Commerce Bancshares Q3 2026 profit rises to $155M
FineMark was consolidated from January 1, while available-for-sale securities included $849.3 million in unrealized losses at quarter-end.
Sentiment and the balance of points
Rhea-AI Sentiment reads the wording of the document, how positive or negative its language is on a 1 to 5 scale. The balance of points shown with the takes weighs what the document actually discloses, so the two can disagree, for example when a trial that missed its main goal is described in upbeat language.
Form Type
10-Q
Commerce Bancshares, Inc. reported third-quarter 2026 net income attributable to the company of $155.0 million, compared with $141.5 million a year earlier; diluted earnings per share were $1.08 versus $1.01. Net interest income was $308.9 million, compared with $279.5 million, and provision for credit losses was $10.0 million versus $20.1 million. For the first nine months, net cash provided by operating activities was $1,087.3 million, compared with $378.8 million in 2025.
On January 1, 2026, the company completed its acquisition of FineMark Holdings, Inc. for $519.9 million in total purchase consideration, including 9.9 million common shares valued at $52.34 each and cash in lieu of fractional shares. Preliminary goodwill was $107.3 million, and acquisition-related transaction costs totaled $24.0 million through September 30, 2026. At quarter-end, available-for-sale debt securities had $849.3 million in unrealized losses, compared with $692.1 million at December 31, 2025. The company said it had not identified a credit loss on these securities and did not intend, nor expect to be required, to sell them at a loss.
3 points · 0 major0 major · 1 point
How this balance works
Rhea-AI gives every point it takes from this document a weight. Minor counts 1, Moderate 3 and Major 9, so one Major point outweighs several Minor ones. The bar adds up the weights on each side, and when neither side holds more than 65% of the total the balance reads Mixed.
It reads the document as published, with the same rules for every company, and it does not look at what the market expected or at how the stock traded, so a point can be objectively good on a day the stock falls.
Rhea-AI Sentiment measures something else, the tone of the wording.
Positive
- Moderate pointNet income attributable was $155.0 million, versus $141.5 million a year earlier.
- Moderate pointOperating cash flow was $1,087.3 million in the first nine months, versus $378.8 million.
- Moderate pointFineMark acquisition completed for $519.9 million in total consideration. 6.5% of market cap
Negative
- Moderate pointAvailable-for-sale securities had $849.3 million in unrealized losses, up $157.2 million from December 31, 2025.
Filing Explained
Commerce Bancshares sold debt securities with
Key Figures
Net income attributable to Commerce Bancshares, Inc.: $155.0 million
Diluted earnings per share: $1.08
Net interest income: $308.9 million
+4 more
7 metrics
Net income attributable to Commerce Bancshares, Inc.
$155.0 million
Three months ended September 30, 2026
Diluted earnings per share
$1.08
Three months ended September 30, 2026
Net interest income
$308.9 million
Three months ended September 30, 2026
Net cash provided by operating activities
$1,087.3 million
Nine months ended September 30, 2026
FineMark total purchase consideration
$519.9 million
Acquisition completed January 1, 2026
Unrealized losses on available-for-sale debt securities
$849.3 million
September 30, 2026; compared with $692.1 million at December 31, 2025
Total assets
$34.8 billion
September 30, 2026
Key Terms
purchased credit deteriorated (PCD) loans, purchase method of accounting, accumulated other comprehensive income (AOCI), measurement period adjustments, +1 more
5 terms
purchased credit deteriorated (PCD) loans financial
"classified as purchased credit deteriorated ("PCD") loans"
purchase method of accounting financial
"accounted for as a business combination using the purchase method of accounting"
accumulated other comprehensive income (AOCI) financial
"changes in fair value reported in accumulated other comprehensive income (AOCI)"
Accumulated other comprehensive income (AOCI) is a section of a company's equity that records certain gains and losses that are excluded from net income, such as currency translation shifts, unrealized gains or losses on some investments, and retirement-plan adjustments. Investors care because AOCI reveals changes in a company’s financial position that don’t show up on the profit-and-loss line but can alter the value of equity over time—like a side account that captures market swings before they hit your main balance.
measurement period adjustments financial
"Measurement period adjustments will be recorded in the period in which they are determined"
core deposit intangible asset financial
"The core deposit intangible asset is being amortized using an accelerated methodology"
An intangible asset recorded by a bank when it pays more than the fair value of a target’s net assets because it is buying valuable customer deposit relationships—essentially paying for a base of low-cost, stable accounts. Investors care because this is a non-cash item that is written down or amortized over time, which affects reported earnings and book value and signals how much a buyer values the reliability and cost advantages of those deposits; think of it as paying extra for a loyal customer list that brings ongoing cash at a low cost.
FAQ
AI-generated questions and answers. How Rhea-AI works. Not financial advice.
How much did CBSH earn in the third quarter of 2026?
Commerce Bancshares reported net income attributable to it of $155.0 million for the three months ended September 30, 2026, and diluted earnings per share of $1.08.
How much did CBSH pay for the FineMark acquisition?
The company completed the acquisition on January 1, 2026, for $519.9 million in total purchase consideration, including 9.9 million common shares valued at $52.34 each and cash in lieu of fractional shares.
Why did CBSH's available-for-sale securities show unrealized losses?
The company said unrealized losses were primarily attributable to changes in interest rates and current market conditions. It had not identified any securities for which a credit loss existed at September 30, 2026.
AI-generated analysis. How Rhea-AI works. Not financial advice.
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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, 2026
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 3, 2026, the registrant had outstanding 141,556,665 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, 2026 (unaudited) and December 31, 2025 | 3 | ||||||||||
Consolidated Statements of Income for the Three and Nine Months Ended September 30, 2026 and 2025 (unaudited) | 4 | ||||||||||
Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2026 and 2025 (unaudited) | 5 | ||||||||||
Consolidated Statements of Changes in Equity for the Three and Nine Months Ended September 30, 2026 and 2025 (unaudited) | 6 | ||||||||||
Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2026 and 2025 (unaudited) | 8 | ||||||||||
Notes to Consolidated Financial Statements | 10 | ||||||||||
Item 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations | 55 | |||||||||
Item 3. | Quantitative and Qualitative Disclosures about Market Risk | 80 | |||||||||
Item 4. | Controls and Procedures | 80 | |||||||||
Part II | Other Information | ||||||||||
Item 1. | Legal Proceedings | 82 | |||||||||
Item 1A. | Risk Factors | 82 | |||||||||
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 82 | |||||||||
Item 5. | Other Information | 82 | |||||||||
Item 6. | Exhibits | 82 | |||||||||
Signatures | 84 | ||||||||||
2
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PART I: FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
Commerce Bancshares, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
| September 30, 2026 | December 31, 2025 | ||||||||||
| (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, 2026 and December 31, 2025, respectively, and allowance for credit losses of $ | |||||||||||
at both September 30, 2026 and December 31, 2025) | |||||||||||
| 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 SHAREHOLDERS' 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. shareholders’ equity: | |||||||||||
Common stock, $ | |||||||||||
Authorized | |||||||||||
| Capital surplus | |||||||||||
| Retained earnings | |||||||||||
Treasury stock of | |||||||||||
and | ( | ( | |||||||||
| Accumulated other comprehensive income (loss) | ( | ( | |||||||||
| Total Commerce Bancshares, Inc. shareholders' 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) | 2026 | 2025 | 2026 | 2025 | |||||||||||||
| (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 | |||||||||||||||||
| Consumer brokerage services | |||||||||||||||||
| Capital market fees | |||||||||||||||||
| 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 | |||||||||||||||||
| Professional and other services | |||||||||||||||||
| Net occupancy | |||||||||||||||||
| 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) | 2026 | 2025 | 2026 | 2025 | |||||||||||||
| (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, 2026 and 2025
| 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, 2026 | $ | $ | $ | $ | ( | $ | ( | $ | $ | |||||||||||||||||
| 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, 2026 | $ | $ | $ | $ | ( | $ | ( | $ | $ | |||||||||||||||||
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 | $ | $ | $ | $ | ( | $ | ( | $ | $ | |||||||||||||||||
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, 2026 and 2025
| 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, 2025 | $ | $ | $ | $ | ( | $ | ( | $ | $ | ||||||||||||||||||||
| Net income | |||||||||||||||||||||||||||||
| Other comprehensive income (loss) | ( | ( | |||||||||||||||||||||||||||
| Distributions to non-controlling interest | ( | ( | |||||||||||||||||||||||||||
| Acquisition of FineMark Holdings, Inc | |||||||||||||||||||||||||||||
| Purchases of treasury stock | ( | ( | |||||||||||||||||||||||||||
| Issuance under stock purchase and equity compensation plans | ( | ( | |||||||||||||||||||||||||||
| Stock-based compensation | |||||||||||||||||||||||||||||
Cash dividends paid on common stock ($ | ( | ( | |||||||||||||||||||||||||||
Balance September 30, 2026 | $ | $ | $ | $ | ( | $ | ( | $ | $ | ||||||||||||||||||||
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 | $ | $ | $ | $ | ( | $ | ( | $ | $ | ||||||||||||||||||||
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) | 2026 | 2025 | |||||||||
| (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 | |||||||||||
| Accretion of discount related to acquired loans | ( | ||||||||||
| 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: | |||||||||||
| Cash received in acquisition | |||||||||||
| 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 | ( | ( | |||||||||
| FHLB short-term borrowings | |||||||||||
| Repayments of FHLB borrowings | ( | ||||||||||
| 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 | $ | $ | |||||||||
8
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Commerce Bancshares, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
| For the Nine Months Ended September 30 | |||||||||||
| (In thousands) | 2026 | 2025 | |||||||||
| (Unaudited) | |||||||||||
| Supplemental disclosures: | |||||||||||
| Income tax payments, net | $ | $ | |||||||||
| Interest paid on deposits and borrowings | |||||||||||
| Non-cash activities: | |||||||||||
| Loans transferred to foreclosed real estate | |||||||||||
| Business combination: | |||||||||||
| Fair value of tangible assets acquired | |||||||||||
| Goodwill and other intangible assets | |||||||||||
| Fair value of liabilities assumed | |||||||||||
| Common stock issued | |||||||||||
| Fair value of equity interest in FineMark prior to acquisition | |||||||||||
(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 $93 thousand at September 30, 2026. The Company had $112 thousand in restricted cash at September 30, 2025.
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Commerce Bancshares, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2026 (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). Effective January 1, 2026, the consolidated financial statements also include the accounts of FineMark Holdings, Inc. ("FineMark"), which was acquired by the Company as described in Note 2 "Acquisition" below, and is consolidated from the date of acquisition. 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 2025 data to conform to current year presentation, and certain balances related to the FineMark Holdings, Inc. acquisition were reclassified to conform to the Company's financial statement 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 months ended September 30, 2026 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.
The Company adopted Accounting Standards Update (ASU) 2025-08 "Financial Instruments - Credit Losses (Topic 326): Purchased Loans" on January 1, 2026. This new guidance makes significant changes to the accounting for certain acquired seasoned loans subject to the current expected credit loss model (CECL). Under the ASU, the initial allowance for credit losses recorded upon the acquisition of loans in scope is recognized as an adjustment to the amortized cost basis of the loan - similar to the model for purchased credit deteriorated assets. For these loans, the "day-one" credit loss estimate does not impact earnings immediately but is instead amortized over time as an adjustment to interest income. Subsequent changes in the allowance for credit losses are reported in earnings within provision for credit losses.
The following significant accounting policies have been updated or added since the Company's 2025 Annual Report on Form 10-K to reflect the adoption of ASU 2025-08.
Acquired loans - Purchased Credit Deteriorated
Loans acquired in a business combination are recognized on the acquisition date at their estimated fair value based on expected future cash flows discounted at a market-based rate of interest and inclusive of adjustments for credit risk, interest rate risk, liquidity, and other factors. Acquired loans that have experienced more-than-insignificant deterioration in credit quality since origination are classified as purchased credit deteriorated ("PCD") loans. An allowance for credit losses is established for the initial estimate of expected credit losses on PCD loans as of the acquisition date and recorded through a gross-up adjustment to the loan’s amortized cost basis.
Acquired loans - Purchased Seasoned Loans
Non-PCD loans acquired in a business combination are deemed purchased seasoned loans with an allowance for credit losses established for the initial estimate of expected credit losses as of the acquisition date and recorded through a gross-up adjustment to the loans’ amortized cost basis. See Note 2 “Acquisition” for additional information on loans acquired in a business combination.
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2. Acquisition
On January 1, 2026 , the Company completed its previously announced acquisition of FineMark Holdings, Inc. , a bank holding company headquartered in Fort Myers, Florida, pursuant to the Agreement and Plan of Merger dated June 16, 2025 . Immediately after the Merger, FineMark's wholly-owned subsidiary, FineMark National Bank & Trust, merged into the Bank, with the Bank continuing as the surviving bank.
Total purchase consideration for the acquisition was $519.9 million, consisting of 9.9 million shares of the Company's common stock (valued at the acquisition-date fair value of $52.34 per share), plus cash in lieu of fractional shares. Prior to the acquisition date, the Company held a non-controlling equity interest in FineMark, and in accordance with Accounting Standards Codification (ASC) 805, this previously held interest was remeasured to its acquisition-date fair value of $4.6 million. The total acquisition-date fair value of the business combination was $524.5 million, comprised of the $519.9 million of consideration transferred and the $4.6 million fair value of the Company's previously held equity interest.
Under the terms of the merger agreement, each outstanding FineMark common stock share was converted into .7245 shares of the Company's common stock, and each outstanding share of FineMark's preferred stock was converted into 36.3636 shares of FineMark common stock, prior to conversion into .7245 shares of the Company's common stock.
The acquisition of FineMark was accounted for as a business combination using the purchase method of accounting in accordance with Financial Accounting Standards Board (FASB) ASC Topic 805, Business Combinations, which requires assets acquired and liabilities assumed to be recognized at fair value as of the acquisition date. The valuation of assets acquired and liabilities assumed has not yet been finalized. The determination of fair value requires management to make estimates related to discount rates, expected future cash flows, market conditions and other future events that are highly subjective in nature and subject to change. Any necessary adjustments from preliminary estimates must be finalized within one year from the closing date of the acquisition. Measurement period adjustments will be recorded in the period in which they are determined, as if they had been completed at the acquisition date. Valuations subject to refinement include, but are not limited to, loans, certain deposits, the core deposit, customer relationship, trade name intangible assets, and certain other assets.
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The following table provides the preliminary allocation of the purchase consideration to the assets acquired and liabilities assumed from FineMark as of January 1, 2026:
(In thousands) | Fair Value | ||||
| Purchase consideration | |||||
| Fair value of common stock issued | $ | ||||
| Fair value of equity interest in FineMark held by the Company prior to acquisition | |||||
| Cash for fractional shares | |||||
| Fair value of total consideration | $ | ||||
| Assets | |||||
| Loans, net of allowance for credit losses on loans | $ | ||||
| Trading securities | |||||
| Other investments | |||||
| Interest earning deposits with banks | |||||
| Cash and due from banks | |||||
| Premises and equipment | |||||
| Identifiable intangible assets | |||||
| Other assets | |||||
| Total assets acquired | $ | ||||
| Liabilities | |||||
| Non-interest bearing deposits | $ | ||||
| Interest-bearing deposits | |||||
| Repurchase agreements | |||||
| Other borrowings | |||||
| Other liabilities | |||||
| Total liabilities assumed | $ | ||||
| Preliminary fair value of net assets acquired | $ | ||||
| Preliminary goodwill | |||||
In connection with the acquisition, the Company recorded preliminary goodwill of $107.3 million, none of which is expected to be deductible for tax purposes. The preliminary goodwill is attributable to expected synergies and other factors to arise from the transaction. Information regarding the allocation of goodwill to the Company’s reportable segments as a result of the acquisition, as well as the carrying amounts and amortization of core deposit and other intangible assets, are provided in Note 5 "Goodwill and Other Intangible Assets" in the Notes to Consolidated Financial Statements.
Loans
Fair values for loans were based on a discounted cash flow methodology that considered factors including the type of loan and related collateral, classification status, fixed or variable interest rate and prepayment rate, term, amortization status and current discount rates. Loans were grouped together according to similar characteristics when applying various valuation techniques. The discount rates used for loans were based on current market rates for new originations of comparable loans and included adjustments for liquidity. The discount rate does not include a factor for credit losses as that has been included as a reduction to the estimated cash flows. Purchased loans that reflect a more-than-insignificant deterioration of credit from origination are considered purchased credit deteriorated ("PCD"). For PCD loans, the initial estimate of expected credit losses is recognized in the allowance for credit losses on loans on the date of acquisition using the same methodology as other loans held-for-investment. The Company adopted ASU 2025-08 "Financial Instruments - Credit Losses (Topic 326): Purchased Loans" as of January 1, 2026. Accordingly, the initial estimate of expected credit losses recognized in the allowance for credit losses on loans included both PCD and non-PCD loans ("purchased seasoned loans").
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The following table includes the fair value and unpaid principal balance of the acquired loans as of January 1, 2026:
| (In thousands) | Unpaid principal balance | Premium / (discount) | Loans | Allowance for credit losses | Net loans | ||||||||||||
| Purchased seasoned loans | $ | $ | ( | $ | $ | ( | $ | ||||||||||
| PCD loans | ( | ( | |||||||||||||||
| Total | $ | $ | ( | $ | $ | ( | $ | ||||||||||
Investment securities
The investment securities acquired by the Company were classified by the Company as trading securities and were valued utilizing the actual sale prices for those securities, as all were sold promptly after the completion of the acquisition.
Interest earning deposits with banks and Cash and due from banks
The carrying amount of these assets was a reasonable estimate of fair value based on the short-term nature of these assets.
Core deposit intangible asset
Core deposit intangibles represent the value of relationships with deposit clients and the cost savings derived from available core deposits relative to an alternative funding source. The fair value of the core deposit intangible was estimated using a net cost savings method, a variation of the income approach. This approach considers expected client attrition rates, average life and balance inflation, alternative cost of funds, the interest cost and net maintenance cost associated with the client deposit base, and a discount rate used to discount the future economic benefits of the core deposit intangible asset to present value. The core deposit intangible asset is being amortized using an accelerated methodology over 12 years based upon the period over which the estimated economic benefits are estimated to be received.
Customer relationship intangible asset
The fair value of the customer relationship intangible asset was determined using an income-based valuation approach, specifically the multi-period excess earnings method. The valuation reflects the present value of expected future cash flows derived from the acquired customer base, after considering expected customer attrition rates, projected earnings, contributory asset charges, and a discount rate reflecting market participant assumptions. The customer relationship intangible asset is being amortized using an accelerated methodology over 12 years based upon the period over which the estimated economic benefits are estimated to be received.
Deposits
The fair value for demand and savings deposits is the amount payable on demand at the acquisition date. The fair value for time deposits was valued using a discounted cash flow calculation that applied interest rates currently being offered to the contractual interest rates on such time deposits.
Other borrowings
The Company assumed FHLB debt of $351.5 million in its acquisition of FineMark and repaid that debt in January 2026. The fair value of FHLB debt assumed was valued using the actual payoff value as provided by the FHLB on January 1, 2026.
