Commerce Bancshares, Inc. Announces Second Quarter Earnings Per Share of $.71

http://www.businesswire.com/news/home/20100715005501/en

KANSAS CITY, Mo.--(Business Wire)--
Commerce Bancshares, Inc. (NASDAQ:CBSH) announced earnings of $.71 per share for
the three months ended June 30, 2010 compared to $.53 per share in the previous
quarter and $.46 per share in the second quarter of 2009.Net income for the
second quarter amounted to $59.7 million compared to $44.2 million in the
previous quarter and $37.0 million in the same period last year.For the quarter,
the return on average assets totaled 1.33%, the return on average equity was
12.2% and the efficiency ratio was 58.5%.

For the six months ended June 30, 2010, earnings per share totaled $1.24
compared to $.84 per share for the first six months of 2009, an increase of
47.6%.Net income amounted to $103.9 million for the first six months of 2010
compared with $67.8 million for the same period last year, or an increase of
$36.1 million.

In announcing these results, David W. Kemper, Chairman and CEO, said, "We are
pleased to report strong second quarter earnings resulting from 3.8% core
revenue growth, a $19.0 million decline in our provision for loan losses, and a
2.5% decrease in non-interest expense when compared to the same quarter last
year.While the economy remains uncertain and customer loan demand continues to
be weak, net interest income grew $5.7 million, or 3.6%, this quarter compared
to the same period last year, with our net interest margin stable at 4.0%.
Non-interest income increased 3.1% over the same period last year resulting from
higher bankcard fees, which grew by 25.1% reflecting strong growth in corporate,
debit and merchant fee income. Additionally, trust fee income increased by
5.2%.Average loans continued to decline this quarter as credit demand remains
low from both consumer and corporate borrowers, while average deposits increased
by 3.0%, or $423 million, over the previous quarter due to growth in both
corporate and consumer deposit balances."

Mr. Kemper continued, "During the quarter, net loan charge-offs totaled $22.2
million, a decrease of $9.1 million from the previous quarter, while total
non-performing assets declined $6.9 million from the previous quarter to $103.2
million.The provision for loan losses matched our net loan charge-offs this
quarter and our allowance for loan losses was unchanged at $197.5 million,
representing 1.9 times non-performing assets.Our capital and liquidity positions
continued to strengthen, as the ratio of tangible common equity to assets
increased to 10.1% compared to 10.0% in the prior quarter, while our loans to
deposits ratio decreased to 72.0% compared to 75.0% in the prior quarter."

Total assets at June 30, 2010 were $18.4 billion, total loans were $10.2
billion, and total deposits were $14.5 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) 3/31/10 6/30/10 6/30/09
Non-Accrual Loans $95,749 $90,267 $122,648
Foreclosed Real Estate $14,334 $12,920 $9,039
Total Non-Performing Assets $110,083 $103,187 $131,687
Non-Performing Assets to Loans 1.12% 1.06% 1.23%
Non-Performing Assets to Total Assets .61% .56% .74%
Loans 90 Days & Over Past Due - Still Accruing $42,583 $42,315 $39,968

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

For additional information, contact
Jeffery Aberdeen, Controller
at PO Box 419248, Kansas City, MO
or by telephone at (816) 234-2081
Website:http://www.commercebank.com
Email: mymoney@commercebank.com

