This October 27, 2025 report delivers a comprehensive analysis of Commerce Bancshares, Inc. (CBSH), examining its business model, financials, past performance, and future growth to ascertain a fair value. Our evaluation benchmarks CBSH against key competitors, including Zions Bancorporation (ZION), Comerica Incorporated (CMA), and KeyCorp (KEY). The findings are further contextualized using the investment principles of Warren Buffett and Charlie Munger.
Mixed: Commerce Bancshares is a high-quality regional bank facing clear headwinds. Its primary strength is a resilient business model with significant fee income that cushions it from interest rate changes. The bank maintains a strong, liquid balance sheet, reflecting its conservative and disciplined approach. However, the future growth outlook is weak, constrained by a conservative strategy and focus on slower-growing markets. Recent financials show rising pressure, with a sharp increase in provisions for potential loan losses. While the stock appears fairly valued, it is not a bargain compared to peers. This makes it better suited for conservative, income-focused investors rather than those seeking growth.
US: NASDAQ
Commerce Bancshares, Inc. (CBSH) operates as a super-community bank, offering a diversified range of financial services to individuals and businesses primarily across the Midwest. Its business model is built on three core pillars: traditional commercial and consumer banking, a sophisticated wealth management arm known as Commerce Trust, and a significant payment solutions business, particularly in commercial cards. Unlike many peers that focus almost exclusively on lending, CBSH generates a substantial portion of its revenue from non-interest sources, creating a more balanced and resilient earnings stream. The bank's core operation involves gathering low-cost deposits through its extensive branch network and leveraging these funds to originate loans. This is supplemented by fee-based income from trust services, deposit account charges, and card transaction fees, which together provide a strong buffer against the volatility of interest rate cycles. This diversified model, rooted in a conservative, long-term relationship banking philosophy, forms the foundation of its business strength.
The largest contributor to CBSH's revenue is its lending operation, which generates Net Interest Income (NII). This segment, representing approximately 54% of total revenue in 2023, encompasses a wide array of loans including commercial and industrial (C&I), commercial real estate (CRE), consumer real estate, and other consumer loans. The market for regional bank lending is vast but highly fragmented and competitive, with growth closely tied to regional economic health. Profitability, driven by the net interest margin (NIM), is sensitive to Federal Reserve policy. Competition is intense, coming from national giants like JPMorgan Chase, other prominent regionals such as UMB Financial and BOK Financial, and local community banks and credit unions. CBSH competes by focusing on relationship depth rather than price, serving a customer base of stable, small-to-medium-sized businesses and individuals within its geographic footprint. The stickiness of these relationships is high, as business clients are often integrated into the bank's treasury management and payment services, creating significant switching costs. The competitive moat for this segment is its low-cost core deposit franchise, an intangible asset built over 150 years, which provides a cheaper source of funding than most competitors can access, allowing for more resilient profitability through economic cycles.
Commerce Trust, the bank's wealth management division, is a significant source of competitive advantage and fee income, contributing around 22% of non-interest income or roughly 10% of total revenue. It provides private banking, investment management, and fiduciary services to high-net-worth individuals, families, and institutions. The U.S. wealth management market is large and growing, with attractive profit margins that are not directly dependent on interest rates. Commerce Trust is one of the largest bank-owned trust companies in the country, a scale that provides it with credibility and operational efficiency. It competes with national wirehouses like Morgan Stanley, other bank trust departments, and independent registered investment advisors (RIAs). Its primary customers are affluent clients who value the stability and integrated service of a large, reputable bank. Customer stickiness is exceptionally high in this segment; trust and advisory relationships are deeply personal and complex to unravel, often spanning generations. This creates a powerful moat based on high switching costs and a trusted brand name, delivering a consistent and high-quality stream of fee revenue that diversifies the bank's earnings away from lending.
Another key differentiator is CBSH's payment solutions business, primarily through its commercial card and merchant acquiring services. This segment generated over $309 million in 2023, accounting for nearly 39% of non-interest income or about 18% of total revenue. The corporate payments market is a high-growth area, expanding as businesses continue to digitize their payment processes. Profit margins are attractive, driven by transaction volume. CBSH is a top-10 commercial card issuer in the U.S., competing with giants like American Express and JPMorgan Chase, as well as fintech players. Its customers are its commercial banking clients, to whom it cross-sells payment solutions as part of a broader treasury management relationship. This integration makes the service extremely sticky, as separating the card program from other banking services would be disruptive and costly for the client. This business line's moat is built on high switching costs and a network effect; as more businesses use their services, the bank gathers more data and can refine its offerings. It provides a significant, scalable, and non-cyclical source of fee income.
In conclusion, Commerce Bancshares' business model is robust and its competitive moat is durable. The bank's strength does not come from a single, unassailable advantage, but rather from the powerful combination of a low-cost, stable deposit base, high switching costs embedded in its commercial and wealth management businesses, and a diversified revenue stream that reduces reliance on interest rate-sensitive lending. The conservative credit culture, refined over a century, acts as an intangible asset that protects it during downturns. The primary vulnerability is its geographic concentration in the American Midwest, which makes it more susceptible to regional economic trends than its more diversified national peers. However, its deeply entrenched community presence and the synergistic nature of its service lines create a resilient franchise. For investors, CBSH represents a high-quality, lower-volatility banking institution whose competitive advantages appear sustainable over the long term.
Commerce Bancshares' recent financial statements paint a portrait of a stable, profitable institution grappling with macroeconomic pressures. On the revenue front, the bank's primary engine, net interest income, has remained flat, posting $279.46M in the most recent quarter compared to $280.15M in the prior one. This suggests that rising deposit costs are offsetting the benefits of higher asset yields, putting pressure on its net interest margin. Profitability remains a key strength, with a return on assets (ROA) of 1.78% and return on equity (ROE) of 15.42%, both comfortably above industry benchmarks of 1% and 10% respectively. This indicates efficient management in converting assets and equity into profits.
The bank's balance sheet is characterized by exceptional liquidity and conservative leverage. With $25.5B in deposits funding only $17.6B in loans, its loan-to-deposit ratio is a very low 69.2%, far below the typical 80-95% for peers. This provides a massive liquidity cushion but may also suggest under-deployment of interest-earning assets. The bank's debt-to-equity ratio of 0.65 is also quite low, indicating a resilient capital structure. However, a significant red flag resides in the -$533.67M of accumulated other comprehensive income (AOCI), representing unrealized losses on its securities portfolio that have eroded its tangible book value.
From a risk perspective, credit quality is an emerging concern. The provision for credit losses surged to $20.06M in the third quarter, a sharp increase from $5.6M in the second quarter. This move signals that management anticipates higher loan defaults in the near future. While the bank generates solid cash flow and maintains a reliable dividend with a low payout ratio of 26.15%, the combination of margin pressure, balance sheet sensitivity to interest rates, and rising credit costs presents a cautious outlook.
Overall, Commerce Bancshares has a solid financial foundation built on strong profitability and a fortress-like liquidity position. However, it is not immune to the challenges facing the banking sector. Investors should weigh its current high returns against the clear risks of margin compression and deteriorating credit quality, making its current financial standing stable but warranting close monitoring.
Over the analysis period of fiscal years 2020 through 2024, Commerce Bancshares demonstrated a history of conservative management and resilience. The bank's past performance is defined by high profitability and disciplined capital returns rather than aggressive expansion. This approach contrasts with many larger regional peers who have pursued faster, but more volatile, growth through acquisitions or by operating with lower capital levels. CBSH’s history suggests a focus on navigating economic cycles with caution, prioritizing the protection of its fortress-like balance sheet.
From a growth perspective, the bank's record is mixed. Revenue grew at a compound annual growth rate (CAGR) of approximately 7.7% from FY2020 to FY2024, which is respectable. However, Earnings Per Share (EPS) growth has been inconsistent. After a large 55.8% jump in FY2021, driven by a release of credit reserves, EPS growth was negative for two consecutive years before recovering with an 11.8% increase in FY2024. In terms of profitability, CBSH has been a standout performer. Its Return on Equity (ROE) has been consistently strong, improving from 10.8% in FY2020 to an average of over 17% from FY2022 to FY2024, indicating highly effective use of its capital base and outperforming many competitors.
Historically, the bank has been a reliable generator of cash flow. Operating cash flow has remained robustly positive throughout the five-year period, providing ample coverage for capital expenditures and shareholder returns. This financial reliability has enabled a strong track record of capital allocation. The dividend per share has grown every year, compounding at an average annual rate of about 5% from FY2020 to FY2024. Furthermore, the bank has consistently repurchased shares, reducing its total share count each year and providing an additional boost to EPS for long-term shareholders. This disciplined return of capital is a hallmark of the bank's past performance.
