Item 2. Management’s Discussion and Analysis
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the consolidated financial statements and related notes and with the statistical information and financial data appearing in this report as well as the Company's 2024 Annual Report on Form 10-K. Results of operations for the three and nine months ended September 30, 2025 are not necessarily indicative of results to be attained for any other period.
Pending Acquisition
On June 16, 2025, the Company and FineMark Holdings, Inc. ("FineMark") announced they entered into a definitive merger agreement ("Merger Agreement") in which the Company will acquire all outstanding shares of FineMark in an all-stock transaction ("Merger"). Immediately after the merger, FineMark's wholly-owned subsidiary, FineMark National Bank & Trust will merge into the Bank ("Bank Merger"). FineMark is headquartered in Fort Meyers, Florida and has 13 banking offices in Florida, Arizona, and South Carolina. As of June 30, 2025, FineMark disclosed that it had total assets of $3.9 billion (including $2.6 billion in loans), $3.5 billion of total liabilities (including $3.1 billion in deposits), and $373 million of total shareholders' equity. Under the terms of the agreement, the shareholders of FineMark will receive a fixed exchange ratio of .690 shares of Company common stock for each share of FineMark common stock. The transaction is valued at approximately $585 million (with the price based on the closing price of the Company's common shares as of June 13, 2025, the last trading day before the public announcement of the merger). The transaction has been approved by the Federal Reserve Bank of Kansas City, the Missouri Division of Finance, and FineMark shareholders. The transaction remains subject to customary closing conditions and is anticipated to close on January 1, 2026.
In connection with the acquisition, the Company incurred merger-related expenses consisting predominantly of professional services for investment banking, legal, and other services associated with the pending transaction that totaled $3.1 million through the third quarter of 2025.
Forward-Looking Information
This report may contain "forward-looking statements" that are subject to risks and uncertainties and include information about possible or assumed future results of operations. Many possible events or factors could affect the future financial results and performance of the Company. This could cause results or performance to differ materially from those expressed in the forward-looking statements. Words such as "expects", "anticipates", "believes", "estimates", variations of such words and other similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in, or implied by, such forward-looking statements. Readers should not rely solely on the forward-looking statements and should consider all uncertainties and risks discussed throughout this report. Forward-looking statements speak only as of the date they are made. The Company does not undertake to update forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements are made or to reflect the occurrence of unanticipated events. Such possible events or factors include: changes in economic conditions in the Company's market area; changes in policies by regulatory agencies; governmental legislation and regulation; fluctuations in interest rates; changes in liquidity requirements; demand for loans in the Company's market area; changes in accounting and tax principles, estimates made on income taxes, competition with other entities that offer financial services, cybersecurity threats; risks related to the proposed Merger with FineMark including, among others, (i) failure to complete the Merger or unexpected delays related to the merger or either party’s inability to satisfy closing conditions required to complete the Merger, (ii) certain restrictions during the pendency of the proposed Merger that may impact the parties’ ability to pursue certain business opportunities or strategic transactions, (iii) diversion of management’s attention from ongoing business operations and opportunities, (iv) cost savings and any revenue synergies from the Merger may not be fully realized or may take longer than anticipated to be realized, (v) deposits attrition, customer or employee loss and/or revenue loss as a result of the proposed Merger, and (vi) expenses related to the proposed Merger being greater than expected; and such other factors as discussed in Part I Item 1A - "Risk Factors" and Part II Item 7 - "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's 2024 Annual Report on Form 10-K and Part II, Item 1A. - "Risk Factors" in this report.
Critical Accounting Estimates and Related Policies
The Company has identified certain policies as being critical because they require management to make particularly difficult, subjective and/or complex judgments about matters that are inherently uncertain and because of the likelihood that materially different amounts would be reported under different conditions or using different assumptions. These estimates and
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related policies are the Company's allowance for credit losses and fair value measurement policies. A discussion of these estimates and related policies can be found in the sections captioned "Critical Accounting Policies" and "Allowance for Credit Losses on Loans and Liability for Unfunded Lending Commitments" in Management's Discussion and Analysis of Financial Condition and Results of Operations included in the Company's 2024 Annual Report on Form 10-K. There have been no changes in the Company's application of critical accounting policies since December 31, 2024.
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Selected Financial Data
Three Months Ended September 30 Nine Months Ended September 30
2025 2024 2025 2024
Per Share Data
Net income per common share — basic $ 1.06 $ 1.02 * $ 3.18 $ 2.87 *
Net income per common share — diluted 1.06 1.01 * 3.18 2.86 *
Cash dividends on common stock .275 .257 * .825 .771 *
Book value per common share 28.51 25.62 *
Market price 59.76 56.57 *
Selected Ratios
(Based on average balance sheets)
Loans to deposits (1)
70.61 % 69.93 % 70.08 % 70.17 %
Non-interest bearing deposits to total deposits 29.64 29.92 29.51 29.98
Equity to loans (1)
21.03 19.18 20.23 18.02
Equity to deposits 14.85 13.41 14.18 12.65
Equity to total assets 11.67 10.68 11.21 10.11
Return on total assets 1.78 1.80 1.81 1.71
Return on equity 15.26 16.81 16.15 16.92
(Based on end-of-period data)
Non-interest income to revenue (2)
36.63 37.74 36.97 37.30
Efficiency ratio (3)
55.26 56.31 55.21 57.92
Tier I common risk-based capital ratio 17.46 16.70
Tier I risk-based capital ratio
17.46 16.70
Total risk-based capital ratio 18.26 17.47
Tangible common equity to tangible assets ratio (4)
11.27 10.47
Tier I leverage ratio
12.95 12.31
* Restated for the 5% stock dividend distributed in December 2024.
(1) Includes loans held for sale.
(2) Revenue includes net interest income and non-interest income.
(3) The efficiency ratio is calculated as non-interest expense (excluding intangibles amortization) as a percent of revenue.
(4) The tangible common equity to tangible assets ratio is a measurement which management believes is a useful indicator of capital adequacy and utilization.
It provides a meaningful basis for period to period and company to company comparisons, and also assists regulators, investors and analysts in analyzing the financial position of the Company. Tangible common equity and tangible assets are non-GAAP measures and should not be viewed as substitutes for, or superior to, data prepared in accordance with GAAP.
The following table is a reconciliation of the GAAP financial measures of total equity and total assets to the non-GAAP measures of total tangible common equity and total tangible assets.
September 30
(Dollars in thousands) 2025 2024
Total equity $ 3,793,047 $ 3,453,539
Less non-controlling interest 21,382 21,458
Less goodwill 146,539 146,539
Less intangible assets* 3,750 3,904
Total tangible common equity (a) $ 3,621,376 $ 3,281,638
Total assets $ 32,288,688 $ 31,493,592
Less goodwill 146,539 146,539
Less intangible assets* 3,750 3,904
Total tangible assets (b) $ 32,138,399 $ 31,343,149
Tangible common equity to tangible assets ratio (a)/(b) 11.27 % 10.47 %
* Intangible assets other than mortgage servicing rights.
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Results of Operations
Summary
Three Months Ended September 30 Nine Months Ended September 30
(Dollars in thousands) 2025 2024 % change 2025 2024 % change
Net interest income (expense) $ 279,457 $ 262,351 6.5 % $ 828,706 $ 773,599 7.1 %
Provision for credit losses (20,061) (9,140) 119.5 (40,145) (19,395) 107.0
Non-interest income 161,511 159,025 1.6 486,073 460,117 5.6
Investment securities gains (losses), net 7,885 3,872 N.M. 731 6,846 (89.3)
Non-interest expense (244,018) (237,600) 2.7 (726,831) (715,511) 1.6
Income taxes (41,152) (38,245) 7.6 (120,516) (108,499) 11.1
Non-controlling interest income (expense) (2,104) (2,256) (6.7) (2,429) (6,934) (65.0)
Net income attributable to Commerce Bancshares, Inc. $ 141,518 $ 138,007 2.5 % $ 425,589 $ 390,223 9.1 %
For the quarter ended September 30, 2025, net income attributable to Commerce Bancshares, Inc. (net income) amounted to $141.5 million, an increase of $3.5 million, or 2.5%, compared to the third quarter of the previous year. For the current quarter, the annualized return on average assets was 1.78%, the annualized return on average equity was 15.26%, and the efficiency ratio was 55.26%. Diluted earnings per common share was $1.06 per share in the current quarter, an increase of 5.0% compared to $1.01 per share in the third quarter of 2024, and decreased 7.0% compared to $1.14 per share in the previous quarter.
Compared to the third quarter of last year, net interest income increased $17.1 million, or 6.5%, mainly due to increases in interest income on investment securities and securities purchased under agreements to resell ("resale agreements") of $11.8 million and $4.4 million, respectively, partly offset by a decrease in interest income on loans of $6.2 million. Interest expense on deposits and interest expense on borrowings also decreased $10.9 million and $4.2 million, respectively. The provision for credit losses increased $10.9 million compared to the same quarter in the prior year. Non-interest income increased $2.5 million, or 1.6%, compared to the third quarter of 2024, mainly due to increases in trust fees, brokerage fees and deposit account fees of $3.7 million, $2.1 million, and $2.0 million, respectively. These increases were partly offset by a decrease in bankcard fee income and a decrease in capital market fees of $2.0 million and $857 thousand, respectively. Net gains on investment securities totaled $7.9 million in the current quarter compared to net gains of $3.9 million in the same quarter of last year. Securities gains in the current quarter primarily resulted from net gains in fair value of $8.0 million recorded on private equity investments. Non-interest expense increased $6.4 million, or 2.7%, over the third quarter of 2024, mainly due to higher salaries expense, professional and other services expense, and data processing and software expense of $4.3 million, $2.5 million, and $1.2 million, respectively, partly offset by non-recurring litigation settlement expense during the third quarter of the prior year.
Net income for the first nine months of 2025 totaled $425.6 million, an increase of $35.4 million, or 9.1% from the same period last year. Diluted earnings per common share was $3.18, an increase of 11.2% compared to $2.86 per share in the same period last year. For the first nine months of 2025, the annualized return on average assets was 1.81%, the annualized return on average equity was 16.15% and the efficiency ratio was 55.21%. Net interest income increased $55.1 million, or 7.1%, over the same period last year. This growth was largely due to increases in interest income on investment securities and securities purchased under agreements to resell ("resale agreements") of $31.5 million and $16.2 million, respectively, partly offset by a decrease in interest income on loans of $23.7 million. Interest expense on deposits and interest expense on borrowings also decreased $31.2 million and $14.0 million, respectively, over the same period last year. The provision for credit losses was $40.1 million for the first nine months of 2025, compared to a provision of $19.4 million in the same period last year. Non-interest income increased $26.0 million, or 5.6%, from the first nine months of last year largely due to increases in trust fees, deposit fees, and brokerage fees of $12.5 million, $5.4 million, and $3.4 million, respectively. Non-interest expense increased $11.3 million, or 1.6%, over the first nine months of last year mainly due to increases in salaries and benefits expense and professional and other services expense of $11.5 million and $8.2 million, respectively, partly offset by non-recurring litigation settlement expense of $10 million and non-recurring charitable donations of $5.0 million during the prior year.