COMMERCE BANCSHARES, INC. and SUBSIDIARIES
FINANCIAL HIGHLIGHTS

(Unaudited) For the Three Months Ended For the Six Months Ended
March 31 June 30 June 30 June 30 June 30
2010 2010 2009 2010 2009
FINANCIAL SUMMARY (In thousands, except per share data)
Net interest income $ 162,710 $ 163,108 $ 157,445 $ 325,818 $ 307,460
Taxable equivalent net interest income 167,534 167,826 162,323 335,360 316,265
Non-interest income 93,252 101,647 98,562 194,899 190,993
Investment securities gains (losses), net (3,665 ) 660 (2,753 ) (3,005 ) (4,925 )
Provision for loan losses 34,322 22,187 41,166 56,509 84,334
Non-interest expense 155,787 155,982 160,011 311,769 312,897
Net income 44,170 59,734 36,968 103,904 67,804
Cash dividends 19,600 19,615 18,515 39,215 36,774
Net total loan charge-offs 31,264 22,187 36,033 53,451 70,952
Business charge-offs 267 2,223 2,378 2,490 6,220
Real estate - construction and land charge-offs 10,966 480 10,373 11,446 19,599
Real estate - business charge-offs 431 1,022 1,033 1,453 1,809
Consumer credit card charge-offs 13,065 12,338 13,214 25,403 23,977
Consumer charge-offs 5,524 4,743 8,476 10,267 17,809
Home equity charge-offs 580 650 96 1,230 396
Student charge-offs 3 - 2 3 2
Real estate - personal charge-offs 201 515 215 716 760
Overdraft charge-offs 227 216 246 443 380
Per common share:
Net income - basic $ 0.53 $ 0.72 $ 0.46 $ 1.25 $ 0.84
Net income - diluted $ 0.53 $ 0.71 $ 0.46 $ 1.24 $ 0.84
Cash dividends $ 0.235 $ 0.235 $ 0.229 $ 0.470 $ 0.457
Diluted wtd. average shares o/s 83,326 83,385 80,524 83,355 80,168
RATIOS
Average loans to deposits (1) 74.98 % 71.96 % 81.58 % 73.44 % 84.32 %
Return on total average assets 1.00 % 1.33 % 0.84 % 1.16 % 0.79 %
Return on total average equity 9.32 % 12.21 % 8.91 % 10.79 % 8.38 %
Non-interest income to revenue (2) 36.43 % 38.39 % 38.50 % 37.43 % 38.32 %
Efficiency ratio (3) 60.49 % 58.48 % 62.15 % 59.47 % 62.36 %
AT PERIOD END
Book value per share based on total equity $ 23.13 $ 23.85 $ 20.99
Market value per share $ 41.14 $ 35.99 $ 30.31
Allowance for loan losses as a percentage of loans 2.01 % 2.03 % 1.74 %
Tier I leverage ratio 9.81 % 10.01 % 9.08 %
Tangible equity to assets ratio (4) 9.99 % 10.15 % 8.85 %
Common shares outstanding 83,313,676 83,371,031 80,901,659
Shareholders of record 4,411 4,369 4,503
Number of bank/ATM locations 373 373 373
Full-time equivalent employees 5,094 5,051 5,181

OTHER QTD INFORMATION
High market value per share $ 41.86 $ 43.22 $ 37.38
Low market value per share $ 37.55 $ 35.52 $ 28.31

(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 Six Months Ended
(In thousands, except per share data) March 31 June 30 June 30 June 30 June 30
2010 2010 2009 2010 2009
Interest income $ 188,069 $ 185,057 $ 198,992 $ 373,126 $ 392,866
Interest expense 25,359 21,949 41,547 47,308 85,406
Net interest income 162,710 163,108 157,445 325,818 307,460
Provision for loan losses 34,322 22,187 41,166 56,509 84,334
Net interest income after provision for loan losses 128,388 140,921 116,279 269,309 223,126

NON-INTEREST INCOME
Bank card transaction fees 32,490 37,659 30,105 70,149 57,273
Deposit account charges and other fees 23,981 25,472 26,935 49,453 52,527
Trust fees 19,318 20,358 19,355 39,676 38,228
Bond trading income 5,004 5,387 6,538 10,391 12,342
Consumer brokerage services 2,117 2,372 2,826 4,489 5,726
Loan fees and sales 1,839 3,472 3,733 5,311 6,694
Other 8,503 6,927 9,070 15,430 18,203
Total non-interest income 93,252 101,647 98,562 194,899 190,993

