Commerce Bancshares, Inc. Announces Fourth Quarter Earnings Per Share Growth of 9%

  Commerce Bancshares, Inc. Announces Fourth Quarter Earnings Per Share Growth
  of 9%

Business Wire

KANSAS CITY, Mo. -- January 15, 2013

Commerce Bancshares, Inc. (NASDAQ: CBSH) announced earnings of $.72 per share
for the three months ended December 31, 2012 compared to $.66 per share in the
fourth quarter of 2011, or an increase of 9.1%. Net income for the fourth
quarter amounted to $66.8 million, compared to $61.5 million in the same
quarter last year and $66.0 million in the prior quarter. For the quarter, the
return on average assets totaled 1.25%, the return on average equity was 11.6%
and the efficiency ratio was 59.6%.

For the year ended December 31, 2012, earnings per share totaled $2.90
compared to $2.69 in 2011, or an increase of 7.8%. Net income amounted to
$269.3 million in 2012 compared to $256.3 million for the same period last
year, or an increase of $13.0 million. In 2012, the return on average assets
was 1.30%, the return on average equity was 12.0% and the efficiency ratio was
59.3%.

In making this announcement, David W. Kemper, Chairman and CEO, said, “We were
pleased to report record earnings in 2012 of over $269 million, which
represents an increase of 5%. Current quarter results compared to the previous
quarter reflected growth in net interest income, low credit costs and solid
growth in both trust and bankcard fees. Strong growth in deposits coupled with
continued new loan volumes and higher interest on inflation-protected
securities enabled our net interest income to increase this quarter.
Non-interest income increased $2.4 million this quarter compared to the
previous quarter, and was up 10% compared to last year as a result of growth
in commercial card fees of 25% and double digit growth in credit card and
trust fee income. Expense growth this quarter was mainly centered in salaries
and technology costs where we continued to make investments in our fee
businesses. Average loans grew $174.5 million, or 2%, this quarter over the
previous quarter from growth in both consumer and commercial lending
activities while average deposits increased $720.7 million, or 4%. Record
earnings over the last two years have strengthened our capital and liquidity
and allowed us to pay a special dividend in December of $1.50 per share in
advance of the higher tax rates now in effect.”

Further, Mr. Kemper noted, “Net loan charge-offs for the current quarter
totaled $10.8 million, compared to $15.6 million in the fourth quarter of 2011
and $9.1 million in the previous quarter. Commercial net loan charge-offs
increased $2.0 million this quarter compared to the previous quarter while
consumer loan losses declined by 3% and totaled $8.8 million. During the
current quarter, the provision for loan losses totaled $8.3 million, or $2.5
million less than net loan charge-offs, reflecting improved credit trends even
as loan balances increased. Our allowance for loan losses amounted to $172.5
million this quarter, representing 3.4 times our non-performing loans. Total
non-performing assets also decreased $8.6 million from the previous quarter to
$64.9 million this quarter.”

Total assets at December 31, 2012 were $22.2 billion, total loans were $9.8
billion, and total deposits were $18.3 billion. During the quarter, the
Company issued a 5% stock dividend and paid both a regular cash dividend of
$.23 per share and a special cash dividend of $1.50 per share. The Company
also repurchased approximately 774,000 shares of its common stock at an
average price per share of $37.93 (per share price of $36.12 as adjusted for
the 5% stock dividend).

Commerce Bancshares, Inc. is a registered bank holding company offering a full
line of banking services, including investment management and securities
brokerage. The Company currently operates in approximately 360 locations in
Missouri, Illinois, Kansas, Oklahoma and Colorado. The Company also has
operating subsidiaries involved in mortgage banking, credit related insurance,
and private equity activities.