The results of FineMark are included in the results of the Company subsequent to January 1, 2026. Transaction costs incurred after the acquisition date totaled $24.0 million as of September 30, 2026, primarily in salaries and employee benefits and professional and other services in the Consolidated Statements of Income. Additional transaction and integration costs will be expensed in future periods as incurred.
The following table presents pro forma combined information as if FineMark had been acquired on January 1, 2025. These results combine the historical results of FineMark into the Company’s consolidated statement of income, and while adjustments were made for the estimated impact of certain fair value adjustments and other acquisition-related activity, the results do not necessarily reflect the results of operations that would have occurred had the acquisition taken place on January 1, 2025. Furthermore, cost savings and other business synergies related to the acquisition are not reflected in the pro forma combined amounts.
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| Pro Forma Combined Results | |||||||||||||||||
| For the Three Months Ended | For the Nine Months Ended | ||||||||||||||||
| (In thousands) | September 30, 2026 | September 30, 2025 | September 30, 2026 | September 30, 2025 | |||||||||||||
| Total revenue * | $ | $ | $ | $ | |||||||||||||
| Net Income | |||||||||||||||||
*Total revenue is comprised of net interest income and non-interest income.
The Company's results for the three and nine months ended September 30, 2026 include the operating results of the acquired assets and assumed liabilities of FineMark subsequent to the acquisition on January 1, 2026. Due to the streamlining and integration of the operating activities into those of the Company post-acquisition, historical reporting for the former FineMark operations is impracticable, and thus disclosures of the revenue from the assets acquired and income before taxes are impracticable for the period subsequent to the acquisition.
3. Loans and Allowance for Credit Losses
Major classifications within the Company’s held for investment loan portfolio at September 30, 2026 and December 31, 2025 are as follows:
(In thousands) | September 30, 2026 | December 31, 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 loans | $ | $ | |||||||||
Accrued interest receivable totaled $86.9 million and $74.4 million at September 30, 2026 and December 31, 2025, respectively, and was included within other assets on the consolidated balance sheets. For the three months ended September 30, 2026, the Company wrote off accrued interest by reversing interest income of $53 thousand and $1.5 million in the Commercial and Personal Banking portfolios. Similarly, for the nine months ended September 30, 2026, the Company wrote off accrued interest of $135 thousand and $4.6 million in the Commercial and Personal Banking portfolios. For the three months ended September 30, 2025, the Company reversed $63 thousand and $1.5 million in the Commercial and Personal Banking portfolios, respectively, and in the nine months ended September 30, 2025, reversed $266 thousand and $4.8 million in the Commercial and Personal Banking portfolios.
At September 30, 2026, loans of $4.1 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.
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
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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 gross domestic product (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, 2026 and December 31, 2025 are discussed below.
| Key Assumption | September 30, 2026 | December 31, 2025 | ||||||
| Overall economic forecast | •Unemployment remains stable •Inflation remains elevated •Continued moderate growth •Continued uncertainty regarding the conflict in the Middle East | •Increased GDP due to expected increases in consumer spending •Stable unemployment •Higher rates and volatility are expected to continue | ||||||
| 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 is 4.2% during the supportable forecast period •Real GDP growth ranges from 2.2% to 2.6% •Housing Price Index from 331.0 to 338.2 •Commercial Real Estate Price Index from 317.2 to 327.9 •CPI inflation rate from 2.0% to 3.2% | •Unemployment rate ranges from 4.3% to 4.5% during the supportable forecast period •Real GDP growth ranges from 2.1% to 2.8% •Housing Price Index from 324.9 to 329.7 •Commercial Real Estate Price Index from 292.5 to 305.6 •CPI inflation rate from 2.1% to 2.6% | ||||||
| Prepayment assumptions | Commercial loans •5% for most loan pools Personal banking loans •Ranging from 9.9% to 26.3% for most loan pools •Consumer credit cards 68.0% | Commercial loans •5% for most loan pools Personal banking loans •Ranging from 8.7% to 24.7% for most loan pools •Consumer credit cards 66.9% | ||||||
| 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 •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 •Auto, other vehicle and other consumer portfolios loss expectation adjustment •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, business growth, and consumer spending. 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. Key forecast risks include higher energy prices, artificial intelligence-related inflation, artificial intelligence investment-related assumptions and US policy uncertainty.
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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.
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, 2026 and 2025, respectively, follows:
For the Three Months Ended September 30, 2026 | For the Nine Months Ended September 30, 2026 | ||||||||||||||||||||||
| (In thousands) | Commercial | Personal Banking | Total | Commercial | Personal Banking | Total | |||||||||||||||||
| ALLOWANCE FOR CREDIT LOSSES ON LOANS | |||||||||||||||||||||||
| Balance at end of prior period | $ | $ | $ | $ | $ | $ | |||||||||||||||||
| Initial allowance for credit losses on purchased credit deteriorated loans at acquisition | |||||||||||||||||||||||
| Initial allowance for credit losses on purchased seasoned loans at acquisition | |||||||||||||||||||||||
| Provision for credit losses on loans | |||||||||||||||||||||||
| Deductions: | |||||||||||||||||||||||
| Loans charged off | |||||||||||||||||||||||
| Less recoveries on loans | |||||||||||||||||||||||
| Net loan charge-offs (recoveries) | |||||||||||||||||||||||
| Balance September 30, 2026 | $ | $ | $ | $ | $ | $ | |||||||||||||||||
| LIABILITY FOR UNFUNDED LENDING COMMITMENTS | |||||||||||||||||||||||
| Balance at end of prior period | $ | $ | $ | $ | $ | $ | |||||||||||||||||
| Initial allowance for credit loss at acquisition | |||||||||||||||||||||||
| Provision for credit losses on unfunded lending commitments | ( | ( | ( | ( | ( | ( | |||||||||||||||||
| Balance September 30, 2026 | $ | $ | $ | $ | $ | $ | |||||||||||||||||
| ALLOWANCE FOR CREDIT LOSSES ON LOANS AND LIABILITY FOR UNFUNDED LENDING COMMITMENTS | $ | $ | $ | $ | $ | $ | |||||||||||||||||
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 | $ | $ | $ | $ | $ | $ | |||||||||||||||||
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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, 2026 and December 31, 2025.
(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, 2026 | |||||||||||||||||
| 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, 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 | $ | $ | $ | $ | $ | ||||||||||||
At September 30, 2026, the Company had $8.9 million non-accrual loans that had no allowance for credit loss, compared to no non-accrual loans that had no allowance for credit loss at December 31, 2025. The Company did not record any interest income on non-accrual loans during the nine months ended September 30, 2026 and 2025, 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, 2026 and December 31, 2025 are as follows:
| Term Loans Amortized Cost Basis by Origination Year | ||||||||||||||||||||||||||
| (In thousands) | 2026 | 2025 | 2024 | 2023 | 2022 | Prior | Revolving Loans Amortized Cost Basis | Total | ||||||||||||||||||
| September 30, 2026 | ||||||||||||||||||||||||||
| Business | ||||||||||||||||||||||||||
| Risk Rating: | ||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Special mention | ||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||
| Non-accrual | ||||||||||||||||||||||||||
| Total Business: | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
Gross write-offs for the nine months ended September 30, 2026 | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Real estate-construction | ||||||||||||||||||||||||||
| Risk Rating: | ||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Special mention | ||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||
| Total Real estate-construction: | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
Gross write-offs for the nine months ended September 30, 2026 | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| 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, 2026 | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Commercial loans | ||||||||||||||||||||||||||
| Risk Rating: | ||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Special mention | ||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||
| Non-accrual | ||||||||||||||||||||||||||
| Total Commercial loans: | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
Gross write-offs for the nine months ended September 30, 2026 | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
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| Term Loans Amortized Cost Basis by Origination Year | ||||||||||||||||||||||||||
| (In thousands) | 2025 | 2024 | 2023 | 2022 | 2021 | Prior | Revolving Loans Amortized Cost Basis | Total | ||||||||||||||||||
| December 31, 2025 | ||||||||||||||||||||||||||
| Business | ||||||||||||||||||||||||||
| Risk Rating: | ||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Special mention | ||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||
| Non-accrual | ||||||||||||||||||||||||||
| Total Business: | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Gross write-offs for the year ended December 31, 2025 | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Real estate-construction | ||||||||||||||||||||||||||
| Risk Rating: | ||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Special mention | ||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||
| Total Real estate-construction: | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Gross write-offs for the year ended December 31, 2025 | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Real estate- business | ||||||||||||||||||||||||||
| Risk Rating: | ||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Special mention | ||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||
| Non-accrual | ||||||||||||||||||||||||||
| Total Real-estate business: | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Gross write-offs for the year ended December 31, 2025 | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Commercial loans | ||||||||||||||||||||||||||
| Risk Rating: | ||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Special mention | ||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||
| Non-accrual | ||||||||||||||||||||||||||
| Total Commercial loans: | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Gross write-offs for the year ended December 31, 2025 | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
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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, 2026 and December 31, 2025 below.
| Term Loans Amortized Cost Basis by Origination Year | ||||||||||||||||||||||||||
| (In thousands) | 2026 | 2025 | 2024 | 2023 | 2022 | Prior | Revolving Loans Amortized Cost Basis | Total | ||||||||||||||||||
| September 30, 2026 | ||||||||||||||||||||||||||
| 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, 2026 | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Consumer | ||||||||||||||||||||||||||
| Current to 90 days past due | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Over 90 days past due | ||||||||||||||||||||||||||
| Total Consumer: | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
Gross write-offs for the nine months ended September 30, 2026 | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| 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 nine months ended September 30, 2026 | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| 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, 2026 | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Overdrafts | ||||||||||||||||||||||||||
| Current to 90 days past due | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Total Overdrafts: | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
Gross write-offs for the nine months ended September 30, 2026 | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| 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, 2026 | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
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| Term Loans Amortized Cost Basis by Origination Year | ||||||||||||||||||||||||||
| (In thousands) | 2025 | 2024 | 2023 | 2022 | 2021 | Prior | Revolving Loans Amortized Cost Basis | Total | ||||||||||||||||||
| December 31, 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 year ended December 31, 2025 | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Consumer | ||||||||||||||||||||||||||
| Current to 90 days past due | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Over 90 days past due | ||||||||||||||||||||||||||
| Total Consumer: | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Gross write-offs for the year ended December 31, 2025 | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Revolving home equity | ||||||||||||||||||||||||||
| Current to 90 days past due | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Over 90 days past due | ||||||||||||||||||||||||||
| Total Revolving home equity: | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Gross write-offs for the year ended December 31, 2025 | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| 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, 2025 | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Overdrafts | ||||||||||||||||||||||||||
| Current to 90 days past due | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Total Overdrafts: | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Gross write-offs for the year ended December 31, 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 year ended December 31, 2025 | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
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Table of Contents
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, 2026 and December 31, 2025.
| (In thousands) | Real Estate | Total | |||||||||||||||
| September 30, 2026 | |||||||||||||||||
| Commercial: | |||||||||||||||||
| Real estate - business | $ | $ | |||||||||||||||
| Total | $ | $ | |||||||||||||||
| December 31, 2025 | |||||||||||||||||
| Commercial: | |||||||||||||||||
| Real estate - business | $ | $ | |||||||||||||||
| 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, 2026 of loans that were modified during the three and nine months ended September 30, 2026 and the amortized cost at September 30, 2025 of loans that were modified during the three and nine months ended September 30, 2025.
| For the Three Months Ended September 30, 2026 | |||||||||||||||||||||||
(Dollars in thousands) | Term Extension | Payment Delay | Interest Rate Reduction | Total | % of Total Loan Category | ||||||||||||||||||
| September 30, 2026 | |||||||||||||||||||||||
| 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, 2026 | |||||||||||||||||||||||
| September 30, 2026 | |||||||||||||||||||||||
| Commercial: | |||||||||||||||||||||||
| Business | $ | $ | $ | $ | % | ||||||||||||||||||
| Real estate – construction and land | |||||||||||||||||||||||
| Real estate – business | |||||||||||||||||||||||
| Personal Banking: | |||||||||||||||||||||||
| Real estate – personal | |||||||||||||||||||||||
| Consumer | |||||||||||||||||||||||
| Consumer credit card | |||||||||||||||||||||||
| Total | $ | $ | $ | $ | % | ||||||||||||||||||
| 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 | $ | $ | $ | $ | % | ||||||||||||||||||
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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, 2026 and September 30, 2025.
| Term Extension | ||||||||
| Three Months Ended September 30, 2026 | Three Months Ended September 30, 2025 | |||||||
| Commercial: | ||||||||
| Business | Extended maturity by a weighted average of | Extended maturity by a weighted average of | ||||||
| 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 9 months. | ||||||
| Nine Months Ended September 30, 2026 | Nine Months Ended September 30, 2025 | |||||||
| 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 | --- | ||||||
| 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 | ||||||
| Payment Delay | ||||||||
| Three Months Ended September 30, 2026 | Three Months Ended September 30, 2025 | |||||||
| Personal Banking: | ||||||||
| Real estate – personal | Deferred certain payments by a weighted average of | Deferred certain payments by a weighted average of | ||||||
| Nine Months Ended September 30, 2026 | Nine Months Ended September 30, 2025 | |||||||
| 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 | ||||||
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Table of Contents
| Interest Rate Reduction | ||||||||
| Three Months Ended September 30, 2026 | Three Months Ended September 30, 2025 | |||||||
| Personal Banking: | ||||||||
| Consumer | ||||||||
| Consumer credit card | ||||||||
| Nine Months Ended September 30, 2026 | Nine Months Ended September 30, 2025 | |||||||
| Personal Banking: | ||||||||
| Consumer | ||||||||
| Consumer credit card | ||||||||
The Company had commitments of $69.8 million and $11.4 million at September 30, 2026 and December 31, 2025, 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, 2026 of loans to borrowers experiencing financial difficulty that had a payment default during the three and nine months ended September 30, 2026 and were modified within the 12 months preceding the payment default, as well as 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 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.
| For the Three Months Ended September 30, 2026 | For the Nine Months Ended September 30, 2026 | ||||||||||||||||||||||||||||||||||||||||
(Dollars in thousands) | Term Extension | Payment Delay | Interest Rate Reduction | Total | Term Extension | Payment Delay | Interest Rate Reduction | Total | |||||||||||||||||||||||||||||||||
| September 30, 2026 | |||||||||||||||||||||||||||||||||||||||||
| Commercial: | |||||||||||||||||||||||||||||||||||||||||
| Real estate – business | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||
| Personal Banking: | |||||||||||||||||||||||||||||||||||||||||
| Real estate – personal | |||||||||||||||||||||||||||||||||||||||||
| Consumer | |||||||||||||||||||||||||||||||||||||||||
| Consumer credit card | |||||||||||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||
| 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 | Total | Term Extension | Payment Delay | Interest Rate Reduction | Total | |||||||||||||||||||||||||||||||||
| September 30, 2025 | |||||||||||||||||||||||||||||||||||||||||
| Commercial: | |||||||||||||||||||||||||||||||||||||||||
| Business | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||
| Real estate – business | |||||||||||||||||||||||||||||||||||||||||
| Personal Banking: | |||||||||||||||||||||||||||||||||||||||||
| Real estate – personal | |||||||||||||||||||||||||||||||||||||||||
| Consumer | |||||||||||||||||||||||||||||||||||||||||
| Consumer credit card | |||||||||||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||
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Table of Contents
The following tables present the amortized cost basis at September 30, 2026 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, 2025 of loans to borrowers experiencing financial difficulty that had been modified within the 12 months preceding September 30, 2025.
(In thousands) | Current | 30-89 Days Past Due | 90 Days Past Due | Total | ||||||||||
| September 30, 2026 | ||||||||||||||
| Commercial: | ||||||||||||||
| Business | $ | $ | $ | $ | ||||||||||
| Real estate – construction and land | ||||||||||||||
| Real estate – business | ||||||||||||||
| Personal Banking: | ||||||||||||||
| Real estate – personal | ||||||||||||||
| Consumer | ||||||||||||||
| Consumer credit card | ||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||
(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 | $ | $ | $ | $ | ||||||||||
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 12. The loans are primarily sold to Federal Home Loan Mortgage Corporation (FHLMC) and Federal National Mortgage Association (FNMA). At September 30, 2026, the fair value of these loans was $1.7 million, and the unpaid principal balance was $1.7 million.
At September 30, 2026, none
Foreclosed real estate/repossessed assets
The Company’s holdings of foreclosed real estate totaled $1.4 million and $1.2 million at September 30, 2026 and December 31, 2025, respectively, and included in those amounts were $1.4 million and $1.0 million at September 30, 2026 and December 31, 2025, respectively, of foreclosed residential real estate properties held as a result of obtaining physical possession. Personal property acquired in repossession, generally autos, totaled $2.1 million and $2.3 million at September 30, 2026 and December 31, 2025. 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.
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Table of Contents
4. Investment Securities
Investment securities consisted of the following at September 30, 2026 and December 31, 2025.
| (In thousands) | September 30, 2026 | December 31, 2025 | ||||||
| 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 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 and common 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 December 31, 2025, this portfolio included the Company’s 411,723 shares of Visa Inc. (“Visa”) Class B-2 common stock, which were held by Commerce Bancshares, Inc. and were acquired by participating in a public exchange offer by Visa in 2024 (2024 Exchange Offer). At December 31, 2025, the Company’s Visa Class B-2 shares were carried at cost, which is $0 , as the Company elected the measurement alternative approach for these shares and there had not been 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.
On April 13, 2026, Visa announced the commencement of a public offering to permit the exchange of Class B-2 common stock for a combination of shares of Class B-3 common stock and Class C common stock (“2026 Exchange Offer”). The Company tendered all of its Visa Class B-2 shares. On May 8, 2026, the 2026 Exchange Offer closed, and in exchange for its 411,723 shares of Visa Class B-2 common stock, the Company received 205,861 shares of Visa Class B-3 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 1.5075 shares of Class A common stock for each share of Class B-3 common stock, subject to adjustment) and 77,584 shares of Visa Class C common stock each of which will 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. A full description of the terms of the 2026 Exchange Offer is set forth in Visa’s related Issuer Tender Offer Statement on Schedule TO and Prospectus, each dated April 13, 2026, publicly filed with the U. S. Securities and Exchange Commission.
As a condition of participating in the 2024 Exchange Offer, the Company entered into a Makewhole Agreement (2024 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 had been effectively indemnified by Visa USA members through reductions to the conversion ratio for its Class B-1 common stock. The purpose of the 2024 Makewhole Agreement was 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
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Commission, both the 2024 Makewhole Agreement and the related escrow fund and transfer restrictions on Visa’s Class B-1 and 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. In order to continue preserving the economic benefit of those same adjustments for Visa's Class A and Class C common stockholders in relation to the Class B-2 and Class B-3 conversion ratios following the 2026 Exchange Offer, and as a condition of participating in the 2026 Exchange Offer, the Company entered into a Makewhole Agreement (2026 Makewhole Agreement) with Visa that provides for similar cash payments to Visa under the same circumstances as described above for the 2024 Makewhole Agreement. As further described in Visa’s related Issuer Tender Offer Statement on Schedule TO and Prospectus, each dated April 13, 2026, publicly filed with the U. S. Securities and Exchange Commission, both the 2026 Makewhole Agreement and the related escrow fund and transfer restrictions on Visa’s Class B-2 common stock and the new Class B-3 common stock will terminate whenever the covered litigation is ultimately resolved, at which future date outstanding shares of Visa Class B-3 common stock will be convertible into shares of its Class A common stock at the then-applicable conversion ratio. The 2026 Makewhole Agreement also includes limited transfer restrictions, such that the Company may only transfer up to one-third of the shares of Visa Class C common stock received in the exchange within the first 45 days following the 2026 Exchange Offer acceptance date, and may only transfer up to two-thirds of the Class C common stock received within the first 90 days following the 2026 Exchange Offer acceptance date.