In conclusion, the historical record for Commerce Bancshares supports confidence in the management team's ability to execute its conservative strategy effectively. While the bank has not delivered explosive growth, its past performance shows a durable and highly profitable institution capable of generating steady shareholder returns through various economic conditions. Its history of stability and superior profitability, especially when compared to the more volatile records of peers like KeyCorp and Comerica, makes its past performance a significant strength for risk-averse investors.
The U.S. regional banking industry faces a period of significant transition over the next 3-5 years, defined by evolving interest rate landscapes, intense competition, and technological disruption. The primary shift will be away from pure balance sheet growth towards a focus on profitability, efficiency, and diversification. Key drivers behind this change include: 1) Persistent pressure on Net Interest Margins (NIMs) as the battle for low-cost deposits intensifies. 2) Increased regulatory scrutiny following the 2023 banking turmoil, which will raise compliance costs and capital requirements for mid-sized banks. 3) The accelerated adoption of digital banking, forcing regionals to invest heavily in technology to compete with national giants and nimble fintechs. 4) An impending credit cycle normalization, which will test the underwriting discipline of the past decade. The competitive landscape is becoming harder, as scale provides a significant advantage in technology spending and marketing reach.
A potential catalyst for renewed demand is a stabilized interest rate environment, which could improve lending margins and boost business investment. Furthermore, M&A activity is expected to increase as smaller banks struggle with the aforementioned pressures, creating opportunities for well-capitalized players. The market for regional banking services is mature, with overall loan growth projected to track nominal GDP, likely in the 2-4% CAGR range. However, specific segments like digital payments and wealth management are expected to grow faster. The key challenge for banks like Commerce Bancshares will be to capture profitable growth in a slow-growing market while managing rising operational and funding costs. Success will depend on defending their low-cost deposit base and expanding non-interest income streams.
Commerce's core lending business, encompassing Commercial & Industrial (C&I) and Commercial Real Estate (CRE) loans, faces a constrained environment. Currently, consumption is limited by high interest rates, which dampens borrower appetite for new projects and expansion, and heightened economic uncertainty, particularly in the Midwest's manufacturing and agricultural sectors. Over the next 3-5 years, a modest increase in consumption is expected, primarily from existing clients expanding their lines of credit as economic conditions normalize. Growth will be driven by relationship depth rather than aggressive market expansion. However, segments tied to speculative real estate or highly cyclical industries may see decreased activity. The key catalyst would be a sustained drop in interest rates, which could unlock pent-up demand for capital expenditures. The market for middle-market lending is projected to grow at a 3-5% CAGR. Customers in this space often choose banks based on service quality, relationship tenure, and reliability, areas where CBSH excels over price-focused competitors like regional peers UMB Financial or national players. CBSH will outperform when a client values a bundled offering of lending, treasury, and payment services. The number of regional bank competitors is expected to decrease due to M&A. A key risk for CBSH is a prolonged regional economic downturn (medium probability), which would directly hit loan demand and credit quality in its concentrated footprint.
The Wealth Management division, Commerce Trust, is a key growth engine. Current consumption is solid but constrained by volatile equity and bond markets, which can slow new asset inflows and depress fee revenue tied to assets under management (AUM). Over the next 3-5 years, consumption is set to increase significantly, driven by the massive intergenerational wealth transfer and the growing need for sophisticated financial planning among affluent clients. Growth will come from deepening relationships with existing commercial and retail banking customers, a key synergy many competitors lack. The U.S. wealth management market is expected to grow AUM at a 5-7% CAGR. Customers choose providers based on trust, performance, and the integration of banking and investment services. CBSH outperforms competitors like national wirehouses (e.g., Morgan Stanley) for clients who prefer a high-touch, bank-centric model. However, independent Registered Investment Advisors (RIAs) are winning share with more flexible, lower-cost models. A primary risk is underperformance of its investment strategies (medium probability), which could lead to AUM outflows. Another risk is fee compression (high probability) across the industry, which could squeeze margins even if AUM grows.
Payment Solutions, particularly the commercial card business, represents another strong growth avenue. Current usage is high, driven by the ongoing shift from paper checks to electronic payments in the B2B space. Consumption is somewhat constrained by overall economic activity, as transaction volumes are tied to business spending. Looking ahead, this segment is poised for robust growth. Consumption will increase as more mid-sized businesses adopt automated payables and integrated treasury solutions to improve efficiency. This is not about winning new companies as much as increasing penetration and usage within the existing commercial client base. The B2B payments market is projected to grow at a 8-10% CAGR. Customers choose providers based on integration with their accounting systems, security, and the quality of treasury management services. CBSH leverages its banking relationships to outperform standalone fintech competitors who cannot offer an integrated solution. However, giants like JPMorgan Chase and American Express have greater scale and technological resources. The number of competitors, especially fintechs, continues to increase. The main risk for CBSH is technological disruption (medium probability), where a competitor offers a superior platform that lures away clients, despite high switching costs. A 5% drop in interchange fees due to regulatory changes (low probability) could also directly impact revenue.
Finally, the Consumer Banking segment, while not a primary growth driver, is the foundation of the bank's low-cost funding advantage. Current consumption is focused on digital access and higher yields on deposits. Growth in consumer loans (auto, mortgage) is currently limited by high rates and affordability challenges. Over the next 3-5 years, the focus will shift further towards digital engagement and deposit gathering. Loan demand will likely remain modest, but the value of its stable, core deposit base will increase as it provides a cheaper source of funds than wholesale markets. The key catalyst for this segment is not growth, but the successful defense of its deposit market share against online banks and credit unions offering higher rates. Consumers choose community banks for personal service and convenience, but are increasingly sensitive to digital features and deposit rates. CBSH competes well on service but can lose out to rate-shoppers. The primary risk is a continued erosion of its noninterest-bearing deposit base (high probability) as customers move cash to higher-yielding alternatives, which would increase CBSH's funding costs and pressure its Net Interest Margin.
Looking forward, Commerce Bancshares' growth strategy hinges on leveraging its diversified business model. The bank's ability to cross-sell its high-growth payment and wealth management services to its stable commercial banking client base is its most significant competitive advantage. Future success will be less about geographic expansion and more about deepening existing relationships. The bank will likely continue its conservative approach to M&A, preferring smaller, in-market acquisitions that bolster its core franchise rather than transformative deals. A key area to watch will be its investment in digital platforms; while historically a laggard, improving its technology stack is critical to retaining customers and improving operational efficiency. The bank's performance will ultimately be a balancing act between the slower growth of its traditional lending business and the faster, more profitable expansion of its fee-based services.
As of October 27, 2025, with a stock price of $53.19, a detailed valuation analysis suggests that Commerce Bancshares is trading within a reasonable range of its intrinsic worth. The bank's strong profitability metrics support its current market price, but a lack of significant undervaluation suggests that investors should not expect substantial near-term gains based on valuation alone. A triangulated valuation approach, weighing multiples, dividends, and asset value, points to a fair value range of approximately $50 - $60 per share. This indicates the stock is Fairly Valued with limited upside from the current price, suggesting it is not a deep value opportunity but also not overpriced. The most reliable method for valuing a bank is comparing its multiples to peers. CBSH trades at a TTM P/E ratio of 12.7x. This is slightly above the regional bank industry average, which is currently around 11.7x for the third quarter of 2025. However, its Price-to-Tangible-Book (P/TBV) ratio of 1.96x (calculated from price of $53.19 and tangible book value per share of $27.15) is justified by a strong Return on Equity of 15.42%, which is a measure of profitability. Banks with higher returns typically command higher P/TBV multiples. Applying the peer average P/E of 11.7x to CBSH's TTM EPS of $4.19 suggests a value of $49.02. Applying a P/TBV multiple of 1.8x, a reasonable metric for a bank with this level of profitability, to its tangible book value per share of $27.15 suggests a value of $48.87. These figures anchor the lower end of the fair value range. The dividend yield provides another valuation checkpoint. With an annual dividend of $1.10 per share, the current yield is 2.07%. While not exceptionally high, the dividend is very safe, with a low payout ratio of just 26.15%. This indicates the company retains most of its earnings to fund future growth. A simple dividend discount model is highly sensitive to growth and discount rate assumptions. However, considering the dividend growth of 6.46% and a required return appropriate for a low-beta stock, the current price appears reasonable, neither excessively high nor low based on its income stream. In conclusion, the valuation of Commerce Bancshares appears fair. The most weight is given to the Price-to-Tangible-Book and ROE comparison, as this is a standard and effective way to evaluate a bank's intrinsic value and operational performance. The triangulation of these methods results in a fair value estimate of $50 - $60 per share. The current market price sits comfortably within this range, suggesting the market has appropriately priced the stock based on its solid fundamentals.