Summary of Non-Performing Assets and Past Due Loans

                                                              
(Dollars in thousands)                   9/30/2012   12/31/2012  12/31/2011
Non-Accrual Loans                        $ 55,201    $ 51,410    $ 75,482
Foreclosed Real Estate                   $ 18,234   $ 13,453   $ 18,321 
Total Non-Performing Assets              $ 73,435   $ 64,863   $ 93,803 
Non-Performing Assets to Loans           .76      %  .66      %  1.02     %
Non-Performing Assets to Total Assets    .35      %  .29      %  .45      %
Loans 90 Days & Over Past Due — Still    $ 12,232   $ 15,347   $ 14,958 
Accruing
                                                                             

This financial news release, including management's discussion of fourth
quarter results, is posted to the Company's web site at www.commercebank.com.


COMMERCE BANCSHARES, INC. and SUBSIDIARIES
FINANCIAL HIGHLIGHTS

              For the Three Months Ended                        For the Year Ended
               September 30,    December 31,     December 31,     December      December
(Unaudited)   2012            2012            2011            31,          31,
                                                                  2012          2011
FINANCIAL SUMMARY (In thousands, except per share data)
Net interest   $ 153,811       $ 161,253       $ 161,757        $ 639,906    $ 646,070
income
Taxable
equivalent       159,934          168,428          167,940          665,214       669,515
net interest
income
Non-interest     100,922          103,309          94,035           399,630       392,917
income
Investment
securities
gains            3,180            (3,728     )     4,942            4,828         10,812
(losses),
net
Provision
for loan         5,581            8,326            12,143           27,287        51,515
losses
Non-interest     153,391          158,277          156,030          618,469       617,249
expense
Net income
attributable
to Commerce      66,006           66,791           61,504           269,329       256,343
Bancshares,
Inc.
Cash             20,165           150,789          19,504           211,608       79,140
dividends
Net total
loan             9,082            10,826           15,649           39,287        64,521
charge-offs
(recoveries)
Business         202              791              650              (2,497  )     4,988
Real estate
—                (102       )     (517       )     2,624            (283    )     6,950
construction
and land
Real estate      (25        )     1,799            731              5,108         3,563
— business
Consumer         6,277            6,095            6,986            24,475        31,617
credit card
Consumer         1,791            1,731            2,682            8,127         12,156
Revolving        314              187              884              1,804         1,667
home equity
Real estate      267              411              798              1,426         2,772
— personal
Overdraft        358              329              294              1,127         808
Per common
share:
Net income —   $ .71            $ .73            $ .66            $ 2.91        $ 2.70
basic
Net income —   $ .72            $ .72            $ .66            $ 2.90        $ 2.69
diluted
Cash           $ .219           $ 1.648          $ .209           $ 2.305       $ .834
dividends
Diluted wtd.
average        91,552        90,999        93,086        91,894     94,712  
shares o/s
RATIOS
Average
loans to         56.89      %     55.53      %     56.01      %     55.80   %     59.15   %
deposits (1)
Return on
total            1.28       %     1.25       %     1.19       %     1.30    %     1.32    %
average
assets
Return on
total            11.57      %     11.62      %     11.39      %     12.00   %     12.15   %
average
equity
Non-interest
income to        39.62      %     39.05      %     36.76      %     38.44   %     37.82   %
revenue (2)
Efficiency     59.99      %   59.62      %   60.71      %   59.26   %   59.10   %
ratio (3)
AT PERIOD
END
Book value
per share      $ 25.08          $ 23.76          $ 23.24
based on
total equity
Market value   $ 38.41          $ 35.06          $ 36.30
per share
Allowance
for loan
losses as a      1.82       %     1.75       %     2.01       %
percentage
of loans
Tier I
leverage         10.00      %     9.14       %     9.55       %
ratio
Tangible
common
equity to        10.47      %     9.25       %     9.91       %
assets ratio
(4)
Common
shares           91,988,811       91,414,306       93,399,774
outstanding
Shareholders     4,146            4,135            4,218
of record
Number of
bank/ATM         362              362              363
locations
Full-time
equivalent     4,707         4,708         4,745      
employees
OTHER QTD
INFORMATION
High market
value per      $ 40.70          $ 38.70          $ 36.83
share
Low market
value per     $ 35.91        $ 34.69        $ 29.99      
share

(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.
      The tangible common equity ratio is calculated as stockholders’ equity
(4)   reduced by goodwill and other intangible assets (excluding mortgage
      servicing rights) divided by total assets reduced by goodwill and other
      intangible assets (excluding mortgage servicing rights).
      


