COMMERCE BANCSHARES INC /MO/CBSH
COMMERCE BANCSHARES INC /MO/ Income Taxes Disclosure
Income Taxes
The components of income tax expense from operations for the years ended December 31, 2025, 2024 and 2023 were as follows:
| (In thousands) | Current | Deferred | Total | ||||||||
Year ended December 31, 2025: | |||||||||||
| U.S. federal | $ | 131,851 | $ | 10,482 | $ | 142,333 | |||||
| State and local | 17,730 | 1,073 | 18,803 | ||||||||
| Total | $ | 149,581 | $ | 11,555 | $ | 161,136 | |||||
Year ended December 31, 2024: | |||||||||||
| U.S. federal | $ | 132,197 | $ | (845) | $ | 131,352 | |||||
| State and local | 13,483 | 254 | 13,737 | ||||||||
| Total | $ | 145,680 | $ | (591) | $ | 145,089 | |||||
Year ended December 31, 2023: | |||||||||||
| U.S. federal | $ | 124,787 | $ | (6,228) | $ | 118,559 | |||||
| State and local | 17,161 | (1,171) | 15,990 | ||||||||
| Total | $ | 141,948 | $ | (7,399) | $ | 134,549 | |||||
The components of income tax (benefit) expense recorded directly to shareholders' equity for the years ended 2025, 2024 and 2023 were as follows:
| (In thousands) | 2025 | 2024 | 2023 | ||||||||
Unrealized gain (loss) on available for sale debt securities | $ | 85,952 | $ | 57,359 | $ | 69,972 | |||||
Change in fair value on cash flow hedges | (3,023) | (13,704) | (6,017) | ||||||||
Accumulated pension (benefit) loss | 811 | 512 | 1,197 | ||||||||
Income tax (benefit) expense allocated to shareholders' equity | $ | 83,740 | $ | 44,167 | $ | 65,152 | |||||
Significant components of the Company’s deferred tax assets and liabilities at December 31, 2025 and 2024 were as follows:
| (In thousands) | 2025 | 2024 | ||||||
Deferred tax assets: | ||||||||
| Unrealized loss on available for sale debt securities | $ | 161,691 | $ | 247,643 | ||||
| Loans, principally due to allowance for credit losses | 47,422 | 43,450 | ||||||
| Unearned fee income | 10,430 | 10,858 | ||||||
| Equity-based compensation | 8,749 | 8,364 | ||||||
| Deferred compensation | 8,433 | 8,477 | ||||||
| Cash flow hedges | 8,301 | 5,630 | ||||||
| Accrued expenses | 7,785 | 10,124 | ||||||
| Other | 367 | 497 | ||||||
Total deferred tax assets | 253,178 | 335,043 | ||||||
Deferred tax liabilities: | ||||||||
| Equipment lease financing | 97,819 | 97,042 | ||||||
| Land, buildings, and equipment | 28,890 | 23,359 | ||||||
| Accretion on investment securities | 9,092 | 4,203 | ||||||
| Intangible assets | 7,702 | 7,596 | ||||||
| Private equity investments | 6,676 | 5,446 | ||||||
| Other | 5,643 | 4,746 | ||||||
Total deferred tax liabilities | 155,822 | 142,392 | ||||||
Net deferred tax assets (liabilities) | $ | 97,356 | $ | 192,651 | ||||
Management believes it is more likely than not that the results of future operations will generate sufficient taxable income to realize the total deferred tax assets, therefore, no valuation allowance is needed for the deferred tax assets at year end.
A reconciliation between the expected federal income tax expense using the federal statutory tax rate of 21%, and the Company's actual income tax expense for 2025, 2024, and 2023 is provided below. The effective tax rate is calculated by dividing income taxes by income before income taxes less the non-controlling interest expense.
| (Dollars in thousands) | 2025 | 2024 | 2023 | |||||||||||||||||||||||
| Amount | Effective Tax Rate (%) | Amount | Effective Tax Rate (%) | Amount | Effective Tax Rate (%) | |||||||||||||||||||||
| $ | 152,751 | 21.00 | % | $ | 140,998 | 21.00 | % | $ | 128,438 | 21.00 | % | |||||||||||||||
| Federal | ||||||||||||||||||||||||||
| Tax Credits, net | (1,893) | (0.26) | (1,431) | (0.21) | (1,478) | (0.24) | ||||||||||||||||||||
| Nontaxable or nondeductible items | ||||||||||||||||||||||||||
| Tax-exempt interest, net of cost to carry | (6,983) | (0.96) | (6,892) | (1.03) | (7,002) | (1.15) | ||||||||||||||||||||
| Other | 5,105 | 0.70 | 4,043 | 0.60 | 4,292 | 0.70 | ||||||||||||||||||||
| Other | (2,732) | (0.37) | (2,444) | (0.36) | (2,349) | (0.38) | ||||||||||||||||||||
| State and local income taxes, net of federal effect | 14,855 | 2.04 | 10,852 | 1.62 | 12,633 | 2.07 | ||||||||||||||||||||
| Changes in unrecognized tax benefits | 33 | — | (37) | (0.01) | 15 | — | ||||||||||||||||||||
Total income tax expense | $ | 161,136 | 22.15 | % | $ | 145,089 | 21.61 | % | $ | 134,549 | 22.00 | % | ||||||||||||||
In 2025, 2024, and 2023, state and local income taxes in Missouri, Illinois, and Kansas comprised the majority of the state and local income taxes, net of federal effect category listed in the table above.
The gross amount of unrecognized tax benefits was $1.2 million at both December 31, 2025 and 2024, and the total amount of unrecognized tax benefits that would impact the effective tax rate, if recognized, was $1.0 million at both December 31, 2025 and 2024. The activity in the accrued liability for unrecognized tax benefits for the years ended December 31, 2025 and 2024 was as follows:
| (In thousands) | 2025 | 2024 | ||||||
| Unrecognized tax benefits at beginning of year | $ | 1,224 | $ | 1,270 | ||||
| Gross increases – tax positions in prior period | 46 | 8 | ||||||
| Gross decreases – tax positions in prior period | (5) | (2) | ||||||
| Gross increases – current-period tax positions | 187 | 295 | ||||||
| Lapse of statute of limitations | (232) | (347) | ||||||
| Unrecognized tax benefits at end of year | $ | 1,220 | $ | 1,224 | ||||
The Company and its subsidiaries are subject to income tax by federal, state and local government taxing authorities. Tax years 2022 through 2025 remain open to examination for U.S. federal income tax and for major state taxing jurisdictions.
Income taxes paid for 2025, 2024, and 2023 was as follows:
| (In thousands) | 2025 | 2024 | 2023 | ||||||||
| U.S. federal | $ | 145,522 | $ | 116,528 | $ | 113,536 | |||||
| State and local | 17,390 | 9,601 | 17,421 | ||||||||
| Total income taxes paid | $ | 162,912 | $ | 126,129 | $ | 130,957 | |||||
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 24, 2026 | Showing above |
| 2024 | Feb 25, 2025 | |
| 2023 | Feb 22, 2024 | |
| 2022 | Feb 22, 2023 | |
| 2021 | Feb 23, 2022 | |
| 2020 | Feb 24, 2021 | |
| 2019 | Feb 25, 2020 | |
| 2018 | Feb 21, 2019 | |
| 2017 | Feb 22, 2018 | |
| 2016 | Feb 23, 2017 | |
| 2015 | Feb 24, 2016 | |
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.