INVESTMENT SECURITIES GAINS (LOSSES), NET
Impairment (losses) reversals on debt securities 1,295 4,415 (10,080 ) 5,710 (31,965 )
Less noncredit-related losses (reversals) on securities not expected to be sold (2,752 ) (5,091 ) 9,286 (7,843 ) 30,618
Net impairment losses (1,457 ) (676 ) (794 ) (2,133 ) (1,347 )
Realized gains (losses) on sales and fair value adjustments (2,208 ) 1,336 (1,959 ) (872 ) (3,578 )
Investment securities gains (losses), net (3,665 ) 660 (2,753 ) (3,005 ) (4,925 )

NON-INTEREST EXPENSE
Salaries and employee benefits 87,438 87,108 86,279 174,546 173,032
Net occupancy 12,098 11,513 11,088 23,611 22,900
Equipment 5,901 5,938 6,255 11,839 12,577
Supplies and communication 7,338 6,829 8,249 14,167 16,933
Data processing and software 16,606 17,497 15,007 34,103 29,354
Marketing 4,718 5,002 4,906 9,720 9,253
Deposit insurance 4,750 4,939 12,969 9,689 17,075
Other 16,938 17,156 15,258 34,094 31,773
Total non-interest expense 155,787 155,982 160,011 311,769 312,897
Income before income taxes 62,188 87,246 52,077 149,434 96,297
Less income taxes 18,377 27,428 15,257 45,805 28,849
Net income before non-controlling interest 43,811 59,818 36,820 103,629 67,448
Less non-controlling interest expense (income) (359 ) 84 (148 ) (275 ) (356 )
Net income $ 44,170 $ 59,734 $ 36,968 $ 103,904 $ 67,804

Net income per common share - basic $ 0.53 $ 0.72 $ 0.46 $ 1.25 $ 0.84
Net income per common share - diluted $ 0.53 $ 0.71 $ 0.46 $ 1.24 $ 0.84

COMMERCE BANCSHARES, INC. and SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

(Unaudited) March 31 June 30 June 30
(In thousands) 2010 2010 2009
ASSETS
Loans $ 9,834,540 $ 9,735,049 $ 10,699,674
Allowance for loan losses (197,538 ) (197,538 ) (186,001 )
Net loans 9,637,002 9,537,511 10,513,673
Loans held for sale 541,104 489,826 388,706
Investment securities:
Available for sale 6,256,242 6,649,890 5,156,343
Trading 26,888 17,245 17,259
Non-marketable 122,508 107,343 133,925
Total investment securities 6,405,638 6,774,478 5,307,527
Federal funds sold and securities purchased under agreements to resell 500 9,300 40,155
Interest earning deposits with banks 7,818 302,354 8,318
Cash and due from banks 345,078 339,990 376,051
Land, buildings and equipment - net 396,296 393,133 406,612
Goodwill 125,585 125,585 125,585
Other intangible assets - net 13,419 12,278 15,849
Other assets 563,757 394,856 537,567
Total assets $ 18,036,197 $ 18,379,311 $ 17,720,043

LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Non-interest bearing demand $ 1,583,090 $ 1,666,649 $ 1,517,398
Savings, interest checking and money market 9,496,969 9,631,428 8,281,652
Time open and C.D.'s of less than $100,000 1,733,534 1,677,251 2,137,049
Time open and C.D.'s of $100,000 and over 1,191,166 1,510,819 1,770,243
Total deposits 14,004,759 14,486,147 13,706,342
Federal funds purchased and securities sold under agreements to repurchase 998,773 1,006,356 1,174,121
Other borrowings 731,507 363,997 847,108
Other liabilities 373,723 534,197 294,163
Total liabilities 16,108,762 16,390,697 16,021,734
Stockholders' equity:
Preferred stock --- --- ---
Common stock 417,315 417,617 385,812
Capital surplus 859,849 862,965 655,020
Retained earnings 593,102 633,221 664,189
Treasury stock (2,052 ) (2,153 ) (823 )
Accumulated other comprehensive income (loss) 58,088 75,797 (7,928 )
Total stockholders' equity 1,926,302 1,987,447 1,696,270
Non-controlling interest 1,133 1,167 2,039
Total equity 1,927,435 1,988,614 1,698,309
Total liabilities and equity $ 18,036,197 $ 18,379,311 $ 17,720,043