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Net Interest Income
The following table summarizes the changes in net interest income on a fully taxable-equivalent basis, by major category of interest earning assets and interest bearing liabilities, identifying changes related to volumes and rates. Changes not solely due to volume or rate are allocated to rate.
Analysis of Changes in Net Interest Income
Three Months Ended September 30, 2025 vs. 2024 Nine Months Ended September 30, 2025 vs. 2024
Change due to Change due to
(In thousands) Average
Volume Average
Rate
Total Average
Volume Average
Rate
Total
Interest income, fully taxable equivalent basis:
Loans:
Business $ 4,411 $ (7,064) $ (2,653) $ 12,448 $ (18,909) $ (6,461)
Real estate - construction and land (76) (3,694) (3,770) (2,120) (11,129) (13,249)
Real estate - business 2,134 (3,229) (1,095) 1,606 (10,178) (8,572)
Real estate - personal 128 1,979 2,107 312 6,272 6,584
Consumer 521 (1,078) (557) 858 (1,311) (453)
Revolving home equity 485 245 730 1,872 (417) 1,455
Consumer credit card 139 (1,077) (938) 300 (3,125) (2,825)
Overdrafts — — — — — —
Total interest on loans 7,742 (13,918) (6,176) 15,276 (38,797) (23,521)
Loans held for sale (6) 3 (3) (50) 24 (26)
Investment securities:
U.S. government and federal agency securities 7,461 2,608 10,069 36,990 7,694 44,684
Government-sponsored enterprise obligations (3) (2) (5) (9) (3) (12)
State and municipal obligations (509) 93 (416) (4,539) 343 (4,196)
Mortgage-backed securities (3,052) 669 (2,383) (13,724) (851) (14,575)
Asset-backed securities (394) 3,850 3,456 (4,285) 13,088 8,803
Other securities (350) 1,375 1,025 (2,476) (942) (3,418)
Total interest on investment securities 3,153 8,593 11,746 11,957 19,329 31,286
Federal funds sold — — — 1 (7) (6)
Securities purchased under agreements to resell 3,337 1,026 4,363 10,102 6,140 16,242
Interest earning deposits with banks (1,954) (5,913) (7,867) 3,278 (17,322) (14,044)
Total interest income 12,272 (10,209) 2,063 40,564 (30,633) 9,931
Interest expense:
Deposits:
Savings (4) (54) (58) (13) (101) (114)
Interest checking and money market 3,089 (7,851) (4,762) 11,030 (23,907) (12,877)
Certificates of deposit of less than $100,000 (437) (2,299) (2,736) 182 (6,255) (6,073)
Certificates of deposit of $100,000 and over (118) (3,227) (3,345) (3,472) (8,628) (12,100)
Total interest on deposits 2,530 (13,431) (10,901) 7,727 (38,891) (31,164)
Federal funds purchased (1,031) (333) (1,364) (5,535) (1,017) (6,552)
Securities sold under agreements to repurchase 1,506 (4,312) (2,806) 4,279 (11,739) (7,460)
Other borrowings 14 (12) 2 25 (4) 21
Total interest expense 3,019 (18,088) (15,069) 6,496 $ (51,651) $ (45,155)
Net interest income, fully taxable-equivalent basis $ 9,253 $ 7,879 $ 17,132 $ 34,068 $ 21,018 $ 55,086
Net interest income in the third quarter of 2025 was $279.5 million, an increase of $17.1 million over the third quarter of 2024. On a fully taxable-equivalent (FTE) basis, net interest income totaled $281.8 million in the third quarter of 2025, up $17.1 million over the same period last year and down $658 thousand from the previous quarter. The increase in net interest
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income compared to the third quarter of 2024 was mainly due to higher interest income earned on investment securities (FTE) of $11.7 million and lower deposit interest expense of $10.9 million, partly offset by lower interest income earned on loans (FTE) of $6.1 million and deposits at the Federal Reserve of $7.9 million. The increase in total interest earned on investment securities (FTE) was mainly the result of higher average balances and rates earned on U.S. government and federal agency securities and higher average rates earned on asset-backed securities. The decrease in deposit interest expense was mainly due to lower average rates paid, while the decrease in interest earned on deposits at the Federal Reserve was mainly due to lower rates earned. Interest income earned on loans (FTE) decreased mainly due to lower average rates, partly offset by higher average balances. The Company's net yield on earning assets (FTE) was 3.64% in the current quarter compared to 3.50% in the third quarter of 2024.
Total interest income (FTE) increased $2.1 million over the third quarter of 2024. Interest income on loans (FTE) was $265.6 million during the third quarter of 2025, a decrease of $6.2 million, or 2.3%, from the same quarter last year. The decrease in loan interest income from the same quarter of last year was primarily due to a decline of 33 basis points in the average rate earned, partly offset by growth of $468.5 million, or 2.8%, in average loan balances. Most of the decrease in interest income occurred in the construction and land, business and business real estate loan categories. The largest decrease to interest income occurred in construction and land loan interest, which declined $3.8 million due to a 107 basis point decrease in the average rate earned. Business loan interest income declined $2.7 million due to a 45 basis point decrease in the average rate earned, partly offset by higher average balances of $263.2 million, or 4.4%. Business real estate loan interest income decreased $1.1 million due to a decrease of 36 basis points in the average rate earned, partly offset by higher average balances of $134.8 million, or 3.8%. Consumer credit card loan interest income declined $938 thousand mainly due to an 80 basis point decrease in the average rate earned. These decreases in interest income were partly offset by an increase in personal real estate loan interest income of $2.1 million mainly due to a 24 basis point increase in the average rate earned.
Interest income on investment securities (FTE) was $75.0 million during the third quarter of 2025, which was an increase of $11.7 million over the same quarter last year. The increase in interest income occurred mainly in interest earned on U.S. government and federal agency securities, which grew $10.1 million due to an $804.3 million increase in average balances and a 38 basis point increase in the average rate earned. Interest income related to the Company's U.S. Treasury inflation-protected securities, which is tied to the non-seasonally adjusted Consumer Price Index (CPI-U), increased $1.6 million over the same quarter last year. Interest income earned on asset-backed securities grew $3.5 million due to a 103 basis point increase in the average rate earned, partly offset by a decrease in average balances of $58.8 million, or 3.9%. Interest earned on other securities increased $1.0 million mainly due to the receipt of $1.3 million in non-accrual interest income from a private equity investment in the third quarter of 2025. These increases to interest income were partly offset by a decline in interest income on mortgage-backed securities of $2.4 million, driven by lower average balances of $621.0 million, or 12.2%. In addition, the Company recorded a $314 thousand adjustment to premium amortization at September 30, 2025, which increased interest income and reflected slower forward prepayment speed estimates on mortgage-backed securities. This increase was higher than the $286 thousand adjustment decreasing income in the same quarter last year. Interest income earned on state and municipal obligations declined $416 thousand mainly due to a $100.5 million, or 11.7%, decrease in average balances. Additionally, the average rate earned on investment securities during the three months ended September 30, 2025 increased 47 basis points over the same period in the prior year. The average balance of the total investment portfolio (excluding unrealized fair value adjustments on available for sale debt securities) was $10.0 billion in both the third quarters of 2025 and 2024.
Interest income on securities purchased under agreements to resell increased $4.4 million over the same quarter last year, due to an increase of 47 basis points in the average rate earned and growth of $375.0 million in the average balance. Interest income on deposits at the Federal Reserve decreased $7.9 million due to declines of 98 basis points in average rate earned and $142.7 million in the average balance.
The average fully taxable-equivalent yield on total interest earning assets was 4.86% in the third quarter of 2025, down from 4.96% in the third quarter of 2024.
Total interest expense decreased $15.1 million compared to the third quarter of 2024 due to decreases of $10.9 million in interest expense on interest bearing deposits and $4.2 million in interest expense on borrowings. The decrease in deposit interest expense resulted mainly from lower interest expense on certificates of deposit balances of $6.1 million due to an 81 basis point decline in the average rate paid and a decrease of $111.4 million, or 4.4%, in average balances. Interest expense on interest checking and money market deposit accounts decreased $4.8 million due to a 20 basis point decline in average rates paid, partly offset by an increase of $498.4 million, or 3.8%, in average balances. The overall rate paid on total deposits decreased 29 basis points from the same quarter last year. Interest expense on federal funds purchased decreased $1.4 million due to lower average balances of $76.0 million and a 104 basis point decline in the average rate paid. Interest expense on customer repurchase agreements decreased $2.8 million due to a 68 basis point decline in the average rate paid, partly offset by
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growth of $167.8 million, or 7.1%, in the average balance. The overall average rate incurred on all interest bearing liabilities was 1.87% and 2.22% in the third quarters of 2025 and 2024, respectively.
Net interest income (FTE) for the first nine months of 2025 was $835.6 million compared to $780.5 million for the same period in 2024. For the first nine months of 2025, the net interest margin was 3.63% compared to 3.46% for the same period in 2024.
Total interest income (FTE) for the first nine months of 2025 increased $9.9 million over the same period last year mainly due to higher interest income on investment securities (FTE) and securities purchased under agreements to resell, partly offset by lower interest income on loans (FTE) and deposit balances at the Federal Reserve. Loan interest income (FTE) decreased $23.5 million, or 2.9%, due to a 29 basis point decrease in the average rate earned, partly offset by a $318.6 million, or 1.9%, increase in average loan balances. The decrease in interest earned occurred in the construction and land, business real estate, business and consumer credit card loan categories, partly offset by an increase in interest income the personal real estate loan category. Interest income on investment securities (FTE) increased $31.3 million mainly due to a 47 basis point increase in the average rate earned and an increase of $1.3 billion in average balances of U.S. government and federal agency securities. Interest earned on U.S. government and federal agency securities increased $44.7 million due to higher average balances and an increase in the average rate earned, while interest earned on asset-backed securities increased $8.8 million due to higher average rates earned, partly offset by a decrease in average balances. These increases in interest income on investment securities were partly offset by decreases in interest earned on mortgage-backed securities and state and municipal obligations of $14.6 million and $4.2 million, respectively, mainly due to decreases in average balances. Interest earned on other securities decreased $3.4 million due to a decline in average balances. Higher interest income of $16.2 million was earned on securities purchased under agreements to resell, which saw growth in both average balances and rates earned. Interest income on balances at the Federal Reserve decreased $14.0 million due to a 101 basis point decline in the average rate earned, partly offset by an $80.3 million increase in the average balance invested.
Total interest expense for the first nine months of 2025 decreased $45.2 million compared to the same period last year. Interest expense on deposits decreased $31.2 million, due to a 29 basis point decline in the average rate paid, partly offset by a $458.2 million increase in average balances. Interest expense on borrowings decreased $14.0 million due lower interest expense on federal funds purchased of $6.6 million, resulting from lower average balances and rates, while interest expense on securities sold under agreements to repurchase declined $7.5 million due to lower average rates paid, partly offset by higher average balances. The overall cost of total interest bearing liabilities decreased to 1.86% compared to 2.21% in the same period last year.
