Commerce Bancshares (CBSH)

Regional banking company Commerce Bancshares (NASDAQ:CBSH) reported Q4 CY2025 results topping the market’s revenue expectations, with sales up 5.9% year on year to $449.4 million. Its GAAP profit of $1.01 per share was 1.9% above analysts’ consensus estimates.

Company Overview

Founded in 1865 during the post-Civil War economic boom, Commerce Bancshares (NASDAQGS:CBSH) is a Midwest-focused bank holding company that provides retail, commercial, and wealth management services to individuals and businesses.

Regional banks, financial institutions operating within specific geographic areas, serve as intermediaries between local depositors and borrowers. They benefit from rising interest rates that improve net interest margins (the difference between loan yields and deposit costs), digital transformation reducing operational expenses, and local economic growth driving loan demand. However, these banks face headwinds from fintech competition, deposit outflows to higher-yielding alternatives, credit deterioration (increasing loan defaults) during economic slowdowns, and regulatory compliance costs. Recent concerns about regional bank stability following high-profile failures and significant commercial real estate exposure present additional challenges.

Commerce Bancshares competes with other regional banks operating in the Midwest such as UMB Financial (NASDAQ:UMBF), Bank of America (NYSE:BAC), U.S. Bancorp (NYSE:USB), and Truist Financial (NYSE:TFC), as well as with local community banks throughout its service area.

From lending activities to service fees, most banks build their revenue model around two income sources. Interest rate spreads between loans and deposits create the first stream, with the second coming from charges on everything from basic bank accounts to complex investment banking transactions. Over the last five years, Commerce Bancshares grew its revenue at a sluggish 5.6% compounded annual growth rate. This fell short of our benchmark for the banking sector and is a poor baseline for our analysis.

We at StockStory place the most emphasis on long-term growth, but within financials, a half-decade historical view may miss recent interest rate changes, market returns, and industry trends. Commerce Bancshares’s annualized revenue growth of 5.9% over the last two years aligns with its five-year trend, suggesting its demand was consistently weak. Note: Quarters not shown were determined to be outliers, impacted by outsized investment gains/losses that are not indicative of the recurring fundamentals of the business.

This quarter, Commerce Bancshares reported year-on-year revenue growth of 5.9%, and its $449.4 million of revenue exceeded Wall Street’s estimates by 1.6%.

Net interest income made up 62.1% of the company’s total revenue during the last five years, meaning lending operations are Commerce Bancshares’s largest source of revenue.

Markets consistently prioritize net interest income growth over fee-based revenue, recognizing its superior quality and recurring nature compared to the more unpredictable non-interest income streams.

Topline growth alone doesn't tell the complete story - the profitability of that growth shapes actual earnings impact. Banks track this dynamic through efficiency ratios, which compare non-interest expenses such as personnel, rent, IT, and marketing costs to total revenue streams.

Markets understand that a bank’s expense base depends on its revenue mix and what mostly drives share price performance is the change in this ratio, rather than its absolute value. It’s somewhat counterintuitive, but a lower efficiency ratio is better.

Over the last five years, Commerce Bancshares’s efficiency ratio has swelled by 2 percentage points, going from 57.7% to 55.5%. Said differently, the company’s expenses have grown at a slower rate than revenue, which typically signals prudent management.

In Q4, Commerce Bancshares’s efficiency ratio was 56.2%, falling short of analysts’ expectations by 58.7 basis points (100 basis points = 1 percentage point).

For the next 12 months, Wall Street expects Commerce Bancshares to maintain its trailing one-year ratio with a projection of 56.1%.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Commerce Bancshares’s EPS grew at a solid 12% compounded annual growth rate over the last five years, higher than its 5.6% annualized revenue growth. However, this alone doesn’t tell us much about its business quality because its efficiency ratio didn’t improve.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

For Commerce Bancshares, its two-year annual EPS growth of 10.5% was lower than its five-year trend. We hope its growth can accelerate in the future.

In Q4, Commerce Bancshares reported EPS of $1.01, up from $0.97 in the same quarter last year. This print beat analysts’ estimates by 1.9%. Over the next 12 months, Wall Street expects Commerce Bancshares’s full-year EPS of $4.06 to stay about the same.

Leverage is core to a financial firm’s business model (loans funded by deposits). To ensure economic stability and avoid a repeat of the 2008 GFC, regulators require certain levels of capital and liquidity, focusing on the Tier 1 capital ratio.

Tier 1 capital is the highest-quality capital that a firm holds, consisting primarily of common stock and retained earnings, but also physical gold. It serves as the primary cushion against losses and is the first line of defense in times of financial distress.

This capital is divided by risk-weighted assets to derive the Tier 1 capital ratio. Risk-weighted means that cash and US treasury securities are assigned little risk while unsecured consumer loans and equity investments get much higher risk weights, for example.

New regulation after the 2008 financial crisis requires that all firms must maintain a Tier 1 capital ratio greater than 4.5%. On top of this, there are additional buffers based on scale, risk profile, and other regulatory classifications, so that at the end of the day, firms generally must maintain a 7-10% ratio at minimum.

Over the last two years, Commerce Bancshares has averaged a Tier 1 capital ratio of 16.1%, which is considered safe and well capitalized in the event that macro or market conditions suddenly deteriorate.

Return on equity, or ROE, tells us how much profit a company generates for each dollar of shareholder equity, a key funding source for banks. Over a long period, banks with high ROE tend to compound shareholder wealth faster through retained earnings, buybacks, and dividends.

Over the last five years, Commerce Bancshares has averaged an ROE of 17%, excellent for a company operating in a sector where the average shakes out around 7.5% and those putting up 15%+ are greatly admired. This is a bright spot for Commerce Bancshares.

It was encouraging to see Commerce Bancshares beat analysts’ revenue expectations this quarter. We were also happy its net interest income narrowly outperformed Wall Street’s estimates, leading to a slight EPS beat. Zooming out, we think this was a solid quarter. The stock remained flat at $55.11 immediately following the results.

Updated: January 22, 2026 at 6:16 AM EST

We think that the latest earnings result is only one piece of the bigger puzzle. If you’re deciding whether to own Commerce Bancshares, you should also grasp the company’s longer-term business quality and valuation.

Commerce Bancshares isn’t a terrible business, but it doesn’t pass our quality test. For starters, its revenue growth was uninspiring over the last five years. And while its expanding net interest margin shows its loan book is becoming more profitable, the downside is its projected EPS for the next year is lacking. On top of that, its net interest income growth was weak over the last five years.

Commerce Bancshares’s P/B ratio based on the next 12 months is 1.7x. This valuation multiple is fair, but we don’t have much faith in the company. We're fairly confident there are better investments elsewhere.

Wall Street analysts have a consensus one-year price target of $61.63 on the company (compared to the current share price of $55.11).