Commerce's Net Interest Income Reverses After TIPS Sale

The Tip Desk · October 22, 2026 · 3 min read

Net interest income fell $6.2 million to $308.9 million as the net yield on interest-earning assets dropped six basis points to 3.71%.

Commerce Bancshares (CBSH), the Kansas City regional holding company, reported net interest income of $308.9 million for the three months ended September 30, 2026, a $6.2 million decline from the prior quarter that reversed the $15.2 million increase recorded in the second quarter.

The net yield on interest-earning assets decreased six basis points to 3.71% after an 18-basis-point expansion to 3.77% in the prior quarter. Chief Executive Officer John Kemper said the underlying net interest margin expanded after excluding the TIPS inflation income recognized in the second quarter, when the company sold its Treasury inflation-protected securities portfolio.

Net income attributable to Commerce Bancshares was $155.0 million, or $1.08 a share, compared with $159.8 million, or $1.10 a share, in the second quarter. The company said the sequential drop in net income was primarily the result of lower net interest income and net securities gains, partly offset by lower non-interest expense. Return on average assets was 1.79% and return on average equity was 14.17%.

Average loans totaled $20.7 billion, up $172.3 million, or 0.8%, from the prior quarter, slightly slower than the $176.6 million, or 0.9%, increase in the second quarter. Kemper said ending loan balances grew at an annualized rate of more than 7%, led by commercial and wealth segments. Average consumer and business loans rose $180.5 million and $70.2 million, while average construction and personal real estate balances declined $74.5 million and $42.7 million.

Total average deposits decreased $361.6 million, or 1.3%, to $27.2 billion, a larger sequential drop than the $135.0 million, or 0.5%, decline in the second quarter. Average available-for-sale debt securities fell $473.7 million to $8.2 billion at fair value, mainly on lower mortgage-backed securities, after a $247.1 million decline in the prior quarter. Period-end total assets were $34.8 billion.

Non-interest income increased $1.6 million, or 0.9%, to $185.5 million, a slower rise than the $8.0 million, or 4.5%, increase in the second quarter, and was 37.5% of total revenue. Trust fees were $73.4 million and bank card transaction fees were $49.2 million. Versus the year-earlier quarter, trust fees grew $15.0 million, or 25.7%, and bank card fees increased $3.6 million, or 8.0%.

Non-interest expense decreased $11.1 million, or 3.7%, to $285.9 million, reversing a $5.9 million, or 2.0%, increase in the second quarter. The efficiency ratio improved to 56.69% from 58.40%.

Annualized net loan charge-offs to average loans were 0.20%, up from 0.19% in the prior quarter. The allowance for credit losses on loans increased $2.5 million to $197.8 million, and the allowance-to-loans ratio was 0.93% at September 30, compared with 0.94% at June 30. Non-accrual loans were $11.5 million, or 0.05% of total loans.

The company purchased approximately 1.9 million shares at an average price of $58.84, after repurchasing approximately 2.1 million shares for $110 million in the second quarter. Cash dividends were $0.275 a share.