Summaries of average assets and liabilities and the corresponding average rates earned/paid appear on the last page of this discussion.
Non-Interest Income
Three Months Ended September 30 Increase (Decrease) Nine Months Ended September 30 Increase (Decrease)
(Dollars in thousands) 2025 2024 Amount % change 2025 2024 Amount % change
Trust fees $ 58,412 $ 54,689 $ 3,723 6.8 % $ 170,575 $ 158,085 $ 12,490 7.9 %
Bank card transaction fees 45,551 47,570 (2,019) (4.2) 137,506 141,977 (4,471) (3.1)
Deposit account charges and other fees 27,427 25,380 2,047 8.1 80,297 74,856 5,441 7.3
Capital market fees 5,138 5,995 (857) (14.3) 16,425 14,647 1,778 12.1
Consumer brokerage services 6,698 4,619 2,079 45.0 16,866 13,505 3,361 24.9
Loan fees and sales 3,465 3,444 21 .6 10,288 10,016 272 2.7
Other 14,820 17,328 (2,508) (14.5) 54,116 47,031 7,085 15.1
Total non-interest income $ 161,511 $ 159,025 $ 2,486 1.6 % $ 486,073 $ 460,117 $ 25,956 5.6 %
Non-interest income as a % of total revenue* 36.6 % 37.7 % 37.0 % 37.3 %
* Total revenue includes net interest income and non-interest income.
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The table below is a summary of net bank card transaction fees for the nine month periods ended September 30, 2025 and 2024.
Three Months Ended September 30 Nine Months Ended September 30
(Dollars in thousands) 2025 2024 $ change % change 2025 2024 $ change % change
Net debit card fees $ 11,270 $ 11,377 $ (107) (.9) % $ 32,818 $ 33,165 $ (347) (1.0) %
Net credit card fees 3,621 3,957 (336) (8.5) 10,471 11,762 (1,291) (11.0)
Net merchant fees 5,570 5,481 89 1.6 17,271 16,593 678 4.1
Net corporate card fees 25,090 26,755 (1,665) (6.2) 76,946 80,457 (3,511) (4.4)
Total bank card transaction fees $ 45,551 $ 47,570 $ (2,019) (4.2) % $ 137,506 $ 141,977 $ (4,471) (3.1) %
For the third quarter of 2025, total non-interest income amounted to $161.5 million compared to $159.0 million in the same quarter last year, which was an increase of $2.5 million, or 1.6%. The increase was mainly due to higher trust fees, consumer brokerage service fees and deposit account fees. Trust fees increased $3.7 million, or 6.8%, mainly due to growth of $3.2 million in private client trust fees. Bank card transaction fees for the current quarter declined $2.0 million, or 4.2%, from the same period last year. Net corporate card fees declined $1.7 million mainly due to higher rewards expense, partly offset by higher interchange income. Net credit card fees decreased $336 thousand mainly due to higher rewards expense. Net debit card fees decreased $107 thousand, while net merchant fees increased $89 thousand. Compared to the third quarter of last year, deposit account fees increased $2.0 million, or 8.1%, mainly due to higher corporate cash management fees of $1.8 million. Capital market fees decreased $857 thousand, or 14.3%, mainly due to lower underwriting and trading securities income, while consumer brokerage service fees increased $2.1 million, or 45.0%, mainly due to higher life insurance income and annuity fees. Other non-interest income decreased $2.5 million, or 14.5%, mainly due to lower gains of $4.7 million on the sales of assets, partly offset by increases in cash sweep commissions, tax credit sales income and international fees of $677 thousand, $625 thousand and $408 thousand, respectively.
Non-interest income for the first nine months of 2025 was $486.1 million compared to $460.1 million in the first nine months of 2024, which was an increase of $26.0 million, or 5.6%. The increase was mainly due to higher trust fees, deposit account fees and gains on the sales of assets. Trust fees increased $12.5 million, or 7.9%, mainly due to higher private client and institutional trust fees. Bank card transaction fees for the current year declined $4.5 million, or 3.1%, from the same period last year, mainly due to decreases of $3.5 million in net corporate card fees and $1.3 million in net credit card fees, partly offset by an increase in net merchant fees of $678 thousand. Deposit account fees increased $5.4 million, or 7.3%, mainly due to higher corporate cash management fees. Capital market fees increased $1.8 million, or 12.1%, mainly due to higher trading securities and underwriting income. Consumer brokerage service fees increased $3.4 million, or 24.9%, mainly due to higher life insurance income, annuity fees and advisory fees. Other non-interest income increased $7.1 million, or 15.1%, mainly due to increases of $3.3 million in gains on the sales of assets, $1.4 million in tax credit sales income and $1.2 million in cash sweep commissions. In addition, an increase in fair value adjustments of $777 thousand was recorded on the Company's deferred compensation plan assets and liabilities.
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Investment Securities Gains (Losses), Net
Three Months Ended September 30 Nine Months Ended September 30
(In thousands) 2025 2024 2025 2024
Net gains (losses) on sales of available for sale debt securities $ — $ (5,395) $ (4,214) $ (192,938)
Net gains (losses) on equity securities (111) (208) 1,666 178,098
Net gains (losses) on sales of private equity investments 43 2,047 (563) 1,481
Fair value adjustments on private equity investments 7,953 7,428 3,842 20,205
Total investment securities gains (losses), net $ 7,885 $ 3,872 $ 731 $ 6,846
Net gains and losses on investment securities, which were recognized in earnings during the three months ended September 30, 2025 and 2024, are shown in the table above. Net securities gains of $7.9 million were reported in the third quarter of 2025, compared to net gains of $3.9 million in the same period last year. The net gains in the third quarter of 2025 were mainly comprised of net gains in fair value of $8.0 million recorded on private equity investments. These gains were partially offset by net losses of $111 thousand on equity investments. The net gains on investment securities for the same quarter last year were primarily comprised of net gains in fair value of $7.4 million recorded on private equity investments and net gains of $2.0 million on sales of private equity investments. These gains were largely offset by net losses of $5.4 million on the sale of available for sale securities as part of the planned portfolio repositioning. Additional information about the sale of Visa Class C shares and the Company's available for sale debt portfolio repositioning transactions is discussed in Note 3, Investment Securities.
Net gains on investment securities of $731 thousand were recognized in earnings for the nine months ended September 30, 2025, compared to net gains of $6.8 million for the same period in 2024. Net gains in the first nine months of 2025 were mainly comprised of net gains in fair value of $3.8 million recorded on private equity investments and net gains of $1.7 million on equity securities. These gains were largely offset by net losses of $4.2 million on the sale of available for sale securities. Net gains in the first nine months of 2024 were mainly comprised of net gains of $178.1 million on equity investments and net gains in fair value of $20.2 million recorded on private equity investments, largely offset by net losses of $192.9 million on sales of available for sale securities. The portion of private equity activity attributable to minority interests is reported as non-controlling interest in the consolidated statements of income and resulted in expense of $656 thousand during the first nine months of 2025 and expense of $3.4 million during the first nine months of 2024.
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Non-Interest Expense
Three Months Ended September 30 Increase (Decrease) Nine Months Ended September 30 Increase (Decrease)
(Dollars in thousands) 2025 2024 Amount % change 2025 2024 Amount % change
Salaries and employee benefits $ 157,461 $ 153,122 $ 4,339 2.8 % $ 465,564 $ 454,043 $ 11,521 2.5 %
Data processing and software 33,555 32,194 1,361 4.2 98,697 94,876 3,821 4.0
Net occupancy 13,474 13,411 63 .5 41,148 39,529 1,619 4.1
Professional and other services 11,284 8,830 2,454 27.8 34,283 26,095 8,188 31.4
Marketing 6,670 7,278 (608) (8.4) 18,487 16,670 1,817 10.9
Equipment 5,421 5,286 135 2.6 15,826 15,387 439 2.9
Supplies and communication 4,837 4,963 (126) (2.5) 14,845 14,343 502 3.5
Deposit insurance 3,074 2,930 144 4.9 10,130 13,301 (3,171) (23.8)
Other 8,242 9,586 (1,344) (14.0) 27,851 41,267 (13,416) (32.5)
Total non-interest expense $ 244,018 $ 237,600 $ 6,418 2.7 % $ 726,831 $ 715,511 $ 11,320 1.6 %
Non-interest expense for the third quarter of 2025 amounted to $244.0 million, an increase of $6.4 million, or 2.7%, compared to expense of $237.6 million in the third quarter of last year. The increase in expense over the same period last year was mainly due to higher salaries and employee benefits expense, professional and other services expense and data processing and software expense. Salaries and employee benefits expense increased $4.3 million, or 2.8%, mainly due to higher full-time salaries expense of $3.0 million and higher incentive compensation expense of $1.4 million, partly offset by lower healthcare expense of $805 thousand. Full-time equivalent employees totaled 4,666 at September 30, 2025, compared to 4,711 at September 30, 2024. Data processing and software expense increased $1.4 million, or 4.2%, mainly due to higher costs for service providers and software. Professional and other services expense, which increased $2.5 million, or 27.8%, included $1.1 million of acquisition related legal and professional services expense. Other non-interest expense decreased $1.3 million, or 14.0%, mainly due to a $1.5 million reimbursement during the third quarter of 2025 related to a litigation settlement.
Non-interest expense amounted to $726.8 million for the first nine months of 2025, an increase of $11.3 million, or 1.6%, over the first nine months of 2024. Salaries and benefits expense increased $11.5 million, or 2.5%, mainly due to higher full-time salaries expense and incentive compensation expense. Data processing and software expense increased $3.8 million, or 4.0%, due to increased costs for service providers and software expense. Professional and other services expense increased $8.2 million, or 31.4%, and included $3.1 million in acquisition related legal and professional fees. Occupancy expense increased $1.6 million, or 4.1%, mainly due to higher building depreciation expense and demolition costs. Marketing expense increased $1.8 million, or 10.9%, and equipment expense increased $439 thousand, or 2.9%. Supplies and communication expense increased $502 thousand, or 3.5%, mainly due to higher bank card reissuance costs. Deposit insurance decreased $3.2 million, or 23.8%, mainly due to accrual adjustments in 2024 and 2025 to the special assessment by the FDIC. Other non-interest expense decreased $13.4 million, or 32.5%, mainly due to litigation settlement expense of $10.0 million, net of insurance, and a $5.0 million donation to a related charitable foundation, both recorded in 2024. In addition, a $1.5 million reimbursement was recorded in the third quarter of 2025 related to a litigation settlement. These decreases were partly offset by higher travel and entertainment expense of $837 thousand and an increase in fair value adjustments of $777 thousand recorded on the Company's deferred compensation plan assets and liabilities.