Warren Buffett would view Commerce Bancshares as a textbook example of a durable banking franchise, prizing its conservative, long-term approach. He would be highly impressed by the bank's fortress-like balance sheet, evidenced by its Common Equity Tier 1 (CET1) ratio of approximately 13.5%. This ratio measures a bank's core capital against its risk-weighted assets, and a high number signifies a very strong ability to absorb losses, a feature Buffett demands. Furthermore, Buffett would admire that nearly 40% of CBSH's revenue comes from stable, non-interest fee income, which provides earnings predictability and reduces reliance on lending cycles. The primary drawback would be its premium valuation, with a Price-to-Book ratio around 1.5x, which may not provide the deep discount or 'margin of safety' he often prefers. Management's use of cash is prudent, balancing modest dividends and share buybacks with reinvestment, reflecting a disciplined capital allocation strategy that aligns with Buffett's philosophy. Given its exceptional safety and quality, Buffett would likely classify CBSH as a 'wonderful business' worth buying, though he might wait for a modest price pullback to improve his entry point. If forced to choose top banks, he would likely select M&T Bank (MTB) for its elite operational efficiency at a better valuation (P/B ~1.2x), Commerce Bancshares (CBSH) for its unmatched capital safety, and U.S. Bancorp (USB) for its best-in-class scale and payments business. A 15-20% price drop in CBSH, without any fundamental deterioration, would likely trigger a decision to invest.
Charlie Munger would view Commerce Bancshares as a quintessential example of a business to buy and hold indefinitely. He would be highly attracted to its simple, understandable banking model, which is heavily fortified by a rare and durable moat: nearly 40% of its revenue comes from stable, fee-based businesses like payments and wealth management. This diversification reduces reliance on the unpredictable nature of lending and interest rate cycles, a feature Munger would prize. Furthermore, the bank's fortress-like balance sheet, evidenced by an industry-leading CET1 capital ratio of ~13.5%, demonstrates a deep-seated culture of risk aversion and a focus on survival and long-term prosperity, perfectly aligning with his principle of avoiding stupidity. While the stock trades at a premium to peers at ~1.5x price-to-book, he would consider this a fair price for a truly superior enterprise with such a strong competitive advantage and conservative management. For retail investors, the takeaway is that CBSH represents a low-drama, high-quality compounder built for the long haul, not for short-term speculation. If forced to choose the best banks, Munger would likely concentrate his capital in the highest-quality operators like Commerce Bancshares for its unique moat and M&T Bank (MTB) for its legendary operational discipline and slightly better valuation. A significant change in its conservative culture or an irrational expansion into riskier ventures would be the primary factors that could alter this positive view.
Bill Ackman would likely view Commerce Bancshares as a high-quality, simple, and predictable business, admiring its fortress-like balance sheet and disciplined management. He would be particularly impressed by its industry-leading Common Equity Tier 1 (CET1) ratio of ~13.5%, which indicates a very strong ability to absorb potential losses compared to peers who are often closer to 10-11%. The bank's significant fee-based income, representing nearly 40% of revenue, would also appeal to him as it provides a stable earnings stream that is less dependent on the unpredictable nature of interest rates. However, Ackman would almost certainly choose not to invest for two critical reasons. First, CBSH is not an underperformer; it is already exceptionally well-run, leaving no clear angle for an activist investor to unlock value through operational, strategic, or governance changes. Second, the stock trades at a premium valuation, with a Price-to-Book (P/B) ratio of approximately 1.5x, which contradicts his philosophy of buying great businesses at a substantial discount to their intrinsic value. Management's capital allocation is conservative; its modest dividend yield of ~2.2% compared to peers like Comerica (~5.5%) indicates a focus on retaining capital to support its strong balance sheet and fund organic growth, a prudent choice that compounds shareholder value over the long term. If forced to choose from the sector, Ackman would likely prefer M&T Bank (MTB) for its similar high-quality operations at a more reasonable valuation (P/B of ~1.2x), or he might investigate a company like Comerica (CMA) as a potential activist target due to its lower valuation (P/B of ~1.0x) and identifiable areas for improvement. Ackman would likely avoid CBSH, viewing it as a great company but not the right type of investment opportunity for his strategy. A severe market downturn causing the stock price to fall by 30% or more could change his mind, creating the margin of safety he requires.
Commerce Bancshares, Inc. stands out in the competitive regional banking landscape not for its size or aggressive growth, but for its consistent, conservative, and disciplined approach to banking. For over 150 years, the company has cultivated a reputation for stability, often prioritizing long-term soundness over short-term gains. This philosophy is most evident in its balance sheet, which is typically more liquid and better capitalized than its peers. A key differentiator is its significant non-interest income, derived from a robust portfolio of fee-generating businesses, including corporate trust services, credit card processing, and wealth management. This diversification provides a valuable buffer against the volatility of interest rate cycles, which heavily impact the earnings of more traditional, loan-dependent banks.
Compared to its competitors, CBSH often appears less dynamic during economic expansions. Its management team avoids risky loan categories and maintains stringent underwriting standards, which can lead to slower loan growth than peers who are willing to expand their risk appetite. This can result in the stock underperforming during bull markets when investor sentiment favors growth over safety. However, this same conservatism becomes a significant strength during economic downturns. The bank's history shows remarkable resilience, with lower loan losses and more stable earnings when the economy falters, making it a defensive holding within the financial sector.
Strategically, CBSH focuses on deepening relationships within its established Midwestern footprint rather than expanding aggressively into new territories. This deep community integration fosters a loyal customer base and a stable, low-cost deposit franchise. While competitors may pursue growth through large-scale mergers and acquisitions, CBSH's growth has been more organic and methodical. This deliberate pace means it may not offer the explosive upside potential of a rapidly consolidating peer, but it also shields it from the integration risks and potential credit quality issues that can arise from large, transformative deals. For an investor, the choice between CBSH and its competition is a clear trade-off: accepting more modest growth in exchange for superior financial strength and downside protection.
Zions Bancorporation presents a contrasting profile to Commerce Bancshares, operating with a larger asset base but a more concentrated geographic focus in the Western United States. While both are regional banks with similar market capitalizations, Zions is known for its higher sensitivity to interest rate changes due to its asset structure, which can lead to greater earnings volatility. CBSH, with its deep roots in the more stable Midwest economy and a stronger emphasis on diversified fee income, offers a more defensive and consistent operating model. This fundamental difference in strategy and risk profile defines their competitive dynamic.
In Business & Moat, CBSH has a slight edge due to its revenue diversification. While both banks have strong regional brands, Zions' brand is powerful across states like Utah, Arizona, and California, with a significant deposit market share. CBSH's strength lies in its payments and wealth management arms, which generate nearly 40% of its revenue, reducing reliance on lending and creating high switching costs for corporate clients. Zions is more of a traditional commercial bank. In terms of scale, Zions is larger with assets of ~$87 billion versus CBSH's ~$31 billion, giving it some scale advantages. However, CBSH’s diversified model provides a more durable moat against economic cycles. Winner: Commerce Bancshares, Inc. for its superior business model diversification.
From a Financial Statement perspective, CBSH demonstrates superior quality and safety. CBSH boasts a Common Equity Tier 1 (CET1) ratio—a key measure of a bank's ability to absorb losses—of around 13.5%, which is significantly higher and more conservative than Zions' ~10.5%. A higher CET1 ratio means the bank is better capitalized and less risky. While Zions has shown strong revenue growth in certain rate environments, CBSH consistently posts a higher Return on Equity (ROE), recently around 12% to Zions' 10%, indicating better profitability from its capital base. CBSH’s higher net interest margin (NIM) of ~2.8% versus Zions' ~2.7% in the current environment also points to more effective asset and liability management. Winner: Commerce Bancshares, Inc. due to its stronger capital base and higher profitability.
Looking at Past Performance, CBSH has delivered more consistent, albeit less spectacular, returns. Over the last five years, CBSH has provided a steadier total shareholder return (TSR) with lower volatility, reflecting its conservative business model. Zions' stock, being more asset-sensitive, has experienced larger swings, with periods of significant outperformance during rising rate cycles but also deeper drawdowns during periods of economic stress. CBSH’s 5-year revenue and EPS growth has been more stable, whereas Zions' has been more cyclical. For risk, CBSH's lower beta and smaller maximum drawdowns make it the clear winner. For TSR, performance varies by the period chosen, but consistency favors CBSH. Winner: Commerce Bancshares, Inc. for its superior risk-adjusted returns and stability.
For Future Growth, Zions may have a slight edge due to its operating leverage and geographic footprint. The Western U.S. markets Zions serves have generally exhibited stronger population and economic growth than CBSH's core Midwest markets. This provides a better demographic tailwind for loan and deposit growth. Furthermore, Zions' balance sheet sensitivity means it could benefit more rapidly from a favorable shift in interest rates. CBSH's growth is more likely to be slow and steady, driven by incremental gains in its fee-based businesses and organic loan growth. While CBSH's path is more predictable, Zions' offers higher, albeit more uncertain, upside potential. Winner: Zions Bancorporation for its exposure to higher-growth markets.
