Commerce Bancshares, Inc. Announces Third Quarter Earnings Per Share of $.66

http://www.businesswire.com/news/home/20091014005272/en

KANSAS CITY, Mo.--(Business Wire)--
Commerce Bancshares, Inc. (NASDAQ: CBSH) announced earnings of $.66 per share
for the quarter ended September 30, 2009, compared to $.48 per share in the
previous quarter and $.32 per share in the third quarter of 2008. Net income for
the third quarter amounted to $51.6 million compared to $37.0 million in the
previous quarter and $24.7 million in the same period last year. During the
third quarter of 2008, the Company recorded a loss on the purchase of auction
rate securities totaling approximately $21 million after tax, or $.27 per share.
For the quarter, the return on average assets totaled 1.16% and the return on
average equity was 11.5%.

For the nine months ended September 30, 2009, earnings per share totaled $1.54
compared to $1.90 for the first nine months of last year. Net income amounted to
$119.5 million for the first nine months of 2009 compared with $144.8 million in
2008, or a decline of $25.4 million. At September 30, 2009, the ratio of
tangible common equity to total assets improved to 9.6% compared to 8.7% at the
same time last year.

In making this announcement, David W. Kemper, Chairman and CEO, said, "Although
the economy remains challenging, this quarter we were pleased to report an
increase in net income of 40%, or $14.7 million, over the previous quarter. The
increase in net income over the previous quarter was mainly the result of 4%
growth in total revenue and good overall expense control. Our net interest
margin increased to 4.02% from 3.91% in the previous quarter. Loan balances
continued to decline this quarter as a result of weak demand, while deposits
were relatively flat."

Mr. Kemper continued, "During this quarter we strengthened our balance sheet,
enhancing both our capital and liquidity positions while also building our loan
loss reserves. Tangible common equity increased $153 million this quarter
through retained earnings, securities portfolio appreciation and stock issuance.
Liquidity also increased as our loan to deposit ratio declined to 77.4%. During
the quarter we increased our allowance for loan losses by $4.5 million to $190.5
million, representing 1.85% of outstanding loans. Net loan charge-offs declined
by $5.1 million from the prior quarter. Non-performing assets, consisting of
non-accrual loans and foreclosed property, declined by $2.5 million to $129.2
million, or 1.26% of loans."

Total assets at September 30, 2009, were $18.0 billion, total loans were $10.6
billion, and total deposits were $13.8 billion.

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 over 370 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) 6/30/09 9/30/09 9/30/08
Non-Accrual Loans $122,648 $121,698 $41,600
Foreclosed Real Estate $9,039 $7,535 $4,622
Total Non-Performing Assets $131,687 $129,233 $46,222
Non-Performing Assets to Loans 1.23% 1.26% . 42%
Non-Performing Assets to Total Assets .74% .72% .27%
Loans 90 Days & Over Past Due - Still $39,968 $45,614 $31,878
Accruing

