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Commerce Bancshares Inc.$55.98($1.34)(2.34%)

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 Commerce Bancshares, Inc. Announces Fourth Quarter Earnings Per Common Share of $.68
   Wednesday, January 18, 2017 7:00:01 AM ET

Commerce Bancshares, Inc. (CBSH ) announced earnings of $.68 per common share for the three months ended December 31, 2016, compared to $.65 per share in the prior quarter and $.60 per share in the fourth quarter of 2015. Net income attributable to Commerce Bancshares, Inc. for the fourth quarter amounted to $71.6 million, compared to $68.5 million in the prior quarter and $63.7 million in the same quarter last year. For the quarter, the return on average assets was 1.14%, the return on average common equity was 11.5%, and the efficiency ratio was 61.8%.

For the year ended December 31, 2016, earnings per common share totaled $2.61 compared to $2.43 in 2015, or an increase of 7.4%. Net income attributable to Commerce Bancshares, Inc. amounted to $275.4 million for the year ended December 31, 2016, compared to $263.7 million in 2015. In 2016, the return on average assets was 1.12%, and the return on average common equity was 11.3%.



In announcing these results, David W. Kemper, Chairman and CEO, said, "Overall, Commerce saw strong performance in 2016, with loan growth of 8% and growth in earnings per share of 7%. Loan growth was solid this quarter, as average loans grew $231 million, or 7% annualized. This increase resulted from higher business real estate loan demand, coupled with good growth in residential mortgage and other consumer loans. Average deposits grew $388 million this quarter, or 8% annualized, reflecting expected seasonal growth. Net interest income increased 7% over the fourth quarter of 2015, reflecting growth in loan and investment securities interest income and stable funding costs, and we remain well positioned for improved margins, should interest rates rise in 2017. Non-interest income this quarter grew 3% compared to the same period last year on continued growth in trust, sweep, deposit and swap fees. Non-interest expense was flat with the prior quarter but was up 3% over the same period last year."

Mr. Kemper added, "We continue to maintain strong capital and liquidity levels. Credit quality across our entire loan portfolio remains excellent, with low credit losses and delinquency rates and declining non-performing assets. Net loan charge-offs totaled $9.0 million this quarter, compared to $6.6 million in the previous quarter, with the increase largely due to lower commercial loan recoveries this quarter and slightly higher consumer net loan charge-offs. During the current quarter, the provision for loan losses totaled $10.4 million, or $1.4 million higher than net loan charge-offs. The allowance for loan losses increased to $155.9 million at December 31, 2016, or 1.16% of period end loans. Total non-performing assets decreased $1.9 million from the previous quarter to $14.6 million this quarter."

Total assets at December 31, 2016 were $25.6 billion, total loans were $13.4 billion, and total deposits were $21.1 billion. During the quarter, the Company signed an agreement to purchase a new core deposit system from Temenos Group AG which is expected to be implemented in 2019. In the fourth quarter of 2016, the Company distributed a 5% stock dividend on its common stock. The Company also paid a cash dividend of $.214 per common share, as restated for the 5% stock dividend, and an annualized 6% cash dividend on its preferred stock this quarter.

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 340 locations in Missouri, Illinois, Kansas, Oklahoma and Colorado. The Company also has operating subsidiaries involved in credit related insurance and private equity activities.

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

For additional information, contact Jeffery Aberdeen, Controller at 1000 Walnut Street, Suite 700 Kansas City, MO 64106 or by telephone at (816) 234-2081 Web Site: http://www.commercebank.com Email: mymoney@commercebank.com

 
                                                                                                                                                                                                                COMMERCE BANCSHARES, INC. and SUBSIDIARIES
                                                                                                                                                                                                                           FINANCIAL HIGHLIGHTS
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
 
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                For the Three Months Ended                                                                                                                                            For the Year Ended
(Unaudited)                                                               December 31,                              September 30,                             December 31,                                                                    December 31,                              December 31,
(Dollars in thousands, except per share                                                                             2016                                                                            2016                                                                            2015                                                                            2016                                                                            2015
data)
-------------------------------------------------------- -------------------- -------------------- -----------------------------------   -------------------- -------------------- -----------------------------------   -------------------- -------------------- -----------------------------------                                             -----------------------------------   -------------------- -------------------- ------------------------------------
FINANCIAL SUMMARY                                                                                                                                                                                                                                                                                                                                                                           
Net interest income                                                                                        $173,202                                  $171,243                                  $162,487                                                                        $680,049                                                                         $634,320
Non-interest income                                                                                         119,479                119,319                116,042                                                      474,392                 448,139  
                                                                                                   ------------------------------------- -------------------- -------------------- ------------------------------------- -------------------- -------------------- -------------------------------------                                           ------------------------------------- -------------------- -------------------- --------------------------------------
    Total revenue                                                                                           292,681                                                                         290,562                                                                         278,529                                                                       1,154,441                                                                        1,082,459
Investment securities gains (losses), net                                                                     3,651                                                                          (1,965 )                                                                        (1,480 )                                                                           (53 )                                                                          6,320
Provision for loan losses                                                                                    10,400                                                                           7,263                                                                           9,186                                                                          36,318                                                                           28,727
Non-interest expense                                                                                        181,261                181,242                175,777                                                      717,065                 676,487  
                                                                                                   ------------------------------------- -------------------- -------------------- ------------------------------------- -------------------- -------------------- -------------------------------------                                           ------------------------------------- -------------------- -------------------- --------------------------------------
    Income before taxes                                                                                     104,671                                                                         100,092                                                                          92,086                                                                         401,005                                                                          383,565
Income taxes                                                                                                 32,297                                                                          30,942                                                                          27,661                                                                         124,151                                                                          116,590
Non-controlling interest expense (income)                                                                       795                    605                    715                                                        1,463                   3,245  
                                                                                                   ------------------------------------- -------------------- -------------------- ------------------------------------- -------------------- -------------------- -------------------------------------                                           ------------------------------------- -------------------- -------------------- --------------------------------------
    Net income attributable to Commerce Bancshares, Inc.                                                     71,579                                                                          68,545                                                                          63,710                                                                         275,391                                                                          263,730
Preferred stock dividends                                                                                     2,250                  2,250                  2,250                                                        9,000                   9,000  
                                                                                                   ------------------------------------- -------------------- -------------------- ------------------------------------- -------------------- -------------------- -------------------------------------                                           ------------------------------------- -------------------- -------------------- --------------------------------------
    Net income available to common shareholders                                                             $69,329                $66,295                $61,460                                                     $266,391                $254,730  
                                                                                                   ===================================== ==================== ==================== ===================================== ==================== ==================== =====================================                                           ===================================== ==================== ==================== ======================================
Earnings per common share:
    Net income -- basic                                                                            $.68                                                                            $.65                                                                            $.60                                                                           $2.62                                                                            $2.44
    Net income -- diluted                                                                          $.68                                                                            $.65                                                                            $.60                                                                           $2.61                                                                            $2.43
Effective tax rate                                                                                            31.09 %                                                                         31.10 %                                                                         30.27 %                                                                         31.07 %                                                                          30.66 %
Tax equivalent net interest income                                                                         $181,301                                                                        $179,115                                                                        $170,141                                                                        $711,433                                                                         $664,038
Average total interest earning assets (1)                                                              $ 23,775,165                                                                    $ 23,150,832                                                                    $ 22,948,756                                                                    $ 23,378,121                                                                     $ 22,621,052
Diluted wtd. average shares outstanding                           100,558,345            100,452,911            101,310,405                                                  100,498,696             103,192,753  
======================================================== ==================== ==================== ===================================== ==================== ==================== ===================================== ==================== ==================== =====================================                                           ===================================== ==================== ==================== ======================================
                                                                                                                                                                                                                                                                                                                                                                                                                                    
