Commerce Bancshares, Inc. (CBSH)

How it makes money

Revenue is the sum of net interest income and fee income. In fiscal 2025 total revenue was $1.76 billion, of which net interest income — the spread between what the bank earns on $17.8 billion of loans and its securities portfolio and what it pays on deposits and borrowings — was $1,111.9 million, described in the filing as 63% of total revenue. Non-interest income was $652.3 million, 37.0% of total revenue, and is spread across trust fees ($232.7 million, driven by $81.6 billion of customer trust assets), bank card transaction fees ($184.3 million, mostly corporate card, debit, merchant and credit card interchange), deposit account charges ($108.2 million, two-thirds of which are corporate cash management fees), consumer brokerage services, capital market fees and loan fees. The fee mix means a meaningful share of income is recurring and asset- or transaction-based rather than dependent on the interest rate spread alone.

Revenue by segment

The durable advantage, such as it is, sits in the stickiness of the relationships rather than in any structural barrier. A $25.6 billion deposit base built over decades in home markets funds the bank cheaply; corporate cash management (two-thirds of deposit fees) and trust accounts ($81.6 billion of customer trust assets) are operationally entangled with the customer and rarely moved on price alone. The company itself attributes its position to focus on local markets, relationship banking and high-touch service — a real but narrow edge. Its own risk factors describe a highly competitive industry in which large national banks with lower funding costs and higher lending limits can enter its markets, and there is nothing in the filing that prevents a customer from banking elsewhere.

Two cycles drive the business. The rate cycle sets the 63% of revenue that is net interest income: when the Federal Reserve moves, loan yields and deposit costs reprice at different speeds and the margin widens or narrows. The credit cycle sets the cost: loan demand, card usage and delinquencies all move with employment and consumer spending, and the company notes that net charge-offs rose in 2025 on consumer credit card and business loans. Fee income softens but does not remove the swing — trust fees rise and fall with market values ($81.6 billion of trust assets, up 9.1% in 2025) and card fees with transaction volumes. Deposit gathering in home markets is the steadier part of the model.

Key risks

• Geographic concentration in a few Midwest states — The company states that, unlike larger national or regional banks that are more geographically diversified, it provides financial services primarily in Missouri, Kansas, central Illinois, Oklahoma and Colorado. A prolonged economic downturn in those markets could have a material adverse effect on its financial condition and results.
• Interest rate and liquidity risk — Net interest income is the largest source of revenue, 63% of total revenue for 2025, so changes in Federal Reserve policy feed straight into earnings. The filing notes three rate cuts during 2025 and warns that changes in rates could also cause unanticipated shifts in customer deposit balances and hurt the liquidity position.
• Allowance for credit losses may prove insufficient — The allowance rests on management's estimate of life-of-loan losses, built from historical loss rates, prepayment speeds, an economic forecast and qualitative factors. The company says the estimate is subject to regulatory review and that the provision can swing from year to year with macroeconomic variables, with credit losses potentially material to earnings.
• Unrealized losses in the securities portfolio — Mostly because of the 2022-2023 rate increases, the available-for-sale debt portfolio carried a net unrealized loss of $646.8 million at December 31, 2025. The company says it has the intent and ability to hold to recovery, but that selling before amortized cost is recovered would turn those losses into income statement losses.
• FineMark integration and its costs — The company warns that combining FineMark may be more difficult, costly or time consuming than expected, that integration could disrupt customer relationships and divert management attention, that substantial transaction and integration expenses have been and will be incurred, and that key employees may not stay.
• Cyber attack and dependence on outside vendors — The bank holds large volumes of customer data on its own systems and on those of vendors, and says it has faced security incidents, minor so far, and expects continued attempts. It also outsources parts of information systems, data management and transaction processing, and as a card issuer absorbs losses from breaches at unaffiliated retailers.
• Extensive regulation and intense competition — Banking regulation is written to protect depositors and the deposit insurance fund, not shareholders, and changes can raise capital requirements, restrict dividends or limit products. Separately, the company lists banks, insurers, brokers, trust companies and financial technology firms among its competitors, and notes that large national institutions may lower fees to win share.

The filing discloses no dependence on a small number of customers and gives no top-customer share. It describes the opposite posture: a loan portfolio diversified between business (65%) and consumer (35%) borrowers, and an explicit aversion to credit concentrations by industry, geography and product, which management credits for its low levels of problem loans. The concentration the company does flag is geographic — its markets — rather than by customer.