In terms of Fair Value, Zions often trades at a discount to CBSH, reflecting its higher risk profile. Zions' Price-to-Book (P/B) ratio is typically around 1.0x, while CBSH trades at a premium, often around 1.5x. This premium for CBSH is justified by its higher ROE, stronger capital position, and more stable earnings stream. Zions offers a significantly higher dividend yield, currently around 4.0% versus CBSH's 2.2%, which may attract income-focused investors. However, for those looking at total value, CBSH's higher quality commands its price. The choice depends on investor preference: income and value (Zions) versus quality and safety (CBSH). Based on risk-adjusted value, CBSH's premium is earned. Winner: Commerce Bancshares, Inc., as its valuation premium is justified by superior quality.
Winner: Commerce Bancshares, Inc. over Zions Bancorporation. CBSH earns the victory due to its superior financial strength, more diversified and resilient business model, and consistent profitability. Its key strengths are its fortress-like CET1 ratio of ~13.5% and significant fee income, which insulate it from interest rate volatility. Zions' primary advantage is its leverage to higher-growth Western markets, but this comes with notable weaknesses, including lower capital ratios (~10.5% CET1) and higher earnings cyclicality. The primary risk for Zions is its sensitivity to economic downturns and interest rate fluctuations, while CBSH's main risk is its potential for slower growth. Ultimately, CBSH's proven stability and higher-quality earnings make it the more prudent long-term investment.
Comerica Incorporated and Commerce Bancshares are both formidable players in commercial banking, but they operate with different strategies and risk profiles. Comerica, with a larger asset base of ~$79 billion, has a significant presence in high-growth markets like Texas and California and a strong national business lending platform. However, it has faced challenges with deposit stability and a more concentrated commercial loan book. CBSH, while smaller, offers a more balanced and conservative model, with deep Midwestern roots and a much larger contribution from stable fee-based businesses, positioning it as a lower-beta alternative.
Analyzing their Business & Moat, both banks have strong commercial banking franchises. Comerica's moat is built on its specialized lending expertise in sectors like technology and life sciences, creating sticky relationships. However, this also concentrates risk. CBSH's moat is its diversification; its payments and wealth management divisions contribute nearly 40% of revenue, a figure far higher than Comerica's. This provides a strong buffer that Comerica lacks. In terms of brand, both are well-respected in their regions. On scale, Comerica is larger, but CBSH’s business mix provides a more durable competitive advantage against economic cycles. Winner: Commerce Bancshares, Inc. due to its superior revenue diversification.
In a Financial Statement comparison, CBSH stands out for its rock-solid balance sheet. CBSH maintains a CET1 ratio of around 13.5%, a clear indicator of its conservative stance and high capacity to absorb unexpected losses. Comerica's CET1 ratio is lower at ~10.8%, closer to the industry average. While Comerica’s Net Interest Margin (NIM) has been higher in certain periods, recently at ~3.0%, its profitability has been more volatile. CBSH has consistently delivered a high-quality Return on Equity (ROE) of ~12%, comparable to Comerica's ~13% but with less underlying risk. CBSH's liquidity profile, supported by a stable, low-cost deposit base, is also arguably stronger than Comerica's, which has experienced some deposit outflows. Winner: Commerce Bancshares, Inc. for its superior capital and liquidity position.
Examining Past Performance, both banks have rewarded shareholders, but with different risk characteristics. Comerica's stock has shown higher volatility, offering greater upside during economic upswings but also suffering steeper declines during downturns. CBSH has provided a smoother ride, with more consistent, albeit sometimes slower, earnings growth. Over the last five years, CBSH’s Total Shareholder Return (TSR) has been less volatile. For risk metrics, CBSH’s lower beta and smaller drawdowns make it the winner. Comerica’s EPS growth has been lumpier, heavily influenced by credit cycles and interest rate moves. Winner: Commerce Bancshares, Inc. for better risk-adjusted historical returns.
Regarding Future Growth, Comerica has an edge due to its exposure to more dynamic economies. Its presence in Texas, California, and Michigan, along with its national lending platforms, gives it access to a larger and faster-growing pool of commercial clients than CBSH's Midwest-centric footprint. Comerica’s strategic initiatives are focused on leveraging these high-growth markets. CBSH's growth will likely remain more methodical and organic, stemming from its payments business and steady market share gains. While safer, CBSH's growth ceiling appears lower than Comerica's potential. Winner: Comerica Incorporated, given its positioning in superior growth markets.
On Fair Value, Comerica typically trades at a lower valuation multiple than CBSH. Its Price-to-Book (P/B) ratio is often near 1.0x, while its P/E ratio is in the single digits (~8x), reflecting market concerns about its deposit stability and earnings volatility. CBSH, in contrast, commands a premium P/B of ~1.5x. Comerica offers a much higher dividend yield, recently over 5.5%, which is attractive for income investors. However, this higher yield comes with higher risk. CBSH's lower yield of ~2.2% is attached to a much safer and more predictable business. The market is pricing Comerica for higher risk, making it appear cheaper, but CBSH's premium is arguably justified by its quality. Winner: Comerica Incorporated for investors willing to take on more risk for a higher yield and lower valuation multiple.
Winner: Commerce Bancshares, Inc. over Comerica Incorporated. The verdict favors CBSH due to its fundamentally safer and more diversified business model, which translates into a much stronger balance sheet and more predictable earnings. CBSH's key strengths are its industry-leading CET1 ratio of ~13.5% and its unique revenue mix, which provides stability. Comerica’s main strength is its leverage to high-growth markets, but this is offset by significant weaknesses, including a less-capitalized balance sheet (~10.8% CET1), deposit volatility concerns, and higher earnings cyclicality. The primary risk for Comerica is a downturn in the commercial credit cycle, whereas the risk for CBSH is simply missing out on some upside. For a long-term investor, CBSH's quality and resilience are more compelling.
KeyCorp and Commerce Bancshares represent two different scales and strategies within regional banking. KeyCorp is a much larger institution with ~$187 billion in assets and a broader business mix that includes a significant investment banking and capital markets arm (KeyBanc Capital Markets). This makes it a more cyclical and economically sensitive entity compared to the smaller, more traditional, and conservatively run CBSH. The core of the comparison is CBSH's stability and focus versus KeyCorp's scale and diversified, albeit more volatile, revenue streams.
From a Business & Moat perspective, KeyCorp's scale is its primary advantage. Its large retail and commercial footprint across 15 states, combined with its national capital markets business, gives it significant economies of scale and cross-selling opportunities that CBSH cannot match. However, CBSH has a stronger moat in its niche fee-generating businesses, like payment processing, which are less cyclical than investment banking. While KeyCorp’s brand is nationally recognized in certain sectors, CBSH enjoys a deeply entrenched community presence in its core markets. KeyCorp’s switching costs are high for its integrated corporate clients, but so are CBSH's for its trust and payments customers. Winner: KeyCorp, as its sheer scale and integrated capital markets platform provide a wider moat.
In a Financial Statement analysis, CBSH's quality shines through. CBSH consistently operates with a much higher capital buffer, with a CET1 ratio of ~13.5% compared to KeyCorp's ~10.2%. This signifies substantially lower risk. KeyCorp's profitability has been under pressure, with a recent ROE of around 8% and a low Net Interest Margin (NIM) of ~2.1%, partly due to its business mix and funding costs. CBSH's ROE is superior at ~12%, and its NIM is healthier at ~2.8%, indicating more efficient and profitable core operations. KeyCorp's balance sheet is more complex and carries more market-sensitive assets, while CBSH's is straightforward and conservatively managed. Winner: Commerce Bancshares, Inc. for its vastly superior capitalization, profitability, and balance sheet simplicity.
Looking at Past Performance, CBSH has been the more reliable performer. Over the past five years, KeyCorp's stock has exhibited significantly higher volatility and has experienced deeper drawdowns, especially during periods of economic uncertainty or stress in the banking sector. Its earnings have been more erratic, influenced by the boom-and-bust cycles of investment banking. CBSH’s earnings and stock price have followed a much steadier upward trajectory. While KeyCorp may have posted stronger TSR in short bursts during market rallies, CBSH has delivered better risk-adjusted returns over a full cycle. Winner: Commerce Bancshares, Inc. due to its consistent performance and lower risk profile.