COMMERCE BANCSHARES, INC. and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME

                   For the Three Months Ended               For the Year Ended
(Unaudited)
                    September     December      December      December      December
(In thousands,     30,          31,          31,          31,          31,
except per share    2012          2012          2011          2012          2011
data)
Interest income     $ 163,194    $ 170,185    $ 173,223    $ 677,969    $ 697,971
Interest expense     9,383       8,932       11,466      38,063      51,901  
Net interest          153,811       161,253       161,757       639,906       646,070
income
Provision for        5,581       8,326       12,143      27,287      51,515  
loan losses
Net interest
income after         148,230     152,927     149,614     612,619     594,555 
provision for
loan losses
NON-INTEREST
INCOME
Bank card             39,488        41,542        36,162        154,197       157,077
transaction fees
Trust fees            23,681        24,351        22,095        94,679        88,313
Deposit account
charges and other     19,873        20,301        20,623        79,485        82,651
fees
Capital market        5,110         4,075         4,591         21,066        19,846
fees
Consumer
brokerage             2,441         2,619         2,142         10,162        10,018
services
Loan fees and         1,358         1,412         1,647         6,037         7,580
sales
Other                8,971       9,009       6,775       34,004      27,432  
Total
non-interest         100,922     103,309     94,035      399,630     392,917 
income
INVESTMENT
SECURITIES GAINS
(LOSSES), NET
Impairment
(losses)              5,989         (356    )     (796    )     11,223        2,190
reversals on debt
securities
Noncredit-related
losses
(reversals) on       (6,546  )    93          14          (12,713 )    (4,727  )
securities not
expected to be
sold
Net impairment        (557    )     (263    )     (782    )     (1,490  )     (2,537  )
losses
Realized gains
(losses) on sales    3,737       (3,465  )    5,724       6,318       13,349  
and fair value
adjustments
Investment
securities gains     3,180       (3,728  )    4,942       4,828       10,812  
(losses), net
NON-INTEREST
EXPENSE
Salaries and          89,292        94,553        88,010        360,899       345,325
employee benefits
Net occupancy         11,588        11,581        11,674        45,534        46,434
Equipment             4,976         4,983         5,583         20,147        22,252
Supplies and          5,400         5,641         5,550         22,321        22,448
communication
Data processing       19,279        18,768        17,873        73,798        68,103
and software
Marketing             4,100         2,715         3,469         15,106        16,767
Deposit insurance     2,608         2,692         2,680         10,438        13,123
Debit overdraft       —             —             7,400         —             18,300
litigation
Other                16,148      17,344      13,791      70,226      64,497  
Total
non-interest         153,391     158,277     156,030     618,469     617,249 
expense
Income before         98,941        94,231        92,561        398,608       381,035
income taxes
Less income taxes    32,155      27,628      29,514      127,169     121,412 
Net income            66,786        66,603        63,047        271,439       259,623
Less
non-controlling      780         (188    )    1,543       2,110       3,280   
interest expense
(income)
Net income
attributable to     $ 66,006     $ 66,791     $ 61,504     $ 269,329    $ 256,343 
Commerce
Bancshares, Inc.
Net income per
common share —      $ .71        $ .73        $ .66        $ 2.91       $ 2.70    
basic
Net income per
common share —     $ .72       $ .72       $ .66       $ 2.90      $ 2.69    
diluted
                                                                                      


COMMERCE BANCSHARES, INC. and SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