RATIOS
Average loans to deposits (2)                                                                                 64.24                    %                                                      64.33                    %                                                      62.80                    %                                                      63.71                    %                                                       61.44                    %
Return on total average assets                                                                                 1.14                                                                            1.12                                                                            1.05                                                                            1.12                                                                             1.11
Return on average common equity (3)                                                                           11.48                                                                           10.97                                                                           10.88                                                                           11.33                                                                            11.43
Non-interest income to total revenue                                                                          40.82                                                                           41.06                                                                           41.66                                                                           41.09                                                                            41.40
Efficiency ratio (4)                                                                                          61.82                                                                           62.25                                                                           62.97                                                                           61.98                                                                            62.34
Net yield on interest earning assets                                     3.03                   3.08                   2.94                                                         3.04                    2.94  
======================================================== ==================== ==================== ===================================== ==================== ==================== ===================================== ==================== ==================== =====================================                                           ===================================== ==================== ==================== ======================================
                                                                                                                                                                                                                                                                                                                                                                                                                                    
EQUITY SUMMARY
Cash dividends per common share                                                                               $.214                                                                           $.214                                                                           $.204                                                                           $.857                                                                            $.816
Cash dividends on common stock                                                                              $21,776                                                                         $21,772                                                                         $20,920                                                                         $87,070                                                                          $84,961
Cash dividends on preferred stock                                                                            $2,250                                                                          $2,250                                                                          $2,250                                                                          $9,000                  $9,000  
                                                                                                                                                                                                                                                                                                                                                   ===================================== ==================== ==================== ======================================
Book value per common share (5)                                                                              $23.22                                                                          $23.82                                                                          $21.77
Market value per common share (5)                                                                            $57.81                                                                          $46.91                                                                          $40.51
High market value per common share                                                                           $59.22                                                                          $48.86                                                                          $44.86
Low market value per common share                                                                            $45.37                                                                          $43.56                                                                          $39.43
Common shares outstanding (5)                                                                           101,460,962                                                                     101,420,849                                                                     102,087,300
Tangible common equity to tangible assets (6)                                                                  8.66                    %                                                       9.22                    %                                                       8.48                    %
Tier I leverage ratio                                                    9.55                    %                 9.58                    %                 9.23                    %
======================================================== ==================== ==================== ===================================== ==================== ==================== ===================================== ==================== ==================== =====================================
                                                                                                                                                                                                                                                                                                                                                                                                                                    