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

COMMERCE BANCSHARES, INC. and SUBSIDIARIES
FINANCIAL HIGHLIGHTS

(Unaudited) For the Three Months Ended For the Nine Months Ended
June 30 Sept. 30 Sept. 30 Sept. 30 Sept. 30
2009 2009 2008 2009 2008
FINANCIAL SUMMARY (In thousands, except per share data)
Net interest income $ 157,445 $ 163,539 $ 151,564 $ 470,999 $ 436,450
Taxable equivalent net
interest income 162,323 168,408 155,458 484,673 447,610
Non-interest income 98,562 102,135 95,593 293,128 290,486
Investment securities gains (losses), net (2,753 ) (945 ) 1,149 (5,870 ) 25,480
Provision for loan losses 41,166 35,361 29,567 119,695 67,567
Non-interest expense 160,011 154,489 184,446 467,386 471,692
Net income 36,968 51,649 24,673 119,453 144,819
Cash dividends 18,515 18,962 18,018 55,736 54,003
Net total loan charge-offs 36,033 30,896 18,734 101,848 45,122
Business charge-offs 2,378 4,626 1,775 10,846 2,315
Real estate - construction
and land charge-offs 10,373 4,463 1,217 24,062 2,194
Real estate - business charge-offs 1,033 1,253 257 3,062 1,198
Consumer credit card charge-offs 13,214 12,577 8,314 36,554 22,842
Consumer charge-offs 8,476 6,522 6,060 24,331 14,546
Home equity charge-offs 96 233 208 629 338
Student charge-offs 2 2 - 4 -
Real estate - personal charge-offs 215 797 182 1,557 356
Overdraft charge-offs 246 423 721 803 1,333
Per common share:
Net income - basic $ 0.48 $ 0.66 $ 0.33 $ 1.55 $ 1.92
Net income - diluted $ 0.48 $ 0.66 $ 0.32 $ 1.54 $ 1.90
Cash dividends $ 0.240 $ 0.240 $ 0.238 $ 0.720 $ 0.714
Diluted wtd. average shares o/s 76,690 78,563 76,065 77,096 75,976
RATIOS
Average loans to deposits (1) 81.58 % 77.40 % 93.29 % 81.96 % 92.46 %
Return on total average assets 0.84 % 1.16 % 0.60 % 0.91 % 1.18 %
Return on total average equity 8.91 % 11.49 % 6.06 % 9.49 % 12.14 %
Non-interest income to revenue (2) 38.50 % 38.44 % 38.68 % 38.36 % 39.96 %
Efficiency ratio (3) 62.15 % 57.75 % 74.20 % 60.76 % 64.43 %
AT PERIOD END
Book value per share based on total equity $ 22.04 $ 23.45 $ 21.16
Market value per share $ 31.83 $ 37.24 $ 44.19
Allowance for loan losses
as a percentage of loans 1.74 % 1.85 % 1.42 %
Tier I leverage ratio 9.08 % 9.65 % 9.11 %
Tangible equity to assets ratio (4) 8.85 % 9.60 % 8.66 %
Common shares outstanding 77,049,199 78,922,671 75,701,500
Shareholders of record 4,503 4,449 4,487
Number of bank/ATM locations 373 373 367
Full-time equivalent employees 5,181 5,148 5,202
Sept. 30 Sept. 30
OTHER YTD INFORMATION 2009 2008
High market value per share $ 44.41 $ 50.47
Low market value per share $ 27.80 $ 34.76

(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 equity ratio is calculated as stockholders' equity 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

(Unaudited) For the Three Months Ended For the Nine Months Ended
(In thousands, except per share data) June 30 Sept. 30 Sept. 30 Sept. 30 Sept. 30
2009 2009 2008 2009 2008
Interest income $ 198,992 $ 201,647 $ 209,464 $ 594,513 $ 640,221
Interest expense 41,547 38,108 57,900 123,514 203,771
Net interest income 157,445 163,539 151,564 470,999 436,450
Provision for loan losses 41,166 35,361 29,567 119,695 67,567
Net interest income after
provision for loan losses 116,279 128,178 121,997 351,304 368,883

NON-INTEREST INCOME
Deposit account charges and other fees 26,935 27,750 27,854 80,277 83,189
Bank card transaction fees 30,105 31,279 29,317 88,552 85,019
Trust fees 19,355 19,258 20,518 57,486 60,917
Bond trading income 6,151 4,834 2,604 16,381 9,951
Consumer brokerage services 3,213 3,045 3,439 9,566 10,259
Loan fees and sales 3,733 6,851 1,594 13,545 4,884
Other 9,070 9,118 10,267 27,321 36,267
Total non-interest income 98,562 102,135 95,593 293,128 290,486

INVESTMENT SECURITIES
GAINS (LOSSES), NET
Impairment losses on securities (10,080 ) (3,457 ) - (35,422 ) -
Less noncredit-related losses on
securities not expected to be sold 9,286 1,993 - 32,611 -
Net impairment losses (794 ) (1,464 ) - (2,811 ) -
Realized gains (losses) on sales and
fair value adjustments (1,959 ) 519 1,149 (3,059 ) 25,480
Investment securities gains (losses), net (2,753 ) (945 ) 1,149 (5,870 ) 25,480