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

(Unaudited) For the Three Months Ended
(Dollars in thousands) March 31, 2010 June 30, 2010 June 30, 2009
Avg. Rates Avg. Rates Avg. Rates
Average Earned/ Average Earned/ Average Earned/
ASSETS: Balance Paid Balance Paid Balance Paid
Loans:
Business (A) $ 2,830,429 3.83 % $ 2,880,616 3.93 % $ 3,259,712 3.81 %
Real estate - construction and land 633,726 4.01 568,417 3.90 750,983 3.50
Real estate - business 2,088,111 5.00 2,028,799 5.08 2,174,443 5.05
Real estate - personal 1,526,254 5.35 1,484,155 5.25 1,596,413 5.55
Consumer 1,306,507 6.94 1,270,243 6.72 1,497,806 6.87
Home equity 488,492 4.31 482,847 4.32 498,083 4.33
Student 328,725 2.28 322,010 2.38 347,239 2.61
Consumer credit card 762,925 12.58 737,798 12.32 697,542 12.70
Overdrafts 7,601 - 6,817 - 8,603 -
Total loans (B) 9,972,770 5.37 9,781,702 5.33 10,830,824 5.27
Loans held for sale 483,763 1.60 557,032 1.63 513,789 1.53
Investment securities:
U.S. government & federal agency 606,148 2.16 668,454 3.00 158,664 3.03
State & municipal obligations (A) 898,495 5.04 893,224 4.87 906,402 5.22
Mortgage and asset-backed securities 4,456,990 3.69 4,389,863 3.47 3,649,150 4.66
Other marketable securities (A) 181,123 4.67 192,647 4.55 193,280 5.40
Total available for sale securities (B) 6,142,756 3.77 6,144,188 3.66 4,907,496 4.74
Trading securities (A) 13,787 2.91 19,545 2.93 19,273 3.12
Non-marketable securities (A) 123,435 5.91 113,601 4.26 138,405 3.65
Total investment securities 6,279,978 3.81 6,277,334 3.67 5,065,174 4.70
Federal funds sold and securities purchased under agreements to resell 7,224 0.84 6,840 0.76 25,853 0.56
Interest earning deposits with banks 108,137 0.24 321,763 0.25 212,930 0.10
Total interest earning assets 16,851,872 4.64 16,944,671 4.49 16,648,570 4.91
Non-interest earning assets (B) 1,110,052 1,113,372 926,055
Total assets $ 17,961,924 $ 18,058,043 $ 17,574,625

LIABILITIES AND EQUITY:
Interest bearing deposits:
Savings $ 461,244 0.10 $ 490,463 0.11 $ 451,900 0.15
Interest checking and money market 9,447,420 0.30 9,871,640 0.31 8,460,468 0.37
Time open & C.D.'s of less than $100,000 1,766,189 1.56 1,702,895 1.43 2,129,991 2.74
Time open & C.D.'s of $100,000 and over 1,323,701 1.20 1,323,064 1.08 2,003,537 1.98
Total interest bearing deposits 12,998,554 0.56 13,388,062 0.52 13,045,896 1.00
Borrowings:
Federal funds purchased and securities sold under agreements to repurchase 1,165,618 0.29 1,026,763 0.32 962,804 0.35
Other borrowings (C) 734,921 3.70 502,191 3.02 873,596 3.79
Total borrowings 1,900,539 1.61 1,528,954 1.21 1,836,400 1.99
Total interest bearing liabilities 14,899,093 0.69 % 14,917,016 0.59 % 14,882,296 1.12 %
Non-interest bearing demand deposits 946,450 979,768 860,819
Other liabilities 193,998 198,909 167,510
Equity 1,922,383 1,962,350 1,664,000
Total liabilities and equity $ 17,961,924 $ 18,058,043 $ 17,574,625
Net interest income (T/E) $ 167,534 $ 167,826 $ 162,323
Net yield on interest earning assets 4.03 % 3.97 % 3.91 %