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 2026, the Company sold 103 thousand shares of Visa Class A common stock at an average price of $333.11 , resulting in proceeds of $34.5 million. During the third quarter of 2026, the Company sold 207 thousand Visa Class A shares at an average price of $358.14 , resulting in proceeds of $74.1 million. As of September 30, 2026, the Company has sold all of the Visa Class C shares it received from the 2026 Exchange Offer. Additionally, because the Company elected the measurement alternative approach for its Visa Class B-3 common stock, these shares will continue to be carried at cost ($0 ) unless there are observable price changes in orderly transactions for identical or similar investments of the same issuer for the Visa Class B-3 shares held by the Company.
Changes in equity investments with no readily determinable fair value for each period were as follows:
| Three Months Ended September 30 | Nine Months Ended September 30 | ||||||||||||||||
| (In thousands) | 2026 | 2026 | |||||||||||||||
| Balance at beginning of period | $ | $ | |||||||||||||||
| Additions | |||||||||||||||||
| Observable upward price adjustments | |||||||||||||||||
| Observable downward price adjustments | |||||||||||||||||
| Impairment charges | |||||||||||||||||
| Sales of securities and other activity | ( | ( | |||||||||||||||
| Balance at end of period | $ | $ | |||||||||||||||
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, 2026 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.
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| (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 1 but within 5 years | ||||||||
| 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 | $ | $ | ||||||
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, 2026, the fair value of securities on this watch list was $1.3 billion compared to $896.7 million at December 31, 2025. 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, 2026, 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, 2026, the Company did not identify any securities for which a credit loss exists, and for the nine months ended September 30, 2026 and 2025, 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, 2026 and December 31, 2025. 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, 2026, 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, 2026 | ||||||||||||||||||||||||||
| 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, 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 | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||
The entire available for sale debt portfolio included $7.7 billion of securities that were in a loss position at September 30, 2026, compared to $5.9 billion at December 31, 2025. The total amount of unrealized loss on these securities was $849.3 million at September 30, 2026, an increase of $157.2 million compared to the unrealized loss at December 31, 2025. 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, 2026 and December 31, 2025, 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, 2026 | |||||||||||||||||
| 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, 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 | $ | $ | $ | ( | $ | $ | |||||||||||
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) | 2026 | 2025 | ||||||
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 | $ | $ | ||||||
Net gains on investment securities for the nine months ended September 30, 2026 were mainly comprised of net gains of $117.4 million on equity investments and net gains in fair value of $15.1 million recorded on private equity investments. These
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gains were partially offset by net losses of $110.1 million on sales of available for sale securities. The majority of the net losses on sales of available for sale debt securities are related to the Company's available for sale debt portfolio rerepositioning, which is discussed further below.
Subsequent to the successful close of the 2026 Exchange Offer in May 2026, the Company approved and executed the repositioning of a portion of its available for sale debt securities portfolio during the second quarter of 2026 through the sale of securities with an amortized cost of $904.7 million. The securities that the Company sold had a yield of approximately 2.6 %, which resulted in a loss of $97.7 million, and the Company reinvested $613.7 million of the proceeds into U.S. Treasury securities yielding approximately 4.3 %.
Pledged securities
At September 30, 2026, securities totaling $5.8 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 $7.3 billion at December 31, 2025. Excluding obligations of various government-sponsored enterprises such as FNMA, FHLB and FHLMC, no 10
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5. Goodwill and Other Intangible Assets
The following table presents information about the Company's intangible assets which have estimable useful lives.
| September 30, 2026 | December 31, 2025 | ||||||||||||||||||||||||||||
(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 | $ | $ | ( | $ | $ | $ | $ | ( | $ | $ | |||||||||||||||||||
| Trade name | ( | ||||||||||||||||||||||||||||
| Customer relationships | ( | ||||||||||||||||||||||||||||
| Mortgage servicing rights | ( | ( | |||||||||||||||||||||||||||
| Total | $ | $ | ( | $ | $ | $ | $ | ( | $ | $ | |||||||||||||||||||
Aggregate amortization expense on intangible assets was $5.7 million and $310 thousand for the three months ended September 30, 2026 and 2025, respectively, and was $17.1 million and $954 thousand for the nine months ended September 30, 2026 and 2025, 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, 2026. 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) | |||||
| 2026 | $ | ||||
| 2027 | |||||
| 2028 | |||||
| 2029 | |||||
| 2030 | |||||
Changes in the carrying amount of goodwill and other intangible assets for the nine months ended September 30, 2026 are as follows:
| (In thousands) | Goodwill | Easement | Core Deposit Premium | Trade Name | Customer Relationships | Mortgage Servicing Rights | ||||||||||||||
Balance January 1, 2026 | $ | $ | $ | $ | $ | $ | ||||||||||||||
| Acquisition | ||||||||||||||||||||
| Originations, net of disposals | ||||||||||||||||||||
| Amortization | ( | ( | ( | ( | ||||||||||||||||
| Balance September 30, 2026 | $ | $ | $ | $ | $ | $ | ||||||||||||||
The Company added $107.3 million of goodwill related to the FineMark acquisition in the first quarter of 2026. The goodwill was calculated based on the preliminary fair values of the assets acquired and liabilities assumed as of the acquisition date and is subject to change as additional information becomes available during the measurement period. Goodwill related to the FineMark acquisition was allocated entirely to the Company's Wealth segment. Goodwill allocated to the Company’s operating segments at September 30, 2026 and December 31, 2025 is shown below.
| (In thousands) | September 30, 2026 | December 31, 2025 | ||||||
| Retail banking segment | $ | $ | ||||||
| Commercial segment | ||||||||
| Wealth segment | ||||||||
| Total goodwill | $ | $ | ||||||
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6. 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, 2026, that net liability was $4.3 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 $735.1 million at September 30, 2026.
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7. 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 12 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) | 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Direct financing and sales-type leases | $ | $ | $ | $ | |||||||||||||
| Operating leases | |||||||||||||||||
| Total lease income | $ | $ | $ | $ | |||||||||||||
8. 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) | 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Service cost | $ | $ | $ | $ | |||||||||||||
| Interest cost on projected benefit obligation | |||||||||||||||||
| Expected return on plan assets | ( | ( | ( | ( | |||||||||||||
| Amortization of unrecognized net loss (gain) | |||||||||||||||||
| Net periodic pension cost | $ | $ | $ | $ | |||||||||||||
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9. 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 restricted stock 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 restricted stock 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 14.
| For the Three Months Ended September 30 | For the Nine Months Ended September 30 | ||||||||||||||||
| (In thousands, except per share data) | 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Basic income per common share: | |||||||||||||||||
| Net income attributable to Commerce Bancshares, Inc. | $ | $ | $ | $ | |||||||||||||
| Less income allocated to nonvested restricted stock awards | |||||||||||||||||
| 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 awards | |||||||||||||||||
| Net income allocated to common stock | $ | $ | $ | $ | |||||||||||||
| Weighted average common shares outstanding | |||||||||||||||||
| Net effect of assumed exercise of stock appreciation rights and restricted stock units - 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 239 thousand and 249 thousand for the three months ended September 30, 2026 and 2025, respectively, and 302 thousand and 242 thousand for the nine months ended September 30, 2026 and 2025, respectively, were excluded from the computation of diluted income per common share because their inclusion would have been anti-dilutive. Nonvested time-vested restricted stock units of 2 thousand for the three months ended September 30, 2026, and 33 thousand for the nine months ended September 30, 2026, 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 2025.
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10. 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 4, and information about unrealized gains and losses on cash flow hedge derivatives is located in Note 12.
| 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, 2026 | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||
| 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, 2026 | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||
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 | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||
(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.
11. Segments
The Company segregates financial information for use in assessing its performance and allocating resources among three 150 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.
The following table presents selected financial information by segment and reconciliations of combined segment totals to consolidated totals. There were no
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(In thousands) | Retail Banking | Commercial | Wealth | Other/Elimination | Consolidated Totals | |||||||||||||||
| Three Months Ended September 30, 2026 | ||||||||||||||||||||
| 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, 2026 | ||||||||||||||||||||
| 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, 2025 | ||||||||||||||||||||
| 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, 2025 | ||||||||||||||||||||
| 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 Retail Banking, 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) to 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.
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.
12. 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
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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, 2026 | December 31, 2025 | ||||||
| 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 $102.2 million, including $11.9 million during the nine months ended September 30, 2026. At September 30, 2026, the maximum length of time over which the Company is hedging its exposure to lower rates is approximately 6.0 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, 2026, net deferred losses on the interest rate floors totaled $46.7 million (pre-tax) and were recorded in AOCI in the consolidated balance sheet. As of September 30, 2026, it is expected that $14.1 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, 2026, the total realized gains on the monetized cash flow hedges remaining in AOCI were $1.3 million (pre-tax),
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which will be reclassified into interest income over the next 3 months. The estimated amount of net gains related to the cash flow hedges remaining in AOCI at September 30, 2026 that is expected to be reclassified into income within the next 12 months is $1.3 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 6 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 16 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.
| Asset Derivatives | Liability Derivatives | ||||||||||||||||
| Sept. 30, 2026 | Dec. 31, 2025 | Sept. 30, 2026 | Dec. 31, 2025 | ||||||||||||||
(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, 2026 | ||||||||||||||||||||||||||
| Derivatives in cash flow hedging relationships: | ||||||||||||||||||||||||||
| Interest rate floors | $ | ( | $ | $ | ( | Interest and fees on loans | $ | ( | $ | $ | ( | |||||||||||||||
| Total | $ | ( | $ | $ | ( | Total | $ | ( | $ | $ | ( | |||||||||||||||
| For the Nine Months Ended September 30, 2026 | ||||||||||||||||||||||||||
| Derivatives in cash flow hedging relationships: | ||||||||||||||||||||||||||
| Interest rate floors | $ | ( | $ | ( | $ | ( | Interest and fees on loans | $ | ( | $ | $ | ( | ||||||||||||||
| Total | $ | ( | $ | ( | $ | ( | Total | $ | ( | $ | $ | ( | ||||||||||||||
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 | $ | $ | $ | ( | |||||||||||||||||
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) | 2026 | 2025 | 2026 | 2025 | ||||||||||||||||
| Derivatives and hedged instruments in fair value hedging relationships: | ||||||||||||||||||||
| Interest rate swaps and hedged loans | Interest and fees on loans | $ | $ | $ | ( | $ | ||||||||||||||
| Total | $ | $ | $ | ( | $ | |||||||||||||||
| Derivative instruments: | ||||||||||||||||||||
| Interest rate swaps | Other non-interest income | $ | $ | $ | $ | |||||||||||||||
| Interest rate caps | 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
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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.
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, 2026 | ||||||||||||||||||||
| 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, 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 | $ | $ | $ | |||||||||||||||||
13. 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
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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.
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, 2026 | ||||||||||||||||||||
Total resale agreements, subject to master netting arrangements | $ | $ | $ | $ | $ | ( | $ | |||||||||||||
Total repurchase agreements, subject to master netting arrangements | ( | |||||||||||||||||||
| December 31, 2025 | ||||||||||||||||||||
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, 2026 and December 31, 2025, 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, 2026 | ||||||||||||||
| 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, 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 | $ | $ | $ | $ | ||||||||||
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14. Stock-Based Compensation
In accordance with the requirements of ASC 718-10-30-3 and 35-2, the Company measures the cost of stock-based compensation based on the grant-date fair value of the award, recognizing the cost over the requisite service period, which is generally the vesting period.
Beginning February 2026, the Company issued stock-based compensation in the form of time-vested restricted stock units (RSUs) and performance-vested restricted stock units (PSUs). The fair value of a PSU is estimated using a Monte Carlo simulation analysis while the fair value of an RSU is the common stock (CBSH) market price. Compensation expense for PSUs is recognized over the requisite service period based on the probable outcome of the performance conditions. RSUs and PSUs accrue forfeitable dividend equivalents which are paid in cash upon vesting. Dividend equivalents are included in compensation expense over the requisite service period. Prior to February 1, 2026, the Company issued stock-based compensation in the form of nonvested restricted stock awards and stock appreciation rights (SARs). The fair value of stock appreciation rights is estimated using the Black-Scholes option-pricing model while the fair value of a nonvested restricted stock award is the common stock (CBSH) market price. The expense recognized for stock-based compensation is included in salaries and employee benefits expense in the accompanying consolidated statements of income. The Company recognizes forfeitures as a reduction to expense only when they have occurred.
Historically, most of the awards have been issued during the first quarter of each year. Total stock-based compensation expense charged against income was $7.3 million and $4.4 million in the three months ended September 30, 2026 and 2025, and $20.1 million and $12.9 million in the nine months ended September 30, 2026 and 2025, respectively.
Restricted Stock Awards
Nonvested restricted 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, 2026, and changes during the nine month period then ended, is presented below.
| Shares | Weighted Average Grant Date Fair Value | |||||||
| Nonvested at January 1, 2026 | $ | |||||||
| Granted | ||||||||
| Vested | ( | |||||||
| Forfeited | ( | |||||||
| Nonvested at September 30, 2026 | $ | |||||||
Time-Vested Restricted Stock Units and Performance-Vested Restricted Stock Units
RSUs generally vest after 3 to 4 years of continued service. PSUs are granted to key executives and vest at the end of a 3 -year performance period. The number of shares ultimately earned is determined based on relative performance compared to peers over the performance period of the following equally weighted measures: Adjusted Return on Average Equity and Diluted EPS Growth. The earned PSU shares are further adjusted by a market condition modifier based on the Company's Total Shareholder Return relative to peers measured 3 years from the date of grant. RSUs and PSUs earn forfeitable cash dividend equivalents, which are paid in cash at the end of the vesting period, but do not carry voting rights.
The fair value of RSUs are based on the closing common stock (CBSH) market price on the date of grant. To measure the probability distribution of performance of the market condition, the fair value of PSUs is estimated based on a Monte Carlo simulation analysis. The Company engages a third-party valuation expert to perform the Monte Carlo simulation, and the assumptions used are shown in the table below.
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A summary of the Company's time-vested restricted stock units and performance-vested restricted stock units as of September 30, 2026, and changes during the nine month period ended, is presented below.
| Time-Vested Restricted Stock Units | Performance-Vested Restricted Stock Units | ||||||||||||||||
| Units | Weighted Average Grant Date Fair Value | Units | Weighted Average Grant Date Fair Value | ||||||||||||||
| Nonvested at January 1, 2026 | $ | $ | |||||||||||||||
| Granted | |||||||||||||||||
| Vested | ( | ||||||||||||||||
| Forfeited | ( | ||||||||||||||||
| Nonvested at September 30, 2026 | $ | $ | |||||||||||||||
The current year Monte Carlo assumptions are shown in the table below.
| Fair value on valuation date | $ | ||||
| Assumptions: | |||||
| Dividend yield | % | ||||
| Historical volatility | % | ||||
| Risk-free interest rate | % | ||||
| Expected term | |||||
Stock Appreciation Rights
Stock appreciation rights (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.
A summary of SAR activity during the first nine months of 2026 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, 2026 | $ | |||||||||||||
| Granted | ||||||||||||||
| Forfeited | ( | |||||||||||||
| Expired | ( | |||||||||||||
| Exercised | ( | |||||||||||||
Outstanding at September 30, 2026 | $ | $ | ||||||||||||
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15. Revenue from Contracts with Customers
Accounting Standard Codification 606, Revenue from Contracts with Customers ("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, 2026, 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) | 2026 | 2025 | 2026 | 2025 | |||||||||||||
| 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 Retail Banking segment, while corporate card and merchant fees were earned in the Commercial segment. The Retail Banking and Commercial segments contributed approximately 27 % and 72 %, 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, 2026 and 2025 for the Company’s significant revenue from contracts with customers.
| (In thousands) | September 30, 2026 | December 31, 2025 | September 30, 2025 | December 31, 2024 | ||||||||||
| Bank card transaction fees | $ | $ | $ | $ | ||||||||||
| Trust fees | ||||||||||||||
| Deposit account charges and other fees | ||||||||||||||
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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16. 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 2025 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, 2026 and December 31, 2025 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 2026 or the year ended December 31, 2025.
| 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, 2026 | ||||||||||||||
| 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, 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 | $ | $ | $ | $ | ||||||||||
* The fair value of each class of derivative is shown in Note 12.
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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, 2026 | |||||||||||||||||
| Balance June 30, 2026 | $ | $ | $ | ||||||||||||||
| 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, 2026 | $ | $ | $ | ||||||||||||||
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, 2026 | $ | $ | $ | ||||||||||||||
*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, 2026 | $ | ( | $ | $ | ( | ||||||||||||
| For the nine months ended September 30, 2026 | |||||||||||||||||
Balance January 1, 2026 | $ | $ | $ | ||||||||||||||
| 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, 2026 | $ | $ | $ | ||||||||||||||
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, 2026 | $ | $ | $ | ||||||||||||||
*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, 2026 | $ | $ | $ | ||||||||||||||
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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, 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 at 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 at 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 | $ | ( | $ | $ | ( | |||||||||
* 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, 2026 | ||||||||||||||
| Total gains or losses included in earnings | $ | |||||||||||||
Change in unrealized gains or losses relating to assets still held at September 30, 2026 | $ | |||||||||||||
For the nine months ended September 30, 2026 | ||||||||||||||
| Total gains or losses included in earnings | $ | |||||||||||||
Change in unrealized gains or losses relating to assets still held at September 30, 2026 | $ | |||||||||||||
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 | $ | |||||||||||||
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Level 3 Inputs
The Company's Level 3 measurements at September 30, 2026, 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 2026 and 2025, and still held as of September 30, 2026 and 2025, 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, 2026 and 2025.
| 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, 2026 | |||||||||||||||||
| Collateral dependent loans | $ | $ | $ | $ | $ | ( | |||||||||||
| Long-lived assets | ( | ||||||||||||||||
| September 30, 2025 | |||||||||||||||||
| Collateral dependent loans | $ | $ | $ | $ | $ | ( | |||||||||||
| Long-lived assets | ( | ||||||||||||||||
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17. 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, 2026 and December 31, 2025:
| Carrying Amount | Estimated Fair Value at September 30, 2026 | |||||||||||||||||||
(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 | ||||||||||||||||||||
| 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, 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 | $ | $ | $ | $ | $ | |||||||||||||||
18. Legal and Regulatory Proceedings
The Company has various legal proceedings pending at September 30, 2026, 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 2025 Annual Report on Form 10-K. Results of operations for the three and nine months ended September 30, 2026 are not necessarily indicative of results to be attained for any other period.