NON-INTEREST EXPENSE
Salaries and employee benefits 86,279 87,267 83,766 260,299 250,023
Net occupancy 11,088 11,752 11,861 34,652 34,735
Equipment 6,255 6,306 6,122 18,883 18,273
Supplies and communication 8,249 8,061 9,276 24,994 26,545
Data processing and software 15,007 15,500 14,229 44,854 41,951
Marketing 4,906 4,846 4,926 14,099 15,660
Deposit insurance 12,969 4,833 510 21,908 1,535
Indemnification obligation - (2,496 ) 2,879 (2,496 ) (5,929 )
Loss on purchase of auction rate securities - - 32,967 - 33,266
Other 15,258 18,420 17,910 50,193 55,633
Total non-interest expense 160,011 154,489 184,446 467,386 471,692
Income before income taxes 52,077 74,879 34,293 171,176 213,157
Less income taxes 15,257 23,415 9,534 52,264 67,320
Net income before non-controlling interest 36,820 51,464 24,759 118,912 145,837
Less non-controlling interest
expense (income) (148 ) (185 ) 86 (541 ) 1,018
Net income $ 36,968 $ 51,649 $ 24,673 $ 119,453 $ 144,819

Net income per common share - basic $ 0.48 $ 0.66 $ 0.33 $ 1.55 $ 1.92
Net income per common share - diluted $ 0.48 $ 0.66 $ 0.32 $ 1.54 $ 1.90

COMMERCE BANCSHARES, INC. and SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

(Unaudited) June 30 Sept. 30 Sept. 30
(In thousands) 2009 2009 2008
ASSETS
Loans $ 10,699,674 $ 10,282,690 $ 10,985,789
Allowance for loan losses (186,001 ) (190,466 ) (156,031 )
Net loans 10,513,673 10,092,224 10,829,758
Loans held for sale 388,706 317,913 392,697
Investment securities:
Available for sale 5,156,343 6,075,632 3,659,488
Trading 17,259 9,242 12,353
Non-marketable 133,925 133,732 153,423
Total investment securities 5,307,527 6,218,606 3,825,264
Federal funds sold and securities
purchased under agreements to resell 40,155 12,620 457,295
Interest earning deposits with banks 8,318 118,745 ---
Cash and due from banks 376,051 342,949 496,970
Land, buildings and equipment - net 406,612 403,900 409,676
Goodwill 125,585 125,585 125,585
Other intangible assets - net 15,849 15,060 18,299
Other assets 537,567 305,505 397,856
Total assets $ 17,720,043 $ 17,953,107 $ 16,953,400

LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Non-interest bearing demand $ 1,517,398 $ 1,512,529 $ 1,187,334
Savings, interest checking and money market 8,281,652 8,678,985 7,451,845
Time open and C.D.'s of less than $100,000 2,137,049 2,004,276 2,018,444
Time open and C.D.'s of $100,000 and over 1,770,243 1,645,005 1,654,464
Total deposits 13,706,342 13,840,795 12,312,087
Federal funds purchased and securities sold
under agreements to repurchase 1,174,121 1,130,193 1,559,975
Other borrowings 847,108 821,941 1,250,510
Other liabilities 294,163 309,534 229,095
Total liabilities 16,021,734 16,102,463 15,351,667
Stockholders' equity:
Preferred stock --- --- ---
Common stock 385,812 395,182 360,935
Capital surplus 655,020 710,588 482,441
Retained earnings 664,189 696,876 760,145
Treasury stock (823 ) (825 ) (161 )
Accumulated other comprehensive income (loss) (7,928 ) 47,003 (4,749 )
Total stockholders' equity 1,696,270 1,848,824 1,598,611
Non-controlling interest 2,039 1,820 3,122
Total equity 1,698,309 1,850,644 1,601,733
Total liabilities and equity $ 17,720,043 $ 17,953,107 $ 16,953,400