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Provision and Allowance for Credit Losses on Loans and Liability for Unfunded Lending Commitments
Three Months Ended Nine Months Ended September 30
(In thousands) Sept. 30, 2025 June 30, 2025 Sept. 30, 2024 2025 2024
ALLOWANCE FOR CREDIT LOSSES ON LOANS
Balance at beginning of period $ 165,260 $ 167,031 $ 158,557 $ 162,742 $ 162,395
Provision for credit losses on loans 20,739 7,919 11,861 $ 43,753 $ 26,657
Net loan charge-offs (recoveries):
Commercial:
Business 826 432 114 1,304 759
Real estate-construction and land — 24 — 24 —
Real estate-business (23) (425) (7) (71) (156)
Commercial net loan charge-offs (recoveries) 803 31 107 1,257 603
Personal Banking:
Real estate-personal 269 35 128 376 231
Consumer 2,310 2,168 2,759 7,330 6,546
Revolving home equity (1) 11 (152) 7 (163)
Consumer credit card 6,515 7,085 6,273 20,567 19,454
Overdrafts 432 360 464 1,287 1,542
Personal banking net loan charge-offs (recoveries) 9,525 9,659 9,472 29,567 27,610
Total net loan charge-offs (recoveries) 10,328 9,690 9,579 30,824 28,213
Balance at end of period $ 175,671 $ 165,260 $ 160,839 $ 175,671 $ 160,839
LIABILITY FOR UNFUNDED LENDING COMMITMENTS
Balance at beginning of period $ 16,005 $ 18,327 $ 20,705 $ 18,935 $ 25,246
Provision for credit losses on unfunded lending commitments (678) (2,322) (2,721) (3,608) (7,262)
Balance at end of period 15,327 16,005 17,984 15,327 17,984
ALLOWANCE FOR CREDIT LOSSES ON LOANS AND LIABILITY FOR UNFUNDED LENDING COMMITMENTS $ 190,998 $ 181,265 $ 178,823 $ 190,998 $ 178,823
Three Months Ended Nine Months Ended September 30
Sept. 30, 2025 June 30, 2025 Sept. 30, 2024 2025 2024
Annualized net loan charge-offs (recoveries)*:
Commercial:
Business .05 % .03 % .01 % .03 % .02 %
Real estate-construction and land — .01 — — —
Real estate-business — (.05) — — (.01)
Commercial net loan charge-offs (recoveries) .03 — — .01 .01
Personal Banking:
Real estate-personal .03 — .02 .02 .01
Consumer .42 .40 .52 .46 .41
Revolving home equity — .01 (.18) — (.07)
Consumer credit card 4.59 5.08 4.46 4.90 4.65
Overdrafts 24.36 25.50 33.81 27.79 34.32
Personal banking net loan charge-offs (recoveries) .61 .63 .62 .65 .61
Total annualized net loan charge-offs (recoveries) .23 % .22 % .22 % .24 % .22 %
* as a percentage of average loans (excluding loans held for sale)
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The following schedule provides a breakdown of the allowance for credit losses on loans (ACL) by loan class and the percentage of the allowance for credit losses to the related loan class at period end.
Sept. 30, 2025 June 30, 2025 Sept. 30, 2024
(Dollars in thousands)
Credit Loss Allowance Allocation % of ACL to Loan Category Credit Loss Allowance Allocation % of ACL to Loan Category Credit Loss Allowance Allocation % of ACL to Loan Category
Business $ 50,715 .79 % $ 46,472 .73 % $ 43,710 .72 %
RE — construction and land 28,585 1.99 28,152 2.00 29,736 2.15
RE — business 33,624 .90 32,230 .86 33,601 .94
RE — personal 11,839 .39 10,753 .35 10,426 .34
Consumer 16,530 .76 14,853 .69 11,309 .54
Revolving home equity 1,877 .52 1,868 .51 1,859 .54
Consumer credit card 32,386 5.63 30,796 5.35 30,047 5.23
Overdrafts 115 1.03 136 .83 151 3.53
Total $ 175,671 .99 % $ 165,260 .94 % $ 160,839 .94 %
To determine the amount of the allowance for credit losses on loans and the liability for unfunded lending commitments, the Company has an established process which assesses the risks and losses expected in its portfolios. This process provides an allowance based on estimates of allowances for pools of loans and unfunded lending commitments, as well as a second, smaller component based on certain individually evaluated loans and unfunded lending commitments. The Company's policies and processes for determining the allowance for credit losses on loans and the liability for unfunded lending commitments are discussed in Note 1 to the consolidated financial statements and in the " Allowance for Credit Losses" discussion within Critical Accounting Estimates and Related Policies in Item 7 of the 2024 Annual Report on Form 10-K.
Net loan charge-offs in the third quarter of 2025 amounted to $10.3 million, compared to $9.7 million in the prior quarter and $9.6 million in the third quarter of last year. Comp ared to the same period last year, net loan charge-offs in the third quarter of 2025 increased $749 thousand, and increased $638 thousand from the previous quarter. The increase from the prior year was mainly driven by increases of $712 thousand and $242 thousand in business and consumer credit card loan net charge-offs, respectively, offset by a decrease of $449 thousand in consumer loan net charge-offs. The increase in net loan charge-offs for the three months ended September 30, 2025 from the previous quarter was driven by increases of $402 thousand and $394 thousand in net charge-offs on business real estate and business loans, respectively, partially offset by a decrease of $570 thousand in net charge-offs on consumer credit card loans.
For the three months ended September 30, 2025, annualized net charge-offs on average consumer credit card loans were 4.59%, compared to 5.08% in the previous quarter and 4.46% in the same period last year. Consumer loan annualized net charge-offs in the current quarter amounted to .42%, compared to .40% in the prior quarter and .52% in the same period last year. In the third quarter of 2025 , total annualized net loan charge-offs were .23%, compared to .22% in the previous quarter and .22% in the same period last year.
For the nine months ended September 30, 2025, total annualized net loan charge-offs were .24%, compared to .22% in the same period last year. Net loan charge-offs were $30.8 million in the first nine months of 2025, an increase of $2.6 million over net loan charge-offs of $28.2 million in the first nine months of 2024. The increase in net loan charge-offs during the first nine months of 2025 was mainly driven by higher net charge-offs on consumer credit card, consumer, and business loans.
For the three months ended September 30, 2025 , the provision for credit losses on loans was $20.7 million, which was an increase of $12.8 million from the provision recorded in the prior quarter. The provision for the three months ended September 30, 2025 was the result of an increase in the allowance for credit losses on loans. Compared to the same period in the prior year, the provision for credit losses on loans for the three months ended September 30, 2025 increased $8.9 million. For the nine months ended September 30, 2025, the provision for credit losses on loans was $43.8 million, which was a $17.1 million increase over the $26.7 million provision recorded in the same period last year. Changes in the provision are driven by changes in the estimate for the allowance for credit losses on loans.
At September 30, 2025, the allowance for credit losses increased $12.9 million compared to the allowance for credit losses on loans at December 31, 2024. The allowance for credit losses on loans increased $6.2 million in the commercial portfolio primarily due to weakness in soft commodity prices impacting certain industries, partially offset by improvement in loss rate assumptions for the Company's construction loans. The allowance for credit losses on the Company's personal banking
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portfolio increased $6.8 million due to recent increases in charge-off trends impacting expected loss rate assumptions for the consumer credit card, automobile, and other non-real estate consumer portfolios. The forecast utilized to estimate the allowance for credit losses at September 30, 2025 was more pessimistic than the forecast utilized at December 31, 2024 and reflected a slight decline in key macroeconomic variables. The forecast did not assume a recession. The allowance for credit losses on loans was $175.7 million at September 30, 2025 and was .99%, .95% and .94% of total loans at September 30, 2025, December 31, 2024 and September 30, 2024, respectively.
In the current quarter, the provision for credit losses on unfunded lending commitments was a benefit of $678 thousand, compared to a benefit of $2.7 million for the three months ended September 30, 2024. At September 30, 2025, the liability for unfunded lending commitments was $15.3 million, compared to $18.9 million at December 31, 2024 and $18.0 million at September 30, 2024. The liability decreased primarily due to decreases in unfunded lending commitment balances, coupled with improvement in loss rate assumptions for the Company's construction loans. The Company's unfunded lending commitments primarily relate to construction loans, and the Company's estimate for credit losses in its unfunded lending commitments utilizes the same model and forecast as its estimate for credit losses on loans. See Note 2 for further discussion of the model inputs utilized in the Company's estimate of credit losses.
The Company considers the allowance for credit losses on loans and the liability for unfunded commitments adequate to cover losses expected in the loan portfolio, including unfunded commitments, at September 30, 2025.
The allowance for credit losses on loans and the liability for unfunded lending commitments are estimates that require significant judgment including projections of the macro-economic environment. The Company utilizes a third-party macro-economic forecast that continuously changes due to economic conditions and events. These changes in the forecast cause fluctuations in the allowance for credit losses on loans and the liability for unfunded lending commitments. The Company uses judgment to assess the macro-economic forecast and internal loss data in estimating the allowance for credit losses on loans and the liability for unfunded lending commitments. These estimates are subject to periodic refinement based on changes in the underlying external and internal data.
Risk Elements of Loan Portfolio
The following table presents non-performing assets and loans which are past due 90 days and still accruing interest. Non-performing assets include non-accruing loans and foreclosed real estate. Loans are placed on non-accrual status when management does not expect to collect payments consistent with acceptable and agreed upon terms of repayment. Loans that are 90 days past due as to principal and/or interest payments are generally placed on non-accrual, unless they are both well-secured and in the process of collection, or they are personal banking loans that are exempt under regulatory rules from being classified as non-accrual.
(Dollars in thousands)
September 30, 2025 December 31, 2024
Non-accrual loans $ 16,253 $ 18,278
Foreclosed real estate 790 343
Total non-performing assets $ 17,043 $ 18,621
Non-performing assets as a percentage of total loans .10 % .11 %
Non-performing assets as a percentage of total assets .05 % .06 %
Total loans past due 90 days and still accruing interest $ 21,536 $ 24,516
Non-accrual loans totaled $16.3 million at September 30, 2025, a decrease of $2.0 million from the balance at December 31, 2024. The decrease occurred mainly in revolving home equity non-accrual loans, which decreased $2.0 million. At September 30, 2025, non-accrual loans were comprised of business real estate (91.9%), personal real estate (5.3%) business (1.6%), and construction and land (1.2%) loans. Foreclosed real estate totaled $790 thousand at September 30, 2025, an increase of $447 thousand compared to December 31, 2024. Total loans past due 90 days or more and still accruing interest totaled $21.5 million as of September 30, 2025, a decrease of $3.0 million from December 31, 2024. Balances by class for non-accrual loans and loans past due 90 days and still accruing interest are shown in the "Delinquent and non-accrual loans" section in Note 2 to the consolidated financial statements.
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In addition to the non-performing and past due loans mentioned above, the Company also has identified loans for which management has concerns about the ability of the borrowers to meet existing repayment terms. They are classified as substandard under the Company's internal rating system. The loans are generally secured by either real estate or other borrower assets, reducing the potential for loss should they become non-performing. Although these loans are generally identified as potential problem loans, they may never become non-performing. Such loans totaled $274.6 million at September 30, 2025 compared to $330.3 million at December 31, 2024, resulting in a decrease of $55.7 million, or 16.9%.
