Commerce Bancshares (NASDAQ:CBSH) Chief Financial Officer Chuck Kim told investors that 2025 was a “record year” for the bank and highlighted the closing of its FineMark acquisition as a major strategic step, while also outlining how management is thinking about loan growth, deposit competition, net interest margin dynamics, fee income drivers, capital return, and technology investment heading into 2026.
2025 results and the return to M&A
Kim said 2025 was “a record year, almost no matter how you slice it,” citing record earnings, record EPS, and “probably record ROA for the whole year.” He noted that performance followed 10% EPS growth in 2024, with 2025 producing “9% growth in EPS.” Kim attributed the results to the company’s business model, emphasizing its “low-cost deposit base” and “really strong fee-income businesses.”
FineMark integration: strategy over cost takeout
Asked what external observers should watch during integration, Kim stressed that the FineMark purchase is “a strategy play, not a cost-takeout play.” He said one of the most important goals is to keep FineMark’s model intact by retaining client-facing associates and customers.
Kim said FineMark’s assets under management increased during the deal process, growing “from the $7 billion to over $8 billion,” which he characterized as evidence the business continued to attract new customers even while the transaction was pending.
He said Commerce retained the FineMark brand at closing as part of a co-branding approach, noting the brand’s recognition in the Florida wealth market. He added that FineMark founder Joseph Catti remains in place running the FineMark brand and branches alongside Commerce’s head of wealth, John Handy.
On strategic rationale, Kim pointed to FineMark’s presence in Southern Florida, Scottsdale, and South Carolina, with Southern Florida described as particularly important. He said the footprint adds convenience for existing Commerce customers and expands opportunities given Commerce’s broader product set, treasury services, healthcare specialization, and larger balance sheet. He also described Commerce’s wealth management infrastructure—such as specialists in farm management and business valuation—as capabilities that can enhance service for FineMark clients.
Borrower sentiment and expectations for loan growth
Kim characterized borrower sentiment as improved relative to a year ago, when there was “a lot of uncertainty,” but still “moderate” rather than “go-go.” He said customers appear more willing to invest than earlier in the cycle and suggested rate stabilization could bring some borrowers into the market.
Commerce posted “about 3% loan growth in 2025,” and Kim said the bank typically views itself as a “moderate single-digit grower” in loans, with occasional lumpiness. He said management wants to see how the first quarter develops before expecting growth above the recent trend line.
On FineMark’s loan mix, Kim said Commerce already has a “decent-sized 1-4 family mortgage” portfolio and that adding FineMark’s residential exposure would likely move the bank to “above average” levels but not to an outsized position. He also said Commerce has been reducing exposure to mortgage-backed securities to lower convexity risk and preserve balance sheet capacity for customers. Kim said FineMark historically produced high single-digit to double-digit loan growth, though growth slowed last year as payoffs increased even as production was “what was expected.”
Deposits, margin pressure, and hedging the downside
On deposits, Kim reiterated a goal of returning to “trendline growth” of roughly 2% to 3%. He said the deposit environment is more difficult when competition is “heavy and very expensive” in higher-rate periods, and tends to be faster in low-rate environments when customers accumulate operating cash at the bank. Kim said the company believes 2% to 3% deposit growth should be sufficient to fund loan growth.
Kim said competition in retail rates had been slow to ease after initial rate decreases, with promotions and CDs staying elevated, but that later in the year banks “begun to do what they needed to do in terms of lowering rates.” He added Commerce lowered deposit costs in the fourth quarter, while noting some deposit categories remain rate sensitive.
Discussing deposit beta, Kim said the bank is “still be in the 20s right now,” with the potential to move into the 30s over the cycle. He said Commerce has room to lower rates on certain deposits with “another couple of three-rate decreases,” though it becomes harder after that.
He also highlighted hedges designed to protect against a move toward zero interest rates, saying the bank has “about $2 billion worth of floors” that could become in the money with one or two additional rate cuts. Kim said Commerce also has asset repos that can increase in yield as rates fall, adding that the bank posted “good returns” during prior periods of zero rates despite asset sensitivity.
On net interest margin (NIM), Kim pointed to the last two quarters as an indicator, saying NIM was down “somewhere 3-6 basis points each quarter” quarter-over-quarter. While net interest income increased in the fourth quarter due to balance sheet expansion, he said the first quarter could look similar in terms of margin pressure as prior rate moves filter through. He said a more stable rate environment could allow stabilization, aided by asset repricing including roughly $300 million in the bond book rolling off at an average yield around 2.98% and potentially being reinvested in the “mid to high threes,” along with repricing of some fixed-rate loans.
Fee income drivers, capital return, and tech spending priorities
Kim described fee income as a key differentiator, with major components including cards, wealth, and treasury services. On consumer card fees, he said debit and credit fees were “kind of flattish,” citing competition around rewards. He said commercial card fee growth has “plateaued a little bit,” but noted improving volume and spend, which he said typically supports future fee growth. He also cited healthcare as a contributor, saying healthcare spend is growing.
In wealth, Kim said Commerce saw growth in trust and brokerage fees at “high single-digit” rates, helped somewhat by the market but “mostly by record sales” in asset management. He said the bank expects continued growth in 2026, further enhanced by FineMark. Treasury services and deposit account fees grew “at 5%-6% last year,” which he linked to healthcare-related receivables and payments processing.
Kim also flagged a 2025 benefit from lease asset dispositions that produced “about $9 million in one-timers” that management does not expect to replicate, describing that as a headwind to year-over-year comparisons.
On capital return, Kim discussed a fourth-quarter buyback that he characterized as partly “catch-up” after being out of the market due to the deal, and partly “opportunistic” at what management viewed as a good price. He emphasized Commerce’s conservative approach to capital—“belt and suspenders”—and said the bank values flexibility in capital, liquidity, and underwriting. He described buybacks as a lever management can adjust, unlike the dividend, and noted the company’s long history of dividend increases. He also said fair value accounting work in the first quarter could result in the FineMark transaction using “10 or 20 basis points of capital less” than initially projected.
Finally, Kim outlined areas of investment as the bank enters 2026, including:
- Improving digital account opening and customer experience while balancing KYC requirements and fraud risk
- Investing in data infrastructure and data governance to support analytics and AI use cases
- Expanding commercial APIs to integrate payments and card products into customer ERP systems, including passing richer information into customers’ general ledgers
- Evaluating AI applications internally and in fraud prevention, often by leveraging third-party partners
- Modernizing systems, including commercial loan system enhancements and broader use of Salesforce across business lines
In closing remarks, Kim argued that Commerce’s asset sensitivity is “a feature of our model” driven by its low-cost deposit base, and said the bank is run for the long term. He also relayed that some investors have told him the shares are “ridiculously cheap right now,” adding, “there’s a time to get in now.”
About Commerce Bancshares (NASDAQ:CBSH)
Commerce Bancshares, Inc is a bank holding company primarily engaged in providing a broad range of banking and financial services across the Midwest. Through its principal subsidiary, Commerce Bank, the company offers commercial and consumer banking, treasury management, trust and wealth advisory, and mortgage lending. Its diversified product suite includes deposit and loan products, cash management solutions, capital markets services, and private banking designed to meet the needs of individuals, small businesses, and large corporations.
The company’s commercial banking group delivers tailored credit facilities, equipment and inventory financing, asset-based lending, and merchant services.
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