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

(Unaudited) For the Three Months Ended
(Dollars in thousands) June 30, 2009 September 30, 2009 September 30, 2008
Avg. Rates Avg. Rates Avg. Rates
Average Earned/ Average Earned/ Average Earned/
ASSETS: Balance Paid Balance Paid Balance Paid
Loans:
Business (A) $ 3,259,712 3.81 % $ 3,019,018 3.77 % $ 3,473,797 4.70 %
Real estate - construction and land 750,983 3.50 698,876 3.74 698,420 4.78
Real estate - business 2,174,443 5.05 2,147,094 5.04 2,324,683 5.80
Real estate - personal 1,596,413 5.55 1,577,908 5.38 1,508,736 5.75
Consumer 1,497,806 6.87 1,423,911 6.99 1,717,075 7.07
Home equity 498,083 4.33 491,525 4.35 479,025 4.72
Student 347,239 2.61 341,516 2.37 - -
Consumer credit card 697,542 12.70 728,547 12.60 790,303 10.76
Overdrafts 8,603 - 11,288 - 12,381 -
Total loans (B) 10,830,824 5.27 10,439,683 5.31 11,004,420 5.88
Loans held for sale 513,789 1.53 293,636 1.95 352,283 4.26
Investment securities:
U.S. government & federal agency 158,664 3.03 412,667 4.47 117,311 4.08
State & municipal obligations (A) 906,402 5.22 907,536 4.97 700,250 5.40
Mortgage and asset-backed securities 3,649,150 4.66 3,985,402 4.47 2,453,686 5.04
Other marketable securities (A) 193,280 5.40 194,802 5.20 81,552 3.23
Total available for sale securities (B) 4,907,496 4.74 5,500,407 4.58 3,352,799 5.03
Trading securities (A) 19,273 3.12 18,143 3.08 23,278 3.71
Non-marketable securities (A) 138,405 3.65 134,422 4.98 144,476 5.83
Total investment securities 5,065,174 4.70 5,652,972 4.58 3,520,553 5.06
Federal funds sold and securities
purchased under agreements to resell 25,853 0.56 31,360 0.66 419,628 2.01
Interest earning deposits with banks 212,930 0.10 203,954 0.23 - -
Total interest earning assets 16,648,570 4.91 16,621,605 4.93 15,296,884 5.55
Non-interest earning assets (B) 926,055 986,142 1,090,215
Total assets $ 17,574,625 $ 17,607,747 $ 16,387,099

LIABILITIES AND EQUITY:
Interest bearing deposits:
Savings $ 451,900 0.15 $ 443,263 0.15 $ 410,201 0.31
Interest checking and money market 8,460,468 0.37 8,653,109 0.35 7,498,605 0.77
Time open & C.D.'s of less than $100,000 2,129,991 2.74 2,107,778 2.54 2,041,276 3.14
Time open & C.D.'s of $100,000 and over 2,003,537 1.98 1,785,414 1.87 1,554,804 2.95
Total interest bearing deposits 13,045,896 1.00 12,989,564 0.90 11,504,886 1.47
Borrowings:
Federal funds purchased and securities
sold under agreements to repurchase 962,804 0.35 937,728 0.35 1,368,050 1.58
Other borrowings (C) 873,596 3.79 833,189 3.66 1,103,224 3.61
Total borrowings 1,836,400 1.99 1,770,917 1.90 2,471,274 2.48
Total interest bearing liabilities 14,882,296 1.12 % 14,760,481 1.02 % 13,976,160 1.65 %
Non-interest bearing demand deposits 860,819 877,500 668,191
Other liabilities 167,510 185,916 123,168
Equity 1,664,000 1,783,850 1,619,580
Total liabilities and equity $ 17,574,625 $ 17,607,747 $ 16,387,099
Net interest income (T/E) $ 162,323 $ 168,408 $ 155,458
Net yield on interest earning assets 3.91 % 4.02 % 4.04 %

(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) Interest expense capitalized on construction projects is not deducted from interest expense in the calculation of the rate shown above.