(In thousands)
September 30, 2025 December 31, 2024
Potential problem loans:
Business $ 115,317 $ 131,527
Real estate – construction and land 20,694 2,662
Real estate – business 138,463 196,030
Real estate – personal 94 96
Total potential problem loans $ 274,568 $ 330,315
When borrowers are experiencing financial difficulty, the Company may agree to modify the contractual terms of a loan to a borrower in order to assist the borrower in repaying principal and interest owed to the Company. At September 30, 2025, the Company held $168.3 million of loans that had been modified during the nine months ended September 30, 2025. These loans are further discussed in the "Modifications for borrowers experiencing financial difficulty" section in Note 2 to the consolidated financial statements.
Loans with Special Risk Characteristics
Management relies primarily on an internal risk rating system, in addition to delinquency status, to assess risk in the loan portfolio, and these statistics are presented in Note 2 to the consolidated financial statements. However, certain types of loans are considered at high risk of loss due to their terms, location, or special conditions. Additional information about the major types of loans in these categories and their risk features are provided below. Information based on loan-to-value (LTV) ratios was generally calculated with valuations at loan origination date. The Company normally obtains an updated appraisal or valuation at the time a loan is renewed or modified, or if the loan becomes significantly delinquent or is in the process of being foreclosed upon.
Real Estate – Construction and Land Loans
The Company's portfolio of construction and land loans, as shown in the table below, amounted to 8.1% of total loans outstanding at September 30, 2025. The largest component of construction and land loans was commercial construction, which increased $24.9 million during the nine months ended September 30, 2025. At September 30, 2025, multi-family residential construction loans totaled approximately $556.3 million, or 45.5%, of the commercial construction loan portfolio, compared to $526.6 million, or 44.0%, at December 31, 2024.
(Dollars in thousands) September 30,
2025
% of Total
% of
Total
Loans
December 31, 2024
% of Total
% of
Total
Loans
Commercial construction $ 1,222,165 85.2 % 6.9 % $ 1,197,278 84.9 % 7.0 %
Residential construction 102,663 7.2 .6 106,884 7.6 .6
Residential land and land development 66,948 4.7 .4 65,342 4.6 .4
Commercial land and land development 41,876 2.9 .2 40,397 2.9 .2
Total real estate - construction and land loans $ 1,433,652 100.0 % 8.1 % $ 1,409,901 100.0 % 8.2 %
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Real Estate – Business Loans
Total business real estate loans were $3.7 billion at September 30, 2025 and comprised 21.1% of the Company's total loan portfolio. These loans include properties such as manufacturing and warehouse buildings, small office and medical buildings, churches, hotels and motels, shopping centers, and other commercial properties. At September 30, 2025, 32.5% of business real estate loans were for owner-occupied real estate properties, which have historically resulted in lower net charge-off rates than non-owner-occupied commercial real estate loans.
(Dollars in thousands) September 30,
2025
% of Total
% of
Total
Loans
December 31, 2024
% of Total
% of
Total
Loans
Owner-occupied $ 1,218,769 32.5 % 6.9 % $ 1,237,265 33.8 % 7.2 %
Office 543,599 14.5 3.1 520,715 14.2 3.0
Industrial 654,164 17.5 3.7 485,250 13.3 2.8
Hotels 308,027 8.2 1.7 334,479 9.1 1.9
Multi-family 364,630 9.7 2.1 310,806 8.5 1.8
Retail 278,288 7.4 1.6 309,431 8.5 1.8
Farm 194,776 5.2 1.1 189,794 5.2 1.1
Senior living 95,528 2.6 .5 183,695 5.0 1.1
Other 87,219 2.4 .4 89,783 2.4 .6
Total real estate - business loans $ 3,745,000 100.0 % 21.1 % $ 3,661,218 100.0 % 21.3 %
Information about the credit quality of the Company's business real estate loan portfolio as of September 30, 2025 and December 31, 2024 is provided in the table below.
(Dollars in thousands) Pass Special Mention Substandard Non-Accrual Total
September 30, 2025
Owner-occupied $ 1,166,454 $ 21,108 $ 31,083 $ 124 $ 1,218,769
Office 458,285 27,631 57,683 — 543,599
Industrial 654,164 — — — 654,164
Hotels 308,027 — — 308,027
Multi-family 315,723 37,994 10,913 — 364,630
Retail 278,288 — — — 278,288
Farm 193,920 494 54 308 194,776
Senior living 42,370 — 38,650 14,508 95,528
Other 85,278 1,941 — — 87,219
Total $ 3,502,509 $ 89,168 $ 138,383 $ 14,940 $ 3,745,000
December 31, 2024
Owner-occupied $ 1,203,019 $ 3,362 $ 30,598 $ 286 $ 1,237,265
Office 451,189 11,980 57,546 — 520,715
Industrial 485,250 — — — 485,250
Hotels 334,479 — — — 334,479
Multi-family 299,825 10,981 — — 310,806
Retail 308,730 — 701 — 309,431
Farm 185,998 642 3,154 — 189,794
Senior living 65,366 — 103,661 14,668 183,695
Other 89,577 206 — — 89,783
Total $ 3,423,433 $ 27,171 $ 195,660 $ 14,954 $ 3,661,218
Revolving Home Equity Loans
The Company had $364.2 million in revolving home equity loans at September 30, 2025 that were collateralized by residential real estate. Most of these loans (94.4%) are written with terms requiring interest-only monthly payments. These loans are offered in three main product lines: LTV up to 80%, 80% to 90%, and 90% to 100%. As of September 30, 2025, the
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outstanding principal of loans with an original LTV higher than 80% was $28.6 million, or 8.0% of the portfolio, compared to $31.9 million as of December 31, 2024. Total revolving home equity loan balances over 30 days past due were $1.4 million at September 30, 2025 and $5.6 million at December 31, 2024, and there was no outstanding balance for revolving home equity loans on non-accrual status at September 30, 2025 compared to $2.0 million at December 31, 2024. The weighted average FICO score for the total portfolio balance at September 30, 2025 is 777. At maturity, the accounts are re-underwritten, and if they qualify under the Company's credit, collateral and capacity policies, the borrower is given the option to renew the line of credit or convert the outstanding balance to an amortizing loan. If criteria are not met, amortization is required, or the borrower may pay off the loan. During the remainder of 2025 through 2028, approximately 12.3% of the Company's current outstanding balances are expected to mature. Of these balances, approximately 86.6% have a FICO score of 700 or higher. The Company does not expect a significant increase in losses as these loans mature, due to their high FICO scores, low LTVs, and low historical loss levels.
Consumer Loans
The consumer loans category is mostly comprised of private banking loans and automobile loans. Private banking loans comprised of 39.2% of the consumer loan portfolio at September 30, 2025. The Company's private banking loans are mostly executive lines of credit, which are secured primarily by assets held by the Company's trust department, and insurance premium finance loans, which are primarily secured by life insurance policies. Automobile loans, which include direct and indirect product lines, comprised 35.8% of the consumer loan portfolio at September 30, 2025, and outstanding balances for auto loans were $778.2 million and $776.7 million at September 30, 2025 and December 31, 2024, respectively. The balances over 30 days past due amounted to $9.3 million at September 30, 2025 and $14.4 million at December 31, 2024, respectively, and comprised 1.2% of the outstanding balances of these loans at September 30, 2025 and 1.9% at December 31, 2024. For the nine months ended September 30, 2025, $282.9 million of new auto loans were originated, compared to $260.6 million during the first nine months of 2024. At September 30, 2025, the automobile loan portfolio had a weighted average FICO score of 756, and net charge-offs on auto loans were .9% of average auto loans.
The Company's consumer loan portfolio also includes fixed rate home equity loans, typically for home repair or remodeling, and these loans comprised 9.7% of the consumer loan portfolio at September 30, 2025. Losses on these loans have historically been low, and the Company saw net recoveries of $135 thousand for the first nine months of 2025. The remaining portion of the Company's consumer loan portfolio is comprised of healthcare financing, boat, RV, motorcycle, other equipment, and unsecured consumer loans. Net charge-offs on consumer loans, other than automobile loans, totaled $2.3 million in the first nine months of 2025 and were .3% of the average balances of these loans at September 30, 2025.
Consumer Credit Card Loans
The Company offers low promotional rates on selected consumer credit card products. Out of a portfolio at September 30, 2025 of $575.3 million in consumer credit card loans outstanding, approximately $125.2 million, or 21.8%, carried a low promotional rate. Within the next six months, $51.8 million of these loans are scheduled to convert to the ongoing higher contractual rate. To mitigate some of the risk involved with this credit card product, the Company performs credit checks and detailed analysis of the customer borrowing profile before approving the loan application. Management believes that the risks in the consumer loan portfolio are reasonable and the anticipated loss ratios are within acceptable parameters.
September 30, 2025 December 31, 2024
FICO score:
Under 600
5.3 % 5.1 %
600 – 659
12.4 11.9
660 – 719
27.9 28.3
720 – 779
26.9 26.3
780 and over
27.5 28.4
Total
100.0 % 100.0 %
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Oil and Gas Energy Lending
The Company's energy lending portfolio is comprised of lending to the petroleum and natural gas sectors and totaled $302.0 million, or 1.7% of total loans at September 30, 2025, a decrease of $36.0 million from December 31, 2024, as shown in the table below.
(In thousands)
September 30, 2025 December 31, 2024 Unfunded commitments at September 30, 2025
Upstream activities $ 225,141 $ 274,265 $ 156,158
Mid-stream activities 32,239 36,801 110,431
Downstream activities 16,085 9,757 28,392
Support activities 28,539 17,226 13,211
Total energy lending portfolio $ 302,004 $ 338,049 $ 308,192
Shared National Credits
The Company participates in credits of large, publicly traded companies which are defined by regulation as shared national credits, or SNCs. Regulations define SNCs as loans exceeding $100 million that are shared by three or more financial institutions. The Company typically participates in these loans when business operations are maintained in the local communities or regional markets and opportunities to provide other banking services are present. The balance of SNC loans totaled $1.6 billion at both September 30, 2025 and December 31, 2024. Additional unfunded commitments at September 30, 2025 totaled $2.4 billion.
Income Taxes
Income tax expense was $41.2 million in the third quarter of 2025, compared to $42.4 million in the second quarter of 2025 and $38.2 million in the third quarter of 2024. The Company's effective tax rate, including the effect of non-controlling interest, was 22.5% in the third quarter of 2025, 21.8% in the second quarter of 2025, and 21.7% in the third quarter of 2024. The increase in the effective tax rate compared to the prior quarter was mostly due to state tax law changes enacted in the prior quarter that decreased the effective tax rate. The increase in the effective tax rate compared to the third quarter of 2024 was mostly due to higher state and local income taxes.
On July 4, 2025, the One Big Beautiful Act ("OBBBA") was enacted in the United States. The OBBBA includes significant provisions, such as the permanent extension of certain expiring provisions of the Tax Cut and Jobs Act, modifications to the international tax framework and the restoration of favorable tax treatment for certain business provisions. The legislation has multiple effective dates, with certain provisions effective in 2025 and others implemented through 2027. We do not expect these items to have a significant impact on our financial statements, though we expect that some minor operational changes may be necessary to support new information reporting requirements.