OTHER QTD INFORMATION
Number of bank/ATM locations                                                                                    336                                                                             340                                                                             346
Full-time equivalent employees                                          4,784                  4,778                  4,770  
======================================================== ==================== ==================== ===================================== ==================== ==================== ===================================== ==================== ==================== =====================================
(1)   Excludes allowance for loan losses and unrealized
                         gains/(losses) on available for sale securities.
(2)                      Includes loans held for sale.
(3)                      Annualized net income available to common shareholders divided
                         by average total equity less preferred stock.
(4)                      The efficiency ratio is calculated as non-interest expense
                         (excluding intangibles amortization) as a percent of revenue.
(5)                      As of period end.
(6)                      The tangible common equity ratio is calculated as stockholders’
                         equity reduced by preferred stock, 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)                                                                    December 31,                                          September 30,                                           June 30,                                              March 31,                                           December 31,                                                                                December 31,                                          December 31,
(In thousands, except per share data)                                                                                    2016                                                                                        2016                                                                                        2016                                                                                        2016                                                                                        2015                                                                                        2016                                                                                        2015
------------------------------------------------------- -------------------- -------------------- -----------------------------------------------   -------------------- -------------------- -----------------------------------------------   -------------------- -------------------- -----------------------------------------------   -------------------- -------------------- -----------------------------------------------   -------------------- -------------------- -----------------------------------------------                                             -----------------------------------------------   -------------------- -------------------- -----------------------------------------------
Interest income                                                                                                       $181,498                                              $179,361                                              $180,065                                              $172,128                                              $169,742                                                                                    $713,052                                              $662,416
Interest expense                                                                                      8,296           8,118           8,236           8,353           7,255                                                33,003          28,096  
                                                                                                  -------------------- ------- -------------------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- -------------------- ------- --------------------                                           -------------------- ------- -------------------- -------------------- -------------------- -------------------- ------- --------------------
Net interest income                                                                                 173,202                                                                  171,243                                                                  171,829                                                                  163,775                                                                  162,487                                                                  680,049                                                                  634,320
Provision for loan losses                                                                            10,400           7,263           9,216           9,439           9,186                                                36,318          28,727  
                                                                                                  -------------------- ------- -------------------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- -------------------- ------- --------------------                                           -------------------- ------- -------------------- -------------------- -------------------- -------------------- ------- --------------------
    Net interest income after provision for loan losses                                             162,802         163,980         162,613         154,336         153,301                                               643,731         605,593  
                                                                                                  -------------------- ------- -------------------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- -------------------- ------- --------------------                                           -------------------- ------- -------------------- -------------------- -------------------- -------------------- ------- --------------------
NON-INTEREST INCOME
Bank card transaction fees                                                                                              45,338                                                                                      47,006                                                                                      45,065                                                                                      44,470                                                                                      46,320                                                                                     181,879                                                                                     178,926
Trust fees                                                                                                              31,360                                                                                      30,951                                                                                      30,241                                                                                      29,243                                                                                      29,622                                                                                     121,795                                                                                     118,437
Deposit account charges and other fees                                                                                  22,134                                                                                      22,241                                                                                      21,328                                                                                      20,691                                                                                      21,606                                                                                      86,394                                                                                      80,416
Capital market fees                                                                                                      2,679                                                                                       2,751                                                                                       2,500                                                                                       2,725                                                                                       3,116                                                                                      10,655                                                                                      11,476
Consumer brokerage services                                                                                              3,409                                                                                       3,375                                                                                       3,491                                                                                       3,509                                                                                       3,254                                                                                      13,784                                                                                      13,784
Loan fees and sales                                                                                                      2,583                                                                                       3,123                                                                                       3,196                                                                                       2,510                                                                                       2,101                                                                                      11,412                                                                                       8,228
Other                                                                                                11,976           9,872          10,749          15,876          10,023                                                48,473          36,872  
                                                                                                  -------------------- ------- -------------------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- -------------------- ------- --------------------                                           -------------------- ------- -------------------- -------------------- -------------------- -------------------- ------- --------------------
    Total non-interest income                                                                       119,479         119,319         116,570         119,024         116,042                                               474,392         448,139  
                                                                                                  -------------------- ------- -------------------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- -------------------- ------- --------------------                                           -------------------- ------- -------------------- -------------------- -------------------- -------------------- ------- --------------------
INVESTMENT SECURITIES GAINS (LOSSES), NET                                                                                3,651                                                                                      (1,965 )                                                                                      (744 )                                                                                      (995 )                                                                                    (1,480 )                                                                                       (53 )                                                                                     6,320
NON-INTEREST EXPENSE
Salaries and employee benefits                                                                                         108,639                                                                                     107,004                                                                                     104,808                                                                                     106,859                                                                                     102,098                                                                                     427,310                                                                                     400,701
Net occupancy                                                                                                           11,529                                                                                      12,366                                                                                      11,092                                                                                      11,303                                                                                      10,981                                                                                      46,290                                                                                      44,788
Equipment                                                                                                                4,884                                                                                       4,842                                                                                       4,781                                                                                       4,634                                                                                       4,915                                                                                      19,141                                                                                      19,086
Supplies and communication                                                                                               5,645                                                                                       5,968                                                                                       5,693                                                                                       6,829                                                                                       6,554                                                                                      24,135                                                                                      22,970
Data processing and software                                                                                            23,390                                                                                      23,663                                                                                      22,770                                                                                      22,899                                                                                      22,274                                                                                      92,722                                                                                      83,944
Marketing                                                                                                                3,431                                                                                       4,399                                                                                       4,389                                                                                       3,813                                                                                       3,539                                                                                      16,032                                                                                      16,107
Deposit insurance                                                                                                        3,443                                                                                       3,576                                                                                       3,143                                                                                       3,165                                                                                       3,145                                                                                      13,327                                                                                      12,146
Other                                                                                                20,300          19,424          20,413          17,971          22,271                                                78,108          76,745  
                                                                                                  -------------------- ------- -------------------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- -------------------- ------- --------------------                                           -------------------- ------- -------------------- -------------------- -------------------- -------------------- ------- --------------------
    Total non-interest expense                                                                      181,261         181,242         177,089         177,473         175,777                                               717,065         676,487  
                                                                                                  -------------------- ------- -------------------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- -------------------- ------- --------------------                                           -------------------- ------- -------------------- -------------------- -------------------- -------------------- ------- --------------------
Income before income taxes                                                                                             104,671                                                                                     100,092                                                                                     101,350                                                                                      94,892                                                                                      92,086                                                                                     401,005                                                                                     383,565
Less income taxes                                                                                    32,297          30,942          31,542          29,370          27,661                                               124,151         116,590  
                                                                                                  -------------------- ------- -------------------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- -------------------- ------- --------------------                                           -------------------- ------- -------------------- -------------------- -------------------- -------------------- ------- --------------------
Net income                                                                                                              72,374                                                                                      69,150                                                                                      69,808                                                                                      65,522                                                                                      64,425                                                                                     276,854                                                                                     266,975
Less non-controlling interest expense (income)                                                          795             605             (85 )                              148             715                                                 1,463           3,245  
                                                                                                  -------------------- ------- -------------------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- -------------------- ------- --------------------                                           -------------------- ------- -------------------- -------------------- -------------------- -------------------- ------- --------------------
Net income attributable to Commerce Bancshares, Inc.                                                                    71,579                                                                                      68,545                                                                                      69,893                                                                                      65,374                                                                                      63,710                                                                                     275,391                                                                                     263,730
Less preferred stock dividends                                                                        2,250           2,250           2,250           2,250           2,250                                                 9,000           9,000  
                                                                                                  -------------------- ------- -------------------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- -------------------- ------- --------------------                                           -------------------- ------- -------------------- -------------------- -------------------- -------------------- ------- --------------------
Net income available to common shareholders                                                                            $69,329                            $66,295                            $67,643                            $63,124                            $61,460                                                                 $266,391                           $254,730  
                                                                                                  ================================================= ==================== ==================== ================================================= ==================== ==================== ================================================= ==================== ==================== ================================================= ==================== ==================== =================================================                                           ================================================= ==================== ==================== =================================================
Net income per common share -- basic                                                                          $.68                               $.65                               $.67                               $.62                               $.60                                                                    $2.62                              $2.44  
                                                                                                  ================================================= ==================== ==================== ================================================= ==================== ==================== ================================================= ==================== ==================== ================================================= ==================== ==================== =================================================                                           ================================================= ==================== ==================== =================================================
Net income per common share -- diluted                                  $.68                               $.65                               $.66                               $.62                               $.60                                                                    $2.61                              $2.43  
======================================================= ==================== ==================== ================================================= ==================== ==================== ================================================= ==================== ==================== ================================================= ==================== ==================== ================================================= ==================== ==================== =================================================                                           ================================================= ==================== ==================== =================================================
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
OTHER INFORMATION
Return on total average assets                                                                                            1.14 %                                                                                      1.12 %                                                                                      1.15 %                                                                                      1.07 %                                                                                      1.05 %                                                                                      1.12 %                                                                                      1.11 %
Return on average common equity (1)                                                                                      11.48                                                                                       10.97                                                                                       11.69                                                                                       11.20                                                                                       10.88                                                                                       11.33                                                                                       11.43
Efficiency ratio (2)                                                                                                     61.82                                                                                       62.25                                                                                       61.27                                                                                       62.62                                                                                       62.97                                                                                       61.98                                                                                       62.34
Effective tax rate                                                                                                       31.09                                                                                       31.10                                                                                       31.10                                                                                       31.00                                                                                       30.27                                                                                       31.07                                                                                       30.66
Net yield on interest earning assets                                                                                      3.03                                                                                        3.08                                                                                        3.11                                                                                        2.95                                                                                        2.94                                                                                        3.04                                                                                        2.94
Tax equivalent net interest income                                              $181,301                           $179,115                           $179,592                           $171,425                           $170,141                                                                 $711,433                           $664,038  
======================================================= ==================== ==================== ================================================= ==================== ==================== ================================================= ==================== ==================== ================================================= ==================== ==================== ================================================= ==================== ==================== =================================================                                           ================================================= ==================== ==================== =================================================
(1)   Annualized net income available to common shareholders divided
                         by average total equity less preferred stock.
(2)                      The efficiency ratio is calculated as non-interest expense
                         (excluding intangibles amortization) as a percent of revenue.
                          
                                                                                                                                       COMMERCE BANCSHARES, INC. and SUBSIDIARIES
                                                                                                                                        CONSOLIDATED BALANCE SHEETS - PERIOD END
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
 