COMMERCE BANCSHARES, INC.
Management Discussion of Third Quarter Results
September 30, 2009

For the quarter ended September 30, 2009, net income amounted to $51.6 million,
an increase of $14.7 million over the previous quarter and an increase of $27.0
million over the same quarter last year. For the current quarter, the return on
average assets was 1.16%, the return on average equity was 11.49%, and the
efficiency ratio was 57.75%. Compared to the previous quarter, net interest
income (tax equivalent) increased by $6.1 million to $168.4 million, while
non-interest income increased by $3.6 million to $102.1 million. Non-interest
expense for the quarter totaled $154.5 million, a decline of $5.5 million from
the previous quarter, which included costs for a special FDIC assessment of $8.0
million. Compared to the previous quarter, the provision for loan losses
declined $5.8 million, totaling $35.4 million in the current quarter. The 3rd
quarter of 2008 included a pre-tax loss of $33.0 million on the purchase of
auction rate securities.

Balance Sheet Review

During the 3rd quarter of 2009, average loans, excluding loans held for sale,
decreased $391.1 million, or 3.6%, compared to the previous quarter. Also,
average loans decreased $564.7 million, or 5.1%, this quarter compared to the
same period last year. The decrease in average loans compared to the previous
quarter was mainly the result of lower business loan totals, which declined
$240.7 million, coupled with declining balances in most other categories,
including construction, business real estate and consumer loans. Consumer credit
card loans grew 4.4% this quarter compared to the previous quarter.

The decline in business loans continued to reflect lower line of credit usage,
lower demand, and pay-downs by business loan customers. Average construction and
business real estate loans declined by $52.1 million and $27.3 million,
respectively, compared to the previous quarter. These declines were reflective
of continued uncertain economic conditions in the real estate markets and lower
overall demand. Average balances of personal real estate and consumer loans
declined by $18.5 million and $73.9 million, respectively, as loan pay-downs
continued to exceed new loan originations for these products. Also, the Company
has ceased most marine and RV lending in the consumer loan portfolio. The
average balance of loans held for sale (comprised mostly of student loans)
declined $220.2 million this quarter as the Company sold student loans totaling
$221.1 million, most of which were originated during the last 12 months.

Total available for sale investment securities (excluding fair value
adjustments) increased on average by $592.9 million to $5.5 billion this quarter
compared with the previous quarter. The majority of this increase was the result
of purchases of U.S. Treasury inflation-protected bonds and other asset-backed
securities, which increased average balances by $262.4 million and $414.9
million, respectively. At September 30, 2009, the fair value of the Company`s
available for sale investment securities included an unrealized gain of $106.4
million compared to $18.6 million at June 30, 2009, reflecting improved bond
prices this quarter.

Total average deposits declined $39.7 million, or .3%, during the 3rd quarter of
2009 compared to the previous quarter, but increased $1.7 billion, or 13.9%,
compared to the 3rd quarter of 2008. Compared to the previous quarter, the
decrease in average deposits resulted mainly from a decline of $240.3 million in
average certificate of deposit balances, which was partly offset by growth of
$200.7 million in average money market accounts. During the current quarter, the
Company reduced rates on certain short-term jumbo corporate certificates of
deposit because of improving liquidity which resulted in a decline of $258.9
million in these balances. Excluding this effect, total deposits would have
grown on average by $219.2 million over the previous quarter. The average loans
to deposits ratio in the current quarter was 77.4%, compared to 81.6% in the
previous quarter.

During the current quarter, the Company`s average borrowings decreased $65.5
million compared to the previous quarter. This decrease was partly the result of
a $25.1 million decline in average federal funds purchased and repurchase
agreement balances, combined with a $40.4 million reduction in average advances
from the Federal Home Loan Bank (FHLB).

Net Interest Income

Net interest income (tax equivalent) in the 3rd quarter of 2009 amounted to
$168.4 million, an increase of $6.1 million, or 3.7%, compared with the previous
quarter and an increase of $13.0 million, or 8.3%, compared to the 3rd quarter
of last year. During the 3rd quarter of 2009, the net yield on earning assets
(tax equivalent) was 4.02%, compared with 3.91% in the previous quarter and
4.04% in the same period last year.