Acquisition
On January 1, 2026, the Company completed its previously announced acquisition of FineMark Holdings, Inc. ("FineMark"), a bank holding company headquartered in Fort Myers, Florida, pursuant to the Agreement and Plan of Merger dated June 16, 2025. Immediately after the merger, FineMark's wholly-owned subsidiary, FineMark National Bank & Trust, merged into the Bank, with the Bank continuing as the surviving bank. The acquisition added total assets of approximately $4.0 billion, including loans of $2.6 billion, total deposits of $3.1 billion, and assets under administration of $8.7 billion, as well as 13 banking offices in Florida, Arizona and South Carolina.
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 merger with FineMark including, among others, (i) the Company's ability to promptly and effectively integrate the merger, (ii) diversion of management’s attention from ongoing business operations and opportunities, (iii) cost savings and any revenue synergies from the merger may not be fully realized or may take longer than anticipated to be realized, (iv) deposit attrition, customer or employee loss and/or revenue loss as a result of the merger, and (v) expenses related to the 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 2025 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 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 2025 Annual Report on Form 10-K. There have been no changes in the Company's application of critical accounting policies since December 31, 2025.
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Selected Financial Data
| Three Months Ended September 30 | Nine Months Ended September 30 | ||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||
| Per Share Data | |||||||||||||||||
| Net income per common share — basic | $ | 1.08 | $ | 1.01 | * | $ | 3.14 | $ | 3.03 | * | |||||||
| Net income per common share — diluted | 1.08 | 1.01 | * | 3.14 | 3.03 | * | |||||||||||
| Cash dividends on common stock | .275 | .262 | * | .825 | .786 | * | |||||||||||
| Book value per common share | 29.68 | 27.15 | * | ||||||||||||||
| Market price | 54.74 | 56.91 | * | ||||||||||||||
| Selected Ratios | |||||||||||||||||
| (Based on average balance sheets) | |||||||||||||||||
Loans to deposits (1) | 76.06 | % | 70.61 | % | 74.65 | % | 70.08 | % | |||||||||
| Non-interest bearing deposits to total deposits | 29.65 | 29.64 | 29.08 | 29.51 | |||||||||||||
Equity to loans (1) | 20.97 | 21.03 | 21.19 | 20.23 | |||||||||||||
| Equity to deposits | 15.95 | 14.85 | 15.82 | 14.18 | |||||||||||||
| Equity to total assets | 12.62 | 11.67 | 12.47 | 11.21 | |||||||||||||
| Return on total assets | 1.79 | 1.78 | 1.75 | 1.81 | |||||||||||||
| Return on equity | 14.17 | 15.26 | 14.03 | 16.15 | |||||||||||||
| (Based on end-of-period data) | |||||||||||||||||
Non-interest income to revenue (2) | 37.52 | 36.63 | 37.11 | 36.97 | |||||||||||||
Efficiency ratio (3) | 56.69 | 55.26 | 58.34 | 55.21 | |||||||||||||
| Tier I common risk-based capital ratio | 16.69 | 17.46 | |||||||||||||||
Tier I risk-based capital ratio | 16.69 | 17.46 | |||||||||||||||
| Total risk-based capital ratio | 17.47 | 18.26 | |||||||||||||||
Tangible common equity to tangible assets ratio (4) | 11.06 | 11.27 | |||||||||||||||
Tier I leverage ratio | 13.04 | 12.95 | |||||||||||||||
* Restated for the 5% stock dividend distributed in December 2025.
(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) | 2026 | 2025 | ||||||
| Total equity | $ | 4,215,424 | $ | 3,793,047 | ||||
| Less non-controlling interest | 26,842 | 21,382 | ||||||
| Less goodwill | 253,805 | 146,539 | ||||||
| Less intangible assets* | 125,606 | 3,750 | ||||||
| Total tangible common equity (a) | $ | 3,809,171 | $ | 3,621,376 | ||||
| Total assets | $ | 34,823,384 | $ | 32,288,688 | ||||
| Less goodwill | 253,805 | 146,539 | ||||||
| Less intangible assets* | 125,606 | 3,750 | ||||||
| Total tangible assets (b) | $ | 34,443,973 | $ | 32,138,399 | ||||
| Tangible common equity to tangible assets ratio (a)/(b) | 11.06 | % | 11.27 | % | ||||
* 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) | 2026 | 2025 | % change | 2026 | 2025 | % change | |||||||||||||||||||||||||||||
| Net interest income (expense) | $ | 308,877 | $ | 279,457 | 10.5 | % | $ | 923,802 | $ | 828,706 | 11.5 | % | |||||||||||||||||||||||
| Provision for credit losses | (10,025) | (20,061) | (50.0) | (29,716) | (40,145) | (26.0) | |||||||||||||||||||||||||||||
| Non-interest income | 185,466 | 161,511 | 14.8 | 545,145 | 486,073 | 12.2 | |||||||||||||||||||||||||||||
| Investment securities gains (losses), net | 4,097 | 7,885 | (48.0) | 28,574 | 731 | N.M. | |||||||||||||||||||||||||||||
| Non-interest expense | (285,931) | (244,018) | 17.2 | (874,125) | (726,831) | 20.3 | |||||||||||||||||||||||||||||
| Income taxes | (44,408) | (41,152) | 7.9 | (131,064) | (120,516) | 8.8 | |||||||||||||||||||||||||||||
| Non-controlling interest income (expense) | (3,086) | (2,104) | 46.7 | (6,213) | (2,429) | N.M. | |||||||||||||||||||||||||||||
| Net income attributable to Commerce Bancshares, Inc. | $ | 154,990 | $ | 141,518 | 9.5 | % | $ | 456,403 | $ | 425,589 | 7.2 | % | |||||||||||||||||||||||
N.M. - Not meaningful.
For the quarter ended September 30, 2026, net income attributable to Commerce Bancshares, Inc. (net income) amounted to $155.0 million, an increase of $13.5 million, or 9.5%, compared to the third quarter of the previous year. For the current quarter, the annualized return on average assets was 1.79%, the annualized return on average equity was 14.17%, and the efficiency ratio was 56.69%. Diluted earnings per common share was $1.08 per share in the current quarter, an increase of 6.9% compared to $1.01 per share in the third quarter of 2025, and decreased 1.8% compared to $1.10 per share in the previous quarter.
Compared to the third quarter of last year, net interest income increased $29.4 million, or 10.5%, mainly due to increases in interest income on loans and securities purchased under agreements to resell, partially offset by lower interest income on interest earning deposits at banks and higher interest expense. Interest income on loans and securities purchased under agreements to resell increased $32.1 million and $3.1 million, respectively, in the third quarter of 2026 as compared to the third quarter of 2025, while interest income on deposits at the Federal Reserve decreased $6.1 million during that period. Interest expense on deposits increased $3.6 million during the current quarter compared to the same quarter last year, while interest expense on borrowings decreased $4.4 million. The provision for credit losses decreased $10.0 million compared to the same quarter in the prior year. Non-interest income increased $24.0 million, or 14.8%, compared to the third quarter of 2025, mainly due to increases in trust and bank card fees of $15.0 million and $3.6 million, respectively. Net gains on investment securities totaled $4.1 million in the current quarter compared to net gains of $7.9 million in the same quarter of last year. Net securities gains in the current quarter primarily resulted from fair value adjustments on private equity investments, net gains on sales of private equity investments, and net gains on equity securities, offset by net losses on sales of available for sale debt securities. Non-interest expense increased $41.9 million, or 17.2%, over the third quarter of 2025, mainly due to higher salaries and benefits expense of $24.1 million, primarily a result of onboarding FineMark team members at the beginning of 2026. Data processing and software expense increased $5.3 million, and professional and other services expense increased $3.4 million. Additionally, other non-interest expense increased $5.7 million, mainly due to $5.4 million in intangible amortization expense related to the FineMark acquisition.
Net income for the first nine months of 2026 totaled $456.4 million, an increase of $30.8 million, or 7.2% from the same period last year. Diluted earnings per common share was $3.14, an increase of 3.6% compared to $3.03 per share in the same period last year. For the first nine months of 2026, the annualized return on average assets was 1.75%, the annualized return on average equity was 14.03%, and the efficiency ratio was 58.34%. Net interest income increased $95.1 million, or 11.5%, over the same period last year. This growth was largely due to an increase in interest income on loans of $97.3 million. Interest expense on deposits increased $10.9 million, while interest expense on borrowings decreased $9.6 million, over the same period last year. The provision for credit losses was $29.7 million for the first nine months of 2026, compared to a provision of $40.1 million in the same period last year. Non-interest income increased $59.1 million, or 12.2%, from the first nine months of last year, largely due to increases in trust fees, bank card fees and deposit account fees. Non-interest expense increased $147.3 million, or 20.3%, over the first nine months of last year, mainly due to higher salaries and benefits expense of $76.7 million, primarily a result of onboarding FineMark team members at the beginning of 2026. Professional and other services expense increased $15.7 million, partly due to acquisition-related legal and professional fees, while data processing and software expense increased $16.7 million. Additionally, other non-interest expense increased $28.4 million over the same period in the prior year, mainly due to a $12.0 million increase in litigation expense and $16.1 million in acquisition-related intangible amortization expense.
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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, 2026 vs. 2025 | Nine Months Ended September 30, 2026 vs. 2025 | ||||||||||||||||||||||
| 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 | $ | 10,413 | $ | (6,048) | $ | 4,365 | $ | 28,061 | $ | (17,923) | $ | 10,138 | |||||||||||
| Real estate - construction and land | 1,378 | (3,489) | (2,111) | 6,687 | (10,108) | (3,421) | |||||||||||||||||
| Real estate - business | 5,407 | (3,163) | 2,244 | 16,360 | (6,619) | 9,741 | |||||||||||||||||
| Real estate - personal | 14,046 | 5,555 | 19,601 | 42,897 | 16,744 | 59,641 | |||||||||||||||||
| Consumer | 7,975 | (2,996) | 4,979 | 18,621 | (6,745) | 11,876 | |||||||||||||||||
| Revolving home equity | 5,860 | (1,205) | 4,655 | 15,290 | (1,346) | 13,944 | |||||||||||||||||
| Consumer credit card | (596) | (924) | (1,520) | (1,261) | (2,914) | (4,175) | |||||||||||||||||
| Overdrafts | — | — | — | — | — | — | |||||||||||||||||
| Total interest on loans | 44,483 | (12,270) | 32,213 | 126,655 | (28,911) | 97,744 | |||||||||||||||||
| Loans held for sale | (9) | 3 | (6) | (3) | (14) | (17) | |||||||||||||||||
| Investment securities: | |||||||||||||||||||||||
| U.S. government and federal agency obligations | 8,209 | (160) | 8,049 | 22,185 | 42 | 22,227 | |||||||||||||||||
| Government-sponsored enterprise obligations | (3) | — | (3) | (9) | — | (9) | |||||||||||||||||
| State and municipal obligations | (427) | 26 | (401) | (1,338) | 160 | (1,178) | |||||||||||||||||
| Mortgage-backed securities | (5,151) | 473 | (4,678) | (11,426) | 1,092 | (10,334) | |||||||||||||||||
| Asset-backed securities | (4,200) | 360 | (3,840) | (12,947) | 1,459 | (11,488) | |||||||||||||||||
| Other securities | 286 | (52) | 234 | 1,676 | (3,176) | (1,500) | |||||||||||||||||
| Total interest on investment securities | (1,286) | 647 | (639) | (1,859) | (423) | (2,282) | |||||||||||||||||
| Federal funds sold | 13 | (4) | 9 | 3 | (12) | (9) | |||||||||||||||||
| Securities purchased under agreements to resell | 3,025 | 105 | 3,130 | 4,415 | 628 | 5,043 | |||||||||||||||||
| Interest earning deposits with banks | (2,015) | (4,037) | (6,052) | 10,647 | (14,475) | (3,828) | |||||||||||||||||
| Total interest income | 44,211 | (15,556) | 28,655 | 139,858 | (43,207) | 96,651 | |||||||||||||||||
| Interest expense: | |||||||||||||||||||||||
| Deposits: | |||||||||||||||||||||||
| Savings | 2 | 54 | 56 | 6 | 122 | 128 | |||||||||||||||||
| Interest checking and money market | 8,100 | (1,224) | 6,876 | 25,611 | (7,292) | 18,319 | |||||||||||||||||
| Certificates of deposit of less than $100,000 | 209 | (1,026) | (817) | 1,332 | (3,578) | (2,246) | |||||||||||||||||
| Certificates of deposit of $100,000 and over | (662) | (1,889) | (2,551) | 881 | (6,165) | (5,284) | |||||||||||||||||
| Total interest on deposits | 7,649 | (4,085) | 3,564 | 27,830 | (16,913) | 10,917 | |||||||||||||||||
| Federal funds purchased | 504 | (271) | 233 | 1,961 | (958) | 1,003 | |||||||||||||||||
| Securities sold under agreements to repurchase | (2,007) | (2,615) | (4,622) | (2,849) | (8,580) | (11,429) | |||||||||||||||||
| Other borrowings | (4) | (1) | (5) | 1,008 | (168) | 840 | |||||||||||||||||
| Total interest expense | 6,142 | (6,972) | (830) | 27,950 | $ | (26,619) | $ | 1,331 | |||||||||||||||
| Net interest income, fully taxable-equivalent basis | $ | 38,069 | $ | (8,584) | $ | 29,485 | $ | 111,908 | $ | (16,588) | $ | 95,320 | |||||||||||
Net interest income in the third quarter of 2026 was $308.9 million, an increase of $29.4 million over the third quarter of 2025. On a fully taxable-equivalent (FTE) basis, net interest income totaled $311.3 million in the third quarter of 2026, up $29.5 million over the same period last year and down $6.2 million from the previous quarter. The increase in net interest
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income compared to the third quarter of 2025 was mainly due to an increase in average loan balances in connection with the acquisition of FineMark on January 1, 2026. Accretion income on FineMark's loans resulting from purchase accounting adjustments totaled $5.0 million in the third quarter of 2026. Interest income earned on loans (FTE) increased over the same period in the prior year mainly due to higher average loan balances, partly offset by lower average rates earned. Total interest earned on investment securities (FTE) decreased due to lower average balances partly offset by higher average rates earned. The increase in deposit interest expense was due to higher average balances, partly offset by lower average rates paid, while interest expense on securities sold under agreements to repurchase decreased due to lower average balances and rates paid. The Company's net yield on earning assets (FTE) was 3.71% in the current quarter compared to 3.64% in the third quarter of 2025.
Total interest income (FTE) increased $28.7 million over the third quarter of 2025. Interest income on loans (FTE) was $297.8 million during the third quarter of 2026, an increase of $32.2 million, or 12.1%, over the same quarter last year. The increase in loan interest income over the same quarter of last year was primarily due to growth of $3.2 billion, or 18.2%, in average loan balances, partly offset by lower average rates earned, which declined 31 basis points. Most of the increase in interest income was due to the acquisition of FineMark, which added $2.7 billion in loan balances. The largest increase to interest income occurred in personal real estate loan interest, which grew $19.6 million due to a $1.3 billion, or 42.0%, increase in average balances coupled with a 51 basis point increase in the average rate earned. Consumer loan interest income increased $5.0 million due to a $492.8 million, or 22.8%, increase in average balances, partly offset by a decline of 45 basis points in the average rate earned. Revolving home equity loan interest income increased $4.7 million due to a $292.8 million, or 81.1%, increase in average balances, partly offset by a 73 basis point decline in the average rate earned. Business loan interest income grew $4.4 million due to higher average balances of $704.5 million, or 11.3%, partly offset by a 33 basis point decrease in the average rate earned. Business real estate loan interest income increased $2.2 million due to higher average balances of $362.4 million, or 9.8%, partly offset by a decrease of 31 basis points in the average rate earned. These increases in interest income were slightly offset by decreases in construction and land loan and consumer credit card loan interest income. Interest income on construction and land loans decreased $2.1 million due to a 95 basis point decrease in the average rate earned, partly offset by an increase in average balances of $74.2 million, or 5.3%. Consumer credit card loan interest income declined $1.5 million due to a 67 basis point decrease in the average rate earned and a $17.9 million, or 3.2% decrease in the average balance.
Interest income on investment securities (FTE) was $74.4 million during the third quarter of 2026, which was a decrease of $639 thousand from the same quarter last year. The largest decrease in interest income occurred in mortgage-backed and asset- backed securities, which declined $4.7 million and $3.8 million, respectively. A decrease of $1.0 billion, or 22.8%, in average balances led to the decline in interest income on mortgage-backed securities. Slightly offsetting this decrease, the Company recorded a $955 thousand adjustment to premium amortization at September 30, 2026, which increased interest income and reflected slower forward prepayment speed estimates on mortgage-backed securities. This adjustment exceeded the $314 thousand increase to interest income recorded in the same quarter of the prior year. Interest income earned on asset-backed securities declined due to a $451.6 million, or 30.8%, decrease in average balances. The decreases in interest income were partly offset by an increase in interest earned on U.S. government and federal agency obligations, which grew $8.0 million, driven by higher average balances of $802.2 million, or 29.8%. During the second quarter of 2026, the Company sold its U.S. Treasury inflation-protected securities portfolio (TIPS) as part of its available for sale debt securities portfolio repositioning. The average balance of the total investment portfolio (excluding unrealized fair value adjustments on available for sale debt securities) was $9.2 billion in the third quarter of 2026 and $10.0 billion in the third quarter of 2025.
Interest income on securities purchased under agreements to resell increased $3.1 million over the same quarter last year, mainly due to growth of $300.0 million in the average balance. These resale agreements were structured with floor spreads to protect against falling interest rates. Interest income on deposits at the Federal Reserve decreased $6.1 million due to declines of 71 basis points in the average rate earned and $179.6 million in the average balance.
The average fully taxable-equivalent yield on total interest earning assets was 4.83% in the third quarter of 2026, down from 4.86% in the third quarter of 2025.
Total interest expense decreased $830 thousand compared to the third quarter of 2025 due to a decrease of $4.4 million in interest expense on borrowings, partly offset by an increase of $3.6 million in interest expense on interest bearing deposits. The increase in deposit interest expense was primarily due to the acquisition of FineMark, which added $2.7 billion in interest bearing deposit balances. Compared to the same quarter last year, interest expense on interest checking and money market deposit balances increased $6.9 million due to growth of $1.7 billion, or 12.7%, in average balances. Interest expense on certificate of deposit accounts decreased $3.4 million due to a 48 basis point decline in average rates paid and a decrease of $60.8 million, or 2.5%, in average balances. The overall rate paid on total deposits decreased eight basis points from the same quarter last year. Interest expense on customer repurchase agreements decreased $4.6 million due to declines of 47 basis points in the average rate paid and $276.5 million, or 11.0%, in the average balance. The overall average rate incurred on all interest bearing liabilities was 1.73% and 1.87% in the third quarters of 2026 and 2025, respectively.