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
(Unaudited)                                                                              December 31,                              September 30,                             December 31,
(In thousands)                                                                                                                     2016                                                                            2016                                                                            2015
----------------------------------------------------------------------- -------------------- -------------------- -----------------------------------   -------------------- -------------------- -----------------------------------   -------------------- -------------------- -----------------------------------
ASSETS                                                                                                                                                         
Loans
    Business                                                                                                          $  4,776,365                                                                    $  4,770,883                                                                    $  4,397,893
    Real estate -- construction and land                                                                       791,236                                                                         800,545                                                                         624,070
    Real estate -- business                                                                                  2,643,374                                                                       2,520,528                                                                       2,355,544
    Real estate -- personal                                                                                  2,010,397                                                                       1,968,005                                                                       1,915,953
    Consumer                                                                                                             1,990,801                                                                       1,972,969                                                                       1,924,365
    Revolving home equity                                                                                                  413,634                                                                         417,591                                                                         432,981
    Consumer credit card                                                                                                   776,465                                                                         760,022                                                                         779,744
    Overdrafts                                                                                                              10,464                 19,698                  6,142  
                                                                                                                  ------------------------------------- -------------------- -------------------- ------------------------------------- -------------------- -------------------- -------------------------------------
Total loans                                                                                                             13,412,736             13,230,241             12,436,692  
                                                                                                                  ------------------------------------- -------------------- -------------------- ------------------------------------- -------------------- -------------------- -------------------------------------
Allowance for loan losses                                                                                                 (155,932 )                                (154,532 )                                (151,532 )
                                                                                                                  ------------------------------------- -------------------- -------------------- ------------------------------------- -------------------- -------------------- -------------------------------------
    Net loans                                                                                                           13,256,804             13,075,709             12,285,160  
                                                                                                                  ------------------------------------- -------------------- -------------------- ------------------------------------- -------------------- -------------------- -------------------------------------
Loans held for sale                                                                                                         14,456                                                                           9,511                                                                           7,607
Investment securities:
  Available for sale                                                                                                     9,649,203                                                                       9,438,871                                                                       9,777,004
  Trading                                                                                                                   22,225                                                                          28,586                                                                          11,890
  Non-marketable                                                                                                            99,558                108,224                112,786  
                                                                                                                  ------------------------------------- -------------------- -------------------- ------------------------------------- -------------------- -------------------- -------------------------------------
    Total investment securities                                                                                          9,770,986              9,575,681              9,901,680  
                                                                                                                  ------------------------------------- -------------------- -------------------- ------------------------------------- -------------------- -------------------- -------------------------------------
Federal funds sold and short-term securities purchased under                                                                15,470                                                                          13,415                                                                          14,505
agreements to resell
Long-term securities purchased under agreements to resell                                                                  725,000                                                                         725,000                                                                         875,000
Interest earning deposits with banks                                                                                       272,275                                                                          56,767                                                                          23,803
Cash and due from banks                                                                                                    494,690                                                                         396,938                                                                         464,411
Land, buildings and equipment -- net                                                                           337,705                                                                         339,196                                                                         352,581
Goodwill                                                                                                                   138,921                                                                         138,921                                                                         138,921
Other intangible assets -- net                                                                                   6,709                                                                           6,621                                                                           6,669
Other assets                                                                                                               608,408                396,709                534,625  
                                                                                                                  ------------------------------------- -------------------- -------------------- ------------------------------------- -------------------- -------------------- -------------------------------------
    Total assets                                                                                                      $ 25,641,424           $ 24,734,468           $ 24,604,962  
                                                                                                                  ===== ========== ==================== ==================== ==================== ===== ========== ==================== ==================== ==================== ===== ========== ====================
LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits:
  Non-interest bearing                                                                                                $  7,429,398                                                                    $  7,130,415                                                                    $  7,146,398
  Savings, interest checking and money market                                                                           11,430,789                                                                      11,023,526                                                                      10,834,746
  Time open and C.D.’s of less than $100,000                                                    713,075                                                                         732,575                                                                         785,191
  Time open and C.D.’s of $100,000 and over                                                   1,527,833              1,279,644              1,212,518  
                                                                                                                  ------------------------------------- -------------------- -------------------- ------------------------------------- -------------------- -------------------- -------------------------------------
    Total deposits                                                                                                      21,101,095             20,166,160             19,978,853  
                                                                                                                  ------------------------------------- -------------------- -------------------- ------------------------------------- -------------------- -------------------- -------------------------------------
Federal funds purchased and securities sold under agreements to                                                          1,723,905                                                                       1,489,891                                                                       1,963,552
repurchase
Other borrowings                                                                                                           102,049                                                                         101,415                                                                         103,818
Other liabilities                                                                                                          213,243                416,189                191,321  
                                                                                                                  ------------------------------------- -------------------- -------------------- ------------------------------------- -------------------- -------------------- -------------------------------------
    Total liabilities                                                                                                   23,140,292             22,173,655             22,237,544  
                                                                                                                  ------------------------------------- -------------------- -------------------- ------------------------------------- -------------------- -------------------- -------------------------------------
Stockholders’ equity:
  Preferred stock                                                                                                          144,784                                                                         144,784                                                                         144,784
  Common stock                                                                                                             510,015                                                                         489,862                                                                         489,862
  Capital surplus                                                                                                        1,552,454                                                                       1,335,150                                                                       1,337,677
  Retained earnings                                                                                                        292,849                                                                         515,081                                                                         383,313
  Treasury stock                                                                                                           (15,294 )                                                                       (50,538 )                                                                       (26,116 )
  Accumulated other comprehensive income                                                                                    10,975                121,082                 32,470  
                                                                                                                  ------------------------------------- -------------------- -------------------- ------------------------------------- -------------------- -------------------- -------------------------------------
    Total stockholders’ equity                                                                2,495,783                                                                       2,555,421                                                                       2,361,990
Non-controlling interest                                                                                                     5,349                  5,392                  5,428  
                                                                                                                  ------------------------------------- -------------------- -------------------- ------------------------------------- -------------------- -------------------- -------------------------------------
    Total equity                                                                                                         2,501,132              2,560,813              2,367,418  
                                                                                                                  ------------------------------------- -------------------- -------------------- ------------------------------------- -------------------- -------------------- -------------------------------------
    Total liabilities and equity                                                $ 25,641,424           $ 24,734,468           $ 24,604,962  
======================================================================= ==================== ==================== ===== ========== ==================== ==================== ==================== ===== ========== ==================== ==================== ==================== ===== ========== ====================
                                                                                                                                                                                                                                                                                                    
                                                                                                                                                                                                                      COMMERCE BANCSHARES, INC. and SUBSIDIARIES
                                                                                                                                                                                                                                AVERAGE BALANCE SHEETS
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
 
