit interest expense of $7.5 million. Non-interest income decreased mainly due to lower net bank card fees (mainly credit and debit card fees). Non-interest expense increased over the same period in the previous year mainly due to higher marketing, miscellaneous losses, data processing and software, and supplies expense. In addition, allocated support costs increased due to higher allocated costs for retail administration and operations. The increase in the provision for credit losses over the first nine months of 2024 was mainly due to higher auto and consumer credit card loan net charge-offs, partly offset by lower other vehicle and equipment loan net charge-offs.
Commercial
For the nine months ended September 30, 2025, income before income taxes for the Commercial segment increased $12.8 million, or 4.7%, compared to the same period in the previous year. This increase was mainly due to higher net interest income and non-interest income, partly offset by higher non-interest expense. Net interest income increased $13.0 million, or 3.4%, mainly due to lower interest expense on deposits and customer repurchase agreements of $20.1 million and $6.9 million,
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respectively, coupled with higher net allocated funding credits of $12.9 million. These increases to income were partly offset by lower loan interest income of $27.5 million. Non-interest income increased $15.7 million, or 8.0%, over the previous year mainly due to higher gains on asset sales and growth in deposit account fees (mainly corporate cash management fees) and capital market fees (mainly underwriting and trading securities). These increases were partly offset by a decrease in net bank card fees (mainly corporate card fees). Non-interest expense increased $15.3 million, or 5.0%, mainly due to higher legal fees, salaries and benefits expense and allocated service and support costs for commercial payments and product support, commercial loan servicing and branch employee expense. The provision for credit losses increased $596 thousand over the same period last year, mainly due to higher commercial and industrial loan net charge-offs.
Wealth
Wealth segment pre-tax profitability for the nine months ended September 30, 2025 increased $11.5 million, or 9.0%, over the same period in the previous year. Net interest income increased $1.3 million, or 2.0%, mainly due to $5.9 million increase in loan interest income and a $2.9 million decrease deposit interest expense. These increases were partly offset by a $7.4 million decrease in net allocated funding credits. Non-interest income increased $16.1 million, or 9.0%, over the prior year largely due to higher private client and institutional trust fees and brokerage fees (mainly life insurance, annuity and advisory fees). Non-interest expense increased $5.8 million, or 4.9%, mainly due to higher salaries and benefits, data processing and software, and allocated support costs for information technology. The provision for credit losses increased $167 thousand over the same period last year.
The Other/Elimination category in the preceding table includes the activity of various support and overhead operating units of the Company, in addition to the investment securities portfolio and other items not allocated to the segments. In accordance with the Company’s transfer pricing procedures, the difference between the total provision for credit losses and total net charge-offs/recoveries is not allocated to a business segment and is included in this category. The pre-tax profitability in this category was $32.2 million higher than in the same period last year. Unallocated securities gains were $731 thousand in the first nine months of 2025 compared to gains of $6.8 million in 2024. Also, the unallocated provision for credit losses decreased $18.2 million, primarily driven by an increase in the provision for credit losses on loans, partly offset by a decrease in the liability for unfunded lending commitments, which are both not allocated to the segments for management reporting purposes. Net charge-offs are allocated to the segments when incurred for management reporting purposes. The provision for credit losses on loans in the first nine months of 2025 was $43.8 million, or $12.9 million higher than net charge-offs, due to an increase in the allowance for credit losses on loans. In the comparable period last year, the provision for credit losses on loans was $26.7 million, or $1.6 million lower than net charge-offs, due to a decrease in the allowance for credit losses on loans. For the nine months ended September 30, 2025, the Company's provision on unfunded lending commitments was a benefit of $3.6 million. Additionally, net interest income increased $46.1 million, while non-interest expense decreased $15.0 million. These increases to pre-tax profitability were partly offset by a decrease in non-interest income $4.5 million.
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Impact of Recently Issued Accounting Standards
Income Taxes The FASB issued ASU 2023-09, "Income Taxes (Topic 740) - Improvements to Income Tax Disclosures", in December 2023. The amendments in this Update require additional disclosures regarding the rate reconciliation and income taxes paid. This Update also removed certain existing disclosure requirements. This Update is effective for annual periods beginning January 1, 2025. Early adoption is permitted. The amendments in this Update should be applied on a prospective basis, though retrospective application is permitted. Other than the inclusion of additional disclosures, the adoption is not expected to have a significant effect on the Company's consolidated financial statements.