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Total interest income (FTE) for the first nine months of 2026 increased $96.6 million over the same period last year mainly due to higher interest income on loans (FTE) and securities purchased under agreements to resell, slightly offset by lower interest income on deposit balances at the Federal Reserve and investment securities (FTE). Loan interest income (FTE) increased $97.7 million, or 12.5%, due to a $3.1 billion, or 17.8%, increase in average loan balances, partly offset by a decline of 28 basis points in the average rate earned. Most of the increase in interest income was due to loan balances acquired in the FineMark acquisition. Increases in interest income occurred in the personal real estate, revolving home equity, consumer, business, and business real estate loan categories, while decreases occurred in the consumer credit card and construction and land loan categories. Interest income on investment securities (FTE) decreased $2.3 million mainly due to decreases in average balances of asset-backed securities and mortgage-backed securities, partly offset by an increase in average balances of U.S. government and federal agency obligations. Interest earned on asset-backed securities decreased $11.5 million mainly due to a decline in average balances of $478.2 million, while interest earned on mortgage-backed securities decreased $10.3 million mainly due to lower average balances of $741.6 million. These decreases in interest income on investment securities were partly offset by increases in interest earned on U.S. government and federal agency securities of $22.2 million due to higher average balances of $716.5 million, or 27.2%. Higher interest income of $5.0 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 $3.8 million due to a 74 basis point decline in the average rate earned, partly offset by a $319.9 million increase in the average balance invested.
Total interest expense for the first nine months of 2026 increased $1.3 million compared to the same period last year. Interest expense on deposits increased $10.9 million, due to a $2.0 billion increase in average balances, partly offset by a ten basis point decline in the average rate paid. Interest expense on borrowings decreased $9.6 million, due to lower interest expense on securities sold under agreements to repurchase of $11.4 million resulting from lower average rates paid and average balances. This decrease was slightly offset by higher interest expense on federal funds purchased of $1.0 million, mainly due to an increase in average balances, partly offset by lower average rates paid, while interest expense on other borrowings increased $840 thousand mainly due to higher average balances. The overall cost of total interest bearing liabilities decreased to 1.71% compared to 1.86% in the same period last year.
Summaries of average assets and liabilities and the corresponding average rates earned/paid appear in the Average Balance Sheet- Average Rates and Yields tables at the end of this discussion.
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Non-Interest Income
| Three Months Ended September 30 | Nine Months Ended September 30 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Increase (Decrease) | Increase (Decrease) | |||||||||||||||||||||||||||||||||||||||||||||||||
| (Dollars in thousands) | 2026 | 2025 | Amount | % change | 2026 | 2025 | Amount | % change | ||||||||||||||||||||||||||||||||||||||||||
| Trust fees | $ | 73,418 | $ | 58,412 | $ | 15,006 | 25.7 | % | $ | 215,979 | $ | 170,575 | $ | 45,404 | 26.6 | % | ||||||||||||||||||||||||||||||||||
| Bank card transaction fees | 49,182 | 45,551 | 3,631 | 8.0 | 142,888 | 137,506 | 5,382 | 3.9 | ||||||||||||||||||||||||||||||||||||||||||
| Deposit account charges and other fees | 29,651 | 27,427 | 2,224 | 8.1 | 87,488 | 80,297 | 7,191 | 9.0 | ||||||||||||||||||||||||||||||||||||||||||
| Consumer brokerage services | 6,345 | 6,698 | (353) | (5.3) | 17,651 | 16,866 | 785 | 4.7 | ||||||||||||||||||||||||||||||||||||||||||
| Capital market fees | 4,034 | 5,138 | (1,104) | (21.5) | 15,039 | 16,425 | (1,386) | (8.4) | ||||||||||||||||||||||||||||||||||||||||||
| Loan fees and sales | 3,566 | 3,465 | 101 | 2.9 | 10,083 | 10,288 | (205) | (2.0) | ||||||||||||||||||||||||||||||||||||||||||
| Other | 19,270 | 14,820 | 4,450 | 30.0 | 56,017 | 54,116 | 1,901 | 3.5 | ||||||||||||||||||||||||||||||||||||||||||
| Total non-interest income | $ | 185,466 | $ | 161,511 | $ | 23,955 | 14.8 | % | $ | 545,145 | $ | 486,073 | $ | 59,072 | 12.2 | % | ||||||||||||||||||||||||||||||||||
| Non-interest income as a % of total revenue* | 37.5 | % | 36.6 | % | 37.1 | % | 37.0 | % | ||||||||||||||||||||||||||||||||||||||||||
* Total revenue includes net interest income and non-interest income.
The table below is a summary of net bank card transaction fees for the three and nine months ended September 30, 2026 and 2025.
| Three Months Ended September 30 | Nine Months Ended September 30 | |||||||||||||||||||||||||||||||||||||||||||
| (Dollars in thousands) | 2026 | 2025 | $ change | % change | 2026 | 2025 | $ change | % change | ||||||||||||||||||||||||||||||||||||
| Net debit card fees | $ | 11,005 | $ | 11,270 | $ | (265) | (2.4) | % | $ | 32,786 | $ | 32,818 | $ | (32) | (.1) | % | ||||||||||||||||||||||||||||
| Net credit card fees | 3,708 | 3,621 | 87 | 2.4 | 11,189 | 10,471 | 718 | 6.9 | ||||||||||||||||||||||||||||||||||||
| Net merchant fees | 5,811 | 5,570 | 241 | 4.3 | 17,540 | 17,271 | 269 | 1.6 | ||||||||||||||||||||||||||||||||||||
| Net corporate card fees | 28,658 | 25,090 | 3,568 | 14.2 | 81,373 | 76,946 | 4,427 | 5.8 | ||||||||||||||||||||||||||||||||||||
| Total bank card transaction fees | $ | 49,182 | $ | 45,551 | $ | 3,631 | 8.0 | % | $ | 142,888 | $ | 137,506 | $ | 5,382 | 3.9 | % | ||||||||||||||||||||||||||||
For the third quarter of 2026, total non-interest income amounted to $185.5 million compared to $161.5 million in the same quarter last year, which was an increase of $24.0 million, or 14.8%. The increase was mainly due to higher trust fees and bank card transaction fees and other non-interest income. Trust fees increased $15.0 million, or 25.7%, mainly due to growth of $15.2 million in private client trust fees. Bank card transaction fees for the current quarter increased $3.6 million, or 8.0%, over the same period last year, mainly due to growth in net corporate card and net merchant fees. Net corporate card fees increased $3.6 million compared to the same period last year primarily due to higher interchange fees, partly offset by higher rewards expense. Net merchant fees increased $241 thousand, while net debit card fees declined $265 thousand. Compared to the third quarter of last year, deposit account fees increased $2.2 million, or 8.1%, mainly due to higher corporate cash management fees of $2.0 million. Consumer brokerage service fees decreased $353 thousand, or 5.3%, mainly due to lower life insurance income, partly offset by higher advisory fees. Capital market fees decreased $1.1 million, or 21.5%, mainly due to lower trading securities income, partly offset by higher underwriting income. Other non-interest income increased $4.5 million, or 30.0%, mainly due to a $2.8 million increase in gains on the sales of assets and higher cash sweep commissions and interest rate swap fees of $881 thousand and $812 thousand, respectively.
Non-interest income for the first nine months of 2026 was $545.1 million compared to $486.1 million in the first nine months of 2025, which was an increase of $59.1 million, or 12.2%. The increase was mainly due to higher trust fees, deposit account fees and bank card fees. Trust fees increased $45.4 million, or 26.6%, mainly due to higher private client and institutional trust fees. Bank card transaction fees for the current year increased $5.4 million, or 3.9%, over the same period last year, mainly due to growth of $4.4 million in net corporate card fees and $718 thousand in net credit card fees. Deposit account fees increased $7.2 million, or 9.0%, mainly due to higher corporate cash management and overdraft and return item fees. Consumer brokerage service fees increased $785 thousand, or 4.7%, mainly due to higher advisory fees, partly offset by lower life insurance income. Capital market fees decreased $1.4 million, or 8.4%, mainly due to lower underwriting income, while loan fees and sales decreased $205 thousand, or 2.0%. Other non-interest income increased $1.9 million, or 3.5%, mainly due to higher cash sweep commissions of $3.3 million, invoice payment services fees of $1.5 million, bank-owned life insurance income of $1.2 million and swap fees of $1.1 million. These increases were partly offset by lower gains on the sales of assets of $2.8 million and tax credit sales fees of $1.4 million.
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Investment Securities Gains (Losses), Net
| Three Months Ended September 30 | Nine Months Ended September 30 | ||||||||||||||||
| (In thousands) | 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Net gains (losses) on sales of available for sale debt securities | $ | (12,447) | $ | — | $ | (110,133) | $ | (4,214) | |||||||||
| Net gains (losses) on equity securities | 3,119 | (111) | 117,396 | 1,666 | |||||||||||||
| Net gains (losses) on sales of private equity investments | 5,301 | 43 | 6,248 | (563) | |||||||||||||
| Fair value adjustments on private equity investments | 8,124 | 7,953 | 15,063 | 3,842 | |||||||||||||
| Total investment securities gains (losses), net | $ | 4,097 | $ | 7,885 | $ | 28,574 | $ | 731 | |||||||||
Net gains and losses on investment securities, which were recognized in earnings during the three months ended September 30, 2026 and 2025, are shown in the table above. Net securities gains of $4.1 million were reported in the third quarter of 2026, compared to net gains of $7.9 million in the same period last year. The net gains in the third quarter of 2026 were mainly comprised of net gains in fair value of $8.1 million recorded on private equity investments, net gains of $5.3 million on sales of private equity investments, and net gains of $3.1 million on equity securities, primarily related to gains recorded on the Company's shares of Visa, as described in Note 4, Investment Securities. These gains were largely offset by net losses of $12.4 million on sales of available for sale debt securities. During the third quarter of 2025, the net gains on investment securities were primarily comprised of net gains in fair value of $8.0 million recorded on private equity investments, partially offset by net losses of $111 thousand on equity securities.
Net gains on investment securities of $28.6 million were recognized in earnings for the nine months ended September 30, 2026, compared to net gains of $731 thousand for the same period in 2025. Net gains in the first nine months of 2026 were mainly comprised of net gains of $117.4 million on equity securities, mainly Visa common stock as described above, and net gains in fair value of $15.1 million recorded on private equity investments. These gains were partially offset by net losses of $110.1 million on sales of available for sale debt securities, most of which was related to the Company's available for sale debt securities portfolio repositioning during the second quarter of 2026. 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 sales of available for sale debt 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 $4.3 million during the first nine months of 2026 and expense of $656 thousand during the first nine months of 2025.
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Non-Interest Expense
| Three Months Ended September 30 | Nine Months Ended September 30 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Increase (Decrease) | Increase (Decrease) | |||||||||||||||||||||||||||||||||||||||||||||||||
| (Dollars in thousands) | 2026 | 2025 | Amount | % change | 2026 | 2025 | Amount | % change | ||||||||||||||||||||||||||||||||||||||||||
| Salaries and employee benefits | $ | 181,566 | $ | 157,461 | $ | 24,105 | 15.3 | % | $ | 542,307 | $ | 465,564 | $ | 76,743 | 16.5 | % | ||||||||||||||||||||||||||||||||||
| Data processing and software | 38,849 | 33,555 | 5,294 | 15.8 | 115,418 | 98,697 | 16,721 | 16.9 | ||||||||||||||||||||||||||||||||||||||||||
| Professional and other services | 14,645 | 11,284 | 3,361 | 29.8 | 49,943 | 34,283 | 15,660 | 45.7 | ||||||||||||||||||||||||||||||||||||||||||
| Net occupancy | 15,068 | 13,474 | 1,594 | 11.8 | 45,014 | 41,148 | 3,866 | 9.4 | ||||||||||||||||||||||||||||||||||||||||||
| Marketing | 6,824 | 6,670 | 154 | 2.3 | 20,194 | 18,487 | 1,707 | 9.2 | ||||||||||||||||||||||||||||||||||||||||||
| Equipment | 5,707 | 5,421 | 286 | 5.3 | 17,248 | 15,826 | 1,422 | 9.0 | ||||||||||||||||||||||||||||||||||||||||||
| Supplies and communication | 5,492 | 4,837 | 655 | 13.5 | 16,214 | 14,845 | 1,369 | 9.2 | ||||||||||||||||||||||||||||||||||||||||||
| Deposit insurance | 3,789 | 3,074 | 715 | 23.3 | 11,544 | 10,130 | 1,414 | 14.0 | ||||||||||||||||||||||||||||||||||||||||||
| Other | 13,991 | 8,242 | 5,749 | 69.8 | 56,243 | 27,851 | 28,392 | 101.9 | ||||||||||||||||||||||||||||||||||||||||||
| Total non-interest expense | $ | 285,931 | $ | 244,018 | $ | 41,913 | 17.2 | % | $ | 874,125 | $ | 726,831 | $ | 147,294 | 20.3 | % | ||||||||||||||||||||||||||||||||||
Non-interest expense for the third quarter of 2026 amounted to $285.9 million, an increase of $41.9 million, or 17.2%, compared to expense of $244.0 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, data processing and software expense, professional and other services expense and intangible amortization expense. Salaries and employee benefits expense increased $24.1 million, or 15.3%, mainly due to the onboarding of FineMark's team members at the beginning of 2026. Acquisition-related salaries and benefits expense was $3.3 million in the current quarter. Full-time equivalent employees totaled 4,969 at September 30, 2026, compared to 4,666 at September 30, 2025. Additionally, healthcare expense increased $4.1 million over the same period in the prior year. Data processing and software expense increased $5.3 million, or 15.8%, mainly due to higher costs for service providers. Professional and other services expense, which increased $3.4 million, or 29.8%, included $1.2 million of acquisition-related legal and professional services expense in the current quarter. Net occupancy expense increased $1.6 million, or 11.8%, and equipment expense increased $286 thousand, or 5.3%, both mainly due to higher depreciation expense. Supplies and communication expense increased $655 thousand, or 13.5%, mainly due to higher data network expense, while deposit insurance expense increased $715 thousand, or 23.3%. Other non-interest expense increased $5.7 million, mainly due to intangible amortization expense of $5.3 million related to the FineMark acquisition and higher travel and entertainment expense of $973 thousand.
Non-interest expense amounted to $874.1 million for the first nine months of 2026, an increase of $147.3 million, or 20.3%, over the first nine months of 2025. Salaries and benefits expense increased $76.7 million, or 16.5%, mainly due to an accrual for retention bonuses, acquisition-related compensation payments and the onboarding of FineMark's team members. Salaries and benefits expense included acquisition-related costs of $13.6 million for the first nine months of 2026. Full-time salaries, incentive compensation, stock compensation and healthcare expense increased $38.4 million, $18.3 million, $7.2 million and $6.3 million, respectively, over the prior year. Data processing and software expense increased $16.7 million, or 16.9%, due to increased costs for service providers and software expense. Professional and other services expense increased $15.7 million, or 45.7%, and included $7.3 million in acquisition-related legal and professional fees. Occupancy expense increased $3.9 million, or 9.4%, and equipment expense increased $1.4 million, or 9.0%, both mainly due to higher depreciation expense. Marketing expense increased $1.7 million, or 9.2%, and deposit insurance expense increased $1.4 million, or 14.0%. Supplies and communication expense increased $1.4 million, or 9.2%, mainly due to higher supplies and data network expense. Other non-interest expense increased $28.4 million, mainly due to acquisition-related intangible amortization and other expense of $16.1 million and $2.4 million, respectively, as well as increases in litigation expense of $12.0 million and travel and entertainment expense of $2.2 million.
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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, 2026 | June 30, 2026 | Sept. 30, 2025 | 2026 | 2025 | |||||||||||||||
| ALLOWANCE FOR CREDIT LOSSES ON LOANS | ||||||||||||||||||||
| Balance at end of prior period | $ | 195,375 | $ | 198,605 | $ | 165,260 | $ | 179,468 | $ | 162,742 | ||||||||||
| Initial allowance for credit losses on purchased credit deteriorated loans at acquisition | — | — | — | 2,958 | — | |||||||||||||||
| Initial allowance for credit losses on purchased seasoned loans at acquisition | — | — | — | 19,870 | — | |||||||||||||||
| Provision for credit losses on loans | 13,068 | 6,311 | 20,739 | 30,662 | 43,753 | |||||||||||||||
| Net loan charge-offs (recoveries): | ||||||||||||||||||||
| Commercial: | ||||||||||||||||||||
| Business | 763 | 224 | 826 | 1,228 | 1,304 | |||||||||||||||
| Real estate-construction and land | — | — | — | — | 24 | |||||||||||||||
| Real estate-business | (7) | (7) | (23) | 5,391 | (71) | |||||||||||||||
| Commercial net loan charge-offs (recoveries) | 756 | 217 | 803 | 6,619 | 1,257 | |||||||||||||||
| Personal Banking: | ||||||||||||||||||||
| Real estate-personal | 139 | 203 | 269 | 344 | 376 | |||||||||||||||
| Consumer | 2,893 | 1,598 | 2,310 | 6,259 | 7,330 | |||||||||||||||
| Revolving home equity | (1) | 83 | (1) | 88 | 7 | |||||||||||||||
| Consumer credit card | 6,323 | 7,029 | 6,515 | 20,491 | 20,567 | |||||||||||||||
| Overdrafts | 493 | 411 | 432 | 1,317 | 1,287 | |||||||||||||||
| Personal banking net loan charge-offs (recoveries) | 9,847 | 9,324 | 9,525 | 28,499 | 29,567 | |||||||||||||||
| Total net loan charge-offs (recoveries) | 10,603 | 9,541 | 10,328 | 35,118 | 30,824 | |||||||||||||||
| Balance at end of period | $ | 197,840 | $ | 195,375 | $ | 175,671 | $ | 197,840 | $ | 175,671 | ||||||||||
| LIABILITY FOR UNFUNDED LENDING COMMITMENTS | ||||||||||||||||||||
| Balance at beginning of period | $ | 20,119 | $ | 17,699 | $ | 16,005 | $ | 17,660 | $ | 18,935 | ||||||||||
| Initial allowance for credit loss at acquisition | — | — | — | 362 | — | |||||||||||||||
| Provision for credit losses on unfunded lending commitments | (3,043) | 2,420 | (678) | (946) | (3,608) | |||||||||||||||
| Balance at end of period | 17,076 | 20,119 | 15,327 | 17,076 | 15,327 | |||||||||||||||
| ALLOWANCE FOR CREDIT LOSSES ON LOANS AND LIABILITY FOR UNFUNDED LENDING COMMITMENTS | $ | 214,916 | $ | 215,494 | $ | 190,998 | $ | 214,916 | $ | 190,998 | ||||||||||
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| Three Months Ended | Nine Months Ended September 30 | |||||||||||||||||||
| Sept. 30, 2026 | June 30, 2026 | Sept. 30, 2025 | 2026 | 2025 | ||||||||||||||||
| Annualized net loan charge-offs (recoveries)*: | ||||||||||||||||||||
| Commercial: | ||||||||||||||||||||
| Business | .04 | % | .01 | % | .05 | % | .02 | % | .03 | % | ||||||||||
| Real estate-construction and land | — | — | — | — | — | |||||||||||||||
| Real estate-business | — | — | — | .18 | — | |||||||||||||||
| Commercial net loan charge-offs (recoveries) | .02 | .01 | .03 | .07 | .01 | |||||||||||||||
| Personal Banking: | ||||||||||||||||||||
| Real estate-personal | .01 | .02 | .03 | .01 | .02 | |||||||||||||||
| Consumer | .43 | .26 | .42 | .33 | .46 | |||||||||||||||
| Revolving home equity | — | .05 | — | .02 | — | |||||||||||||||
| Consumer credit card | 4.60 | 5.18 | 4.59 | 4.99 | 4.90 | |||||||||||||||
| Overdrafts | 30.33 | 22.61 | 24.36 | 25.30 | 27.79 | |||||||||||||||
| Personal banking net loan charge-offs (recoveries) | .48 | .47 | .61 | .47 | .65 | |||||||||||||||
| Total annualized net loan charge-offs (recoveries) | .20 | % | .19 | % | .23 | % | .23 | % | .24 | % | ||||||||||
* as a percentage of average loans (excluding loans held for sale)
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, 2026 | June 30, 2026 | Dec. 31, 2025 | |||||||||||||||||||||||||||||||||
(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 | $ | 58,415 | .80 | % | $ | 57,295 | .81 | % | $ | 53,238 | .83 | % | |||||||||||||||||||||||
| RE — construction and land | 31,378 | 2.16 | 30,322 | 2.03 | 29,053 | 2.02 | |||||||||||||||||||||||||||||
| RE — business | 37,597 | .89 | 36,013 | .89 | 34,574 | .94 | |||||||||||||||||||||||||||||
| RE — personal | 19,468 | .45 | 20,533 | .47 | 10,915 | .36 | |||||||||||||||||||||||||||||
| Consumer | 14,949 | .55 | 15,288 | .60 | 15,624 | .71 | |||||||||||||||||||||||||||||
| Revolving home equity | 3,388 | .51 | 3,517 | .54 | 1,738 | .46 | |||||||||||||||||||||||||||||
| Consumer credit card | 32,518 | 5.84 | 32,277 | 5.75 | 34,178 | 5.80 | |||||||||||||||||||||||||||||
| Overdrafts | 127 | 3.82 | 130 | .25 | 148 | 3.53 | |||||||||||||||||||||||||||||
| Total | $ | 197,840 | .93 | % | $ | 195,375 | .94 | % | $ | 179,468 | 1.01 | % | |||||||||||||||||||||||
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 2025 Annual Report on Form 10-K.