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
(Unaudited)                                                                                                                                                                                                                                     For the Three Months Ended
(In thousands)
                                                                    December 31,                              September 30,                               June 30,                                  March 31,                               December 31,
                                                                                                                                 2016                                                                            2016                                                                            2016                                                                            2016                                                                            2015
--------------------------------------------------------------------- -------------------- -------------------- -----------------------------------   -------------------- -------------------- -----------------------------------   -------------------- -------------------- -----------------------------------   -------------------- -------------------- -----------------------------------   -------------------- -------------------- ------------------------------------
ASSETS:                                                                                                                                                                                                                                                                                
Loans:
  Business                                                                                                          $  4,731,405                                                                    $  4,694,340                                                                    $  4,691,476                                                                    $  4,491,556                                                                     $  4,351,756
  Real estate -- construction and land                                                                       821,048                                                                         821,422                                                                         789,329                                                                         682,557                                                                          584,185
  Real estate -- business                                                                                  2,559,028                                                                       2,432,325                                                                       2,389,170                                                                       2,382,094                                                                        2,320,439
  Real estate -- personal                                                                                  1,985,606                                                                       1,943,951                                                                       1,905,968                                                                       1,909,532                                                                        1,916,219
  Consumer                                                                                                             1,978,154                                                                       1,947,956                                                                       1,927,925                                                                       1,934,577                                                                        1,908,540
  Revolving home equity                                                                                                  415,429                                                                         411,832                                                                         413,198                                                                         429,682                                                                          429,582
  Consumer credit card                                                                                                   757,618                                                                         750,412                                                                         738,130                                                                         752,098                                                                          756,743
  Overdrafts                                                                                                               5,501                  4,652                  3,916                  4,772                   6,303  
                                                                                                                ------------------------------------- -------------------- -------------------- ------------------------------------- -------------------- -------------------- ------------------------------------- -------------------- -------------------- ------------------------------------- -------------------- -------------------- --------------------------------------
Total loans                                                                                                           13,253,789             13,006,890             12,859,112             12,586,868              12,273,767  
                                                                                                                ------------------------------------- -------------------- -------------------- ------------------------------------- -------------------- -------------------- ------------------------------------- -------------------- -------------------- ------------------------------------- -------------------- -------------------- --------------------------------------
  Allowance for loan losses                                                                                             (154,040 )                                (153,517 )                                (151,622 )                                (151,308 )                                 (150,856 )
                                                                                                                ------------------------------------- -------------------- -------------------- ------------------------------------- -------------------- -------------------- ------------------------------------- -------------------- -------------------- ------------------------------------- -------------------- -------------------- --------------------------------------
Net loans                                                                                                             13,099,749             12,853,373             12,707,490             12,435,560              12,122,911  
                                                                                                                ------------------------------------- -------------------- -------------------- ------------------------------------- -------------------- -------------------- ------------------------------------- -------------------- -------------------- ------------------------------------- -------------------- -------------------- --------------------------------------
Loans held for sale                                                                                                       10,765                                                                          26,597                                                                          56,272                                                                           9,360                                                                            6,118
Investment securities:
  U.S. government and federal agency obligations                                                                         811,524                                                                         726,469                                                                         698,374                                                                         703,212                                                                          580,816
  Government-sponsored enterprise obligations                                                                            445,544                                                                         481,573                                                                         666,354                                                                         776,488                                                                          824,066
  State and municipal obligations                                                                                      1,784,407                                                                       1,747,794                                                                       1,763,849                                                                       1,718,587                                                                        1,779,704
  Mortgage-backed securities                                                                                           3,656,695                                                                       3,366,292                                                                       3,394,466                                                                       3,424,716                                                                        3,335,627
  Asset-backed securities                                                                                              2,417,367                                                                       2,340,783                                                                       2,377,708                                                                       2,537,472                                                                        2,574,426
  Other marketable securities                                                                                            333,236                                                                         334,747                                                                         337,572                                                                         342,382                                                                          337,340
  Unrealized gain on investment securities                                                                               155,818                235,169                191,565                149,319                 130,231  
                                                                                                                ------------------------------------- -------------------- -------------------- ------------------------------------- -------------------- -------------------- ------------------------------------- -------------------- -------------------- ------------------------------------- -------------------- -------------------- --------------------------------------
    Total available for sale securities                                                                                9,604,591                                                                       9,232,827                                                                       9,429,888                                                                       9,652,176                                                                        9,562,210
  Trading securities                                                                                                      21,717                                                                          18,433                                                                          20,540                                                                          18,190                                                                           23,217
  Non-marketable securities                                                                                              105,420                113,954                116,103                127,769                 114,321  
                                                                                                                ------------------------------------- -------------------- -------------------- ------------------------------------- -------------------- -------------------- ------------------------------------- -------------------- -------------------- ------------------------------------- -------------------- -------------------- --------------------------------------
Total investment securities                                                                                            9,731,728              9,365,214              9,566,531              9,798,135               9,699,748  
                                                                                                                ------------------------------------- -------------------- -------------------- ------------------------------------- -------------------- -------------------- ------------------------------------- -------------------- -------------------- ------------------------------------- -------------------- -------------------- --------------------------------------
Federal funds sold and short-term securities purchased under                                                               8,336                                                                          13,054                                                                          11,916                                                                          17,378                                                                           18,694
agreements to resell
Long-term securities purchased under agreements to resell                                                                724,998                                                                         766,302                                                                         824,999                                                                         850,275                                                                          902,174
Interest earning deposits with banks                                                                                     201,367                                                                         207,944                                                                         125,024                                                                         219,636                                                                          178,486
Other assets                                                                                                           1,153,982              1,151,549              1,113,214              1,172,916               1,119,602  
                                                                                                                ------------------------------------- -------------------- -------------------- ------------------------------------- -------------------- -------------------- ------------------------------------- -------------------- -------------------- ------------------------------------- -------------------- -------------------- --------------------------------------
Total assets                                                                                                        $ 24,930,925           $ 24,384,033           $ 24,405,446           $ 24,503,260            $ 24,047,733  
                                                                                                                ===== ========== ==================== ==================== ==================== ===== ========== ==================== ==================== ==================== ===== ========== ==================== ==================== ==================== ===== ========== ==================== ==================== ==================== ====== ========== ====================
                                                                                                                                                                                                                                                                                                                                                                                                                                                 
LIABILITIES AND EQUITY:
  Non-interest bearing deposits                                                                                     $  7,307,407                                                                    $  7,096,218                                                                    $  6,885,889                                                                    $  6,905,673                                                                     $  6,995,666
  Savings                                                                                                                773,304                                                                         778,663                                                                         787,478                                                                         761,020                                                                          736,824
  Interest checking and money market                                                                                  10,512,268                                                                      10,210,744                                                                      10,287,923                                                                      10,128,543                                                                        9,805,457
  Time open & C.D.’s of less than $100,000                                                    722,775                                                                         740,729                                                                         758,703                                                                         775,221                                                                          796,639
  Time open & C.D.’s of $100,000 and over                                                   1,333,764              1,435,001              1,635,892              1,483,700               1,219,803  
                                                                                                                ------------------------------------- -------------------- -------------------- ------------------------------------- -------------------- -------------------- ------------------------------------- -------------------- -------------------- ------------------------------------- -------------------- -------------------- --------------------------------------
Total deposits                                                                                                        20,649,518             20,261,355             20,355,885             20,054,157              19,554,389  
                                                                                                                ------------------------------------- -------------------- -------------------- ------------------------------------- -------------------- -------------------- ------------------------------------- -------------------- -------------------- ------------------------------------- -------------------- -------------------- --------------------------------------
Borrowings:
  Federal funds purchased and securities sold under agreements to                                                      1,284,916                                                                       1,163,728                                                                       1,211,892                                                                       1,404,754                                                                        1,707,430
  repurchase
  Other borrowings                                                                                                       101,412                102,769                104,649                377,711                 103,819  
                                                                                                                ------------------------------------- -------------------- -------------------- ------------------------------------- -------------------- -------------------- ------------------------------------- -------------------- -------------------- ------------------------------------- -------------------- -------------------- --------------------------------------
Total borrowings                                                                                                       1,386,328                                                                       1,266,497                                                                       1,316,541                                                                       1,782,465                                                                        1,811,249
Other liabilities                                                                                                        346,900                306,306                260,179                254,437                 295,718  
                                                                                                                ------------------------------------- -------------------- -------------------- ------------------------------------- -------------------- -------------------- ------------------------------------- -------------------- -------------------- ------------------------------------- -------------------- -------------------- --------------------------------------
Total liabilities                                                                                                     22,382,746             21,834,158             21,932,605             22,091,059              21,661,356  
                                                                                                                ------------------------------------- -------------------- -------------------- ------------------------------------- -------------------- -------------------- ------------------------------------- -------------------- -------------------- ------------------------------------- -------------------- -------------------- --------------------------------------
Equity                                                                                                                 2,548,179              2,549,875              2,472,841              2,412,201               2,386,377  
                                                                                                                ------------------------------------- -------------------- -------------------- ------------------------------------- -------------------- -------------------- ------------------------------------- -------------------- -------------------- ------------------------------------- -------------------- -------------------- --------------------------------------
Total liabilities and equity                                                  $ 24,930,925           $ 24,384,033           $ 24,405,446           $ 24,503,260            $ 24,047,733  
===================================================================== ==================== ==================== ===== ========== ==================== ==================== ==================== ===== ========== ==================== ==================== ==================== ===== ========== ==================== ==================== ==================== ===== ========== ==================== ==================== ==================== ====== ========== ====================
                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
                                                                                                                                                                                                                 COMMERCE BANCSHARES, INC. and SUBSIDIARIES
                                                                                                                                                                                                                                AVERAGE RATES
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
 