Financial Condition
Balance Sheet
Total assets of the Company were $32.3 billion at September 30, 2025 and $32.0 billion at December 31, 2024. Earning assets (excluding the allowance for credit losses on loans and fair value adjustments on available for sale debt securities) amounted to $31.1 billion at September 30, 2025 and $30.9 billion at December 31, 2024, and consisted of 57% in loans and 32% in investment securities at September 30, 2025.
At September 30, 2025, total loans increased $566.7 million or 3.3%, compared to balances at December 31, 2024. The increase was mainly due to growth in business, business real estate, and construction loans of $361.0 million, $83.8 million, and $23.8 million, respectively. The increase in business loans was mainly due to growth in commercial and industrial, commercial credit card and tax-free lending. In addition, consumer loans increased $98.5 million, mainly due to growth in private banking loans. These increases were partially offset by a decrease in consumer credit card loans of $20.6 million.
Total available for sale debt securities, excluding fair value adjustments, decreased $440.3 million a t September 30, 2025 compared to December 31, 2024. Available for sale debt security sales, maturities and pay downs during this period totaled $1.5 billion , partly offset by pu rchases of available for sale debt securities during this period of $991.7 million. The decline in available for sale debt securities was mainly the result of lower balances of mortgage-backed securities, asset-backed securities and state and municipal obligations, which decreased $450.6 million, $186.1 million and $74.2 million, respectively, at
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September 30, 2025 compared to December 31, 2024. These decreases were partly offset by growth of $309.0 million in U.S. government and federal agency obligations. At September 3 0, 2025, the duration of the available for sale investment portfolio was 4.4 years, and maturities and pay downs of approximately $1.3 billion are expected to occur during the next 12 months.
Total deposits at September 30, 2025 amounted to $25.5 billion, an increase of $164.4 million compared to December 31, 2024. The increase in deposits largely resulted from an increase in interest checking and money market deposit balances of $807.9 million. This increase was partly offset by a decrease in demand deposits of $661.0 million, mainly in business demand deposits (decrease of $688.3 million). The Company’s borrowings totaled $2.5 billion at September 30, 2025, a decrease of $444.5 million from balances at December 31, 2 024, mainly due to a decline in customer repurchase agreement balances.
Liquidity and Capital Resources
Liquidity Management
The Company’s most liquid assets include balances at the Federal Reserve Bank, federal funds sold, and available for sale debt securities, as follows:
(In thousands)
September 30, 2025 September 30, 2024 December 31, 2024
Liquid assets:
Balances at the Federal Reserve Bank $ 2,477,668 $ 2,642,048 $ 2,624,553
Federal funds sold — 10 3,000
Available for sale debt securities 8,998,586 9,167,681 9,136,853
Total $ 11,476,254 $ 11,809,739 $ 11,764,406
Interest earning balances at the Federal Reserve Bank, which have overnight maturities and are used for general liquidity purposes, totaled $2.5 billion at September 30, 2025 and decreased $147 thousand from December 31, 2024. At September 30, 2025, the Company did not have a balance of federal funds sold, which are funds lent to the Company's correspondent bank customers with overnight maturities. The fair value of the available for sale debt portfolio was $9.0 billion at September 30, 2025 and included an unrealized net loss of $688.5 million. The total net unrealized loss included net losses of $640.7 million on mortgage-backed and asset-backed securities and $52.9 million on state and municipal obligations.
The Company's available for sale debt securities portfolio has a diverse mix of high quality and liquid investment securities with a duration of 4.4 years at September 30, 2025. Approximately $1.3 billion of the Company's available for sale debt portfolio is expected to mature or pay down during the next 12 months, and these funds offer substantial resources to meet either new loan demand or offset potential reductions in the Company's deposit funding base. The Company pledges portions of its investment securities portfolio to secure public fund deposits, securities sold under agreements to repurchase, trust funds, letters of credit issued by the FHLB, and borrowing capacity at the FHLB and the Federal Reserve Bank. Total investment securities pledged for these purposes were as follows:
(In thousands)
September 30, 2025 September 30, 2024 December 31, 2024
Investment securities pledged for the purpose of securing:
Federal Reserve Bank borrowings $ 575,311 $ 917,340 $ 840,771
FHLB borrowings and letters of credit 2,021,043 1,238,975 1,473,691
Securities sold under agreements to repurchase * 2,402,124 2,122,196 2,866,468
Other deposits and swaps 1,738,808 1,876,968 1,755,335
Total pledged securities 6,737,286 6,155,479 6,936,265
Unpledged and available for pledging 2,260,338 2,986,267 2,175,800
Ineligible for pledging 962 25,935 24,788
Total available for sale debt securities, at fair value $ 8,998,586 $ 9,167,681 $ 9,136,853
* Includes securities pledged for collateral swaps outstanding at each period end shown in the table.
The average loans to deposits ratio is a measure of a bank's liquidity, and the Company’s average loans to deposits ratio was 70.1% for the nine months ended September 30, 2025. Core customer deposits, defined as non-interest bearing, interest checking, savings, and money market deposit accounts totaled $23.0 billion and represented 90.5% of the Company's total deposits at September 30, 2025. These core deposits are normally less volatile, as they are often with customer relationships tied to other products offered by the Company, promoting long lasting relationships and stable funding sources. Core deposits increased $136.2 million at September 30, 2025 compared to December 31, 2024, primarily due to an increase in commercial
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deposits of $451.4 million, partly offset by a decrease in consumer deposits of $265.9 million. While the Company considers core consumer and wealth management deposits less volatile, corporate deposits could decline if interest rates increase significantly, encouraging corporate customers to increase investing activities, or if the economy deteriorates and companies experience lower cash inflows, reducing deposit balances. If these corporate deposits decline, the Company's funding needs may be met by liquidity supplied by investment security maturities and pay downs expected to total $1.3 billion over the next year, as noted above. In addition, as shown in the table of collateral available for future advances below, the Company has borrowing capacity of $6.5 billion through advances from the FHLB and the Federal Reserve.
The Company also holds securities sold under agreements to repurchase ("resale agreements") which are an additional source of liquidity. At September 30, 2025, the Company's resale agreements totaled $850.0 million and mature from 2028 through 2030. Under these agreements, the Company lends funds to upstream financial institutions and holds marketable securities, safe-kept by a third-party custodian, as collateral. This collateral totaled $875.1 million in fair value at September 30, 2025.
Certificates of deposit of $100,000 or greater totaled $1.4 billion at September 30, 2025. These deposits are normally considered more volatile and higher costing, and comprised 5.6% of total deposits at September 30, 2025.
(In thousands)
September 30, 2025 September 30, 2024 December 31, 2024
Core deposit base:
Non-interest bearing $ 7,489,645 $ 7,396,153 $ 8,150,669
Interest checking 7,954,187 7,761,976 7,301,288
Savings and money market 7,597,612 7,454,581 7,453,283
Total $ 23,041,444 $ 22,612,710 $ 22,905,240
During the third quarter of 2024, the Company issued $100.0 million of short-term brokered certificates of deposit, which all matured by December 31, 2024. The Company may occasionally issue brokered certificates of deposit to test the reliability of this potential funding source. While it is not clear how many brokered certificates of deposit the market would allow the Company to issue, the Company believes brokered certificates of deposits may be an additional, reliable source of liquidity during periods of stress in the banking industry.
Other important components of liquidity are the level of borrowings from third party sources and the availability of future credit. During 2025, the Company's outside borrowings have mainly been comprised of federal funds purchased and repurchase agreements, as follows:
(In thousands)
September 30, 2025 September 30, 2024 December 31, 2024
Borrowings:
Federal funds purchased $ 137,660 $ 113,630 $ 123,715
Securities sold under agreements to repurchase 2,335,405 2,068,599 2,803,043
Other debt 9,270 10,201 56
Total $ 2,482,335 $ 2,192,430 $ 2,926,814
Federal funds purchased, which totaled $137.7 million at September 30, 2025, are unsecured overnight borrowings obtained mainly from upstream correspondent banks with which the Company maintains approved lines of credit. At September 30, 2025, the Company had approved lines of credit totaling $4.6 billion. Since these borrowings are unsecured and limited by market trading activity, their availability may be less certain than collateralized sources of borrowings. Retail repurchase agreements are offered to customers wishing to earn interest in highly liquid balances and are used by the Company as a funding source considered to be stable, but short-term in nature. Repurchase agreements are collateralized by securities in the Company's investment portfolio. Total repurchase agreements at September 30, 2025 were comprised of non-insured customer funds totaling $2.3 billion, and securities pledged as collateral for these retail agreements totaled $2.4 billion at September 30, 2025. The Company also borrows on a secured basis through advances from the FHLB. The advances are generally short-term, fixed interest rate borrowings. There were no advances outstanding from the FHLB at September 30, 2025.
The Company pledges certain assets, including loans and investment securities, to both the FRB and the FHLB as security to establish lines of credit and borrow from these entities. Based on the amount and type of collateral pledged, the FHLB establishes a collateral value from which the Company may draw advances against the collateral. Additionally, this collateral is used to enable the FHLB to issue letters of credit in favor of public fund depositors of the Company. The FRB also establishes a collateral value of assets pledged and permits borrowings from the discount window. The following table reflects the collateral
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value of assets pledged, borrowings, and letters of credit outstanding, in addition to the estimated future funding capacity available to the Company at September 30, 2025.
September 30, 2025
(In thousands)
FHLB
Federal Reserve
Total
Total collateral value established by FHLB and FRB $ 3,921,515 $ 2,722,775 $ 6,644,290
Letters of credit issued (102,600) — (102,600)
Available for future advances $ 3,818,915 $ 2,722,775 $ 6,541,690
The Company receives outside ratings from both Standard & Poor’s and Moody’s on the consolidated company and its subsidiary bank, Commerce Bank. These ratings are as follows:
Standard & Poor’s Moody’s
Commerce Bancshares, Inc.
Issuer rating A-
Rating outlook Stable
Commerce Bank
Issuer rating A A3
Baseline credit assessment a2
Short-term rating A-1 P-1
Rating outlook Stable Stable
The Company considers these ratings to be indications of a sound capital base and strong liquidity and believes that these ratings would help ensure the ready marketability of its commercial paper, should the need arise. No commercial paper has been outstanding during the past ten years. The Company has no subordinated or hybrid debt instruments which would affect future borrowing capacity. Because of its lack of significant long-term debt, the Company believes that through its Commercial Tradable Products division or in other public debt markets, it could generate additional liquidity from sources such as jumbo certificates of deposit, privately placed corporate notes or other forms of debt.
