$50.20
$97.90
bear $50.20
base $79.10
bull $97.90
margin of safety $48.00
market price* $55.69
Commerce Bancshares (Commerce Bank) is a bank holding company based in St. Louis and Kansas City. Its 140 branches serve Missouri, Kansas, central Illinois, Tulsa and Oklahoma City in Oklahoma, and Denver in Colorado, and it also runs a large trust and wealth management business and a commercial card and payments business that sells nationwide. At the end of 2025 it had $32.9 billion of assets, $17.8 billion of loans and $25.6 billion of deposits. It has raised its regular dividend for 57 consecutive years and has paid a 5% stock dividend for 32 consecutive years. On January 1, 2026 it acquired FineMark Holdings (13 offices in Florida, Arizona and South Carolina, with $2.7 billion of loans, $3.1 billion of deposits and $8.7 billion of assets under administration) entirely in stock, issuing 9.9 million shares. HOW WE MEASURED EARNINGS. For a bank, deposits and loans are the raw material of the business, so interest is a normal operating cost. We therefore value earnings after interest and subtract no separate debt. We started from operating cash flow, removed swings in working capital (interest receivable and payable, taxes payable, trading securities and other balance-sheet timing items), and deducted stock compensation, maintenance spending on branches and equipment, and the provision for loan losses. The last deduction is a judgement: the provision is a non-cash charge that cash flow adds back, but loan losses appear nowhere else in cash flow, so leaving it out would overstate what owners can actually take out. Amortization of acquired intangibles is tiny ($1.3 million in 2025), so there is no wasting-asset issue to adjust for. Per-share figures are restated for the annual 5% stock dividends. Owner earnings per share were $2.05 (2016), $2.32, $2.96, $2.88, $3.34 (2020), $4.15, $3.21, $2.77, $3.76 and $4.02 (2025). We anchored on the median of 2021 through 2025, $3.76 per share, or roughly $546 million on about 145 million diluted shares today. That window spans the full move from near-zero interest rates to peak rates and the reversal of the pandemic reserve build. We left 2020 out because its cash flow includes $156.7 million from terminating interest rate hedges that will not repeat, and because it carried a $137.2 million loan-loss provision that was largely released in 2021 (a $66.3 million release). 2023 stays in the window even though it includes a one-time $54.4 million purchase of a rate hedge, because it does not change the median. Years before 2021 describe a smaller bank in a lower-rate era. GROWTH CHECK. Owner earnings per share grew 6.9% in 2025 (from $3.76 to $4.02). Our base case assumes 4% for the first year, below that actual rate, and its first-year figure of $3.91 is below what was actually earned in 2025. First-half 2026 net income of $301.4 million was 6.1% above the first half of 2025, consistent with this level. Operating cash flow jumped to $866.7 million in that half from $249.8 million, but $525.6 million of that was a reduction in trading securities, a balance-sheet timing item rather than earnings, so we did not use it. GROWTH WE CREDITED is limited to earnings retained and reinvested at the returns the bank has actually earned: return on equity was about 16% in 2025, and net income compounded at 7.3% a year from $261.8 million in 2014 to $566.3 million in 2025, funded from the bank's own cash. We assume growth requires holding back earnings equal to the growth rate divided by an assumed return on equity, and we give no separate credit for share buybacks (values are kept on today's share count). We left out any cost savings or revenue gains from FineMark, expansion in Florida, Arizona and South Carolina, margin expansion, market share gains and any rebound in interest rates, because none of these has yet happened or been demonstrated. BASE CASE, $79.10 per share. Starting from $3.76 per share, owner earnings grow 4% a year for three years, 3.5% for three years and 3% for four years, reaching $5.28 in year 10, then 2% a year through year 20 ($6.44), and stay flat afterward. Retained earnings are assumed to earn a 14% return, below the 2025 level. The lasting earning power comes from a low-cost deposit base and fee businesses (trust, card and payments) that have operated through many rate and credit cycles. The business is worth $79.10 per share; deposits are its operating funding, so no borrowings are subtracted, and the difference is the same $79.10. FineMark's $350 million of Federal Home Loan Bank advances were paid off in January 2026, so no near-term maturity affects the outcome. BEAR CASE, $50.20 per share. The named risk is credit. In 2020 the provision for loan losses reached $137.2 million; with that hedge windfall removed, 2020 owner earnings were about $2.33 per share, and the bear case repeats that level in year 1. Loan-book exposures in the filing that could produce it include $3.7 billion of business real estate loans (20.7% of loans) and a $589.7 million consumer credit card portfolio with net charge-offs of 4.81% of average balances in 2025; the filing also warns that integrating FineMark may cost more or take longer than expected. Earnings then settle at about $2.90 for years 2 and 3, the 2018-2019 level, grow 2% a year to year 10 ($3.33) on a lower 11% return on retained earnings, and stay flat afterward. The business is worth $50.20 per share, with no borrowings to subtract, so the difference is $50.20; leverage risk is carried here through credit losses rather than debt maturities. BULL CASE, $97.90 per share. Starting from the 2025 level of $4.02, which the bank has already reached, owner earnings grow 6% a year for four years, 5% for three years and 4% for three years (reaching $6.61 in year 10), then 3% a year through year 20 and flat afterward, with a 15.5% return on retained earnings. That is at or below the 6.9% one-year growth of 2025 and the 7.3% long-run net income growth, and non-interest income (trust, card, cash management) grew 6.0% in 2025. The business is worth $97.90 per share with nothing to subtract for borrowings. TESTING THE CASE. We challenged the base case with two specific facts. First, the first-half 2026 cash flow surge was traced to trading securities, not earnings, and reported net income growth of 6.1% supports the anchor. Second, credit: 2025 net loan charge-offs were $40.7 million versus $38.9 million in 2024, so losses are stable; the median year in the window (2024) carried a $32.9 million provision, slightly light against those charge-offs, but 2025 carried $56.1 million and still produced $4.02 per share. What would make our numbers wrong: a credit cycle worse than 2020, a sustained fall in interest rates that compresses the margin, or a FineMark integration that dilutes returns. Book equity was $4,357.7 million at June 30, 2026 after the FineMark issuance. CHANGE SINCE OUR EARLIER ESTIMATE. Our August 2026 estimate put the base value at $61.30 using a higher required return. This update values every company at the same 6% discount rate and rebuilds earnings from cash flow with the stated adjustments, which lifts the estimates; the business itself has not changed materially. Values are stated on today's share count; the next 5% stock dividend, normally paid in December, will reduce per-share figures by about 4.8% without changing what each holder owns.