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
(Unaudited)                                                                                                                                                                                                                                For the Three Months Ended
                                                                                    December 31,                            September 30,                             June 30,                                March 31,                             December 31,
                                                                                                           2016                                                                          2016                                                                          2016                                                                          2016                                                                          2015
                                                                      -------------------- ----------------------------------  -------------------- -------------------- ----------------------------------  -------------------- -------------------- ----------------------------------  -------------------- -------------------- ----------------------------------  -------------------- -------------------- ----------------------------------
ASSETS:                                                                                                                                                                                                                                                                        
Loans:
  Business (1)                                                                                                            2.91 %                                                                        2.87 %                                                                        2.90 %                                                                        2.87 %                                                                        2.78 %
  Real estate -- construction and land                                                                        3.64                                                                          3.48                                                                          3.46                                                                          3.51                                                                          3.41
  Real estate -- business                                                                                     3.61                                                                          3.63                                                                          3.69                                                                          3.70                                                                          3.68
  Real estate -- personal                                                                                     3.69                                                                          3.73                                                                          3.76                                                                          3.77                                                                          3.76
  Consumer                                                                                                                3.85                                                                          3.91                                                                          3.80                                                                          3.87                                                                          3.91
  Revolving home equity                                                                                                   3.50                                                                          3.56                                                                          3.59                                                                          3.52                                                                          3.44
  Consumer credit card                                                                                                   11.38                                                                         11.56                                                                         11.54                                                                         11.42                                                                         11.23
  Overdrafts                                                                                                    --       --       --       --       --  
                                                                                                                -------------- -------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------- -------------- --------------------
Total loans                                                                                                               3.85                 3.86                 3.86                 3.89                 3.85  
                                                                                                                -------------- -------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------- -------------- --------------------
Loans held for sale                                                                                                       5.77                                                                          5.00                                                                          4.95                                                                          5.80                                                                          5.40
Investment securities:
  U.S. government and federal agency obligations                                                                          2.18                                                                          2.43                                                                          3.48                                                                           .40                                                                           .17
  Government-sponsored enterprise obligations                                                                             1.54                                                                          2.24                                                                          3.03                                                                          1.93                                                                          1.89
  State and municipal obligations (1)                                                                                     3.57                                                                          3.60                                                                          3.60                                                                          3.66                                                                          3.64
  Mortgage-backed securities                                                                                              2.40                                                                          2.38                                                                          2.36                                                                          2.45                                                                          2.54
  Asset-backed securities                                                                                                 1.52                                                                          1.48                                                                          1.45                                                                          1.39                                                                          1.25
  Other marketable securities (1)                                                                                         2.95                 2.74                 2.77                 2.79                 2.83  
                                                                                                                -------------- -------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------- -------------- --------------------
    Total available for sale securities                                                                                   2.36                                                                          2.39                                                                          2.51                                                                          2.20                                                                          2.20
  Trading securities (1)                                                                                                  2.40                                                                          2.42                                                                          2.27                                                                          2.87                                                                          2.65
  Non-marketable securities (1)                                                                                           5.42                10.24                 8.03                 6.54                 8.19  
                                                                                                                -------------- -------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------- -------------- --------------------
Total investment securities                                                                                               2.39                 2.49                 2.58                 2.26                 2.27  
                                                                                                                -------------- -------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------- -------------- --------------------
Federal funds sold and short-term securities purchased under                                                               .72                                                                           .61                                                                           .64                                                                           .56                                                                           .32
agreements to resell
Long-term securities purchased under agreements to resell                                                                 1.86                                                                          1.73                                                                          1.64                                                                          1.64                                                                          1.40
Interest earning deposits with banks                                                                                       .56                  .51                  .49                  .49                  .28  
                                                                                                                -------------- -------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------- -------------- --------------------
Total interest earning assets                                                                                             3.17                 3.22                 3.25                 3.10                 3.07  
                                                                                                                ============== ==================== ==================== ==================== ============== ==================== ==================== ==================== ============== ==================== ==================== ==================== ============== ==================== ==================== ==================== ============== ====================
                                                                                                                                                                                                                                                                                                                                                                                                                                         
LIABILITIES AND EQUITY:
Interest bearing deposits:
  Savings                                                                                                                  .12                                                                           .12                                                                           .11                                                                           .12                                                                           .12
  Interest checking and money market                                                                                       .13                                                                           .13                                                                           .13                                                                           .13                                                                           .13
  Time open & C.D.’s of less than $100,000                                                      .37                                                                           .37                                                                           .38                                                                           .38                                                                           .37
  Time open & C.D.’s of $100,000 and over                                                       .60                  .61                  .58                  .54                  .51  
                                                                                                                -------------- -------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------- -------------- --------------------
Total interest bearing deposits                                                                                            .19                  .20                  .20                  .19                  .18  
                                                                                                                -------------- -------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------- -------------- --------------------
Borrowings:
  Federal funds purchased and securities sold under agreements to                                                          .30                                                                           .25                                                                           .24                                                                           .25                                                                           .14
  repurchase
  Other borrowings                                                                                                        3.54                 3.51                 3.49                 1.33                 3.47  
                                                                                                                -------------- -------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------- -------------- --------------------
Total borrowings                                                                                                           .54                  .51                  .50                  .48                  .33  
                                                                                                                -------------- -------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------- -------------- --------------------
Total interest bearing liabilities                                                                                         .22 %                                   .22 %                                   .22 %                                   .23 %                                   .20 %
                                                                                                                ============== ==================== ==================== ==================== ============== ==================== ==================== ==================== ============== ==================== ==================== ==================== ============== ==================== ==================== ==================== ============== ====================
                                                                                                                                                                                                                                                                                                                                                                                                                                         
Net yield on interest earning assets                                                3.03 %                                  3.08 %                                  3.11 %                                  2.95 %                                  2.94 %
===================================================================== ==================== ==================== ============== ==================== ==================== ==================== ============== ==================== ==================== ==================== ============== ==================== ==================== ==================== ============== ==================== ==================== ==================== ============== ====================
(1)   Stated on a tax equivalent basis using a federal income tax
                         rate of 35%.
                          
                                                                                                                                                                                                                                     COMMERCE BANCSHARES, INC. and SUBSIDIARIES
                                                                                                                                                                                                                                     CREDIT QUALITY
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
 