The increase of $6.1 million in net interest income (tax equivalent) in the 3rd
quarter of 2009 over the previous quarter was primarily the result of higher
interest income earned on investment securities due to higher average balances,
coupled with lower rates paid on deposits. This increase was offset somewhat by
lower interest income earned on loans due to lower volumes. Interest income on
loans (tax equivalent) decreased by $2.8 million this quarter due to lower
average balances, especially in business and consumer loans. This effect was
partly offset by an increase of $1.0 million due to higher average balances of
consumer credit card loans. Interest income on investment securities increased
$5.9 million (tax equivalent) as a result of a $587.8 million increase in
average balances, mainly in U.S. Treasury inflation-protected (TIPS) and other
asset-backed securities. At September 30, 2009, the Company owned TIPS with a
book value of $372.0 million. During the current quarter, inflation-adjusted
income earned on these bonds amounted to $2.4 million.

Interest expense on deposits declined $2.8 million in the 3rd quarter of 2009
compared with the previous quarter as a result of lower rates paid on virtually
all deposit products, coupled with lower certificate of deposit balances which
carry higher interest rates. Interest expense on borrowings decreased $612
thousand due mainly to lower average balances of FHLB advances.

The tax equivalent yield on interest earning assets in the 3rd quarter of 2009
increased 2 basis points over the previous quarter to 4.93%, while the overall
cost of interest bearing liabilities decreased 10 basis points to 1.02%.

Non-Interest Income

For the 3rd quarter of 2009, total non-interest income amounted to $102.1
million, an increase of $6.5 million compared to $95.6 million in the same
period last year. Also, current quarter non-interest income increased $3.6
million, or 3.6%, compared to $98.6 million recorded in the previous quarter.

Bank card fees for the quarter increased 6.7% over the 3rd quarter of last year,
primarily due to continued growth in transaction fees earned on corporate card
(growth of 26.4%) and debit card (growth of 3.1%) transactions, but continued to
be negatively impacted by lower retail sales affecting both merchant and credit
card fees. Trust fees for the quarter decreased 6.1% from the same period last
year and were flat with the previous quarter, reflecting continued lower asset
values and the effects of low interest rates on money market income. Deposit
account fees decreased slightly from the same period last year, as overdraft
fees were down 9.7%, partly offset by a 26.5% increase in corporate cash
management fees. However, overdraft fee income grew 2.9% when compared to the
previous quarter. Bond trading income for the current quarter totaled $4.8
million, an increase of 85.6% over the same period last year, due to higher
sales of fixed income securities to correspondent banks and corporate customers.
During the quarter, the Company sold $221.1 million of student loans held for
sale and recorded a pre-tax gain of $4.4 million.

Investment Securities Gains and Losses

Net securities losses amounted to $945 thousand in the 3rd quarter of 2009,
compared to net losses of $2.8 million in the previous quarter and net gains of
$1.1 million in the same quarter last year. During the current quarter, the
Company recorded additional credit-related impairment losses of $1.5 million on
certain non-agency guaranteed mortgage-backed securities identified as other
than temporarily impaired. The noncredit-related loss on these securities, which
was recorded in other comprehensive income, was $2.0 million. At September 30,
2009, the par value of these bonds identified as other than temporarily impaired
totaled $137.8 million, compared to $102.3 million at June 30, 2009.

The current quarter also included pre-tax gains of $519 thousand, most of which
related to private equity investments of the Company. Minority interest expense
related to this activity totaled $255 thousand and is included in
non-controlling interest in the income statement.