Income Statement Reporting The FASB issued ASU 2024-03, "Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses" in November 2024. The amendments in this Update require new disclosures providing further detail of a company's income statement expense items. This Update is effective for annual periods beginning January 1, 2027, and interim periods beginning January 1, 2028. Early adoption is permitted. The amendments in this Update should be applied on a prospective basis. Other than the inclusion of additional disclosures, the adoption is not expected to have a significant effect on the Company's consolidated financial statements.
Internal-Use Software Development Costs The FASB issued ASU 2025-06, "Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Targeted Improvement to the Accounting for Internal-Use Software" in September 2025. The amendments in this Update are intended to modernize the accounting for internal-use software by eliminating references to software development project stages, making the guidance neutral to various development methodologies, including those currently in use and those that may be developed in the future. This Update is effective for annual and interim periods beginning after December 15, 2027. Early adoption is permitted as of the beginning of an annual reporting period. The amendments may be applied on a prospective, modified retrospective or full retrospective basis. The adoption is not expected to have a significant effect on the Company's consolidated financial statements.
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AVERAGE BALANCE SHEETS — AVERAGE RATES AND YIELDS
Three Months Ended September 30, 2025 and 2024
Third Quarter 2025 | Third Quarter 2024 | ||||||||||||||||||||||
(Dollars in thousands) | Average Balance | Interest Income/Expense | Avg. Rates Earned/Paid | Average Balance | Interest Income/Expense | Avg. Rates Earned/Paid | |||||||||||||||||
| ASSETS: | |||||||||||||||||||||||
| Loans: | |||||||||||||||||||||||
Business(A) | $ | 6,230,019 | $ | 89,818 | 5.72 | % | $ | 5,966,797 | $ | 92,471 | 6.17 | % | |||||||||||
| Real estate — construction and land | 1,396,977 | 25,934 | 7.37 | 1,400,563 | 29,704 | 8.44 | |||||||||||||||||
| Real estate — business | 3,715,597 | 55,433 | 5.92 | 3,580,772 | 56,528 | 6.28 | |||||||||||||||||
| Real estate — personal | 3,059,913 | 33,509 | 4.34 | 3,047,563 | 31,402 | 4.10 | |||||||||||||||||
| Consumer | 2,160,637 | 34,962 | 6.42 | 2,129,483 | 35,519 | 6.64 | |||||||||||||||||
| Revolving home equity | 360,820 | 7,220 | 7.94 | 335,817 | 6,490 | 7.69 | |||||||||||||||||
| Consumer credit card | 563,351 | 18,759 | 13.21 | 559,410 | 19,697 | 14.01 | |||||||||||||||||
| Overdrafts | 7,037 | — | — | 5,460 | — | — | |||||||||||||||||
| Total loans | 17,494,351 | 265,635 | 6.02 | 17,025,865 | 271,811 | 6.35 | |||||||||||||||||
| Loans held for sale | 2,369 | 36 | 6.03 | 2,448 | 39 | 6.34 | |||||||||||||||||
| Investment securities: | |||||||||||||||||||||||
| U.S. government and federal agency obligations | 2,693,327 | 27,547 | 4.06 | 1,888,985 | 17,478 | 3.68 | |||||||||||||||||
| Government-sponsored enterprise obligations | 55,014 | 326 | 2.35 | 55,583 | 331 | 2.37 | |||||||||||||||||
State and municipal obligations(A) | 756,137 | 3,901 | 2.05 | 856,620 | 4,317 | 2.00 | |||||||||||||||||
| Mortgage-backed securities | 4,461,056 | 22,573 | 2.01 | 5,082,091 | 24,956 | 1.95 | |||||||||||||||||