(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 Second Quarter Results
June 30, 2010

For the quarter ended June 30, 2010, net income amounted to $59.7 million, an
increase of $22.8 million over the same quarter last year, and an increase of
$15.6 million compared to the previous quarter. For the current quarter, the
return on average assets was 1.33%, the return on average equity was 12.2%, and
the efficiency ratio was 58.5%. Compared to the same quarter last year, net
interest income (tax equivalent) increased by $5.5 million to $167.8 million,
while non-interest income increased by $3.1 million to $101.6 million.
Non-interest expense for the quarter totaled $156.0 million, a decrease of $4.0
million, or 2.5%, from the same period last year. The provision for loan losses
totaled $22.2 million, representing a decline of $19.0 million from the amount
recorded in the same quarter last year.

Balance Sheet Review

During the 2nd quarter of 2010, average loans, excluding loans held for sale,
decreased $191.1 million, or 1.9%, compared to the previous quarter. Also, these
same loans decreased $1.0 billion, or 9.7%, 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 loan balances in all categories except business
loans, which grew on average by $50.2 million. The growth in business loans
resulted from seasonal borrowings on several larger loans in addition to new
loans made this quarter.

During the 2nd quarter of 2010, average construction and business real estate
loans declined $65.3 million and $59.3 million, respectively, while average
personal real estate loans declined $42.1 million. Average consumer loans,
consisting mainly of automobile and marine and RV loans, declined $36.3 million
as loan pay-downs, mostly from marine and RV loans, exceeded new loan
originations. Average credit card balances declined $25.1 million from the
previous quarter; however, period end balances of consumer credit card loans
totaled $775.7 million, an increase of $15.2 million over the previous quarter.
The average balance of loans held for sale (comprised mostly of student loans)
increased $73.3 million this quarter due to new loan originations, but reflected
sales of student loans totaling $95.1 million, most of which occurred late in
the quarter. It is expected that nearly all held for sale student loans will be
sold later this year, and regulatory changes effective 7/1/10 will preclude the
Company from continuing to make federally guaranteed student loans.

Total available for sale investment securities (excluding fair value
adjustments) averaged $6.1 billion this quarter, up slightly compared to the
previous quarter. Declines in average municipal securities and mortgage and
asset-backed securities were offset by growth in U.S. government and agency
securities, which grew by $62.3 million on average this quarter. At June 30,
2010 the duration of the investment portfolio was 1.6 years and maturities of
approximately $1.9 billion are expected to occur during the next 12 months.

Total average deposits increased $422.8 million, or 3.0%, during the 2nd quarter
of 2010 compared to the previous quarter. This increase in average deposits
resulted mainly from growth in business demand deposits, money market, and
interest checking accounts of $33.2 million, $384.0 million, and $40.2 million,
respectively. Average certificates of deposit, however, declined by $63.9
million in total. Growth in consumer deposits represented approximately 64% of
the overall deposit growth this quarter. The average loans to deposits ratio in
the current quarter was 72.0%, compared to 75.0% in the previous quarter.

During the current quarter, the Company`s average borrowings decreased $371.6
million compared to the previous quarter. This decrease was mainly due to
current quarter maturities of Federal Home Loan Bank (FHLB) advances totaling
$300.4 million, which had a weighted average rate of 4.8%. Federal funds
purchased and repurchase agreements also declined on average by $138.9 million.

Net Interest Income

Net interest income (tax equivalent) in the 2nd quarter of 2010 amounted to
$167.8 million, an increase of $292 thousand compared with the previous quarter,
and an increase of $5.5 million compared to the 2nd quarter of last year. During
the 2nd quarter of 2010, the net yield on earning assets (tax equivalent) was
3.97%, compared with 4.03% in the previous quarter and 3.91% in the same period
last year.