Non-Interest Expense

Non-interest expense for the current quarter amounted to $154.5 million, a
decrease of $5.5 million compared with amounts recorded in the previous quarter
and a decrease of $30.0 million compared to the same period last year.
Non-interest expense for the previous quarter included costs for an FDIC special
assessment of $8.0 million that did not reoccur in the current quarter.
Additionally during the 3rd quarter of 2008, the Company recorded a loss on the
purchase of auction rate securities totaling $33.0 million. Compared to the 3rd
quarter of last year, salaries and benefits expense increased $3.5 million, or
4.2%, resulting mainly from higher medical and pension costs, coupled with
increased incentives paid on certain capital markets activities. Full-time
equivalent employees totaled 5,148 and 5,202 at September 30, 2009 and 2008,
respectively.

Compared with the 3rd quarter of last year, supplies and communication costs
declined 13.1% and occupancy costs were down .9%. Marketing costs were slightly
lower than in the previous year, while data processing and software costs
increased 8.9% as a result of higher costs for several new software and
servicing systems put in place this year. FDIC insurance expense increased $4.3
million over the same quarter last year due to higher insurance rates assessed.
Included in non-interest expense in the current quarter was a reduction of $2.5
million in certain Visa, Inc. (Visa) indemnification costs, compared to net
costs of $2.9 million for Visa obligations in the 3rd quarter of 2008.

Income Taxes

The effective tax rate for the Company was 31.2% for the current quarter,
compared with 29.2% in the previous quarter and 27.9% in the 3rd quarter of
2008.

Credit Quality

Net loan charge-offs for the 3rd quarter of 2009 amounted to $30.9 million,
compared with $36.0 million in the prior quarter and $18.7 million in the
3rdquarter of last year. The decrease in net loan charge-offs in the 3rd quarter
of 2009 compared to the previous quarter was mainly the result of a decline in
losses on construction loans of $5.9 million, coupled with lower consumer
banking losses of $2.0 million and lower consumer credit card losses. Net loan
charge-offs on business loans increased by $2.2 million over the previous
quarter. Combined net loan charge-offs for business, business real estate and
construction loans this quarter totaled $10.3 million compared to $13.8 million
in both the 1st and 2nd quarters of 2009. The ratio of annualized net loan
charge-offs to total average loans was 1.17% in the current quarter compared to
1.33% in the previous quarter.

For the 3rd quarter of 2009, annualized net charge-offs on average consumer
credit card loans decreased to 6.85%, compared with 7.60% in the previous
quarter and 4.19% in the same period last year. Consumer loan net charge-offs
for the quarter amounted to 1.82% of average consumer loans, compared to 2.27%
in the previous quarter and 1.40% in the same quarter last year. The provision
for loan losses for the current quarter totaled $35.4 million, and was $5.8
million lower than the previous quarter. However, the Company increased the
allowance for loan losses by $4.5 million this quarter to $190.5 million, or
1.85% of total loans, excluding loans held for sale. The allowance for loan loss
balance was 157% of total non-accrual loans.

At September 30, 2009, total non-performing assets amounted to $129.2 million, a
decrease of $2.5 million from the previous quarter, and represented 1.26% of
loans outstanding. Non-performing assets are comprised of non-accrual loans
($121.7 million) and foreclosed real estate ($7.5 million). At September 30,
2009, the balance of non-accrual loans included residential construction loans
of $67.4 million, business real estate loans of $19.9 million and business loans
of $24.1 million. Loans past due more than 90 days and still accruing interest
totaled $45.6 million at September 30, 2009, but included $15.3 million in
guaranteed student loans that the Company intends to hold to maturity.

Other

The Company`s purchases of treasury stock during the current quarter were not
significant and related mainly to employee stock option activity. In conjunction
with the Company`s previously announced at-the-market offering, the Company
issued 1,845,621 shares of its common stock during the 3rd quarter of 2009.
Gross proceeds from these sales during the quarter were $63.6 million, with an
average sale price of $34.48 per share. Commissions paid to the sales agent for
the sale of these shares were $955 thousand. After payment of commissions and
SEC, legal, and accounting fees relating to the offering during the 3rd quarter
of 2009, net proceeds totaled $62.7 million, with average net sale proceeds of
$33.96 per share. On July 31, 2009, the Company terminated its Equity
Distribution Agreement related to this offering and no further shares were
issued.

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 statements.

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

Copyright Business Wire 2009