| Asset-backed securities | 1,466,770 | 13,644 | 3.69 | 1,525,593 | 10,188 | 2.66 | |||||||||||||||||
| Other debt securities | 204,281 | 1,528 | 2.97 | 224,528 | 1,166 | 2.07 | |||||||||||||||||
Trading debt securities(A) | 56,032 | 659 | 4.67 | 47,440 | 539 | 4.52 | |||||||||||||||||
Equity securities(A) | 50,823 | 780 | 6.09 | 85,118 | 951 | 4.44 | |||||||||||||||||
Other securities(A) | 220,041 | 4,044 | 7.29 | 217,377 | 3,330 | 6.09 | |||||||||||||||||
| Total investment securities | 9,963,481 | 75,002 | 2.99 | 9,983,335 | 63,256 | 2.52 | |||||||||||||||||
| Federal funds sold | 23 | — | — | 12 | — | — | |||||||||||||||||
| Securities purchased under agreements to resell | 850,000 | 8,578 | 4.00 | 474,997 | 4,215 | 3.53 | |||||||||||||||||
| Interest earning deposits with banks | 2,422,441 | 27,167 | 4.45 | 2,565,188 | 35,034 | 5.43 | |||||||||||||||||
| Total interest earning assets | 30,732,665 | 376,418 | 4.86 | 30,051,845 | 374,355 | 4.96 | |||||||||||||||||
| Allowance for credit losses on loans | (164,623) | (158,003) | |||||||||||||||||||||
| Unrealized gain (loss) on debt securities | (766,025) | (961,695) | |||||||||||||||||||||
| Cash and due from banks | 374,673 | 361,854 | |||||||||||||||||||||
| Premises and equipment, net | 502,525 | 481,301 | |||||||||||||||||||||
| Other assets | 832,049 | 805,166 | |||||||||||||||||||||
| Total assets | $ | 31,511,264 | $ | 30,580,468 | |||||||||||||||||||
| LIABILITIES AND EQUITY: | |||||||||||||||||||||||
| Interest bearing deposits: | |||||||||||||||||||||||
| Savings | $ | 1,283,671 | 156 | .05 | $ | 1,303,675 | 214 | .07 | |||||||||||||||
| Interest checking and money market | 13,740,770 | 53,201 | 1.54 | 13,242,398 | 57,963 | 1.74 | |||||||||||||||||
| Certificates of deposit of less than $100,000 | 991,877 | 8,337 | 3.33 | 1,055,683 | 11,073 | 4.17 | |||||||||||||||||
| Certificates of deposit of $100,000 and over | 1,416,572 | 13,258 | 3.71 | 1,464,143 | 16,603 | 4.51 | |||||||||||||||||
| Total interest bearing deposits | 17,432,890 | 74,952 | 1.71 | 17,065,899 | 85,853 | 2.00 | |||||||||||||||||
| Borrowings: | |||||||||||||||||||||||
| Federal funds purchased | $ | 130,622 | $ | 1,428 | 4.34 | 206,644 | $ | 2,792 | 5.38 | ||||||||||||||
| Securities sold under agreements to repurchase | 2,519,660 | 18,260 | 2.88 | 2,351,870 | 21,066 | 3.56 | |||||||||||||||||
Other borrowings(B) | 1,860 | 8 | 1.71 | 496 | 6 | 4.81 | |||||||||||||||||
| Total borrowings | 2,652,142 | 19,696 | 2.95 | 2,559,010 | 23,864 | 3.71 | |||||||||||||||||
| Total interest bearing liabilities | 20,085,032 | 94,648 | 1.87 | % | 19,624,909 | 109,717 | 2.22 | % | |||||||||||||||
| Non-interest bearing deposits | 7,345,156 | 7,284,834 | |||||||||||||||||||||
| Other liabilities | 402,265 | 405,490 | |||||||||||||||||||||
| Equity | 3,678,811 | 3,265,235 | |||||||||||||||||||||
| Total liabilities and equity | $ | 31,511,264 | $ | 30,580,468 | |||||||||||||||||||
| Net interest margin (FTE) | $ | 281,770 | $ | 264,638 | |||||||||||||||||||
| Net yield on interest earning assets | 3.64 | % | 3.50 | % | |||||||||||||||||||
(A) Stated on a fully taxable-equivalent basis using a federal income tax rate of 21%.
(B) Interest expense capitalized on construction projects in 2024 is not deducted from the interest expense shown above. There was no interest expense capitalized in 2025.