Net loan charge-offs in the third quarter of 2026 amounted to $10.6 million, compared to $9.5 million in the prior quarter and $10.3 million in the third quarter of last year. Compared to the same period last year, net loan charge-offs in the third quarter of 2026 increased $275 thousand and increased $1.1 million from the previous quarter. The increase from the prior year was mainly driven by an increase of $583 thousand in consumer loan net charge-offs, partially offset by a decrease of $192 thousand in consumer credit card loan net charge-offs. The increase in net loan charge-offs for the three months ended September 30, 2026 from the previous quarter was driven by increases of $1.3 million and $539 thousand in net charge-offs on consumer and business loans, respectively, partially offset by a decrease of $706 thousand in net charge-offs on consumer credit card loans.
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For the three months ended September 30, 2026, annualized net charge-offs on average consumer credit card loans were 4.60%, compared to 5.18% in the previous quarter and 4.59% in the same period last year. Consumer loan annualized net charge-offs in the current quarter amounted to .43%, compared to .26% in the prior quarter and .42% in the same period last year. In the third quarter of 2026, total annualized net charge-offs on loans were .20%, compared to .19% in the previous quarter and .23% in the same period last year.
For the nine months ended September 30, 2026 and September 30, 2025, total annualized net charge-offs on loans were .23% and .24%, respectively. Net charge-offs on loans were $35.1 million in the first nine months of 2026, an increase of $4.3 million over net charge-offs of $30.8 million in the first nine months of 2025. The increase in net charge-offs on loans during the first nine months of 2026 was mainly driven by higher net charge-offs of business real estate loans, which was partially offset by lower net charge-offs of consumer loans.
For the three months ended September 30, 2026, the provision for credit losses on loans was $13.1 million, which was an increase of $6.8 million from the provision recorded in the prior quarter. Compared to the same period in the prior year, the provision for credit losses on loans for the three months ended September 30, 2026 decreased $7.7 million. For the nine months ended September 30, 2026, the provision for credit losses on loans was $30.7 million, which was a $13.1 million decrease from the $43.8 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.
The allowance for credit losses increased $2.5 million compared to prior quarter. The allowance for credit losses in the commercial portfolio increased $3.8 million primarily due to increases in the allowance on business loans and business real estate loans, mainly due to higher outstanding loan balances coupled with an increase in commercial substandard loans. The allowance for credit losses on the personal banking portfolio decreased $1.3 million primarily due to a decrease in the allowance on the personal real estate loans. The forecast utilized to estimate the allowance for credit losses on loans at September 30, 2026 assumes continued elevated levels of inflation with slight improvements in unemployment causing a slight decrease in the allowance that was offset by the factors described above.
At September 30, 2026, the allowance for credit losses increased $18.4 million compared to the allowance for credit losses on loans at December 31, 2025. The most significant driver of the increase in the allowance for credit losses is due to an increase in loan balances as a result of the acquisition of FineMark, as the initial allowance for FineMark loans acquired was $22.8 million. This increase was partially offset by a decrease in the allowance on the consumer and consumer credit card loan portfolios. The allowance as a percentage of outstanding loans decreased compared to December 31, 2025 due to the change in mix of loans caused by the acquisition which included more personal real estate loans that carry a lower allowance for credit losses than other classes. The allowance for credit losses on loans was $197.8 million at September 30, 2026 and was .93%, .94%, and 1.01% of total loans at September 30, 2026, June 30, 2026, and December 31, 2025, respectively.
In the current quarter, the provision for credit losses on unfunded lending commitments was a benefit of $3.0 million, compared to a benefit of $678 thousand for the three months ended September 30, 2025. At September 30, 2026, the liability for unfunded lending commitments was $17.1 million, compared to $17.7 million at December 31, 2025 and $15.3 million at September 30, 2025. At September 30, 2026, the liability for unfunded lending commitments remained largely consistent with the liability as of December 31, 2025. The Company's unfunded lending commitments primarily relate to construction loans, and the Company's estimate for credit losses in its unfunded lending commitments utilizes the same model and forecast as its estimate for credit losses on loans. See Note 3 for further discussion of the model inputs utilized in the Company's estimate of credit losses.
The Company considers the allowance for credit losses on loans and the liability for unfunded commitments adequate to cover losses expected in the loan portfolio, including unfunded commitments, at September 30, 2026.
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.
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Risk Elements of the 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, 2026 | December 31, 2025 | ||||||
| Non-accrual loans | $ | 11,505 | $ | 15,750 | ||||
| Foreclosed real estate | 1,401 | 1,218 | ||||||
| Total non-performing assets | $ | 12,906 | $ | 16,968 | ||||
| Non-performing assets as a percentage of total loans | .06 | % | .10 | % | ||||
| Non-performing assets as a percentage of total assets | .04 | % | .05 | % | ||||
| Total loans past due 90 days and still accruing interest | $ | 26,409 | $ | 24,659 | ||||
Non-accrual loans totaled $11.5 million at September 30, 2026, a decrease of $4.2 million from the balance at December 31, 2025. The decrease occurred mainly in business real estate non-accrual loans, which decreased $5.7 million. At September 30, 2026, non-accrual loans were comprised of business real estate (79.4%), personal real estate (18.0%), business (2.3%), and home equity (.3%) loans. Foreclosed real estate totaled $1.4 million at September 30, 2026, an increase of $183 thousand compared to December 31, 2025. Total loans past due 90 days or more and still accruing interest totaled $26.4 million as of September 30, 2026, an increase of $1.8 million from December 31, 2025. Balances by class for non-accrual loans and loans past due 90 days and still accruing interest are shown in the "Delinquent and non-accrual loans" section in Note 3 to the consolidated financial statements.
In addition to the non-performing and past due loans mentioned above, the Company also has identified loans for which management has concerns about the ability of the borrowers to meet existing repayment terms. They are classified as substandard under the Company's internal rating system. The loans are generally secured by either real estate or other borrower assets, reducing the potential for loss should they become non-performing. Although these loans are generally identified as potential problem loans, they may never become non-performing. Such loans totaled $441.2 million at September 30, 2026 compared to $264.9 million at December 31, 2025, resulting in an increase of $176.3 million, or 66.6%.
(In thousands) | September 30, 2026 | December 31, 2025 | ||||||
| Potential problem loans: | ||||||||
| Business | $ | 201,433 | $ | 112,018 | ||||
| Real estate – construction and land | 122,227 | 46,622 | ||||||
| Real estate – business | 115,777 | 106,163 | ||||||
| Real estate – personal | 1,779 | 91 | ||||||
| Consumer | 11 | — | ||||||
| Total potential problem loans | $ | 441,227 | $ | 264,894 | ||||
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, 2026, the Company held $154.1 million of loans that had been modified during the nine months ended September 30, 2026. These loans are further discussed in the "Modifications for borrowers experiencing financial difficulty" section in Note 3 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 3 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 is 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.
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Real Estate – Construction and Land Loans
The Company's portfolio of construction and land loans, as shown in the table below, amounted to 6.8% of total loans outstanding at September 30, 2026. The largest component of construction and land loans was commercial construction, which decreased $140.4 million during the nine months ended September 30, 2026. At September 30, 2026, multi-family residential construction loans totaled approximately $500.8 million, or 46.1%, of the commercial construction loan portfolio, compared to $553.1 million, or 45.1%, at December 31, 2025.
| (Dollars in thousands) | September 30, 2026 | % of Total | % of Total Loans | December 31, 2025 | % of Total | % of Total Loans | ||||||||||||||
| Commercial construction | $ | 1,085,946 | 74.8 | % | 5.1 | % | $ | 1,226,363 | 85.3 | % | 6.9 | % | ||||||||
| Residential construction | 227,513 | 15.7 | 1.0 | 105,874 | 7.4 | .6 | ||||||||||||||
| Residential land and land development | 76,205 | 5.2 | .4 | 63,288 | 4.3 | .4 | ||||||||||||||
| Commercial land and land development | 62,040 | 4.3 | .3 | 42,487 | 3.0 | .2 | ||||||||||||||
| Total real estate - construction and land loans | $ | 1,451,704 | 100.0 | % | 6.8 | % | $ | 1,438,012 | 100.0 | % | 8.1 | % | ||||||||
Real Estate – Business Loans
Total business real estate loans were $4.2 billion at September 30, 2026 and comprised 19.9% 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, 2026, 34.0% 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, 2026 | % of Total | % of Total Loans | December 31, 2025 | % of Total | % of Total Loans | ||||||||||||||
| Owner-occupied | $ | 1,439,016 | 34.0 | % | 6.8 | % | $ | 1,248,172 | 34.0 | % | 7.0 | % | ||||||||
| Office | 708,726 | 16.8 | 3.3 | 528,421 | 14.4 | 3.0 | ||||||||||||||
| Industrial | 673,468 | 15.9 | 3.2 | 628,223 | 17.1 | 3.5 | ||||||||||||||
| Hotels | 469,982 | 11.1 | 2.2 | 326,147 | 8.9 | 1.8 | ||||||||||||||
| Retail | 376,868 | 8.9 | 1.8 | 292,490 | 8.0 | 1.6 | ||||||||||||||
| Multi-family | 237,403 | 5.6 | 1.1 | 317,541 | 8.6 | 1.8 | ||||||||||||||
| Farm | 198,852 | 4.7 | .9 | 199,678 | 5.4 | 1.1 | ||||||||||||||
| Senior living | 11,986 | .3 | .1 | 43,161 | 1.2 | .2 | ||||||||||||||
| Other | 111,326 | 2.7 | .5 | 90,734 | 2.4 | .7 | ||||||||||||||
| Total real estate - business loans | $ | 4,227,627 | 100.0 | % | 19.9 | % | $ | 3,674,567 | 100.0 | % | 20.7 | % | ||||||||
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Information about the credit quality of the Company's business real estate loan portfolio as of September 30, 2026 and December 31, 2025 is provided in the table below.
| (Dollars in thousands) | Pass | Special Mention | Substandard | Non-Accrual | Total | ||||||||||||
| September 30, 2026 | |||||||||||||||||
| Owner-occupied | $ | 1,364,306 | $ | 12,413 | $ | 62,171 | $ | 126 | $ | 1,439,016 | |||||||
| Industrial | 667,685 | 5,783 | — | — | 673,468 | ||||||||||||
| Office | 655,418 | 3,929 | 49,379 | — | 708,726 | ||||||||||||
| Hotels | 463,574 | 6,298 | 110 | — | 469,982 | ||||||||||||
| Retail | 367,779 | 9,089 | — | — | 376,868 | ||||||||||||
| Multi-family | 237,403 | — | — | — | 237,403 | ||||||||||||
| Farm | 196,645 | 1,141 | 922 | 144 | 198,852 | ||||||||||||
| Senior living | — | — | 3,121 | 8,865 | 11,986 | ||||||||||||
| Other | 111,326 | — | — | — | 111,326 | ||||||||||||
| Total | $ | 4,064,136 | $ | 38,653 | $ | 115,703 | $ | 9,135 | $ | 4,227,627 | |||||||
| December 31, 2025 | |||||||||||||||||
| Owner-occupied | $ | 1,198,970 | $ | 18,011 | $ | 31,067 | $ | 124 | $ | 1,248,172 | |||||||
| Industrial | 628,223 | — | — | — | 628,223 | ||||||||||||
| Office | 443,737 | 27,175 | 57,509 | — | 528,421 | ||||||||||||
| Hotels | 326,147 | — | — | — | 326,147 | ||||||||||||
| Multi-family | 250,018 | 56,633 | 10,890 | — | 317,541 | ||||||||||||
| Retail | 292,490 | — | — | — | 292,490 | ||||||||||||
| Farm | 197,566 | 1,686 | 273 | 153 | 199,678 | ||||||||||||
| Senior living | 22,262 | — | 6,391 | 14,508 | 43,161 | ||||||||||||
| Other | 89,157 | 1,577 | — | — | 90,734 | ||||||||||||
| Total | $ | 3,448,570 | $ | 105,082 | $ | 106,130 | $ | 14,785 | $ | 3,674,567 | |||||||
Revolving Home Equity Loans
The Company had $662.3 million in revolving home equity loans at September 30, 2026 that were collateralized by residential real estate. Most of these loans (96.1%) are written with terms requiring interest-only monthly payments. These loans are offered in three main product lines: LTV up to and including 80%, higher than 80% to 90%, and higher than 90% to 100%. As of September 30, 2026, the outstanding principal of loans with an original LTV higher than 80% was $47.0 million, or 7.1% of the portfolio, compared to $27.7 million as of December 31, 2025. Total revolving home equity loan balances over 30 days past due were $2.7 million at September 30, 2026 and $1.9 million at December 31, 2025, and the outstanding balance for revolving home equity loans on non-accrual status was $32 thousand at September 30, 2026 compared to no balance at December 31, 2025. The weighted average FICO score for the total portfolio balance at September 30, 2026 is 778. At maturity, the accounts are re-underwritten, and if they qualify under the Company's credit, collateral and capacity policies, the borrower is given the option to renew the line of credit or convert the outstanding balance to an amortizing loan. If criteria are not met, amortization is required, or the borrower may pay off the loan. During the remainder of 2026 through 2029, approximately 17.6% of the Company's current outstanding balances are expected to mature. Of these balances, approximately 83.8% 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 51.9% of the consumer loan portfolio at September 30, 2026. The Company's private banking loans are mostly executive lines of credit, which are secured primarily by assets held by the Company's trust department, and insurance premium finance loans, which are primarily secured by life insurance policies. Automobile loans, which include direct and indirect product lines, comprised 28.0% of the consumer loan portfolio at September 30, 2026, and outstanding balances for auto loans were $760.5 million and $773.6 million at September 30, 2026 and December 31, 2025, respectively. The balances over 30 days past due amounted to $7.9 million at September 30, 2026 and $11.0 million at December 31, 2025, respectively, and comprised 1.0% of the outstanding balances of these loans at September 30, 2026 and 1.4% at December 31, 2025. For the nine months ended September 30, 2026, $276.0 million of new auto loans were originated, compared to $282.9 million during the
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first nine months of 2025. At September 30, 2026, the automobile loan portfolio had a weighted average FICO score of 765, and annualized net charge-offs on auto loans were .6% 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 7.2% of the consumer loan portfolio at September 30, 2026. Losses on these loans have historically been low, and the Company saw net charge offs of $9 thousand for the first nine months of 2026. The remaining portion of the Company's consumer loan portfolio is comprised of healthcare financing, boat, RV, motorcycle, other equipment, and unsecured consumer loans. Net charge-offs on consumer loans, other than automobile and fixed rate home equity loans, totaled $3.0 million in the first nine months of 2026 and were .3% of the average balances of these loans at September 30, 2026, on an annualized basis.
Consumer Credit Card Loans
The Company offers low promotional rates on selected consumer credit card products. Out of a portfolio at September 30, 2026 of $556.6 million in consumer credit card loans outstanding, approximately $117.8 million, or 21.2%, carried a low promotional rate. Within the next six months, $51.0 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, 2026 | December 31, 2025 | |||||||
FICO score: | ||||||||
Under 600 | 5.5 | % | 5.4 | % | ||||
600 – 659 | 12.1 | 12.3 | ||||||
660 – 719 | 27.3 | 27.4 | ||||||
720 – 779 | 26.3 | 26.3 | ||||||
780 and over | 28.8 | 28.6 | ||||||
Total | 100.0 | % | 100.0 | % | ||||
Oil and Gas Energy Lending
The Company's energy lending portfolio is comprised of lending to the petroleum and natural gas sectors and totaled $407.5 million, or 1.9% of total loans at September 30, 2026, an increase of $104.5 million from December 31, 2025, as shown in the table below.
(In thousands) | September 30, 2026 | December 31, 2025 | Unfunded commitments at September 30, 2026 | |||||||||||
| Upstream activities | $ | 266,642 | $ | 228,660 | $ | 159,275 | ||||||||
| Mid-stream activities | 90,020 | 25,038 | 88,329 | |||||||||||
| Downstream activities | 18,657 | 15,543 | 21,517 | |||||||||||
| Support activities | 32,215 | 33,803 | 18,524 | |||||||||||
| Total energy lending portfolio | $ | 407,534 | $ | 303,044 | $ | 287,645 | ||||||||
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 September 30, 2026 and $1.5 billion at December 31, 2025. Additional unfunded commitments at September 30, 2026 totaled $2.8 billion.
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Income Taxes
Income tax expense was $44.4 million in the third quarter of 2026, compared to $45.8 million in the second quarter of 2026 and $41.2 million in the third quarter of 2025. The Company's effective tax rate, including the effect of non-controlling interest, was 22.3% in the third quarter of 2026, 22.3% in the second quarter of 2026, and 22.5% in the third quarter of 2025.
Financial Condition
Balance Sheet
Total assets of the Company were $34.8 billion at September 30, 2026 and $32.9 billion at December 31, 2025. Earning assets (excluding the allowance for credit losses on loans and fair value adjustments on available for sale debt securities) amounted to $33.2 billion at September 30, 2026 and $31.4 billion at December 31, 2025, and consisted of 64% in loans and 27% in investment securities at September 30, 2026.