(Unaudited)                   September 30,    December 31,     December 31,
                             2012            2012            2011
(In thousands)
ASSETS                                                      
Loans                         $ 9,638,645      $ 9,831,384      $ 9,177,478
Allowance for loan losses      (175,032   )    (172,532   )    (184,532   )
Net loans                      9,463,613      9,658,852      8,992,946  
Loans held for sale             8,741            8,827            31,076
Investment securities:
Available for sale              9,020,951        9,522,248        9,224,702
Trading                         13,595           28,837           17,853
Non-marketable                 117,540        118,650        115,832    
Total investment securities    9,152,086      9,669,735      9,358,387  
Short-term federal funds
sold and securities             10,475           27,595           11,870
purchased under agreements
to resell
Long-term securities
purchased under agreements      850,000          1,200,000        850,000
to resell
Interest earning deposits       132,144          179,164          39,853
with banks
Cash and due from banks         426,742          573,066          465,828
Land, buildings and             350,040          357,612          360,146
equipment — net
Goodwill                        125,585          125,585          125,585
Other intangible assets —       5,804            5,300            7,714
net
Other assets                   353,539        353,853        405,962    
Total assets                  $ 20,878,769    $ 22,159,589    $ 20,649,367 
LIABILITIES AND
STOCKHOLDERS’ EQUITY
Deposits:
Non-interest bearing          $ 5,814,932      $ 6,299,903      $ 5,377,549
Savings, interest checking      9,025,688        9,817,943        8,933,941
and money market
Time open and C.D.’s of         1,094,215        1,074,618        1,166,104
less than $100,000
Time open and C.D.’s of        914,795        1,156,189      1,322,289  
$100,000 and over
Total deposits                  16,849,630       18,348,653       16,799,883
Federal funds purchased and
securities sold under           1,257,949        1,083,550        1,256,081
agreements to repurchase
Other borrowings                103,744          103,710          111,817
Other liabilities              360,374        452,102        311,225    
Total liabilities              18,571,697     19,988,015     18,479,006 
Stockholders’ equity:
Preferred stock                 —                —                —
Common stock                    446,387          458,646          446,387
Capital surplus                 1,033,515        1,102,507        1,042,065
Retained earnings               717,138          477,210          575,419
Treasury stock                  (60,644    )     (7,580     )     (8,362     )
Accumulated other              166,040        136,344        110,538    
comprehensive income
Total stockholders’ equity      2,302,436        2,167,127        2,166,047
Non-controlling interest       4,636          4,447          4,314      
Total equity                   2,307,072      2,171,574      2,170,361  
Total liabilities and        $ 20,878,769   $ 22,159,589   $ 20,649,367 
equity
                                                                             