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AVERAGE BALANCE SHEETS — AVERAGE RATES AND YIELDS
Nine Months Ended September 30, 2025 and 2024
Nine Months 2025 | Nine Months 2024 | ||||||||||||||||||||||
(Dollars in thousands) | Average Balance | Interest Income/Expense | Avg. Rates Earned/Paid | Average Balance | Interest Income/Expense | Avg. Rates Earned/Paid | |||||||||||||||||
| ASSETS: | |||||||||||||||||||||||
| Loans: | |||||||||||||||||||||||
Business(A) | $ | 6,194,939 | $ | 265,434 | 5.73 | % | $ | 5,940,326 | $ | 271,895 | 6.11 | % | |||||||||||
| Real estate — construction and land | 1,414,294 | 77,797 | 7.35 | 1,448,033 | 91,046 | 8.40 | |||||||||||||||||
| Real estate — business | 3,692,120 | 163,089 | 5.91 | 3,657,875 | 171,661 | 6.27 | |||||||||||||||||
| Real estate — personal | 3,051,613 | 98,351 | 4.31 | 3,041,256 | 91,767 | 4.03 | |||||||||||||||||
| Consumer | 2,130,841 | 102,870 | 6.45 | 2,113,267 | 103,323 | 6.53 | |||||||||||||||||
| Revolving home equity | 360,613 | 20,336 | 7.54 | 328,060 | 18,881 | 7.69 | |||||||||||||||||
| Consumer credit card | 561,258 | 55,808 | 13.29 | 558,403 | 58,633 | 14.03 | |||||||||||||||||
| Overdrafts | 6,191 | — | — | 6,002 | — | — | |||||||||||||||||
| Total loans | 17,411,869 | 783,685 | 6.02 | 17,093,222 | 807,206 | 6.31 | |||||||||||||||||
| Loans held for sale | 1,901 | 99 | 6.96 | 2,351 | 125 | 7.10 | |||||||||||||||||
| Investment securities: | |||||||||||||||||||||||
| U.S. government and federal agency obligations | 2,635,112 | 81,621 | 4.14 | 1,316,296 | 36,937 | 3.75 | |||||||||||||||||
| Government-sponsored enterprise obligations | 55,126 | 980 | 2.38 | 55,623 | 992 | 2.38 | |||||||||||||||||
State and municipal obligations(A) | 780,011 | 11,951 | 2.05 | 1,084,951 | 16,147 | 1.99 | |||||||||||||||||
| Mortgage-backed securities | 4,628,953 | 71,285 | 2.06 | 5,511,120 | 85,860 | 2.08 | |||||||||||||||||
| Asset-backed securities | 1,568,586 | 42,495 | 3.62 | 1,797,750 | 33,692 | 2.50 | |||||||||||||||||
| Other debt securities | 233,070 | 4,984 | 2.86 | 363,677 | 5,402 | 1.98 | |||||||||||||||||
Trading debt securities(A) | 48,552 | 1,718 | 4.73 | 44,839 | 1,645 | 4.90 | |||||||||||||||||
Equity securities(A) | 54,085 | 2,758 | 6.82 | 75,193 | 2,658 | 4.72 | |||||||||||||||||
Other securities(A) | 223,305 | 14,843 | 8.89 | 222,473 | 18,016 | 10.82 | |||||||||||||||||
| Total investment securities | 10,226,800 | 232,635 | 3.04 | 10,471,922 | 201,349 | 2.57 | |||||||||||||||||
| Federal funds sold | 749 | 31 | 5.53 | 738 | 37 | 6.70 | |||||||||||||||||
| Securities purchased under agreements to resell | 829,853 | 24,512 | 3.95 | 373,544 | 8,270 | 2.96 | |||||||||||||||||
| Interest earning deposits with banks | 2,282,707 | 76,052 | 4.45 | 2,202,444 | 90,096 | 5.46 | |||||||||||||||||
| Total interest earning assets | 30,753,879 | 1,117,014 | 4.86 | 30,144,221 | 1,107,083 | 4.91 | |||||||||||||||||
| Allowance for credit losses on loans | (164,409) | (159,888) | |||||||||||||||||||||
| Unrealized gain (loss) on debt securities | (845,750) | (1,168,558) | |||||||||||||||||||||
| Cash and due from banks | 376,247 | 303,877 | |||||||||||||||||||||
| Premises and equipment, net | 500,058 | 479,544 | |||||||||||||||||||||
| Other assets | 816,838 | 888,441 | |||||||||||||||||||||
| Total assets | $ | 31,436,863 | $ | 30,487,637 | |||||||||||||||||||
| LIABILITIES AND EQUITY: | |||||||||||||||||||||||