The slight increase in net interest income (tax equivalent) in the 2nd quarter
of 2010 over the previous quarter was primarily due to lower interest costs on
other borrowings and deposits, but offset by lower interest earned on average
loans and investment securities. The decrease in interest earned on loans this
quarter was mainly due to lower average balances on most loan products, except
business loans, coupled with small changes in rates earned. Interest on business
loans (tax equivalent) grew by $1.4 million over the previous quarter due to
higher average balances and higher rates earned, especially on those variable
rate loans based on LIBOR indices. Interest income on investment securities (tax
equivalent) decreased $1.5 million as rates earned on investment securities
declined 14 basis points to an average yield of 3.67%, while the average balance
was consistent with the previous quarter. At June 30, 2010, the Company held
Treasury inflation-protected securities with a book value of $426.6 million.
During the current quarter, inflation-adjusted income earned on these bonds
amounted to $2.6 million compared to $982 thousand in the previous quarter.

Interest expense on deposits declined $502 thousand in the 2nd quarter of 2010
compared with the previous quarter as a result of lower rates paid on virtually
all deposit products, coupled with lower average CD balances which carry higher
interest rates. Higher average balances for money market, interest checking and
savings accounts increased expense this quarter by $395 thousand. Interest
expense on borrowings decreased $2.9 million, due mainly to lower average
balances and lower rates paid on FHLB advances discussed above.

The tax equivalent yield on interest earning assets in the 2nd quarter of 2010
decreased 15 basis points from the previous quarter to 4.49%, while the overall
cost of interest bearing liabilities decreased 10 basis points to .59%.

Non-Interest Income

For the 2nd quarter of 2010, total non-interest income amounted to $101.6
million, an increase of $3.1 million compared to $98.6 million in the same
period last year. Also, current quarter non-interest income increased $8.4
million compared to $93.3 million recorded in the previous quarter.

Bank card fees for the current quarter increased 25.1% over the 2nd quarter of
last year due to continued growth in transaction fees earned on corporate card
(growth of 64.9%), merchant (growth of 12.1%) and debit card (growth of 14.0%)
transactions. The growth in corporate card fees continued to result from both
new customer transactions and increased volumes from existing customers. Debit
card fees in the 2nd quarter comprised 38.7% of total bankcard fees while
corporate card fees comprised 33.2% of total fees. Trust fees for the quarter
were up 5.2% compared to the same period last year, and resulted from growth in
both personal and institutional trust business, but continued to be negatively
affected by low interest rates on money market investments held in trust
accounts.

Deposit account fees decreased 5.4% from the 2nd quarter of 2009, as overdraft
fees were down 7.8%. However, overdraft fees showed seasonal growth of $1.8
million when compared to the previous quarter. Corporate cash management fees,
which comprised 32% of total deposit account fees in the current quarter, were
essentially flat compared to the same period in the previous year. Effective
July 1, 2010, the Company implemented new overdraft regulations on debit
transactions which are expected to reduce overdraft fees during the 2nd half of
2010 by as much as $13 million.

Bond trading income for the current quarter totaled $5.4 million, a decrease of
17.6% from the same period last year. Loan fees and sales totaled $3.5 million
this quarter, down somewhat from last year, and included gains of $1.5 million
on sales of $95.1 million of student loans. Also included in other income was an
impairment charge of $969 thousand on a downtown Kansas City office building
which is vacant and held for sale.

Investment Securities Gains and Losses

Net securities gains amounted to $660 thousand in the 2nd quarter of 2010,
compared to net losses of $3.7 million in the previous quarter and net losses of
$2.8 million in the same quarter last year. During the current quarter, the
Company recorded additional credit-related impairment losses of $676 thousand on
certain non-agency guaranteed mortgage-backed securities identified as other
than temporarily impaired, compared to $794 thousand in the 2nd quarter of 2009.
The cumulative credit-related impairment reserve on these bonds totaled $4.6
million at quarter end. At June 30, 2010, the par value of non-agency guaranteed
mortgage-backed securities identified as other than temporarily impaired totaled
$178.0 million, compared to $171.6 million at December 31, 2009.