COMMERCE BANCSHARES, INC. and SUBSIDIARIES
AVERAGE BALANCE SHEETS — AVERAGE RATES AND YIELDS

(Unaudited)           For the Three Months Ended

(Dollars in            September 30, 2012               December 31, 2012             December 31, 2011
thousands)
                       Average         Avg. Rates      Average         Avg. Rates    Average         Avg. Rates
                       Balance          Earned/Paid     Balance          Earned/Paid   Balance          Earned/Paid
ASSETS:                                                                                             
Loans:
Business ^ (A)         $ 3,018,475      3.39    %       $ 3,041,700      3.29    %     $ 2,819,598      3.53    %
Real estate —
construction and         339,908        4.30              345,608        4.11            386,738        4.52
land
Real estate —            2,182,584      4.39              2,200,088      4.33            2,162,052      4.67
business
Real estate —            1,523,148      4.31              1,571,860      4.15            1,421,296      4.64
personal
Consumer                 1,205,318      5.54              1,272,831      5.35            1,111,299      6.08
Revolving home           444,076        4.17              436,671        4.13            464,694        4.24
equity
Consumer credit card     730,104        11.83             748,754        11.42           733,712        11.62
Overdrafts              5,353        —               5,908        —             7,101        —       
Total loans ^ (B)       9,448,966    4.76            9,623,420    4.64          9,106,490    5.01    
Loans held for sale      8,753          3.86              8,818          3.74            36,987         2.55
Investment
securities:
U.S. government and
federal agency           329,172        (.07    )   (C)   341,537        5.11            328,641        2.49
obligations
Government-sponsored
enterprise               276,505        1.65              400,387        1.72            305,003        1.93
obligations
State and municipal      1,387,624      3.89              1,531,754      3.67            1,239,330      4.16
obligations ^ (A)
Mortgage-backed          3,766,602      2.62              3,447,995      2.79            4,453,362      2.71
securities
Asset-backed             2,878,941      1.10              3,157,988      .99             2,645,538      1.12
securities
Other marketable        121,596      4.50            138,066      5.35          164,545      5.39    
securities ^ (A)
Total available for
sale securities ^        8,760,440      2.21              9,017,727      2.39            9,136,419      2.46
(B)
Trading securities ^     24,337         2.34              20,771         2.01            19,785         2.87
(A)
Non-marketable          117,210      7.54            118,802      17.51         110,486      10.81   
securities ^(A)
Total investment        8,901,987    2.29            9,157,300    2.59          9,266,690    2.56    
securities
Short-term federal
funds sold and
securities purchased     19,400         .49               10,371         .46             10,162         .39
under agreements to
resell
Long-term securities
purchased under          847,829        2.31              1,021,741      2.10            850,000        1.97
agreements to resell
Interest earning        81,139        .20             208,930       .25           122,953      .25     
deposits with banks
Total interest           19,308,074     3.49             20,030,580     3.52           19,393,282     3.67    
earning assets
Non-interest earning    1,209,295                      1,234,609                    1,121,569  
assets ^(B)
Total assets           $ 20,517,369                    $ 21,265,189                  $ 20,514,851 
LIABILITIES AND
EQUITY:
Interest bearing
deposits:
Savings                $ 581,819        .15             $ 581,174        .13           $ 529,027        .17
Interest checking        8,401,165      .21               8,638,073      .19             8,068,003      .29
and money market
Time open & C.D.’s
of less than             1,101,399      .70               1,083,492      .68             1,186,324      .75
$100,000
Time open & C.D.’s      1,004,708    .69             1,030,184    .65           1,367,472    .59     
of $100,000 and over
Total interest          11,089,091   .30             11,332,923   .28           11,150,826   .37     
bearing deposits
Borrowings:
Federal funds
purchased and
securities sold          1,217,036      .07               1,130,210      .07             1,147,421      .05
under agreements to
repurchase
Other borrowings        108,819      3.11            103,766      3.25          112,024      3.26    
Total borrowings        1,325,855    .32             1,233,976    .33           1,259,445    .33     
Total interest           12,414,946     .30     %         12,566,899     .28     %       12,410,271     .37     %
bearing liabilities
Non-interest bearing     5,536,274                        6,013,165                      5,173,106
deposits
Other liabilities        296,178                          399,160                        789,564
Equity                  2,269,971                      2,285,965                    2,141,910  
Total liabilities      $ 20,517,369                    $ 21,265,189                  $ 20,514,851 
and equity
Net interest income    $ 159,934                       $ 168,428                     $ 167,940    
(T/E)
Net yield on
interest earning                     3.30    %                     3.35    %                   3.44    %
assets

(A)  Stated on a tax equivalent basis using a federal income tax rate of 35%.
(B)   The allowance for loan losses and unrealized gains/(losses) on available
      for sale securities are included in non-interest earning assets.
(C)   Includes ($1.4 million) in inflation income on U.S. Treasury
      inflation-protected securities in the third quarter of 2012.
      