| Interest bearing deposits: | |||||||||||||||||||||||
| Savings | $ | 1,293,707 | 491 | .05 | $ | 1,322,148 | 605 | .06 | |||||||||||||||
| Interest checking and money market | 13,849,135 | 157,104 | 1.52 | 13,206,726 | 169,981 | 1.72 | |||||||||||||||||
| Certificates of deposit of less than $100,000 | 989,516 | 25,714 | 3.47 | 1,012,254 | 31,787 | 4.19 | |||||||||||||||||
| Certificates of deposit of $100,000 and over | 1,384,079 | 39,491 | 3.81 | 1,517,154 | 51,591 | 4.54 | |||||||||||||||||
| Total interest bearing deposits | 17,516,437 | 222,800 | 1.70 | 17,058,282 | 253,964 | 1.99 | |||||||||||||||||
| Borrowings: | |||||||||||||||||||||||
| Federal funds purchased | $ | 129,626 | $ | 4,228 | 4.36 | $ | 266,415 | 10,780 | 5.40 | ||||||||||||||
| Securities sold under agreements to repurchase | 2,537,227 | 54,337 | 2.86 | 2,372,816 | 61,797 | 3.48 | |||||||||||||||||
Other borrowings(B) | 1,746 | 35 | 2.68 | 470 | 14 | 3.98 | |||||||||||||||||
| Total borrowings | 2,668,599 | 58,600 | 2.94 | 2,639,701 | 72,591 | 3.67 | |||||||||||||||||
| Total interest bearing liabilities | 20,185,036 | 281,400 | 1.86 | % | 19,697,983 | 326,555 | 2.21 | % | |||||||||||||||
| Non-interest bearing deposits | 7,333,745 | 7,303,728 | |||||||||||||||||||||
| Other liabilities | 394,543 | 404,962 | |||||||||||||||||||||
| Equity | 3,523,539 | 3,080,964 | |||||||||||||||||||||
| Total liabilities and equity | $ | 31,436,863 | $ | 30,487,637 | |||||||||||||||||||
| Net interest margin (FTE) | $ | 835,614 | $ | 780,528 | |||||||||||||||||||
| Net yield on interest earning assets | 3.63 | % | 3.46 | % | |||||||||||||||||||
(A) Stated on a fully taxable-equivalent basis using a federal income tax rate of 21%.
(B) Interest expense capitalized on construction projects in 2024 is not deducted from the interest expense shown above. There was no interest expense capitalized in 2025.
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Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Interest rate risk management focuses on maintaining consistent growth in net interest income within Board-approved policy limits. The Company primarily uses earnings simulation models to analyze net interest income sensitivity to movement in interest rates. The Company performs monthly simulations that model interest rate movements and risk in accordance with changes to its balance sheet composition. For further discussion of the Company’s market risk, see the Interest Rate Sensitivity section of Management’s Discussion and Analysis of Financial Condition and Results of Operations included in the Company’s 2024 Annual Report on Form 10-K.
The table below shows the effects of gradual shifts in interest rates over a twelve month period on the Company’s net interest income versus the Company's net interest income in a flat rate scenario. The simulation presents three rising rate scenarios and three falling rate scenarios, and in these scenarios, rates are assumed to change evenly over 12 months, while the balance sheet remains flat.
The Company utilizes this simulation both for monitoring interest rate risk and for liquidity planning purposes. While the future effects of rising and falling rates on deposit balances cannot be known, the Company maintains a practice of running multiple rate scenarios, when relevant, to better understand interest rate risk and its effect on the Company’s performance.