For Future Growth, KeyCorp has more levers to pull, albeit with higher risk. Its national digital bank (Laurel Road) and its capital markets division provide growth opportunities beyond traditional lending, with the potential for high returns if market conditions are favorable. The bank's larger size also gives it more capacity to invest in technology and pursue acquisitions. CBSH's growth is more constrained to its existing markets and business lines, likely resulting in a slower but more predictable growth rate. The consensus outlook for KeyCorp's earnings growth is more volatile but could be higher if its strategic initiatives pay off. Winner: KeyCorp, for its greater number of potential growth drivers and higher ceiling.
Regarding Fair Value, KeyCorp's higher risk profile is reflected in its valuation. It often trades at or slightly below its tangible book value (P/B ~1.0x) and offers a very high dividend yield, recently around 6.0%, to compensate investors for the risk. CBSH trades at a significant premium, with a P/B of ~1.5x and a more modest dividend yield of ~2.2%. An investor sees a clear choice: a high-yield, potential turnaround story in KeyCorp, or a high-quality, stable compounder in CBSH. KeyCorp appears cheaper on paper, but the discount is warranted by its lower profitability and higher risk. Winner: KeyCorp, but only for investors with a high risk tolerance seeking yield and value.
Winner: Commerce Bancshares, Inc. over KeyCorp. This verdict is based on CBSH's superior quality, safety, and consistent execution. Its standout strengths are its fortress balance sheet, evidenced by a ~13.5% CET1 ratio, and its stable, high-margin fee businesses. KeyCorp’s primary strength is its scale and its capital markets arm, but this is also a notable weakness, leading to earnings volatility and lower profitability metrics like its ~8% ROE. The main risk for KeyCorp is an economic downturn hurting its investment banking and credit portfolio simultaneously. For CBSH, the risk is being perceived as 'boring' and missing out on aggressive rallies. For a prudent investor, CBSH's stability and disciplined approach make it the clear winner.
Fifth Third Bancorp is a super-regional banking powerhouse with ~$210 billion in assets, dwarfing Commerce Bancshares in size and scope. Operating across the Midwest and Southeast, Fifth Third offers a full suite of banking, wealth management, and consumer lending services, often competing with a more aggressive, growth-oriented mindset. The comparison pits Fifth Third's massive scale and diversified, but more economically sensitive, operations against CBSH’s focused, conservative, and exceptionally well-capitalized banking model. This is a clear case of a large, mainstream bank versus a high-quality, niche-focused competitor.
In the realm of Business & Moat, Fifth Third's scale is a defining advantage. Its vast branch network, extensive product offerings, and significant market share in key metropolitan areas like Cincinnati, Chicago, and Nashville create a formidable competitive barrier. The bank has also successfully expanded into the high-growth Southeastern U.S. In contrast, CBSH’s moat is built on quality, not quantity. Its payments business (including credit card issuance) and trust services create very sticky customer relationships and generate a high proportion of fee income (~40%). While Fifth Third is much larger, CBSH's unique business mix gives it a more resilient, if smaller, moat. Winner: Fifth Third Bancorp, because its sheer scale and market penetration are powerful competitive advantages.
Financially, CBSH demonstrates a much more conservative and resilient profile. The most striking difference is in capital adequacy: CBSH’s CET1 ratio stands at an exceptional ~13.5%, whereas Fifth Third’s is significantly lower at around 10%. This means CBSH has a far greater capacity to withstand severe economic stress. While Fifth Third's profitability can be strong during good times, with an ROE recently around 12% (comparable to CBSH's), its earnings are more cyclical. CBSH's financial statements reflect a more risk-averse culture, with pristine credit quality and stable margins. Winner: Commerce Bancshares, Inc. for its fortress-like balance sheet and higher-quality financial position.
Reviewing Past Performance, Fifth Third has a history of more volatile results. As a larger, more traditional lending institution, its performance is more closely tied to the broader economic cycle, leading to greater swings in both its earnings and stock price. CBSH, cushioned by its large fee income base, has delivered a much smoother performance over the past decade. It has consistently shown lower loan losses during downturns and more predictable EPS growth. While Fifth Third may have outperformed during strong economic recoveries, CBSH has provided superior risk-adjusted returns over the long term. Winner: Commerce Bancshares, Inc. for its track record of consistency and resilience.
In terms of Future Growth, Fifth Third has more avenues for expansion. Its presence in the fast-growing Southeast provides a significant demographic tailwind for loan and deposit growth that CBSH's Midwest footprint lacks. Fifth Third has also been active in fintech partnerships and strategic acquisitions to bolster its capabilities, particularly in wealth management and digital banking. CBSH’s growth strategy is more organic and focused on deepening relationships in existing markets. While this is a lower-risk approach, it also implies a lower growth ceiling. Winner: Fifth Third Bancorp, due to its exposure to better growth markets and its proactive M&A strategy.
When it comes to Fair Value, the market clearly distinguishes between the two. Fifth Third typically trades at a lower valuation, with a Price-to-Book (P/B) ratio often hovering around 1.1x and a compelling dividend yield near 3.8%. This reflects its higher cyclicality and lower capital levels. CBSH, by contrast, consistently trades at a premium P/B of ~1.5x, with investors willing to pay more for its safety and quality. Its dividend yield is lower at ~2.2%. For an investor seeking value and income, Fifth Third appears cheaper. However, the discount is a fair compensation for the additional risk. Winner: Fifth Third Bancorp for investors prioritizing a lower entry valuation and higher dividend yield.
Winner: Commerce Bancshares, Inc. over Fifth Third Bancorp. Despite Fifth Third's immense scale and growth prospects, CBSH is the superior investment choice based on its fundamental quality and lower-risk profile. CBSH’s defining strengths are its industry-leading capital position (~13.5% CET1) and its stable, diversified fee-income businesses that insulate it from the credit cycle. Fifth Third’s strengths are its scale and southeastern exposure, but its weaknesses include lower capital buffers and higher earnings volatility. The primary risk for Fifth Third is a sharp economic downturn, which would impact its loan book more severely. CBSH’s main risk is underperforming in a speculative bull market. Prudent investors will favor CBSH’s proven resilience and disciplined management.
M&T Bank Corporation and Commerce Bancshares are often viewed as kindred spirits in the regional banking world, both renowned for their conservative management, disciplined underwriting, and long-term focus. M&T, with ~$200 billion in assets, is significantly larger and has a strong presence in the Northeast and Mid-Atlantic. The comparison is compelling because it pits two of the industry's highest-quality operators against each other, with the key differences being M&T's larger scale and geographic focus versus CBSH's unique fee-income diversification.
Assessing their Business & Moat, both banks are top-tier. M&T's moat is built on decades of disciplined, risk-averse commercial lending and an incredibly stable, low-cost deposit base, giving it one of the best efficiency ratios in the industry. It has a dominant market share in many of its core upstate New York and Mid-Atlantic markets. CBSH's moat is different but equally strong; it derives from its payments and wealth management divisions, which generate nearly 40% of revenue. This provides a level of diversification that even M&T cannot match. While M&T's scale (~$200B assets vs CBSH's ~$31B) is a clear advantage, CBSH's business model is structurally more insulated from lending cycles. Winner: Commerce Bancshares, Inc., by a narrow margin, for its superior revenue diversification.
From a Financial Statement perspective, this is a clash of titans. Both banks are exceptionally well-managed. M&T is famous for its cost control, consistently posting one of the best efficiency ratios among its peers. However, CBSH has the clear advantage in capitalization, with a CET1 ratio of ~13.5% compared to M&T's ~11%. Both generate strong and consistent profitability, with ROEs typically in the low double-digits. M&T has a long history of pristine credit quality, as does CBSH. The deciding factor is CBSH’s superior capital buffer, which provides an extra layer of safety. Winner: Commerce Bancshares, Inc., due to its stronger capital position.
In terms of Past Performance, both banks have been outstanding long-term compounders for shareholders. M&T, under its legendary former leadership, delivered decades of market-beating returns with low volatility. CBSH has a similarly impressive track record of steady, consistent growth. Over the last five to ten years, both have delivered solid Total Shareholder Returns with less volatility than the broader banking index. M&T's EPS growth has been incredibly consistent, while CBSH's has also been very stable. This is an extremely close contest, but M&T's longer and more storied history of disciplined execution gives it a slight edge. Winner: M&T Bank Corporation, based on its phenomenal long-term historical track record.
For Future Growth, M&T has a slight advantage through its proven ability to successfully integrate large acquisitions, such as its merger with People's United. This M&A expertise gives it a clear path to expanding its footprint and unlocking cost synergies. CBSH's growth is almost entirely organic, which is slower and more methodical. While CBSH's payments business provides a solid growth engine, M&T's larger platform and M&A capabilities give it more options to drive future expansion. M&T's markets in the Northeast are mature, but its newer territories provide growth opportunities. Winner: M&T Bank Corporation, for its greater potential to grow via acquisition.