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                                                                                                         For the Three Months Ended                                                                                                                                                                                                                  For the Year Ended
(Unaudited)                                                            December 31,                             September 30,                            June 30,                             March 31,                           December 31,                                                                 December 31,                             December 31,
(In thousands, except per share data)                                                                            2016                                                                           2016                                                                         2016                                                                       2016                                                                        2015                                                                         2016                                                                           2015
------------------------------------------------------ -------------------- -------------------- ----------------------------------   -------------------- -------------------- ----------------------------------   -------------------- -------------------- ------------------------------   -------------------- -------------------- ------------------------------   -------------------- -------------------- -------------------------------                                             ----------------------------------   -------------------- -------------------- ---------------------------------
ALLOWANCE FOR LOAN LOSSES                                                                                                                                                                                                                                                                                                                                                        
Balance at beginning of period                                                                         $ 154,532                                                                      $ 153,832                                                                  $ 152,132                                                                  $ 151,532                                                                   $ 151,532                                                                      $ 151,532                                                                     $ 156,532
  Provision for losses                                                                                    10,400                                                                          7,263                                                                      9,216                                                                      9,439                                                                       9,186                                                                         36,318                                                                        28,727
  Net charge-offs (recoveries):
    Commercial portfolio:
      Business                                                                                               268                                                                            (50 )                                                                      (65 )                                                                      463                                                                        (133 )                                                                          616                                                                          (388 )
      Real estate -- construction and land                                                      (882 )                                                                       (2,312 )                                                                     (507 )                                                                      (11 )                                                                        60                                                                         (3,712 )                                                                      (1,262 )
      Real estate -- business                                                                     97                  (106 )                             (1,030 )                               (242 )                                (626 )                                                                       (1,281 )                                  (133 )
                                                                                                 ------------------------------------ -------------------- -------------------- ------------------------------------ -------------------- -------------------- -------------------------------- -------------------- -------------------- -------------------------------- -------------------- -------------------- ---------------------------------                                           ------------------------------------ -------------------- -------------------- -----------------------------------
                                                                                                            (517 )                                 (2,468 )                             (1,602 )                                210               (699 )                                                                       (4,377 )                                (1,783 )
                                                                                                 ------------------------------------ -------------------- -------------------- ------------------------------------ -------------------- -------------------- -------------------------------- -------------------- -------------------- -------------------------------- -------------------- -------------------- ---------------------------------                                           ------------------------------------ -------------------- -------------------- -----------------------------------
    Personal banking portfolio:
      Consumer credit card                                                                                 6,506                                                                          6,356                                                                      6,650                                                                      5,918                                                                       6,479                                                                         25,430                                                                        25,039
      Consumer                                                                                             2,427                                                                          2,240                                                                      1,781                                                                      2,599                                                                       2,251                                                                          9,047                                                                         8,278
      Overdraft                                                                                              379                                                                            434                                                                        307                                                                        219                                                                         487                                                                          1,339                                                                         1,350
      Real estate -- personal                                                                    (38 )                                                                          (78 )                                                                      305                                                                       (195 )                                                                       458                                                                             (6 )                                                                         441
      Revolving home equity                                                                                  243                    79                75                88                210                                                         485                  402  
                                                                                                 ------------------------------------ -------------------- -------------------- ------------------------------------ -------------------- -------------------- -------------------------------- -------------------- -------------------- -------------------------------- -------------------- -------------------- ---------------------------------                                           ------------------------------------ -------------------- -------------------- -----------------------------------
                                                                                                           9,517                 9,031             9,118             8,629              9,885                                                      36,295               35,510  
                                                                                                 ------------------------------------ -------------------- -------------------- ------------------------------------ -------------------- -------------------- -------------------------------- -------------------- -------------------- -------------------------------- -------------------- -------------------- ---------------------------------                                           ------------------------------------ -------------------- -------------------- -----------------------------------
  Total net loan charge-offs                                                                               9,000                 6,563             7,516             8,839              9,186                                                      31,918               33,727  
                                                                                                 ------------------------------------ -------------------- -------------------- ------------------------------------ -------------------- -------------------- -------------------------------- -------------------- -------------------- -------------------------------- -------------------- -------------------- ---------------------------------                                           ------------------------------------ -------------------- -------------------- -----------------------------------
Balance at end of period                                         $ 155,932             $ 154,532         $ 153,832         $ 152,132          $ 151,532                                                   $ 155,932            $ 151,532  
====================================================== ==================== ==================== ======= ======= ==================== ==================== ==================== ======= ======= ==================== ==================== ==================== === ======= ==================== ==================== ==================== === ======= ==================== ==================== ==================== ==== ======= ====================                                           ======= ======= ==================== ==================== ==================== ====== ======= ====================
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
NET CHARGE-OFF RATIOS*
Commercial portfolio:
  Business                                                                                                   .02 %                                                               -- %                                                                     (.01 )%                                                                     .04 %                                                                      (.01 )%                                                                         .01 %                                                                        (.01 )%
  Real estate -- construction and land                                                          (.43 )                                                                        (1.12 )                                                                     (.26 )                                                                     (.01 )                                                                       .04                                                                           (.48 )                                                                        (.26 )
  Real estate -- business                                                                        .02                  (.02 )                               (.17 )                               (.04 )                                (.11 )                                                                         (.05 )                                  (.01 )
                                                                                                 ------------------------------------ -------------------- -------------------- ------------------------------------ -------------------- -------------------- -------------------------------- -------------------- -------------------- -------------------------------- -------------------- -------------------- ---------------------------------                                           ------------------------------------ -------------------- -------------------- -----------------------------------
                                                                                                            (.03 )                                   (.12 )                               (.08 )                                .01               (.04 )                                                                         (.06 )                                  (.03 )
                                                                                                 ------------------------------------ -------------------- -------------------- ------------------------------------ -------------------- -------------------- -------------------------------- -------------------- -------------------- -------------------------------- -------------------- -------------------- ---------------------------------                                           ------------------------------------ -------------------- -------------------- -----------------------------------
Personal banking portfolio:
  Consumer credit card                                                                                      3.42                                                                           3.37                                                                       3.62                                                                       3.16                                                                        3.40                                                                           3.39                                                                          3.35
  Consumer                                                                                                   .49                                                                            .46                                                                        .37                                                                        .54                                                                         .47                                                                            .46                                                                           .45
  Overdraft                                                                                                27.41                                                                          37.11                                                                      31.53                                                                      18.46                                                                       30.65                                                                          28.42                                                                         24.93
  Real estate -- personal                                                                       (.01 )                                                                         (.02 )                                                                      .06                                                                       (.04 )                                                                       .09                                                                 --                                                                           .02
  Revolving home equity                                                                                      .23                   .08               .07               .08                .19                                                         .12                  .09  
                                                                                                 ------------------------------------ -------------------- -------------------- ------------------------------------ -------------------- -------------------- -------------------------------- -------------------- -------------------- -------------------------------- -------------------- -------------------- ---------------------------------                                           ------------------------------------ -------------------- -------------------- -----------------------------------
                                                                                                             .74                   .71               .74               .69                .78                                                         .72                  .72  
                                                                                                 ------------------------------------ -------------------- -------------------- ------------------------------------ -------------------- -------------------- -------------------------------- -------------------- -------------------- -------------------------------- -------------------- -------------------- ---------------------------------                                           ------------------------------------ -------------------- -------------------- -----------------------------------
Total                                                                  .27 %                                    .20 %                                .24 %                                .28 %                                 .30 %                                                                          .25 %                                   .28 %
====================================================== ==================== ==================== ==================================== ==================== ==================== ==================================== ==================== ==================== ================================ ==================== ==================== ================================ ==================== ==================== =================================                                           ==================================== ==================== ==================== ===================================
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
CREDIT QUALITY RATIOS
Non-performing assets to total loans                                                                         .11 %                                                                          .13 %                                                                      .20 %                                                                      .25 %                                                                       .24 %
Non-performing assets to total assets                                                                        .06                                                                            .07                                                                        .11                                                                        .13                                                                         .12
Allowance for loan losses to total loans                              1.16                  1.17              1.18              1.20               1.22  
====================================================== ==================== ==================== ==================================== ==================== ==================== ==================================== ==================== ==================== ================================ ==================== ==================== ================================ ==================== ==================== =================================
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
NON-PERFORMING ASSETS
 Non-accrual loans:
   Business                                                                                            $   8,682                                                                      $   8,758                                                                  $  12,716                                                                  $  16,098                                                                   $  10,874
   Real estate -- construction and land                                                          564                                                                          1,310                                                                      2,170                                                                      2,710                                                                       3,090
   Real estate -- business                                                                     1,634                                                                          1,920                                                                      5,236                                                                      6,234                                                                       7,863
   Real estate -- personal                                                                     3,403                                                                          3,634                                                                      4,293                                                                      4,205                                                                       4,425
   Revolving home equity                                                                          --                    23               109               120                323  
                                                                                                 ------------------------------------ -------------------- -------------------- ------------------------------------ -------------------- -------------------- -------------------------------- -------------------- -------------------- -------------------------------- -------------------- -------------------- ---------------------------------
 Total                                                                                                    14,283                15,645            24,524            29,367             26,575  
                                                                                                 ------------------------------------ -------------------- -------------------- ------------------------------------ -------------------- -------------------- -------------------------------- -------------------- -------------------- -------------------------------- -------------------- -------------------- ---------------------------------
 Foreclosed real estate                                                                                      366                   950             1,609             1,997              2,819  
                                                                                                 ------------------------------------ -------------------- -------------------- ------------------------------------ -------------------- -------------------- -------------------------------- -------------------- -------------------- -------------------------------- -------------------- -------------------- ---------------------------------
Total non-performing assets                                                                            $  14,649             $  16,595         $  26,133         $  31,364          $  29,394  
                                                                                                 ------- ------- -------------------- -------------------- -------------------- ------- ------- -------------------- -------------------- -------------------- --- ------- -------------------- -------------------- -------------------- --- ------- -------------------- -------------------- -------------------- ---- ------- --------------------
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
Loans past due 90 days and still accruing interest               $  16,396             $  16,916         $  15,892         $  15,360          $  16,467  
====================================================== ==================== ==================== ======= ======= ==================== ==================== ==================== ======= ======= ==================== ==================== ==================== === ======= ==================== ==================== ==================== === ======= ==================== ==================== ==================== ==== ======= ====================
*as a percentage of average loans (excluding loans held for
sale)
 