The cash flows from the operating, investing and financing activities of the Company resulted in a net decrease in cash, cash equivalents and restricted cash of $421.8 million during the first nine months of 2025, as reported in the consolidated statements of cash flows in this report. Operating activities, consisting mainly of net income adjusted for certain non-cash items, provided cash flow of $378.8 million and have historically been a stable source of funds. Investing activities, which occur mainly in the loan and investment securities portfolios, used cash of $400.3 million. Growth in the loan portfolio used cash of $598.9 million and purchases of securities under agreements to resell (net of repayments) used cash of $225.0 million. These uses of cash were partly balanced by sales, maturities, and pay downs (net of purchases) of investment securities, which provided cash of $462.5 million. Investing activities are somewhat unique to financial institutions in that, while large sums of cash flow are normally used to fund growth in investment securities, loans, or other bank assets, they are normally dependent on the financing activities described below. Financing activities used cash of $400.3 million, largely resulting from federal funds purchased and securities sold under agreements to repurchases, which used cash of $453.7 million during the first nine months of 2025, partly offset by a net increase of $250.4 million in deposits. Cash dividend payments (including distributions to non-controlling interest) and purchases of treasury stock used cash of $114.0 million and $92.3 million, respectively.
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Capital Management
The Company met all capital adequacy requirements and had regulatory capital ratios in excess of the levels established for well-capitalized institutions at September 30, 2025 and December 31, 2024, as shown in the following table.
(Dollars in thousands) September 30, 2025 December 31, 2024 Minimum Capital Requirement Capital Conservation Buffer Minimum Ratios Requirement including Capital Conservation Buffer
Minimum Ratios
for
Well-Capitalized
Banks *
Risk-adjusted assets $ 23,841,648 $ 23,500,396
Tier I common risk-based capital 4,163,019 3,926,446
Tier I risk-based capital 4,163,019 3,926,446
Total risk-based capital 4,354,017 4,108,270
Tier I common risk-based capital ratio 17.46 % 16.71 % 4.50 % 2.50 % 7.00 % 6.50 %
Tier I risk-based capital ratio 17.46 16.71 6.00 2.50 8.50 8.00
Total risk-based capital ratio 18.26 17.48 8.00 2.50 10.50 10.00
Tier I leverage ratio 12.95 12.26 4.00 N/A 4.00 5.00
*Under Prompt Corrective Action requirements
The Company is subject to a 2.5% capital conservation buffer, which is an amount above the minimum ratios under capital adequacy guidelines, and is intended to absorb losses during periods of economic stress. Failure to maintain the buffer will result in constraints on dividends, share repurchases, and executive compensation.
In the first quarter of 2020, the interim final rule of the Federal Reserve Bank and other U.S. banking agencies became effective, providing banks that adopted CECL (ASU 2016-13) during the 2020 calendar year the option to delay recognizing the estimated impact on regulatory capital until after a two year deferral period, followed by a three year transition period. In connection with the adoption of CECL on January 1, 2020, the Company elected to utilize this option. As a result, the two year deferral period for the Company extended through December 31, 2021. Beginning on January 1, 2022, the Company was required to phase in 25% of the previously deferred estimated capital impact of CECL, with an additional 25% to be phased in at the beginning of each subsequent year until fully phased in, which was during the first quarter of 2025.
The Company maintains a treasury stock buyback program under authorizations by its Board of Directors (the Board) and periodically purchases stock in the open market. During the nine months ended September 30, 2025, the Company purchased 1,862,967 shares at an average price of $62.85 in open market purchases and through stock-based compensation transactions. At September 30, 2025, 1,486,812 shares remained available for purchase under the Board authorization in place at that date. On October 31, 2025, the share repurchase authorization was increased to 5,000,000 shares.
The Company's common stock dividend policy reflects its earnings outlook, desired payout ratios, the need to maintain adequate capital levels and alternative investment options. The Company paid a $.275 per share cash dividend on its common stock in the third quarter of 2025, which was a 7.0% increase compared to its 2024 quarterly dividend.
Material Cash Requirements, Commitments, Off-Balance Sheet Arrangements and Contingencies
The Company's material cash requirements include commitments for contractual obligations (both short-term and long-term), commitments to extend credit, and off-balance sheet arrangements. The Company's material cash requirements for the next 12 months are primarily to fund loan growth. Additionally, the Company will utilize cash to fund deposit maturities and withdrawals that may occur in the next 12 months. Other contractual obligations, purchase commitments, lease obligations, and unfunded commitments may require cash payments by the Company within the next 12 months, and these are further discussed in the Company's 2024 Annual Report on Form 10-K. Further discussion of the Company's longer-term material cash obligations and sources for fulfilling those obligations is below.
In the normal course of business, various commitments and contingent liabilities arise that are not required to be recorded on the balance sheet. The most significant of these are loan commitments, which at September 30, 2025 totaled $16.2 billion (including $6.0 billion in unused, approved credit card lines). In addition, the Company enters into standby and commercial letters of credit. The contractual amount of standby and commercial letters of credit totaled $631.8 million and $1.8 million, respectively, at September 30, 2025. As many commitments expire unused or only partially used, these totals do not necessarily reflect future cash requirements. The allowance for these commitments is recorded in the Company’s liability for unfunded lending commitments within other liabilities on its consolidated balance sheets. At September 30, 2025, the liability
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for unfunded lending commitments totaled $15.3 million. See further discussion of the liability for unfunded lending commitments in Note 2 to the consolidated financial statements.
The Company regularly purchases various state tax credits arising from third party property redevelopment. These credits are either resold to third parties at a profit or retained for use by the Company. During the first nine months of 2025, purchases and sales of tax credits amounted to $160.2 million and $125.4 million, respectively. Fees from sales of tax credits were $4.9 million for the nine months ended September 30, 2025, compared to $3.5 million in the same period last year. At September 30, 2025, the Company expected to fund outstanding purchase commitments of $16.7 million during the remainder of 2025 and had purchase commitments of $545.8 million that it expects to fund from 2026 through 2029.
The Company continued to maintain a strong liquidity position throughout the first nine months of 2025. Through the various sources of liquidity described above, the Company maintains a liquidity position that it believes will adequately satisfy its financial obligations.
Segment Results
The table below is a summary of segment pre-tax income results for the first nine months of 2025 and 2024.
(Dollars in thousands)
Consumer
Commercial
Wealth
Segment
Totals
Other/ Elimination
Consolidated Totals
Nine Months Ended September 30, 2025
Net interest income $ 378,958 $ 393,453 $ 67,729 $ 840,140 $ (11,434) $ 828,706
Provision for credit losses (29,241) (1,548) (17) (30,806) (9,339) (40,145)
Non-interest income 73,055 211,388 195,985 480,428 5,645 486,073
Investment securities gains (losses), net — — — — 731 731
Non-interest expense (250,968) (319,258) (124,356) (694,582) (32,249) (726,831)
Income before income taxes $ 171,804 $ 284,035 $ 139,341 $ 595,180 $ (46,646) $ 548,534
Nine Months Ended September 30, 2024
Net interest income $ 384,278 $ 380,476 $ 66,390 $ 831,144 $ (57,545) $ 773,599
Provision for credit losses (27,451) (952) 150 (28,253) 8,858 (19,395)
Non-interest income 74,424 195,669 179,840 449,933 10,184 460,117
Investment securities gains (losses), net — — — — 6,846 6,846
Non-interest expense (245,834) (303,959) (118,512) (668,305) (47,206) (715,511)
Income before income taxes $ 185,417 $ 271,234 $ 127,868 $ 584,519 $ (78,863) $ 505,656
Increase (decrease) in income before income taxes:
Amount $ (13,613) $ 12,801 $ 11,473 $ 10,661 $ 32,217 $ 42,878
Percent (7.3) % 4.7 % 9.0 % 1.8 % (40.9) % 8.5 %
Consumer
For the nine months ended September 30, 2025, income before income taxes for the Consumer segment decreased $13.6 million, or 7.3%, compared to the first nine months of 2024. The decrease in income before income taxes was due to declines in net interest income of $5.3 million, or 1.4%, and non-interest income of $1.4 million, or 1.8%, and increases in non-interest expense of $5.1 million, or 2.1%, and the provision for credit losses of $1.8 million. Net interest income declined due to lower net allocated funding credits assigned to the Consumer segment's loan and deposit portfolios of $11.7 million and loan interest income of $1.1 million. These decreases were partly offset by lower deposit interest expense of $7.5 million. Non-interest income decreased mainly due to lower net bank card fees (mainly credit and debit card fees). Non-interest expense increased over the same period in the previous year mainly due to higher marketing, miscellaneous losses, data processing and software, and supplies expense. In addition, allocated support costs increased due to higher allocated costs for retail administration and operations. The increase in the provision for credit losses over the first nine months of 2024 was mainly due to higher auto and consumer credit card loan net charge-offs, partly offset by lower other vehicle and equipment loan net charge-offs.
Commercial
For the nine months ended September 30, 2025, income before income taxes for the Commercial segment increased $12.8 million, or 4.7%, compared to the same period in the previous year. This increase was mainly due to higher net interest income and non-interest income, partly offset by higher non-interest expense. Net interest income increased $13.0 million, or 3.4%, mainly due to lower interest expense on deposits and customer repurchase agreements of $20.1 million and $6.9 million,
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respectively, coupled with higher net allocated funding credits of $12.9 million. These increases to income were partly offset by lower loan interest income of $27.5 million. Non-interest income increased $15.7 million, or 8.0%, over the previous year mainly due to higher gains on asset sales and growth in deposit account fees (mainly corporate cash management fees) and capital market fees (mainly underwriting and trading securities). These increases were partly offset by a decrease in net bank card fees (mainly corporate card fees). Non-interest expense increased $15.3 million, or 5.0%, mainly due to higher legal fees, salaries and benefits expense and allocated service and support costs for commercial payments and product support, commercial loan servicing and branch employee expense. The provision for credit losses increased $596 thousand over the same period last year, mainly due to higher commercial and industrial loan net charge-offs.
Wealth
Wealth segment pre-tax profitability for the nine months ended September 30, 2025 increased $11.5 million, or 9.0%, over the same period in the previous year. Net interest income increased $1.3 million, or 2.0%, mainly due to $5.9 million increase in loan interest income and a $2.9 million decrease deposit interest expense. These increases were partly offset by a $7.4 million decrease in net allocated funding credits. Non-interest income increased $16.1 million, or 9.0%, over the prior year largely due to higher private client and institutional trust fees and brokerage fees (mainly life insurance, annuity and advisory fees). Non-interest expense increased $5.8 million, or 4.9%, mainly due to higher salaries and benefits, data processing and software, and allocated support costs for information technology. The provision for credit losses increased $167 thousand over the same period last year.