COMMERCE BANCSHARES, INC.
Management Discussion of Fourth Quarter Results
December 31, 2012

For the quarter ended December 31, 2012, net income attributable to Commerce
Bancshares, Inc. (net income) amounted to $66.8 million, an increase of $5.3
million over the same quarter last year, and an increase of $785 thousand
compared to the previous quarter. The slight increase in net income over the
previous quarter resulted mainly from higher net interest income and fees
totaling a combined $9.8 million, but offset by a higher provision for loan
losses of $2.7 million, net securities losses of $3.7 million and growth in
non-interest expense of $4.9 million. For the current quarter, the return on
average assets was 1.25%, the return on average equity was 11.62%, and the
efficiency ratio was 59.62%.

Compared to the same quarter last year, net interest income (tax equivalent)
increased by $488 thousand to $168.4 million, while non-interest income
increased $9.3 million to $103.3 million. The securities losses this quarter
resulted mainly from private equity activities and compared to net gains of
$4.9 million in the 4^th quarter of 2011. Non-interest expense for the current
quarter totaled $158.3 million, a slight increase over the same period last
year. The provision for loan losses totaled $8.3 million, representing a
decrease of $3.8 million from the amount recorded in the same quarter last
year.

Balance Sheet Review

During the 4^th quarter of 2012, average loans, including loans held for sale,
increased $174.5 million compared to the previous quarter and increased $488.8
million, or 5.3%, compared to the same period last year. The increase in
average loans over the previous quarter resulted from increases in most
lending categories including growth in business (up $23.2 million), business
real estate and construction (up $23.2 million), personal real estate (up
$48.7 million) and consumer loans (up $67.5 million, mainly in automobile and
fixed rate home equity loans). Consumer credit card loans also increased on
average by $18.7 million. Growth in business loans mainly resulted from higher
leasing activities while demand for construction and business real estate
loans improved this quarter with modest loan growth. Demand for consumer
automobile lending remained strong as average outstanding balances grew by
$91.5 million. However, marine and RV loans, included in the consumer loan
portfolio, continued to run off this quarter by $21.0 million, while home
equity lines of credit also declined by $7.4 million.

Total available for sale investment securities (excluding fair value
adjustments) averaged $9.0 billion this quarter, up $257.3 million when
compared to the previous quarter. Purchases of new securities, totaling $1.3
billion in the 4^th quarter of 2012, were offset by maturities and pay downs
of $734.9 million. At December 31, 2012, the duration of the investment
portfolio was 2.4 years, and maturities and pay downs of approximately $2.2
billion are expected to occur during the next 12 months.

Total average deposits increased $720.7 million, or 4.3%, during the 4^th
quarter of 2012 compared to the previous quarter. This increase in average
deposits resulted mainly from growth in business demand (increase of $429.3
million) and money market (increase of $222.6 million) accounts. Certificate
of deposit (CD) accounts also increased slightly mainly from growth in
short-term jumbo CD's. Overall, $411.9 million of the deposit growth this
quarter came from commercial deposits while the remaining $308.8 million in
deposit growth was mostly from private banking and retail banking customers.
The average loans to deposits ratio in the current quarter was 55.5%, compared
to 56.9% in the previous quarter.

During the current quarter, the Company's average borrowings declined $91.9
million compared to the previous quarter, mainly due to lower federal funds
purchased this quarter.

Net Interest Income

Net interest income (tax equivalent) in the 4^th quarter of 2012 amounted to
$168.4 million compared with $159.9 million in the previous quarter, or an
increase of $8.5 million. Net interest income this quarter increased slightly
compared to the 4^th quarter of last year. During the 4^th quarter of 2012,
the net yield on earning assets (tax equivalent) was 3.35%, compared with
3.30% in the previous quarter and 3.44% in the same period last year.

The increase in net interest income (tax equivalent) in the 4^th quarter of
2012 compared to the previous quarter was mainly due to an increase in
inflation interest of $4.5 million on the Company's inflation-protected
securities as a result of the higher Consumer Price Indices published this
quarter, on which this interest is based. Inflation income totaled $3.1
million this quarter. Also, the Company received a special dividend on a
private equity investment this quarter totaling $2.2 million; however, a
related offsetting fair value adjustment of $1.4 million was recorded on the
same investment in net securities losses.