On Fair Value, both banks typically trade at a premium to the sector, reflecting their high quality. M&T's Price-to-Book (P/B) ratio is often around 1.2x, while CBSH trades at a higher ~1.5x. The market awards CBSH a richer premium due to its higher capital levels and unique business mix. M&T's dividend yield is usually higher, recently around 3.5% versus CBSH's 2.2%. For an investor seeking quality at a more reasonable price, M&T presents a better value proposition. The premium for CBSH is significant and may not be justified when compared to another high-quality operator like M&T. Winner: M&T Bank Corporation, as it offers a similar level of quality at a more attractive valuation.
Winner: M&T Bank Corporation over Commerce Bancshares, Inc. This is the closest matchup, but M&T takes the win due to its proven history of execution at scale, its successful M&A integration, and its more compelling valuation. M&T’s key strengths are its disciplined culture, industry-leading efficiency, and shareholder-friendly capital allocation. CBSH’s strengths are its superior capital buffer (~13.5% CET1) and unique fee businesses. Both banks are exceptionally well-run, and neither has significant weaknesses. The primary risk for M&T is fumbling the integration of a future large acquisition, while the risk for CBSH is its premium valuation contracting. In a head-to-head comparison of two elite banks, M&T offers a slightly better combination of quality, growth potential, and value.
Based on industry classification and performance score:
Commerce Bancshares operates a durable and diversified banking model, anchored by a loyal, low-cost deposit base and a significant fee-generating wealth management and payments business. This structure provides resilience against interest rate fluctuations. While its geographic concentration in the Midwest poses a risk, the bank's conservative culture and strong customer relationships create a defensible competitive position. The investor takeaway is positive for those seeking a stable, well-managed regional bank with a clear competitive moat.
With nearly half of its revenue coming from fees, the bank is exceptionally well-diversified and less dependent on interest rate movements than virtually all of its regional banking peers.
Commerce Bancshares stands out for its remarkably balanced revenue mix. In 2023, noninterest income was $804 million compared to net interest income of $953 million, meaning fee-based revenue accounted for 45.8% of its total revenue. This is significantly ABOVE the regional bank average, which is typically in the 20-30% range. The fee income is also high-quality and diversified, stemming from recurring sources like trust fees ($187 million), bank card interchange fees ($309 million), and deposit account service charges ($143 million). This powerful fee engine provides a crucial buffer during periods of compressing net interest margins, making CBSH's earnings stream more stable and predictable than its more loan-dependent competitors.
Commerce Bancshares has a well-diversified deposit base across consumer, commercial, and wealth management clients, with minimal reliance on risky, less stable funding sources.
The bank's deposit base is sourced from a healthy mix of customers, reducing concentration risk. Its funding comes from a granular blend of consumer checking and savings accounts, deposits from small and mid-sized businesses, and balances held by its wealth management clients. The bank has very little reliance on brokered deposits, which are more volatile and expensive funding sources often used by banks with weaker core deposit franchises. At the end of 2023, brokered deposits were a negligible portion of its funding base. This diversified and stable mix demonstrates a strong ability to self-fund its operations without resorting to volatile wholesale markets, a hallmark of a conservative and well-managed institution.
While not focused on a single niche, Commerce Bancshares demonstrates strong, diversified lending expertise across commercial, business real estate, and consumer categories, supported by a conservative credit culture.
Instead of dominating a single niche, CBSH maintains a deliberately diversified loan portfolio, mitigating risk from any one sector. As of year-end 2023, its loan book was well-balanced, with major categories including business real estate (25%), commercial and industrial loans (25%), and consumer loans (25%). This diversification is a strategic choice that reflects its conservative risk management. The bank has a proven ability to compete effectively in the small and medium-sized business lending space within its geographic footprint, leveraging deep customer relationships rather than specialized product offerings. While this approach may not offer the high growth of a niche specialist, it has resulted in consistently strong credit quality through various economic cycles, which is a competitive advantage in itself.
The bank's exceptional funding profile is built on a large base of low-cost, sticky deposits, giving it a significant and durable cost advantage over competitors.
A bank's moat is often built on its deposit franchise, and CBSH excels here. As of Q1 2024, noninterest-bearing deposits constituted 26% of its total deposits. While this has decreased from post-pandemic highs due to rising rates, it remains ABOVE the regional bank median of around 20-25%. This provides the bank with a substantial amount of free funding. Consequently, its total cost of deposits is highly competitive. Furthermore, its estimated uninsured deposits were 37% of total deposits at the end of 2023, which is IN LINE or slightly BELOW many peers, indicating a manageable risk profile in the event of market stress. This sticky, low-cost deposit base is a direct result of long-standing community ties and integrated commercial banking services, providing a powerful and resilient funding advantage.
Commerce Bancshares maintains a productive branch network with higher-than-average deposits per branch, indicating efficient operations and a strong local presence despite a lack of national scale.
Commerce Bancshares operates a physical network of approximately 280 branches and ATMs, primarily concentrated in Missouri, Kansas, Illinois, Oklahoma, and Colorado. With total deposits of around $29.9 billion as of Q1 2024, the bank's deposits per branch stand at roughly $107 million. This figure is ABOVE the typical regional bank average, which often hovers between $80 million and $100 million, suggesting that CBSH's branches are more productive at gathering deposits than many peers. While the bank is not aggressively expanding its physical footprint, it has effectively optimized its existing locations to serve as hubs for relationship-based banking. This dense local network supports its ability to attract and retain sticky retail and small business deposits, which form the core of its low-cost funding base.
Commerce Bancshares shows a mixed financial picture, defined by strong profitability and high liquidity on one hand, but concerning trends in credit costs and interest rate sensitivity on the other. Key metrics like a return on assets of 1.78% and a low loan-to-deposit ratio of 69.2% highlight its stability and earnings power. However, a recent 258% quarterly jump in provisions for loan losses and significant unrealized losses on its investment portfolio (-$533.67M) are notable red flags. The overall investor takeaway is mixed; the bank is fundamentally profitable but faces clear headwinds that could impact future performance.
With an exceptionally low loan-to-deposit ratio, the bank maintains an extremely strong liquidity position, which along with solid capital levels, provides a robust defense against financial stress.
The bank's capital and liquidity are significant strengths. The most telling metric is the loan-to-deposits ratio, which stood at 69.2% in Q3 2025 ($17.61B in net loans / $25.46B in total deposits). This is well below the industry benchmark range of 80-95%, indicating that the bank is not overly reliant on lending and is funded by a large, stable base of core deposits. This provides a massive liquidity cushion and significant capacity for future loan growth without needing to seek more expensive funding.
Capitalization also appears robust. The Tangible Common Equity to Total Assets ratio can be calculated as 11.19% ($3.61B / $32.29B), a healthy buffer that demonstrates the bank's ability to absorb potential losses. While specific figures for CET1 ratio and uninsured deposits are not available, the existing data strongly suggests that the bank is well-capitalized and highly liquid, positioning it well to navigate economic uncertainty.
A nearly fourfold increase in the provision for credit losses in the most recent quarter signals management's concern about future loan performance, overshadowing its current reserve levels.
While the bank's historical credit performance has been stable, recent trends raise a significant red flag. In Q3 2025, Commerce Bancshares set aside $20.06M as a provision for credit losses, a dramatic increase from $5.6M in Q2 2025. Such a sharp, sequential jump suggests that the bank is anticipating a deterioration in its loan portfolio. This action is a forward-looking indicator from management that credit risk is rising.
As of the latest quarter, the total allowance for credit losses stands at $175.67M, which represents 0.99% of its gross loans ($17.79B). This reserve level is adequate but could be considered thin compared to peers, who often maintain reserves above 1.2%. The key concern is not the current level of reserves but the rapid increase in provisioning, which implies that net charge-offs (actual loan losses) are expected to rise. This proactive but concerning move warrants a cautious stance on the bank's credit quality.
The bank's equity is significantly impacted by unrealized losses on its investment securities, highlighting a notable vulnerability to changes in interest rates.
Commerce Bancshares' balance sheet shows clear sensitivity to interest rate movements. The most direct evidence is the -$533.67M in accumulated other comprehensive income (AOCI) as of Q3 2025. This figure, primarily representing unrealized losses on its securities portfolio, is equivalent to a substantial 14.1% of the bank's total common equity ($3.77B). Such a large negative mark-to-market adjustment indicates that a significant portion of its $12.66B investment portfolio is in fixed-rate assets that have lost value as rates have risen.
While the bank's core net interest income has remained relatively stable, this large paper loss on the balance sheet reduces tangible book value and can limit financial flexibility. Should the bank need to sell these securities before they mature, it would have to realize these losses, which would directly impact earnings. This level of exposure suggests that the bank's assets and liabilities are not perfectly matched for the current rate environment, creating a tangible risk for shareholders.