| September 30, 2025 | June 30, 2025 | ||||||||||||||||||||||||||||
(Dollars in millions) | $ Change in Net Interest Income | % Change in Net Interest Income | $ Change in Net Interest Income | % Change in Net Interest Income | |||||||||||||||||||||||||
| 300 basis points rising | $ | 44.1 | 4.02 | % | $ | 34.5 | 3.11 | % | |||||||||||||||||||||
| 200 basis points rising | 36.1 | 3.28 | 27.8 | 2.51 | |||||||||||||||||||||||||
| 100 basis points rising | 23.8 | 2.17 | 17.9 | 1.62 | |||||||||||||||||||||||||
| 100 basis points falling | $ | (23.7) | (2.16) | % | $ | (23.4) | (2.11) | % | |||||||||||||||||||||
| 200 basis points falling | (42.6) | (3.88) | (43.3) | (3.90) | |||||||||||||||||||||||||
| 300 basis points falling | (54.9) | (5.00) | (55.6) | (5.02) | |||||||||||||||||||||||||
Under the simulation, in the three rising rate scenarios, interest rate risk is more asset sensitive when compared to the scenarios in the previous quarter. This change was primarily due to fluctuations in average interest earning cash balances at the Federal Reserve coupled with a reduction in the Federal funds rate which resulted in lower projected deposit rates. In the falling rate scenarios, there was a slight change when compared to the previous quarter, primarily due to fluctuations in average interest earning cash balances at the Federal Reserve, mostly offset by interest rate floors that were further in the money in the current quarter's falling rate scenarios.
The comparison above provides insight into potential effects of changes in rates on net interest income. The Company believes that its approach to interest rate risk has appropriately considered its susceptibility to both rising and falling rates and has adopted strategies which minimize the impact of interest rate risk.
Item 4. CONTROLS AND PROCEDURES
An evaluation was performed under the supervision and with the participation of the Company's management, including the Company's Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of September 30, 2025. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures were effective. There were no changes in the Company's internal control over financial reporting that occurred during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.
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PART II: OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
The information required by this item is set forth in Part I, Item 1 under Note 17, Legal and Regulatory Proceedings.
Item 1A. RISK FACTORS
The section titled Risk Factors in Part I, Item 1A of the Company’s 2024 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 2024 Annual Report on Form 10-K and those added to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2025.
Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
The following table sets forth information about the Company's purchases of its $5 par value common stock, its only class of common stock registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended.
Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as part of Publicly Announced Program | Maximum Number that May Yet Be Purchased Under the Program | |||||||||||||
| July 1 - 31, 2025 | 1,719 | $ | 64.31 | 1,719 | 1,903,224 | ||||||||||||
| August 1 - 31, 2025 | 28,018 | $ | 62.17 | 28,018 | 1,875,206 | ||||||||||||
| September 1 - 30, 2025 | 388,394 | $ | 60.17 | 388,394 | 1,486,812 | ||||||||||||
| Total | 418,131 | $ | 60.32 | 418,131 | 1,486,812 | ||||||||||||
The Company's stock purchases shown above were made under authorizations by the Board of Directors. Under the most recent authorization in April 2024 of 5,000,000 shares, 1,486,812 shares remained available for purchase at September 30, 2025.
Item 5. OTHER INFORMATION
During the three months ended September 30, 2025, none of the officers or directors of the Company adopted terminated
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Item 6. EXHIBITS
The exhibits filed as part of this report and exhibits incorporated herein by reference to other documents are listed below.
2 - Agreement and Plan of Merger, dated as of June 16, 2025, by and among Commerce Bancshares, Inc., CBI-Kansas, Inc., and FineMark Holdings, Inc., were filed in current report on Form 8-K (Commission file number 1-36502) dated June 17, 2025, and the same is hereby incorporated by reference.
31.1 — Certification of CEO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2 — Certification of CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32 — Certifications of CEO and CFO pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101 — Interactive data files in Inline XBRL pursuant to Rule 405 of Regulation S-T: (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Income, (iii) the Consolidated Statements of Comprehensive Income, (iv) the Consolidated Statements of Changes in Equity, (v) the Consolidated Statements of Cash Flows and (vi) the Notes to Consolidated Financial Statements, tagged as blocks of text and in detail. The instance document does not appear in the interactive data file because its XBRL tags are embedded within the Inline XBRL document.
104 — Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
COMMERCE BANCSHARES, INC. | |||||||||||
| By | /s/ MARGARET M. ROWE | ||||||||||
| Margaret M. Rowe | |||||||||||
Date: November 10, 2025 | Senior Vice President & Secretary | ||||||||||
| By | /s/ PAUL A. STEINER | ||||||||||
| Paul A. Steiner | |||||||||||
| Controller | |||||||||||
Date: November 10, 2025 | (Chief Accounting Officer) | ||||||||||
79
Commerce Bancs
NASDAQ:CBSH
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