Compared to the previous quarter, interest on loans declined $937 thousand
(tax-equivalent) as a result of lower average rates of 12 basis points offset
by higher balances. The average rate on investment securities increased 30
basis points to 2.59% partly due to the higher inflation and dividend income
mentioned above coupled with higher overall average balances. Also, rates on
mortgage-backed securities increased due to lower premium amortization
(reduction in amortization expense of $1.7 million) as prepayment speeds
slowed.

Interest expense on deposits declined $412 thousand in the 4^th quarter of
2012 compared with the previous quarter as overall rates declined slightly.
Interest expense on borrowings also declined slightly.

Non-Interest Income

In the 4^th quarter of 2012, total non-interest income amounted to $103.3
million, an increase of $9.3 million, or 9.9%, compared to the same period
last year. Also, current quarter non-interest income increased $2.4 million
when compared to amounts recorded in the previous quarter. The increase in
non-interest income over the same period last year was mainly due to an
increase in bank card fees, coupled with growth in trust fees and higher tax
credit fee income.

Total bank card fees in the current quarter increased $5.4 million, or 14.9%,
over the same period last year as a result of a 25.3% increase in corporate
card fees, which totaled $18.9 million this quarter. Merchant and credit card
fees also grew by 7.8% and 10.3%, respectively, reflecting increased holiday
sales volumes and a 5^th billing weekend in December not present in 2011.
Debit card fees grew by 5.3% and totaled $8.8 million this quarter.

Trust fees for the quarter increased 10.2% compared to the same period last
year, resulting mainly from growth in private client (up 10.5%) and
institutional (up 12.3%) trust fees. Deposit account fees declined $322
thousand, or 1.6%, compared to last year as overdraft fees declined by $1.1
million, but were offset by growth in various other deposit fees of $986
thousand, or 38.8%. Capital market fees declined $516 thousand with low
interest rates reducing correspondent bank demand for bonds this quarter.
Other non-interest income grew by $2.2 million this quarter compared to the
same period last year partly due to higher fees on sales of tax credits, which
grew by $577 thousand, and additional swap fee income of $225 thousand. Also,
in the 4^th quarter of 2011 the Company wrote down the value of certain
banking properties held for sale by $874 thousand, which did not reoccur this
quarter.

Investment Securities Gains and Losses

Net securities losses, related mostly to private equity fair value
adjustments, amounted to $3.7 million in the 4^th quarter of 2012, compared to
net gains of $3.2 million in the previous quarter and net gains of $4.9
million in the same quarter last year. The current quarter included unrealized
net losses of $3.9 million on these private equity investments, coupled with a
reduction to minority interest expense related to these losses totaling $461
thousand which is included in non-controlling interest expense. Year to date
net gains and fair value adjustments on private equity investments totaled
$6.0 million in 2012 compared with $13.2 million in 2011.

Also during the current quarter, the Company recorded credit-related
impairment losses of $263 thousand on certain non-agency guaranteed
mortgage-backed securities identified as other-than-temporarily impaired,
compared to losses of $557 thousand in the previous quarter and $782 thousand
in the same quarter last year. The cumulative credit-related impairment on
these bonds totaled $11.3 million at quarter end. At December 31, 2012, the
fair value of non-agency guaranteed mortgage-backed securities identified as
other-than-temporarily impaired totaled $101.7 million, compared to $124.8
million at December 31, 2011.