The current quarter also included a pre-tax gain of $1.3 million, mainly due to
sales of certain investment securities from the Company`s available for sale
investment portfolio.

Non-Interest Expense

Non-interest expense for the current quarter amounted to $156.0 million, an
increase of $195 thousand over the previous quarter and a decrease of $4.0
million, or 2.5%, compared to the same period last year. The decrease from last
year was mainly due to a reduction of $8.0 million in FDIC insurance costs, in
addition to other reductions in supplies and communication and equipment costs.
A special assessment by the FDIC of $8.0 million occurred in the 2nd quarter of
2009 which did not reoccur in 2010. Compared to the 2nd quarter of last year,
salaries and benefits expense was well controlled, increasing only $829
thousand, or 1.0%, but included additional 401K plan expense of $1.6 million
tied to improved Company performance. Full-time equivalent employees totaled
5,051 and 5,181 at June 30, 2010 and 2009, respectively.

Compared with the 2nd quarter of last year, supplies and communication costs
declined 17.2% and equipment costs were down 5.1%. Marketing costs increased
2.0% over the same period last year, while data processing and software costs
increased 16.6% as a result of higher costs for bankcard processing fees
(related to higher bankcard revenues), higher student loan servicing costs and
other upgraded IT related systems. Foreclosed real estate property expense this
quarter totaled $857 thousand compared to $154 thousand in the previous year.
Included in other expense was a reduction in the Visa, Inc. (Visa)
indemnification obligation of $1.7 million, which resulted from funding
contributions by Visa to its litigation escrow account.

Income Taxes

The effective tax rate for the Company was 31.5% for the current quarter,
compared with 29.4% in the previous quarter and 29.2% in the 2nd quarter of
2009.

Credit Quality

Net loan charge-offs for the 2nd quarter of 2010 amounted to $22.2 million,
compared with $31.3 million in the prior quarter and $36.0 million in the 2nd
quarter of last year. The $9.1 million decrease in net loan charge-offs in the
2nd quarter of 2010 compared to the previous quarter was mainly the result of
lower loan losses on construction loans of $10.5 million, coupled with lower
losses on consumer banking and consumer credit card loans of $781 thousand and
$727 thousand, respectively. Net loan charge-offs on business loans increased
$2.0 million over the previous quarter but remained low at .31% of average
business loans outstanding. The ratio of annualized net loan charge-offs to
total average loans was .91% in the current quarter compared to 1.27% in the
previous quarter.

For the 2nd quarter of 2010, annualized net charge-offs on average consumer
credit card loans amounted to 6.71%, compared with 6.95% in the previous quarter
and 7.60% in the same period last year. Consumer loan net charge-offs for the
quarter amounted to 1.50% of average consumer loans, compared to 1.71% in the
previous quarter and 2.27% in the same quarter last year. The provision for loan
losses for the current quarter totaled $22.2 million, matching net loan
charge-offs, and was $12.1 million lower than the previous quarter. The
allowance for loan losses, which was unchanged from the previous quarter,
totaled $197.5 million, or 2.03% of total loans, excluding loans held for sale.
At June 30, 2010, the allowance for loan losses was 219% of total non-accrual
loans.

At June 30, 2010, total non-performing assets amounted to $103.2 million, a
decrease of $6.9 million from the previous quarter, and represented 1.06% of
loans outstanding. Non-performing assets are comprised of non-accrual loans
($90.3 million) and foreclosed real estate ($12.9 million). At June 30, 2010,
the balance of non-accrual loans included construction and land loans of $53.3
million, business real estate loans of $17.5 million and business loans of $10.9
million. Loans past due more than 90 days and still accruing interest totaled
$42.3 million at June 30, 2010, but included $17.1 million in federally
guaranteed student loans.

Other

The Company`s purchases of treasury stock during the current quarter were not
significant and related mainly to employee stock option activity.

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 2010