At September 30, 2026, total loans were $21.2 billion, an increase of $3.4 billion compared to balances at December 31, 2025. The increase was primarily due to the acquisition of FineMark, which added $2.6 billion in loan balances. The balances of personal real estate, business, business real estate, and revolving home equity loans grew $1.3 billion, $822.9 million, $553.1 million, and $287.1 million, respectively, compared to December 31, 2025. Consumer loans, which include automobile, marine and RV, fixed rate home equity and other consumer loans, increased $515.3 million, mainly due to growth in other consumer loans.
Total available for sale debt securities, excluding fair value adjustments, decreased $966.3 million at September 30, 2026 compared to December 31, 2025. Sales, maturities and pay downs of available for sale debt securities during this period totaled $2.1 billion, partly offset by purchases of $1.1 billion. The decline in available for sale debt securities was mainly the result of lower balances of mortgage-backed securities and asset-backed securities, which decreased $944.8 million and $204.5 million, respectively, at September 30, 2026 compared to December 31, 2025. These decreases were partly offset by an increase of $255.3 million in the balance of U.S. government and federal agency obligations. At September 30, 2026, the duration of the available for sale investment portfolio was 4.1 years, and maturities and pay downs of approximately $1.1 billion are expected to occur during the next 12 months.
Securities purchased under agreements to resell increased $300.0 million at September 30, 2026, compared to the balance at December 31, 2205, and interest earning deposits with banks at September 30, 2026 decreased $971.0 million from December 31, 2025. Additionally, the balances of goodwill, other intangible assets, and premises and equipment increased $107.3 million, $121.8 million and $68.8 million, respectively, mainly related to the Company's acquisition of FineMark. These increases were partly offset by a decline of $179.1 million in the balance of cash and due from banks.
Total deposits at September 30, 2026 amounted to $27.2 billion, an increase of $1.6 billion compared to December 31, 2025. The increase was primarily due to the FineMark acquisition, which added $2.7 billion in interest bearing and $425 million in non-interest bearing deposit balances. Shortly after the acquisition, the Company moved $1.0 billion of FineMark’s high-cost, money market deposit balances off-balance sheet. Compared to December 31, 2025, savings, interest checking and money market deposit balances increased $1.7 billion. The Company’s borrowings, which included customer repurchase agreements of $2.0 billion, totaled $2.7 billion at September 30, 2026, a decrease of $290.2 million from balances at December 31, 2025. Federal Home Loan Bank advances of $350.0 million, which the Company acquired from the FineMark acquisition, were paid off in January 2026.
Liquidity and Capital Resources
Liquidity Management
The Company’s most liquid assets include balances at the Federal Reserve Bank, federal funds sold, available for sale debt securities, and securities purchased under agreements to resell, as follows:
(In thousands) | September 30, 2026 | September 30, 2025 | December 31, 2025 | ||||||||||||||
| Liquid assets: | |||||||||||||||||
| Balances at the Federal Reserve Bank | $ | 1,773,409 | $ | 2,477,668 | $ | 2,744,393 | |||||||||||
| Federal funds sold | 515 | — | — | ||||||||||||||
| Available for sale debt securities | 7,928,567 | 8,998,586 | 9,095,513 | ||||||||||||||
| Securities purchased under agreements to resell | 1,150,000 | — | 850,000 | ||||||||||||||
| Total | $ | 10,852,491 | $ | 11,476,254 | $ | 12,689,906 | |||||||||||
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Interest earning balances at the Federal Reserve Bank, which have overnight maturities and are used for general liquidity purposes, totaled $1.8 billion at September 30, 2026 and decreased $971.0 million from December 31, 2025. At September 30, 2026, the Company's balance of federal funds sold totaled $515 thousand, 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 $7.9 billion at September 30, 2026 and included an unrealized net loss of $847.4 million. The total net unrealized loss included net losses of $637.0 million on mortgage-backed and asset-backed securities and $64.7 million on state and municipal obligations.
The Company holds securities purchased under agreements to resell (“resale agreements”) which totaled $1.2 billion at September 30, 2026, with maturities in 2028 through 2031. Under these agreements, the Company lends funds to upstream financial institutions and holds marketable securities, safe-kept by a third-party custodian, as collateral. This collateral totaled $1.2 billion in fair value at September 30, 2026.
The Company's available for sale debt securities portfolio has a diverse mix of high quality and liquid investment securities with a duration of 4.1 years at September 30, 2026. Approximately $1.1 billion of the Company's available for sale debt portfolio is expected to mature or pay down during the next 12 months, and these funds offer substantial resources to meet either new loan demand or offset potential reductions in the Company's deposit funding base. The Company pledges portions of its investment securities portfolio to secure public fund deposits, securities sold under agreements to repurchase, trust funds, letters of credit issued by the FHLB, and borrowing capacity at the FHLB and the Federal Reserve Bank. Total investment securities pledged for these purposes were as follows:
(In thousands) | September 30, 2026 | September 30, 2025 | December 31, 2025 | |||||||||||
| Investment securities pledged for the purpose of securing: | ||||||||||||||
| Federal Reserve Bank borrowings | $ | 477,273 | $ | 575,311 | $ | 538,874 | ||||||||
| FHLB borrowings and letters of credit | 1,600,660 | 2,021,043 | 2,160,967 | |||||||||||
| Securities sold under agreements to repurchase * | 2,118,663 | 2,402,124 | 2,937,267 | |||||||||||
| Other deposits and swaps | 1,598,490 | 1,738,808 | 1,638,324 | |||||||||||
| Total pledged securities | 5,795,086 | 6,737,286 | 7,275,432 | |||||||||||
| Unpledged and available for pledging | 2,132,517 | 2,260,338 | 1,808,420 | |||||||||||
| Ineligible for pledging | 964 | 962 | 11,661 | |||||||||||
| Total available for sale debt securities, at fair value | $ | 7,928,567 | $ | 8,998,586 | $ | 9,095,513 | ||||||||
* 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 74.6% for the nine months ended September 30, 2026. Core customer deposits, defined as non-interest bearing, interest checking, savings, and money market deposit accounts totaled $25.0 billion and represented 91.6% of the Company's total deposits at September 30, 2026. These core deposits are normally less volatile, as they are often with customer relationships tied to other products offered by the Company, promoting long lasting relationships and stable funding sources. Core deposits increased $1.7 billion at September 30, 2026 compared to December 31, 2025, primarily due to an increase in wealth deposits of $1.8 billion, slightly offset by decreases in commercial deposits. While the Company considers core retail banking and wealth deposits less volatile, corporate deposits could decline if interest rates increase significantly, encouraging corporate customers to increase investing activities, or if the economy deteriorates and companies experience lower cash inflows, reducing deposit balances. If these corporate deposits decline, the Company's funding needs may be met by liquidity supplied by investment security maturities and pay downs expected to total $1.1 billion over the next year, as noted above. In addition, as shown in the table of collateral available for future advances below, the Company has borrowing capacity of $6.9 billion through advances from the FHLB and the Federal Reserve.
(In thousands) | September 30, 2026 | September 30, 2025 | December 31, 2025 | |||||||||||
| Core deposit base: | ||||||||||||||
| Non-interest bearing | $ | 8,217,972 | $ | 7,489,645 | $ | 8,205,711 | ||||||||
| Interest checking | 8,223,628 | 7,954,187 | 7,360,515 | |||||||||||
| Savings and money market | 8,518,001 | 7,597,612 | 7,686,891 | |||||||||||
| Total | $ | 24,959,601 | $ | 23,041,444 | $ | 23,253,117 | ||||||||
Certificates of deposit of $100,000 or greater totaled $1.3 billion at September 30, 2026. These deposits are normally considered more volatile and higher costing, and comprised 4.8% of total deposits at September 30, 2026.
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The Company may occasionally issue short-term 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 deposit 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 2026, the Company's outside borrowings have mainly been comprised of federal funds purchased and repurchase agreements, as follows:
(In thousands) | September 30, 2026 | September 30, 2025 | December 31, 2025 | |||||||||||
| Borrowings: | ||||||||||||||
| Federal funds purchased | $ | 644,955 | $ | 137,660 | $ | 128,625 | ||||||||
| Securities sold under agreements to repurchase | 2,051,148 | 2,335,405 | 2,861,016 | |||||||||||
| Other debt | 16,164 | 9,270 | 12,798 | |||||||||||
| Total | $ | 2,712,267 | $ | 2,482,335 | $ | 3,002,439 | ||||||||
Federal funds purchased, which totaled $645.0 million at September 30, 2026, are unsecured overnight borrowings obtained mainly from upstream correspondent banks with which the Company maintains approved lines of credit. At September 30, 2026, the Company had approved lines of credit totaling $4.1 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, 2026 were comprised of non-insured customer funds totaling $2.1 billion, and securities pledged as collateral for these retail agreements totaled $2.1 billion at September 30, 2026. The Company also borrows on a secured basis through advances from the FHLB. The advances are generally short-term, fixed interest rate borrowings. There were no advances outstanding from the FHLB at September 30, 2026.
The Company pledges certain assets, including loans and investment securities, to both the FRB and the FHLB as security to establish lines of credit and borrow from these entities. Based on the amount and type of collateral pledged, the FHLB establishes a collateral value from which the Company may draw advances against the collateral. Additionally, this collateral is used to enable the FHLB to issue letters of credit in favor of public fund depositors of the Company. The FRB also establishes a collateral value of assets pledged and permits borrowings from the discount window. The following table reflects the collateral value of assets pledged, borrowings, and letters of credit outstanding, in addition to the estimated future funding capacity available to the Company at September 30, 2026.
| September 30, 2026 | |||||||||||
| (In thousands) | FHLB | Federal Reserve | Total | ||||||||
| Total collateral value established by FHLB and FRB | $ | 4,391,126 | $ | 2,608,009 | $ | 6,999,135 | |||||
| Letters of credit issued | (93,467) | — | (93,467) | ||||||||
| Available for future advances | $ | 4,297,659 | $ | 2,608,009 | $ | 6,905,668 | |||||
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 | ||||||
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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 $1.1 billion during the first nine months of 2026, as reported in the consolidated statements of cash flows in this report. Operating activities, consisting mainly of net income adjusted for certain non-cash items, provided cash flow of $1.1 billion and have historically been a stable source of funds. Investing activities, which occur mainly in the loan and investment securities portfolios, provided cash of $356.3 million. Activity in the investment securities portfolio provided cash of $1.0 billion from sales, maturities, and pay downs (net of purchases) of investment securities. These gains were partially offset by a net increase in loans of $828.3 million and purchases of securities under agreements to resell (net of repayments) of $300.0 million. Investing activities are somewhat unique to financial institutions in that, while large sums of cash flow are normally used to fund growth in investment securities, loans, or other bank assets, they are normally dependent on the financing activities described below. Financing activities used cash of $2.6 billion, largely resulting from decreases in deposits and federal funds purchased and securities sold under agreements to repurchase of $1.5 billion and $356.6 million, respectively, and repayments of FHLB borrowings (assumed in the FineMark acquisition), which used cash of $603.9 million during the first nine months of 2026. Cash dividend payments (including distributions to non-controlling interest) and purchases of treasury stock used cash of $122.2 million and $307.0 million, respectively.
Capital Management
Under Basel III capital guidelines, the Company met all capital adequacy requirements and had regulatory capital ratios in excess of the levels established for well-capitalized institutions at September 30, 2026 and December 31, 2025, as shown in the following table.
| (Dollars in thousands) | September 30, 2026 | December 31, 2025 | Minimum Capital Requirement | Capital Conservation Buffer | Minimum Ratios Requirement including Capital Conservation Buffer | Minimum Ratios for Well-Capitalized Banks * | ||||||||||||||
| Risk-adjusted assets | $ | 27,125,580 | $ | 23,970,761 | ||||||||||||||||
| Tier I common risk-based capital | 4,526,677 | 4,156,776 | ||||||||||||||||||
| Tier I risk-based capital | 4,526,677 | 4,156,776 | ||||||||||||||||||
| Total risk-based capital | 4,739,264 | 4,353,905 | ||||||||||||||||||
| Tier I common risk-based capital ratio | 16.69 | % | 17.34 | % | 4.50 | % | 2.50 | % | 7.00 | % | 6.50 | % | ||||||||
| Tier I risk-based capital ratio | 16.69 | 17.34 | 6.00 | 2.50 | 8.50 | 8.00 | ||||||||||||||
| Total risk-based capital ratio | 17.47 | 18.16 | 8.00 | 2.50 | 10.50 | 10.00 | ||||||||||||||
| Tier I leverage ratio | 13.04 | 12.65 | 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.
The Company maintains a treasury stock buyback program under authorizations by its Board of Directors (the Board) and routinely purchases stock in the open market. On April 24, 2026, the share repurchase authorization was increased to 7,500,000 shares. During the nine months ended September 30, 2026, the Company purchased 5,576,222 shares at an average price of $54.56 in open market purchases and stock-based compensation transactions. At September 30, 2026, 3,556,499 shares remained available for purchase under the Board authorization in place at that date. On October 30, 2026, the share repurchase authorization was increased to 7,500,000 shares.
The Company's common stock dividend policy reflects its earnings outlook, desired payout ratios, the need to maintain adequate capital levels and alternative investment options. The Company paid a $.275 per share cash dividend on its common stock in the third quarter of 2026, which was a 5.0% increase compared to its 2025 quarterly dividend.
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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 2025 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, 2026 totaled $16.9 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 $726.4 million and $1.6 million, respectively, at September 30, 2026. 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, 2026, the liability for unfunded lending commitments totaled $17.1 million. See further discussion of the liability for unfunded lending commitments in Note 3 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 or retained for use by the Company. During the first nine months of 2026, purchases and sales of tax credits amounted to $59.0 million and $92.8 million, respectively. Fees from sales of tax credits were $3.4 million for the nine months ended September 30, 2026, compared to $4.9 million in the same period last year. At September 30, 2026, the Company expected to fund outstanding purchase commitments of $31.7 million during the remainder of 2026 and had purchase commitments of $572.7 million that it expects to fund from 2027 through 2030.
The Company continued to maintain a strong liquidity position throughout the first nine months of 2026. 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 2026 and 2025.
(Dollars in thousands) | Retail Banking | Commercial | Wealth | Segment Totals | Other/ Elimination | Consolidated Totals | ||||||||||||||
| Nine Months Ended September 30, 2026 | ||||||||||||||||||||
| Net interest income | $ | 368,969 | $ | 398,426 | $ | 144,117 | $ | 911,512 | $ | 12,290 | $ | 923,802 | ||||||||
| Provision for credit losses | (27,324) | (6,631) | (1,118) | (35,073) | 5,357 | (29,716) | ||||||||||||||
| Non-interest income | 75,396 | 215,505 | 247,614 | 538,515 | 6,630 | 545,145 | ||||||||||||||
| Investment securities gains (losses), net | — | — | — | — | 28,574 | 28,574 | ||||||||||||||
| Non-interest expense | (263,873) | (349,221) | (184,392) | (797,486) | (76,639) | (874,125) | ||||||||||||||
| Income before income taxes | $ | 153,168 | $ | 258,079 | $ | 206,221 | $ | 617,468 | $ | (23,788) | $ | 593,680 | ||||||||
| 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 | (250,966) | (319,195) | (124,130) | (694,291) | (32,540) | (726,831) | ||||||||||||||
| Income before income taxes | $ | 171,806 | $ | 284,098 | $ | 139,567 | $ | 595,471 | $ | (46,937) | $ | 548,534 | ||||||||
| Increase (decrease) in income before income taxes: | ||||||||||||||||||||
| Amount | $ | (18,638) | $ | (26,019) | $ | 66,654 | $ | 21,997 | $ | 23,149 | $ | 45,146 | ||||||||
| Percent | (10.8) | % | (9.2) | % | 47.8 | % | 3.7 | % | (49.3) | % | 8.2 | % | ||||||||
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Retail Banking
For the nine months ended September 30, 2026, income before income taxes for the Retail Banking segment decreased $18.6 million, or 10.8%, compared to the first nine months of 2025. The decrease in income before income taxes was mainly due to an increase in non-interest expense of $12.9 million, or 5.1%, and a decline in net interest income of $10.0 million, or 2.6%. These decreases to income were partly offset by an increase in non-interest income of $2.3 million, or 3.2%, and a decline in the provision for credit losses of $1.9 million, or 6.6%. Net interest income declined due to lower loan interest income of $7.7 million and higher deposit interest expense of $5.8 million, partly offset by an increase in net allocated funding credits assigned to the Retail Banking segment's loan and deposit portfolios of $3.5 million. The increase in non-interest income was mainly due to growth in deposit account fees (mainly overdraft and return items fees) and bank card fee income (mainly credit card fees). Non-interest expense increased over the same period in the previous year mainly due to higher salaries and benefits expense, marketing expense, occupancy expense and allocated support and service costs (mainly technology, customer support and operations). These increases were slightly offset by a decline in miscellaneous losses. The decrease in the provision for credit losses from the first nine months of 2025 was mainly due to lower auto loan net charge-offs.
Commercial
For the nine months ended September 30, 2026, income before income taxes for the Commercial segment decreased $26.0 million, or 9.2%, compared to the same period in the previous year. This decrease was mainly due to higher non-interest expense and an increase in the provision for credit losses, partly offset by higher net interest income and non-interest income. Net interest income increased $5.0 million, or 1.3%, mainly due to lower interest expense on deposits and customer repurchase agreements of $17.7 million and $13.0 million, respectively. These increases to income were partly offset by lower loan interest income of $18.8 million and allocated funding credits of $6.7 million. Non-interest income increased $4.1 million, or 1.9%, mainly due to higher deposit account fees (mainly corporate cash management fees) and bank card fee income (mainly corporate card fees), partly offset by a decline in gains on the sales of assets. Non-interest expense increased $30.0 million, or 9.4%, mainly due to higher legal fees, salaries and benefits expense, miscellaneous losses and allocated support costs (mainly technology and credit administration). The provision for credit losses increased $5.1 million, mainly due to a business real estate loan charge-off on a single senior living loan in the current year.
Wealth
Wealth segment pre-tax profitability for the nine months ended September 30, 2026 increased $66.7 million, or 47.8%, over the same period in the previous year. The increase was mainly due to the FineMark acquisition. Net interest income increased $76.4 million, or 112.8%, mainly due to a $115.5 million increase in loan interest income, partly offset by a $23.3 million increase in deposit interest expense and a $14.3 million decrease in net allocated funding credits. Non-interest income increased $51.6 million, or 26.3%, over the prior year largely due to higher private client and institutional trust fees. Non-interest expense increased $60.3 million, or 48.5%, mainly due to higher salaries and benefits, data processing and software, and occupancy expense. The provision for credit losses increased $1.1 million over the same period last year mainly due to higher net charge-offs on other consumer loans.
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 $23.1 million higher than in the same period last year. Unallocated securities gains were $28.6 million in the first nine months of 2026 compared to gains of $731 thousand in 2025. Also, the unallocated provision for credit losses decreased $14.7 million, primarily driven by a decrease in the provision for credit losses on loans, as well as 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 2026 was $30.7 million, or $4.5 million lower than net charge-offs. In the comparable period last year, the provision for credit losses on loans 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. The allowance for credit losses on loans increased in the current year as a result of the FineMark initial allowance at acquisition of $22.8 million. For the nine months ended September 30, 2026, the Company's provision on unfunded lending commitments was a benefit of $946 thousand. Additionally, net interest income and non-interest income increased $23.7 million and $985 thousand, respectively, but were offset by an increase in non-interest expense of $44.1 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. The Company adopted this Update for the year ended December 31, 2025, and applied the new disclosures on a retrospective basis.