Non-Interest Expense

Non-interest expense for the current quarter amounted to $158.3 million, an
increase of $2.2 million over the same quarter last year and an increase of
$4.9 million compared to the previous quarter. Compared to the 4^th quarter of
last year, salaries and benefits expense increased $6.5 million, or 7.4%,
mainly due to an increase in salary costs of $2.0 million, or 3.4%, coupled
with higher incentives paid which included a $1.1 million increase due to
timing changes on expense for several commercial card incentive plans. Nearly
half of the increased salaries costs resulted from staff investments in the
trust, commercial card and mortgage servicing areas. Medical costs also
increased by $1.2 million, or 29.2%, this quarter compared to last year as
self-insured claims increased. Full-time equivalent employees totaled 4,708
and 4,745 at December 31, 2012 and 2011, respectively.

Compared to the 4^th quarter of last year, occupancy, equipment and marketing
expense declined $1.4 million on a combined basis mainly due to lower
depreciation and reductions in property repairs and marketing expenditures.
Data processing and software costs grew by $895 thousand, or 5.0%. This growth
included higher data processing and bank card-related costs, but was partly
offset by the renegotiation of a new merchant processing contract, which
reduced 4^th quarter costs by $523 thousand. Other non-interest expense in the
4^th quarter of 2011 included the reversal of a VISA indemnification
obligation of $3.1 million (lowering expense) that did not reoccur in 2012.

Income Taxes

The effective tax rate for the Company was 29.3% in the current quarter,
compared with 32.8% in the previous quarter and 32.4% in the 4^th quarter of
2011. The lower rate in the current quarter resulted partly from tax benefits
on the special dividend paid in the 4^th quarter to the Company's employee
stock ownership plan.

Credit Quality

Net loan charge-offs in the 4^th quarter of 2012 amounted to $10.8 million,
compared with $9.1 million in the prior quarter and $15.6 million in the 4^th
quarter of last year. The ratio of annualized net loan charge-offs to total
average loans was .45% in the current quarter compared to .38% in the previous
quarter.

For the 4^th quarter of 2012, annualized net loan charge-offs on average
consumer credit card loans amounted to 3.24%, compared with 3.42% in the
previous quarter and 3.78% in the same period last year. Consumer loan net
charge-offs for the quarter amounted to .54% of average consumer loans,
compared to .59% in the previous quarter and .96% in the same quarter last
year. The provision for loan losses for the current quarter totaled $8.3
million, an increase of $2.7 million over the previous quarter and $3.8
million lower than in the same period last year. The current quarter provision
for loan losses was $2.5 million less than net loan charge-offs for the
current quarter, as credit quality in the loan portfolio continued to improve.
As a result, the allowance for loan losses was reduced to $172.5 million. At
December 31, 2012 the allowance was 1.75% of total loans, excluding loans held
for sale, and was 336% of total non-accrual loans.

At December 31, 2012, total non-performing assets amounted to $64.9 million, a
decrease of $8.6 million from the previous quarter. Non-performing assets are
comprised of non-accrual loans ($51.4 million) and foreclosed real estate
($13.5 million). At December 31, 2012, the balance of non-accrual loans, which
represented .52% of loans outstanding, included business real estate loans of
$17.3 million, construction and land loans of $13.7 million and business loans
of $13.1 million. Loans more than 90 days past due and still accruing interest
totaled $15.3 million at December 31, 2012.

Other

During the quarter ended December 31, 2012, the Company paid a 5% stock
dividend and also paid a special cash dividend of $1.50 per share in addition
to its normal cash dividend of $.23 per share. The Company also purchased
approximately 774,000 shares of treasury stock at an average cost of $37.93
per share (per share price of $36.12 as adjusted for the 5% stock dividend).

Forward Looking Information

This information contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. Such statements include
future financial and operating results, expectations, intentions and other
statements that are not historical facts. Such statements are based on current
beliefs and expectations of the Company's management and are subject to
significant risks and uncertainties. Actual results may differ materially from
those set forth in the forward-looking statement.

Contact:

Commerce Bancshares, Inc.
Jeffery Aberdeen, 816-234-2081
Controller
mymoney@commercebank.com
http://www.commercebank.com
 
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