The bank's net interest income, its main source of earnings, has stalled, indicating that rising funding costs are squeezing its profitability from lending and investing.
Net interest income (NII) is the lifeblood of a bank, and here Commerce Bancshares is showing signs of pressure. In Q3 2025, NII was $279.46M, a slight sequential decline from $280.15M in Q2 2025. In an environment where interest rates have been volatile, this flat-to-down trend suggests the bank is struggling to increase the yield on its assets faster than its cost of funds is rising. Total interest expense grew from $91.49M in Q2 to $94.65M in Q3, outpacing the growth in total interest income.
This trend points toward Net Interest Margin (NIM) compression, a key challenge for the banking industry. When NIM shrinks, a bank's core profitability is weakened. While the exact NIM percentage is not provided, the trajectory of its components is unfavorable. For a bank's financial performance to be considered strong, it should demonstrate an ability to protect or expand its margin. The current stagnation in NII fails this test.
The bank's efficiency ratio remains elevated compared to industry benchmarks for top performers, indicating a relatively high cost structure for generating revenue.
A bank's efficiency ratio measures how much it costs to generate a dollar of revenue, with lower being better. For Q3 2025, Commerce Bancshares' efficiency ratio was 54.1% (calculated as $242.92M in noninterest expense divided by $448.86M in net interest income plus noninterest income). This is an improvement from 54.7% in the prior quarter and 56.6% for the full year 2024, but it remains above the 50% level often associated with highly efficient banks. An efficiency ratio in the mid-50s is average but not strong.
The largest component of its noninterest expense is salaries and employee benefits, which came in at $157.46M in Q3, representing 64.8% of total noninterest expenses. While the bank shows some discipline in keeping costs from escalating, its current structure is more expensive to run than more streamlined competitors. This could become a bigger problem if revenue growth continues to be flat, as high fixed costs would further squeeze profitability.
Commerce Bancshares has a strong track record of stability and consistent shareholder returns over the past five years. The bank's key strengths are its consistently growing dividend, supported by a conservative payout ratio of under 30%, and a high average Return on Equity around 17% in recent years. However, its performance has been hampered by choppy earnings growth and shrinking deposits over the last three years. Compared to more aggressive peers, CBSH's growth has been slower but its risk profile is significantly lower. The investor takeaway is positive for those prioritizing safety, consistent income, and quality over rapid growth.
The bank has struggled with its deposit base, which has declined over the past three years, overshadowing modest loan growth and representing a clear historical weakness.
A review of the bank's balance sheet from FY2021 to FY2024 reveals a concerning trend in its core funding. Total deposits peaked at ~$29.8 billion in FY2021 and have since fallen each year, ending FY2024 at ~$25.3 billion. This represents a three-year decline of over 15%, a significant issue for any bank as deposits are the primary source of funding for loans. While this trend has been seen across the industry due to changing interest rates, the persistent decline is a material weakness in CBSH's recent history.
Over the same period, gross loans grew at a modest CAGR of 4.3%, from ~$15.2 billion to ~$17.2 billion. As a result of shrinking deposits and growing loans, the loan-to-deposit ratio has increased from a very low 51% to a still-conservative 68%. While the ratio itself is not alarming, the underlying driver—a shrinking deposit base—is a fundamental problem. Because steady growth in core deposits is a key signal of a healthy franchise, this negative trend results in a failure for this factor.
The bank's efficiency has not improved over the past three years, and while net interest income has grown, the overall trend does not show sustained operational improvement.
An analysis of the bank's key operating trends from FY2022 to FY2024 reveals a mixed but ultimately stagnant picture. On the positive side, Net Interest Income (the profit from loans and investments after paying for deposits) has grown steadily, with a 5.1% CAGR over the past two years. This shows the bank has managed to grow its core interest earnings.
However, cost discipline has not shown similar progress. The efficiency ratio, which measures non-interest expenses as a percentage of revenue, stood at 56.2% in FY2022, worsened to 58.7% in FY2023, and then improved back to 56.6% in FY2024. A lower ratio is better, and this lack of sustained improvement indicates that expense growth has largely kept pace with revenue growth. Without a clear trend of improving efficiency, the bank's past performance in this area is not strong enough to warrant a pass.
Although the long-term earnings trend is positive, EPS growth over the past three years has been highly inconsistent, with two years of declines before a recent recovery.
Commerce Bancshares' earnings per share (EPS) path has been volatile in recent years. While the five-year CAGR from FY2020 to FY2024 is a strong 12.7%, this number masks significant year-to-year swings. The bank saw a massive 55.8% EPS growth in FY2021, largely due to a one-time release of credit reserves. Following this, performance faltered, with EPS declining by -6.16% in FY2022 and -0.97% in FY2023 as interest expenses rose and earnings normalized.
While EPS recovered with 11.82% growth in FY2024, the lack of a smooth, predictable growth path is a historical weakness. A core component of strong past performance is consistency, and the two consecutive years of negative growth break that pattern. Despite the bank's high profitability, as shown by an excellent average Return on Equity of 17.2% over the last three years, the inconsistent bottom-line growth leads to a failing grade for this factor.
The bank's history of low and stable provisions for credit losses, along with a consistent loan loss reserve, points to a long-standing culture of disciplined and conservative lending.
While specific data on net charge-offs is not provided, the bank's financial statements strongly indicate a history of excellent credit management. After a spike in the provisionForLoanLosses to $137 million in 2020 due to the pandemic, the bank booked a large reserve release of -$66 million in 2021. Since then, provisions have been remarkably stable and low, averaging just $32 million per year from FY2022 to FY2024. This suggests that actual loan losses have been minimal and well-controlled.
This stability is also reflected in the bank's allowance for loan losses (ACL) as a percentage of gross loans. Since FY2021, this ratio has remained in a tight and healthy range of 0.92% to 0.99%. A stable ACL ratio indicates that management has maintained a consistent and prudent view of risk in its loan portfolio without needing to make large, unexpected adjustments. This historical discipline in underwriting is a key strength and justifies a pass.
The bank has an excellent and highly consistent record of returning capital to shareholders through steadily increasing dividends and continuous share buybacks.
Commerce Bancshares has demonstrated a strong and reliable commitment to its shareholders. Over the last five fiscal years (FY2020-FY2024), the dividend per share has grown each year, rising from $0.846 to $1.029. This consistent growth is supported by a conservative payout ratio, which stood at a healthy 27.6% in FY2024, indicating that dividends are well-covered by earnings and there is room for future increases.
In addition to dividends, the bank has actively reduced its share count through buybacks. The income statement shows a negative sharesChange figure for each of the last five years, including -1.38% in FY2024, confirming a steady reduction in shares outstanding. This strategy makes each remaining share more valuable over time. The combination of a growing dividend and consistent buybacks reflects a disciplined capital allocation policy that directly benefits investors, justifying a passing grade.
Commerce Bancshares' future growth outlook is mixed. The bank is well-positioned to grow its high-quality fee-income businesses, particularly in payment solutions and wealth management, which provide a significant advantage over loan-dependent peers. However, its overall growth will likely be constrained by modest loan demand within its Midwest footprint and a conservative management approach in a challenging interest rate environment. Compared to more aggressive regional banks, CBSH will probably exhibit slower but more stable earnings growth over the next 3-5 years. The investor takeaway is cautiously positive for those prioritizing stability and dividend income over rapid expansion.
The bank's loan growth outlook is modest and cautious, reflecting a disciplined underwriting approach and softening demand in its core Midwest markets.
Management has consistently guided towards low-single-digit loan growth, reflecting both a conservative risk appetite and a tepid economic outlook in its primary operating regions. This contrasts with some more aggressive peers who may be targeting mid-single-digit growth by expanding into new markets or product lines. The bank's unfunded commitment levels and line utilization rates have been stable but not indicative of a major acceleration in borrowing demand. While its lending pipeline remains solid due to long-standing relationships, the overall guidance suggests growth will likely lag that of the broader banking sector. This disciplined approach protects credit quality but sacrifices top-line growth, making it a point of weakness from a pure growth perspective.
The bank maintains a conservative capital strategy focused on shareholder returns through dividends and opportunistic buybacks, with a clear reluctance to pursue large-scale M&A.
Commerce Bancshares has a long history of prudent capital management, consistently maintaining capital ratios well above regulatory minimums. Its CET1 ratio is strong, providing flexibility. The company regularly uses share repurchase programs; for example, it has a recurring authorization to buy back shares, though the pace of execution varies with market conditions. Management's commentary suggests a continued focus on organic growth and a cautious stance on M&A. They have not announced any significant acquisitions and are unlikely to pursue large deals that would risk diluting their conservative credit culture. While this approach ensures stability, it limits a key avenue for growth and expense synergies that more acquisitive regional banks utilize to boost EPS, making its capital deployment plan more focused on defense than offense.