The Other/Elimination category in the preceding table includes the activity of various support and overhead operating units of the Company, in addition to the investment securities portfolio and other items not allocated to the segments. In accordance with the Company’s transfer pricing procedures, the difference between the total provision for credit losses and total net charge-offs/recoveries is not allocated to a business segment and is included in this category. The pre-tax profitability in this category was $32.2 million higher than in the same period last year. Unallocated securities gains were $731 thousand in the first nine months of 2025 compared to gains of $6.8 million in 2024. Also, the unallocated provision for credit losses decreased $18.2 million, primarily driven by an increase in the provision for credit losses on loans, partly offset by a decrease in the liability for unfunded lending commitments, which are both not allocated to the segments for management reporting purposes. Net charge-offs are allocated to the segments when incurred for management reporting purposes. The provision for credit losses on loans in the first nine months of 2025 was $43.8 million, or $12.9 million higher than net charge-offs, due to an increase in the allowance for credit losses on loans. In the comparable period last year, the provision for credit losses on loans was $26.7 million, or $1.6 million lower than net charge-offs, due to a decrease in the allowance for credit losses on loans. For the nine months ended September 30, 2025, the Company's provision on unfunded lending commitments was a benefit of $3.6 million. Additionally, net interest income increased $46.1 million, while non-interest expense decreased $15.0 million. These increases to pre-tax profitability were partly offset by a decrease in non-interest income $4.5 million.
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Impact of Recently Issued Accounting Standards
Income Taxes The FASB issued ASU 2023-09, "Income Taxes (Topic 740) - Improvements to Income Tax Disclosures", in December 2023. The amendments in this Update require additional disclosures regarding the rate reconciliation and income taxes paid. This Update also removed certain existing disclosure requirements. This Update is effective for annual periods beginning January 1, 2025. Early adoption is permitted. The amendments in this Update should be applied on a prospective basis, though retrospective application is permitted. Other than the inclusion of additional disclosures, the adoption is not expected to have a significant effect on the Company's consolidated financial statements.
Income Statement Reporting The FASB issued ASU 2024-03, "Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses" in November 2024. The amendments in this Update require new disclosures providing further detail of a company's income statement expense items. This Update is effective for annual periods beginning January 1, 2027, and interim periods beginning January 1, 2028. Early adoption is permitted. The amendments in this Update should be applied on a prospective basis. Other than the inclusion of additional disclosures, the adoption is not expected to have a significant effect on the Company's consolidated financial statements.
Internal-Use Software Development Costs The FASB issued ASU 2025-06, "Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Targeted Improvement to the Accounting for Internal-Use Software" in September 2025. The amendments in this Update are intended to modernize the accounting for internal-use software by eliminating references to software development project stages, making the guidance neutral to various development methodologies, including those currently in use and those that may be developed in the future. This Update is effective for annual and interim periods beginning after December 15, 2027. Early adoption is permitted as of the beginning of an annual reporting period. The amendments may be applied on a prospective, modified retrospective or full retrospective basis. The adoption is not expected to have a significant effect on the Company's consolidated financial statements.
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AVERAGE BALANCE SHEETS — AVERAGE RATES AND YIELDS
Three Months Ended September 30, 2025 and 2024
Third Quarter 2025
Third Quarter 2024
(Dollars in thousands)
Average Balance
Interest Income/Expense
Avg. Rates Earned/Paid
Average Balance Interest Income/Expense Avg. Rates Earned/Paid
ASSETS:
Loans:
Business (A)
$ 6,230,019 $ 89,818 5.72 % $ 5,966,797 $ 92,471 6.17 %
Real estate — construction and land 1,396,977 25,934 7.37 1,400,563 29,704 8.44
Real estate — business 3,715,597 55,433 5.92 3,580,772 56,528 6.28
Real estate — personal 3,059,913 33,509 4.34 3,047,563 31,402 4.10
Consumer 2,160,637 34,962 6.42 2,129,483 35,519 6.64
Revolving home equity 360,820 7,220 7.94 335,817 6,490 7.69
Consumer credit card 563,351 18,759 13.21 559,410 19,697 14.01
Overdrafts 7,037 — — 5,460 — —
Total loans 17,494,351 265,635 6.02 17,025,865 271,811 6.35
Loans held for sale 2,369 36 6.03 2,448 39 6.34
Investment securities:
U.S. government and federal agency obligations 2,693,327 27,547 4.06 1,888,985 17,478 3.68
Government-sponsored enterprise obligations 55,014 326 2.35 55,583 331 2.37
State and municipal obligations (A)
756,137 3,901 2.05 856,620 4,317 2.00
Mortgage-backed securities 4,461,056 22,573 2.01 5,082,091 24,956 1.95
Asset-backed securities 1,466,770 13,644 3.69 1,525,593 10,188 2.66
Other debt securities 204,281 1,528 2.97 224,528 1,166 2.07
Trading debt securities (A)
56,032 659 4.67 47,440 539 4.52
Equity securities (A)
50,823 780 6.09 85,118 951 4.44
Other securities (A)
220,041 4,044 7.29 217,377 3,330 6.09
Total investment securities 9,963,481 75,002 2.99 9,983,335 63,256 2.52
Federal funds sold 23 — — 12 — —
Securities purchased under agreements to resell 850,000 8,578 4.00 474,997 4,215 3.53
Interest earning deposits with banks 2,422,441 27,167 4.45 2,565,188 35,034 5.43
Total interest earning assets 30,732,665 376,418 4.86 30,051,845 374,355 4.96
Allowance for credit losses on loans (164,623) (158,003)
Unrealized gain (loss) on debt securities (766,025) (961,695)
Cash and due from banks 374,673 361,854
Premises and equipment, net 502,525 481,301
Other assets 832,049 805,166
Total assets $ 31,511,264 $ 30,580,468
LIABILITIES AND EQUITY:
Interest bearing deposits:
Savings $ 1,283,671 156 .05 $ 1,303,675 214 .07
Interest checking and money market 13,740,770 53,201 1.54 13,242,398 57,963 1.74
Certificates of deposit of less than $100,000 991,877 8,337 3.33 1,055,683 11,073 4.17
Certificates of deposit of $100,000 and over 1,416,572 13,258 3.71 1,464,143 16,603 4.51
Total interest bearing deposits 17,432,890 74,952 1.71 17,065,899 85,853 2.00
Borrowings:
Federal funds purchased $ 130,622 $ 1,428 4.34 206,644 $ 2,792 5.38
Securities sold under agreements to repurchase 2,519,660 18,260 2.88 2,351,870 21,066 3.56
Other borrowings (B)
1,860 8 1.71 496 6 4.81
Total borrowings 2,652,142 19,696 2.95 2,559,010 23,864 3.71
Total interest bearing liabilities 20,085,032 94,648 1.87 % 19,624,909 109,717 2.22 %
Non-interest bearing deposits 7,345,156 7,284,834
Other liabilities 402,265 405,490
Equity 3,678,811 3,265,235
Total liabilities and equity $ 31,511,264 $ 30,580,468
Net interest margin (FTE) $ 281,770 $ 264,638
Net yield on interest earning assets 3.64 % 3.50 %
(A) Stated on a fully taxable-equivalent basis using a federal income tax rate of 21%.
(B) Interest expense capitalized on construction projects in 2024 is not deducted from the interest expense shown above. There was no interest expense capitalized in 2025.
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AVERAGE BALANCE SHEETS — AVERAGE RATES AND YIELDS
Nine Months Ended September 30, 2025 and 2024
Nine Months 2025
Nine Months 2024
(Dollars in thousands)
Average Balance
Interest Income/Expense
Avg. Rates Earned/Paid
Average Balance Interest Income/Expense Avg. Rates Earned/Paid
ASSETS:
Loans:
Business (A)
$ 6,194,939 $ 265,434 5.73 % $ 5,940,326 $ 271,895 6.11 %
Real estate — construction and land 1,414,294 77,797 7.35 1,448,033 91,046 8.40
Real estate — business 3,692,120 163,089 5.91 3,657,875 171,661 6.27
Real estate — personal 3,051,613 98,351 4.31 3,041,256 91,767 4.03
Consumer 2,130,841 102,870 6.45 2,113,267 103,323 6.53
Revolving home equity 360,613 20,336 7.54 328,060 18,881 7.69
Consumer credit card 561,258 55,808 13.29 558,403 58,633 14.03
Overdrafts 6,191 — — 6,002 — —
Total loans 17,411,869 783,685 6.02 17,093,222 807,206 6.31
Loans held for sale 1,901 99 6.96 2,351 125 7.10
Investment securities:
U.S. government and federal agency obligations 2,635,112 81,621 4.14 1,316,296 36,937 3.75
Government-sponsored enterprise obligations 55,126 980 2.38 55,623 992 2.38
State and municipal obligations (A)
780,011 11,951 2.05 1,084,951 16,147 1.99
Mortgage-backed securities 4,628,953 71,285 2.06 5,511,120 85,860 2.08
Asset-backed securities 1,568,586 42,495 3.62 1,797,750 33,692 2.50
Other debt securities 233,070 4,984 2.86 363,677 5,402 1.98
Trading debt securities (A)
48,552 1,718 4.73 44,839 1,645 4.90
Equity securities (A)
54,085 2,758 6.82 75,193 2,658 4.72
Other securities (A)
223,305 14,843 8.89 222,473 18,016 10.82
Total investment securities 10,226,800 232,635 3.04 10,471,922 201,349 2.57
Federal funds sold 749 31 5.53 738 37 6.70
Securities purchased under agreements to resell 829,853 24,512 3.95 373,544 8,270 2.96
Interest earning deposits with banks 2,282,707 76,052 4.45 2,202,444 90,096 5.46
Total interest earning assets 30,753,879 1,117,014 4.86 30,144,221 1,107,083 4.91
Allowance for credit losses on loans (164,409) (159,888)
Unrealized gain (loss) on debt securities (845,750) (1,168,558)
Cash and due from banks 376,247 303,877
Premises and equipment, net 500,058 479,544
Other assets 816,838 888,441
Total assets $ 31,436,863 $ 30,487,637
LIABILITIES AND EQUITY:
Interest bearing deposits:
Savings $ 1,293,707 491 .05 $ 1,322,148 605 .06
Interest checking and money market 13,849,135 157,104 1.52 13,206,726 169,981 1.72
Certificates of deposit of less than $100,000 989,516 25,714 3.47 1,012,254 31,787 4.19
Certificates of deposit of $100,000 and over 1,384,079 39,491 3.81 1,517,154 51,591 4.54
Total interest bearing deposits 17,516,437 222,800 1.70 17,058,282 253,964 1.99
Borrowings:
Federal funds purchased $ 129,626 $ 4,228 4.36 $ 266,415 10,780 5.40
Securities sold under agreements to repurchase 2,537,227 54,337 2.86 2,372,816 61,797 3.48
Other borrowings (B)
1,746 35 2.68 470 14 3.98
Total borrowings 2,668,599 58,600 2.94 2,639,701 72,591 3.67
Total interest bearing liabilities 20,185,036 281,400 1.86 % 19,697,983 326,555 2.21 %
Non-interest bearing deposits 7,333,745 7,303,728
Other liabilities 394,543 404,962
Equity 3,523,539 3,080,964
Total liabilities and equity $ 31,436,863 $ 30,487,637
Net interest margin (FTE) $ 835,614 $ 780,528
Net yield on interest earning assets 3.63 % 3.46 %
(A) Stated on a fully taxable-equivalent basis using a federal income tax rate of 21%.
(B) Interest expense capitalized on construction projects in 2024 is not deducted from the interest expense shown above. There was no interest expense capitalized in 2025.
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