Purchased Loans The FASB issued ASU 2025-08 "Financial Instruments - Credit Losses (Topic 326): Purchased Loans" in November 2025. This new guidance makes significant changes to the accounting for certain acquired seasoned loans subject to the current expected credit loss model (CECL). Under the ASU, the initial allowance for credit losses recorded upon the acquisition of loans in scope is recognized as an adjustment to the amortized cost basis of the loan - similar to the model for purchased credit deteriorated assets. For these loans, the "day-one" credit loss estimate does not impact earnings immediately but is instead amortized over time as an adjustment to interest income. Subsequent changes in the allowance for credit losses are reported in earnings within credit loss expense. The ASU is effective for fiscal periods beginning after December 15, 2026 and interim periods within. Early adoption is permitted and amendments are to be applied prospectively. The Company adopted this Update on January 1, 2026.
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.
Derivatives and Hedging The FASB issued ASU 2025-09 "Derivatives and Hedging (Topic 815): Hedge Accounting Improvements" in December 2025. The amendments in this Update make targeted improvements to hedge accounting intended to better align financial reporting with an entity's risk-management activities. At a high level, the Update provides for a broader application of grouping forecasted transactions in cash flow hedges by replacing 'same risk exposure' requirements with a more flexible 'similar risk exposure' standard, which may apply to the Company's current cash flow hedges. This Update is effective for annual and interim periods beginning after December 15, 2026. Early adoption is permitted in an interim or annual reporting period. The amendments should be applied on a prospective basis for all hedging relationships, and the Company may elect to adopt the amendments for existing hedging relationships as of the adoption, without dedesignating the hedges. The Company is currently evaluating the provisions of this Update.
Interim Reporting The FASB issued ASU 2025-11 "Interim Reporting (Topic 270): Narrow-Scope Improvements" in December 2025. The amendments in this Update are intended to clarify interim disclosure requirements and the applicability of Topic 270. The ASU is effective for interim periods within annual periods beginning after December 15, 2027. Early adoption is permitted and amendments may be applied prospectively or retrospectively to prior periods presented. The Company does not anticipate a significant impact on the Company's consolidated financial statements.
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AVERAGE BALANCE SHEETS — AVERAGE RATES AND YIELDS
Three Months Ended September 30, 2026 and 2025
Third Quarter 2026 | Third Quarter 2025 | ||||||||||||||||||||||
(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) | $ | 6,934,517 | $ | 94,183 | 5.39 | % | $ | 6,230,019 | $ | 89,818 | 5.72 | % | |||||||||||
| Real estate — construction and land | 1,471,171 | 23,823 | 6.42 | 1,396,977 | 25,934 | 7.37 | |||||||||||||||||
| Real estate — business | 4,077,981 | 57,677 | 5.61 | 3,715,597 | 55,433 | 5.92 | |||||||||||||||||
| Real estate — personal | 4,343,967 | 53,110 | 4.85 | 3,059,913 | 33,509 | 4.34 | |||||||||||||||||
| Consumer | 2,653,454 | 39,941 | 5.97 | 2,160,637 | 34,962 | 6.42 | |||||||||||||||||
| Revolving home equity | 653,614 | 11,875 | 7.21 | 360,820 | 7,220 | 7.94 | |||||||||||||||||
| Consumer credit card | 545,441 | 17,239 | 12.54 | 563,351 | 18,759 | 13.21 | |||||||||||||||||
| Overdrafts | 6,449 | — | — | 7,037 | — | — | |||||||||||||||||
| Total loans | 20,686,594 | 297,848 | 5.71 | 17,494,351 | 265,635 | 6.02 | |||||||||||||||||
| Loans held for sale | 1,909 | 30 | 6.23 | 2,369 | 36 | 6.03 | |||||||||||||||||
| Investment securities: | |||||||||||||||||||||||
| U.S. government and federal agency obligations | 3,495,551 | 35,596 | 4.04 | 2,693,327 | 27,547 | 4.06 | |||||||||||||||||
| Government-sponsored enterprise obligations | 54,554 | 323 | 2.35 | 55,014 | 326 | 2.35 | |||||||||||||||||
State and municipal obligations(A) | 673,412 | 3,500 | 2.06 | 756,137 | 3,901 | 2.05 | |||||||||||||||||
| Mortgage-backed securities | 3,444,269 | 17,895 | 2.06 | 4,461,056 | 22,573 | 2.01 | |||||||||||||||||
| Asset-backed securities | 1,015,185 | 9,804 | 3.83 | 1,466,770 | 13,644 | 3.69 | |||||||||||||||||
| Other debt securities | 165,446 | 1,314 | 3.15 | 204,281 | 1,528 | 2.97 | |||||||||||||||||
Trading debt securities(A) | 50,797 | 577 | 4.51 | 56,032 | 659 | 4.67 | |||||||||||||||||
Equity securities(A) | 66,468 | 579 | 3.46 | 50,823 | 780 | 6.09 | |||||||||||||||||
Other securities(A) | 241,759 | 4,775 | 7.84 | 220,041 | 4,044 | 7.29 | |||||||||||||||||
| Total investment securities | 9,207,441 | 74,363 | 3.20 | 9,963,481 | 75,002 | 2.99 | |||||||||||||||||
| Federal funds sold | 901 | 9 | 3.96 | 23 | — | — | |||||||||||||||||
| Securities purchased under agreements to resell | 1,150,000 | 11,708 | 4.04 | 850,000 | 8,578 | 4.00 | |||||||||||||||||
| Interest earning deposits with banks | 2,242,802 | 21,115 | 3.74 | 2,422,441 | 27,167 | 4.45 | |||||||||||||||||
| Total interest earning assets | 33,289,647 | 405,073 | 4.83 | 30,732,665 | 376,418 | 4.86 | |||||||||||||||||
| Allowance for credit losses on loans | (194,777) | (164,623) | |||||||||||||||||||||
| Unrealized gain (loss) on debt securities | (656,125) | (766,025) | |||||||||||||||||||||
| Cash and due from banks | 388,666 | 374,673 | |||||||||||||||||||||
| Premises and equipment, net | 558,373 | 502,525 | |||||||||||||||||||||
| Other assets | 1,003,296 | 832,049 | |||||||||||||||||||||
| Total assets | $ | 34,389,080 | $ | 31,511,264 | |||||||||||||||||||
| LIABILITIES AND EQUITY: | |||||||||||||||||||||||
| Interest bearing deposits: | |||||||||||||||||||||||
| Savings | $ | 1,299,729 | 212 | .06 | $ | 1,283,671 | 156 | .05 | |||||||||||||||
| Interest checking and money market | 15,486,834 | 60,077 | 1.54 | 13,740,770 | 53,201 | 1.54 | |||||||||||||||||
| Certificates of deposit of less than $100,000 | 1,006,309 | 7,520 | 2.96 | 991,877 | 8,337 | 3.33 | |||||||||||||||||
| Certificates of deposit of $100,000 and over | 1,341,305 | 10,707 | 3.17 | 1,416,572 | 13,258 | 3.71 | |||||||||||||||||
| Total interest bearing deposits | 19,134,177 | 78,516 | 1.63 | 17,432,890 | 74,952 | 1.71 | |||||||||||||||||
| Borrowings: | |||||||||||||||||||||||
| Federal funds purchased | $ | 176,809 | $ | 1,661 | 3.73 | 130,622 | $ | 1,428 | 4.34 | ||||||||||||||
| Securities sold under agreements to repurchase | 2,243,167 | 13,638 | 2.41 | 2,519,660 | 18,260 | 2.88 | |||||||||||||||||
| Other borrowings | 1,119 | 3 | 1.06 | 1,860 | 8 | 1.71 | |||||||||||||||||
| Total borrowings | 2,421,095 | 15,302 | 2.51 | 2,652,142 | 19,696 | 2.95 | |||||||||||||||||
| Total interest bearing liabilities | 21,555,272 | 93,818 | 1.73 | % | 20,085,032 | 94,648 | 1.87 | % | |||||||||||||||
| Non-interest bearing deposits | 8,065,085 | 7,345,156 | |||||||||||||||||||||
| Other liabilities | 429,744 | 402,265 | |||||||||||||||||||||
| Equity | 4,338,979 | 3,678,811 | |||||||||||||||||||||
| Total liabilities and equity | $ | 34,389,080 | $ | 31,511,264 | |||||||||||||||||||
| Net interest margin (FTE) | $ | 311,255 | $ | 281,770 | |||||||||||||||||||
| Net yield on interest earning assets | 3.71 | % | 3.64 | % | |||||||||||||||||||
(A) Stated on a fully taxable-equivalent basis using a federal income tax rate of 21%.
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AVERAGE BALANCE SHEETS — AVERAGE RATES AND YIELDS
Nine Months Ended September 30, 2026 and 2025
Nine Months 2026 | Nine Months 2025 | ||||||||||||||||||||||
(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) | $ | 6,829,565 | $ | 275,572 | 5.39 | % | $ | 6,194,939 | $ | 265,434 | 5.73 | % | |||||||||||
| Real estate — construction and land | 1,535,936 | 74,376 | 6.47 | 1,414,294 | 77,797 | 7.35 | |||||||||||||||||
| Real estate — business | 4,062,226 | 172,830 | 5.69 | 3,692,120 | 163,089 | 5.91 | |||||||||||||||||
| Real estate — personal | 4,382,325 | 157,992 | 4.82 | 3,051,613 | 98,351 | 4.31 | |||||||||||||||||
| Consumer | 2,516,836 | 114,746 | 6.10 | 2,130,841 | 102,870 | 6.45 | |||||||||||||||||
| Revolving home equity | 631,739 | 34,280 | 7.25 | 360,613 | 20,336 | 7.54 | |||||||||||||||||
| Consumer credit card | 548,571 | 51,633 | 12.58 | 561,258 | 55,808 | 13.29 | |||||||||||||||||
| Overdrafts | 6,959 | — | — | 6,191 | — | — | |||||||||||||||||
| Total loans | 20,514,157 | 881,429 | 5.74 | 17,411,869 | 783,685 | 6.02 | |||||||||||||||||
| Loans held for sale | 1,909 | 82 | 5.74 | 1,901 | 99 | 6.96 | |||||||||||||||||
| Investment securities: | |||||||||||||||||||||||
| U.S. government and federal agency obligations | 3,351,569 | 103,848 | 4.14 | 2,635,112 | 81,621 | 4.14 | |||||||||||||||||
| Government-sponsored enterprise obligations | 54,648 | 971 | 2.38 | 55,126 | 980 | 2.38 | |||||||||||||||||
State and municipal obligations(A) | 692,779 | 10,773 | 2.08 | 780,011 | 11,951 | 2.05 | |||||||||||||||||
| Mortgage-backed securities | 3,887,401 | 60,951 | 2.10 | 4,628,953 | 71,285 | 2.06 | |||||||||||||||||
| Asset-backed securities | 1,090,420 | 31,007 | 3.80 | 1,568,586 | 42,495 | 3.62 | |||||||||||||||||
| Other debt securities | 171,094 | 4,044 | 3.16 | 233,070 | 4,984 | 2.86 | |||||||||||||||||
Trading debt securities(A) | 67,075 | 1,914 | 3.82 | 48,552 | 1,718 | 4.73 | |||||||||||||||||
Equity securities(A) | 69,803 | 2,139 | 4.10 | 54,085 | 2,758 | 6.82 | |||||||||||||||||
Other securities(A) | 246,546 | 14,706 | 7.97 | 223,305 | 14,843 | 8.89 | |||||||||||||||||
| Total investment securities | 9,631,335 | 230,353 | 3.20 | 10,226,800 | 232,635 | 3.04 | |||||||||||||||||
| Federal funds sold | 832 | 22 | 3.54 | 749 | 31 | 5.53 | |||||||||||||||||
| Securities purchased under agreements to resell | 979,304 | 29,555 | 4.04 | 829,853 | 24,512 | 3.95 | |||||||||||||||||
| Interest earning deposits with banks | 2,602,602 | 72,224 | 3.71 | 2,282,707 | 76,052 | 4.45 | |||||||||||||||||
| Total interest earning assets | 33,730,139 | 1,213,665 | 4.81 | 30,753,879 | 1,117,014 | 4.86 | |||||||||||||||||
| Allowance for credit losses on loans | (198,167) | (164,409) | |||||||||||||||||||||
| Unrealized gain (loss) on debt securities | (660,087) | (845,750) | |||||||||||||||||||||
| Cash and due from banks | 407,618 | 376,247 | |||||||||||||||||||||
| Premises and equipment, net | 549,496 | 500,058 | |||||||||||||||||||||
| Other assets | 1,046,351 | 816,838 | |||||||||||||||||||||
| Total assets | $ | 34,875,350 | $ | 31,436,863 | |||||||||||||||||||
| LIABILITIES AND EQUITY: | |||||||||||||||||||||||
| Interest bearing deposits: | |||||||||||||||||||||||
| Savings | $ | 1,310,589 | 619 | .06 | $ | 1,293,707 | 491 | .05 | |||||||||||||||
| Interest checking and money market | 15,756,799 | 175,423 | 1.49 | 13,849,135 | 157,104 | 1.52 | |||||||||||||||||
| Certificates of deposit of less than $100,000 | 1,022,436 | 23,468 | 3.07 | 989,516 | 25,714 | 3.47 | |||||||||||||||||
| Certificates of deposit of $100,000 and over | 1,401,545 | 34,207 | 3.26 | 1,384,079 | 39,491 | 3.81 | |||||||||||||||||
| Total interest bearing deposits | 19,491,369 | 233,717 | 1.60 | 17,516,437 | 222,800 | 1.70 | |||||||||||||||||
| Borrowings: | |||||||||||||||||||||||
| Federal funds purchased | $ | 189,747 | $ | 5,231 | 3.69 | $ | 129,626 | 4,228 | 4.36 | ||||||||||||||
| Securities sold under agreements to repurchase | 2,404,030 | 42,908 | 2.39 | 2,537,227 | 54,337 | 2.86 | |||||||||||||||||
| Other borrowings | 30,764 | 875 | 3.80 | 1,746 | 35 | 2.68 | |||||||||||||||||
| Total borrowings | 2,624,541 | 49,014 | 2.50 | 2,668,599 | 58,600 | 2.94 | |||||||||||||||||
| Total interest bearing liabilities | 22,115,910 | 282,731 | 1.71 | % | 20,185,036 | 281,400 | 1.86 | % | |||||||||||||||
| Non-interest bearing deposits | 7,992,138 | 7,333,745 | |||||||||||||||||||||
| Other liabilities | 419,212 | 394,543 | |||||||||||||||||||||
| Equity | 4,348,090 | 3,523,539 | |||||||||||||||||||||
| Total liabilities and equity | $ | 34,875,350 | $ | 31,436,863 | |||||||||||||||||||
| Net interest margin (FTE) | $ | 930,934 | $ | 835,614 | |||||||||||||||||||
| Net yield on interest earning assets | 3.69 | % | 3.63 | % | |||||||||||||||||||
(A) Stated on a fully taxable-equivalent basis using a federal income tax rate of 21%.
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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 2025 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, 2026 | June 30, 2026 | ||||||||||||||||||||||||||||
(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 | $ | 37.6 | 3.04 | % | $ | 29.6 | 2.43 | % | |||||||||||||||||||||
| 200 basis points rising | 22.7 | 1.84 | 16.6 | 1.36 | |||||||||||||||||||||||||
| 100 basis points rising | 7.8 | .63 | 5.3 | .43 | |||||||||||||||||||||||||
| 100 basis points falling | $ | (19.3) | (1.56) | % | $ | (15.7) | (1.29) | % | |||||||||||||||||||||
| 200 basis points falling | (24.7) | (2.00) | (15.3) | (1.25) | |||||||||||||||||||||||||
| 300 basis points falling | (24.3) | (1.97) | (15.0) | (1.23) | |||||||||||||||||||||||||
Under the simulation, in the three rising rate scenarios and three falling rate scenarios, interest rate risk is more asset sensitive when compared to the scenarios in the previous quarter. This change was primarily due to an increase in the Federal funds rate and an increase in variable rate loans. These increases were partly offset by an increase in average Federal funds purchased balances.
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.
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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, 2026. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures were effective.
As a result of its acquisition of FineMark, the Company has begun to integrate certain business processes and systems of FineMark. Accordingly, certain changes have been made and will continue to be made to our internal control over financial reporting until such time as this integration is complete. As permitted by guidance issued by the Office of the Chief Accountant of the SEC, companies may exclude controls of an acquired business from their assessment of internal control over financial reporting for a period not to extend more than one year beyond the date of the acquisition. Management’s assessment of the effectiveness of the Company’s internal control over financial reporting as of September 30, 2026 did not include the internal controls of FineMark, which the Company acquired on January 1, 2026. As of January 1, 2026, FineMark's assets represented approximately 12% of the Company's consolidated assets. There have been no other changes in the Company’s internal control over financial reporting (as such term is defined in Rule 13a-15(f) under the Exchange Act) during the three-month period ended September 30, 2026 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 18, Legal and Regulatory Proceedings.
Item 1A. RISK FACTORS
The section titled Risk Factors in Part I, Item 1A of the Company’s 2025 Annual Report on Form 10-K included a discussion of the many risks and uncertainties that the Company faces, any one or more of which could have a material adverse effect on its business, results of operations, financial condition (including capital and liquidity), prospects, or the value of or return on an investment in the Company. There are no material changes to the risk factors as previously described under Item 1A of the Company’s 2025 Annual Report on Form 10-K.
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 (1) | Average Price Paid per Share (2) | Total Number of Shares Purchased as Part of Publicly Announced Program | Maximum Number that May Yet Be Purchased Under the Program | ||||||||||
| July 1 - 31, 2026 | 423,187 | $59.21 | 422,153 | 5,003,675 | ||||||||||
| August 1 - 31, 2026 | 884,339 | 59.16 | 881,416 | 4,122,259 | ||||||||||
| September 1 - 30, 2026 | 566,295 | 58.08 | 565,760 | 3,556,499 | ||||||||||
| Total | 1,873,821 | $58.84 | 1,869,329 | 3,556,499 | ||||||||||
(1) Includes 1,034 shares, 2,923 shares, and 535 shares in July, August, and September 2026, respectively, withheld to meet tax withholding requirements related to the vesting of restricted stock awards.
(2) For shares withheld to meet tax withholding requirements related to the vesting of restricted stock awards, the average market value per share was $58.60, $58.85, and $58.18 in July, August, and September 2026, respectively.
The Company's stock purchases shown above were made under authorizations by the Board of Directors. Under the Board's repurchase authorization in April 2026 of 7,500,000 shares, 3,556,499 shares remained available for purchase at September 30, 2026.
Item 5. OTHER INFORMATION
During the three months ended September 30, 2026, 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.
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 5, 2026 | Senior Vice President & Secretary | ||||||||||
| By | /s/ STEVEN A. BRANDJORD | ||||||||||
| Steven A. Brandjord | |||||||||||
| Controller | |||||||||||
Date: November 5, 2026 | (Chief Accounting Officer) | ||||||||||
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