The bank is actively managing its physical footprint while investing in digital capabilities, but it has not provided explicit, aggressive targets for cost savings or digital user growth.
Commerce Bancshares follows an industry trend of optimizing its branch network, selectively closing or consolidating branches in response to shifting customer behavior. However, the company has not publicly announced large-scale closure plans or specific cost-saving targets associated with this optimization, suggesting a more measured, gradual approach rather than a transformative one. Deposits per branch remain healthy, indicating network productivity. On the digital front, the bank continues to invest in its online and mobile platforms to improve user experience and functionality. While these investments are necessary to remain competitive, the bank does not disclose metrics like digital active user growth, making it difficult to assess its progress against digitally-focused competitors. The lack of clear, aggressive targets suggests optimization is more about maintenance than a strategic growth driver.
While the bank's low-cost deposit base provides a significant advantage, rising funding costs and a stable-to-lower rate outlook will likely keep its net interest margin under pressure.
Commerce Bancshares' net interest margin (NIM) has benefited from its high proportion of low-cost deposits. However, like the rest of the industry, it is facing significant pressure from rising deposit costs as customers seek higher yields. Management's guidance has been cautious, often pointing to potential NIM compression in the near term. While a portion of its loan portfolio is variable-rate, which helps in a rising rate environment, the benefit is being offset by the rapid increase in funding costs. Securities reinvestment yields are improving but may not be enough to fully counteract the pressure on deposits. The bank's future NIM performance will be highly dependent on its ability to defend its deposit base without overpaying, and the outlook remains challenging.
With nearly half its revenue from diversified fees and leading positions in commercial card and wealth management, the bank is exceptionally well-positioned for future non-interest income growth.
This is a core strength for Commerce Bancshares. The bank's strategy explicitly focuses on growing its noninterest income streams to buffer against net interest margin volatility. Its commercial card business is a top-10 issuer nationally, poised to continue benefiting from the secular trend of B2B payment digitization, with interchange volume growth expected to outpace general economic growth. Likewise, Commerce Trust is a significant wealth management player, set to benefit from wealth transfer trends. The bank consistently generates around 45% of its revenue from fees, a ratio far superior to most regional peers. While the bank doesn't provide explicit growth targets for each fee category, the strategic emphasis and strong existing platforms support a positive outlook for continued expansion in these high-margin businesses.
Based on its current valuation metrics, Commerce Bancshares, Inc. appears to be fairly valued. As of the market close on October 24, 2025, the stock price was $53.19. The company's key valuation numbers, such as its Price-to-Earnings (P/E) ratio of 12.7 (TTM) and Price-to-Tangible-Book-Value (P/TBV) of 1.96x, are reasonable when considering its high profitability, evidenced by a Return on Equity (ROE) of 15.42%. The stock is currently trading near the bottom of its 52-week range of $52.11 to $72.75, suggesting limited downside risk but also a lack of strong positive momentum. For investors, the takeaway is neutral; the stock isn't a bargain but is priced reasonably for a well-run bank, making it a solid candidate for a watchlist.
The stock trades at a premium to its tangible book value, which is well-justified by its high and consistent profitability (Return on Equity).
For banks, a key valuation metric is the Price-to-Tangible-Book-Value (P/TBV) ratio, which compares the stock price to the hard assets the company owns. CBSH's tangible book value per share is $27.15. With a stock price of $53.19, the P/TBV ratio is 1.96x. This means investors are paying almost double the bank's tangible net worth. However, a high P/TBV ratio can be justified if the bank is highly profitable. Commerce Bancshares has a Return on Equity (ROE) of 15.42%. A general rule of thumb is that a bank earning a 15% ROE can justify a P/TBV multiple in the 1.5x to 2.0x range. Since CBSH's profitability is strong and supports its current valuation multiple, this is a positive sign. It indicates a well-managed franchise that creates significant value from its asset base.
The company's high Return on Equity justifies its Price-to-Book multiple, indicating that the market is appropriately rewarding a high-performing bank.
A bank's ability to generate high returns on its equity should be reflected in a higher Price-to-Book (P/B) multiple. Commerce Bancshares has a P/B ratio of 1.88x and an ROE of 15.42%. This level of profitability is excellent, especially in a stable interest rate environment. The current 10-Year Treasury yield, a benchmark for the "risk-free" rate, is around 4.02%. The large spread between CBSH's ROE (15.42%) and the risk-free rate (~4%) demonstrates that the bank is generating returns well above its likely cost of capital. This value creation justifies investors paying a premium over the book value of its assets. The P/B multiple of 1.88x is well-aligned with a mid-teens ROE, suggesting the valuation is rational and fair based on the bank's performance.
The stock's P/E ratio is slightly elevated compared to the industry average, and its expected earnings growth is modest, suggesting the price isn't at a discount relative to its growth prospects.
This analysis checks if the stock's price is low relative to its earnings and growth. Commerce Bancshares has a trailing twelve-month (TTM) P/E ratio of 12.7x and a forward P/E of 12.51x. This indicates that analysts expect earnings to grow, but only slightly. The regional banking industry's average P/E ratio is currently around 11.7x. CBSH's P/E is therefore slightly higher than its peers. Analysts forecast earnings per share (EPS) to grow by about 6.09% next year. While this is positive, it is not particularly high. A common valuation metric, the PEG ratio (P/E divided by growth rate), would be over 2.0 (12.7 / 6.09), which is generally considered high and suggests the stock is not cheap based on its expected growth. Because the P/E is not discounted to peers and growth is not exceptionally strong, this factor does not pass.
The company offers a sustainable and growing dividend, complemented by consistent share buybacks, resulting in a solid total yield for shareholders.
Commerce Bancshares provides a healthy return to shareholders through both dividends and share repurchases. The current dividend yield is 2.07%, based on an annual payout of $1.10 per share. While this yield may not seem very high, its sustainability is excellent, as shown by a low payout ratio of 26.15%. This means the company pays out only a small portion of its profits as dividends, leaving plenty of cash for reinvestment and future growth. Furthermore, the company actively buys back its own stock, which increases the value of the remaining shares. The number of shares outstanding has been decreasing, with a 1.63% "buyback yield". Combining the dividend yield and the buyback yield gives a total shareholder return of approximately 3.7%. This balanced approach of providing income and reinvesting for growth is a positive sign for long-term investors.
When compared to its peers, the stock does not appear to be on sale, as its valuation multiples are slightly higher and its dividend yield is lower than many competitors.
This factor assesses how the stock is priced relative to its direct competitors. CBSH's TTM P/E ratio of 12.7x is slightly above the regional bank average of 11.7x. Its dividend yield of 2.07% is also less attractive than many other regional banks, some of which offer yields in the 3% to 4.5% range. While its P/TBV ratio of 1.96x is supported by high profitability, it doesn't signal a discount. The stock has also underperformed, trading near its 52-week low. A low beta of 0.58 indicates lower-than-average market risk, which is a positive quality. However, from a pure relative value perspective, an investor could find other regional banks with lower P/E ratios and higher dividend yields. Therefore, it does not stand out as a clear bargain compared to the sector.
The primary risk for Commerce Bancshares stems from macroeconomic uncertainty, particularly interest rate movements. The bank's profitability is heavily tied to its net interest margin (NIM), which is the difference between the interest it earns on loans and pays on deposits. If the Federal Reserve begins to cut rates, this margin could compress, directly impacting earnings. Additionally, as a bank with a strong focus on commercial lending, CBSH is vulnerable to an economic downturn. A recession would likely lead to lower demand for new loans and an increase in defaults from its business clients, forcing the bank to set aside more money to cover potential losses and reducing its profitability.
The banking industry is undergoing significant change, creating competitive and regulatory hurdles for regional players like CBSH. The bank competes on multiple fronts: against money-center giants like JPMorgan Chase with massive technology budgets, smaller community banks with deep local ties, and innovative fintech companies that are unbundling traditional banking services. This intense competition can pressure both loan pricing and the ability to attract low-cost deposits. Following the regional bank failures in 2023, regulators are imposing stricter capital and liquidity rules. Complying with this heightened scrutiny increases operational costs and can limit the bank's ability to deploy capital for growth or shareholder returns.
From a company-specific view, potential vulnerabilities lie within its loan portfolio and reliance on non-interest income. Like many banks its size, CBSH has exposure to commercial real estate (CRE), a sector facing headwinds from remote work trends and higher borrowing costs, particularly in the office space. While the bank has a well-regarded fee-income business, including trust and credit card services, this revenue is not immune to economic cycles. A stock market downturn could reduce wealth management fees, and a slowdown in consumer spending would negatively impact card transaction revenue. Investors should monitor the performance of the CRE loan book and the stability of these key fee-generating businesses.
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