COMMERCE BANCSHARES, INC. Management Discussion of Fourth Quarter Results December 31, 2016

For the quarter ended December 31, 2016, net income attributable to Commerce Bancshares, Inc. (net income) amounted to $71.6 million, compared to $68.5 million in the previous quarter and $63.7 million in the same quarter last year. The increase in net income over the previous quarter resulted mainly from an increase in net interest income of $2.0 million and an increase in net securities gains of $5.6 million. The provision for loan losses increased $3.1 million over the prior quarter. The allowance for loan losses increased $1.4 million this quarter, and net loan charge-offs increased mostly due to a decline in commercial loan recoveries this quarter. Non-interest expense this quarter was nearly unchanged from the prior quarter. For the current quarter, the return on total average assets was 1.14%, the return on average common equity was 11.5%, and the efficiency ratio was 61.8%.

Balance Sheet Review

During the 4th quarter of 2016, average total loans increased $231.1 million, or 7.1% annualized, compared to the previous quarter, and increased $984.7 million, or 8.0%, over the same period last year. Compared to the previous quarter, the increase in average loans resulted mainly from growth in business real estate (up $126.7 million), personal real estate (up $41.7 million), business (up $37.1 million), and consumer (up $30.2 million) loans. Included in the quarter were loan pay-offs of $162.8 million, which were primarily pay-offs of construction loans. Demand was stronger for business real estate loans, and the Company originated a number of larger business real estate loans this quarter. Growth in business loans was driven by higher demand for lease, tax-free and commercial and industrial loans, while consumer loan growth mainly resulted from new private banking loan originations. During the current quarter, the Company sold certain fixed rate personal real estate loans totaling $41.7 million compared to $43.4 million in the prior quarter. Additionally, personal real estate loan originations continued to be strong this quarter, especially for 15 year fixed rate loans, which the Company did not sell into the secondary market.

During the 4th quarter of 2016, total average available for sale investment securities increased $371.8 million to $9.6 billion, at fair value. The growth in investment securities was funded by deposit growth as noted below. Purchases of new securities totaled $773.4 million in the 4th quarter of 2016 and were offset by sales, maturities and pay downs of $377.4 million. Average mortgage-backed securities increased $290.4 million this quarter while other asset-backed securities grew $76.6 million. At December 31, 2016, the duration of the investment portfolio was 2.9 years, and maturities and pay downs of approximately $1.7 billion are expected to occur during the next 12 months.

Total average deposits increased $388.2 million, or 1.9%, this quarter compared to the previous quarter. The increase in average deposits resulted mainly from growth in business demand deposits of $254.1 million, coupled with an increase in money market (increase of $258.0 million) and interest checking (increase of $43.5 million) accounts. Compared to the previous quarter, total average consumer, commercial and private banking deposits increased $104.4 million, $63.6 million, and $229.5 million, respectively. The average loans to deposits ratio was 64.2% in the current quarter and 64.3% in the prior quarter.

Compared to the previous quarter, the Company’s average borrowings increased $119.8 million to $1.4 billion in the current quarter, mostly due to higher federal funds purchased and repurchase agreement balances.

Net Interest Income

Net interest income (tax equivalent) in the 4th quarter of 2016 amounted to $181.3 million, compared with $179.1 million in the previous quarter. Net interest income (tax equivalent) for the current quarter increased $11.2 million compared to the 4th quarter of last year. During the 4th quarter of 2016, the net yield on earning assets (tax equivalent) was 3.03%, compared with 3.08% in the previous quarter and 2.94% in the same period last year. The increase in net interest income (tax equivalent) in the current quarter compared to the prior quarter was due mainly to higher interest income on loans and investment securities of $2.3 million, partly offset by an increase in interest expense of $178 thousand.

Compared to the previous quarter, interest on loans (tax equivalent) increased $1.9 million, mainly as a result of higher average balances in business real estate, personal real estate, consumer and consumer credit card loans. Overall, the average yield on the loan portfolio declined slightly this quarter to 3.85%.

Interest on investment securities (tax equivalent) increased $419 thousand over the previous quarter. The current quarter included an adjustment of $1.8 million lowering premium amortization expense due to slowing prepayment speeds on mortgage-backed securities and was reflective of rising interest rates this quarter. Also, the prior quarter included one-time interest income of $938 thousand received on a private equity debt investment that did not reoccur this quarter. Interest on government-sponsored investment securities declined $983 thousand due to lower balances and rates, offset by increased interest income from mortgage-backed, asset-backed and municipal securities. Total inflation income on treasury inflation-protected securities (TIPS) for the quarter totaled $1.9 million compared to $2.2 million in the previous quarter. The yield on total investment securities was 2.39% in the current quarter compared to 2.49% in the prior quarter.

Interest expense on deposits decreased $72 thousand this quarter compared with the previous quarter due mainly to lower certificate of deposit balances. Borrowing costs increased $250 thousand this quarter compared to the prior quarter mostly due to higher rates paid on federal funds and repurchase agreements.

Non-Interest Income

In the 4th quarter of 2016, total non-interest income amounted to $119.5 million, an increase of $3.4 million, or 3.0%, compared to the same period last year. Also, current quarter non-interest income was slightly higher 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 growth in trust and swap fee income which increased $1.7 million and $1.8 million, respectively, and was partly offset by lower bank card fees.

Total bank card fees in the current quarter declined $982 thousand, or 2.1%, from the same period last year. The decrease was mainly the result of a decline in commercial card fees of $866 thousand, coupled with lower merchant and credit card interchange fees. Debit card fees grew 1.6% this quarter over the 4th quarter of last year. Total bank card fees this quarter were comprised of fees on corporate card ($21.8 million), debit card ($10.1 million), merchant ($7.0 million) and credit card ($6.5 million) transactions.

In the current quarter, trust fees increased $1.7 million, or 5.9%, over the same period last year, with growth coming mainly from private client customers. Compared to the same period last year, deposit account fees increased $528 thousand, or 2.4%, as a result of growth in deposit account service fees of $409 thousand, or 8.2%, and higher corporate cash management fees.

Compared to the 4th quarter of 2015, loan fees and sales grew $482 thousand, or 22.9%, this quarter due to higher mortgage banking revenue related to the Company’s fixed rate residential mortgage sale program. Included in other non-interest income are fees from sales of interest rate swaps and sweep fees, which increased $1.8 million and $949 thousand, respectively, over the same period last year. Fees from the sales of tax credits grew by $186 thousand this quarter. Non-interest income comprised 40.8% of the Company’s total revenue this quarter.

Investment Securities Gains and Losses

The Company recorded net securities gains of $3.7 million this quarter, compared with net losses of $2.0 million last quarter and net losses of $1.5 million in the same period last year. Net gains in the current quarter resulted primarily from realized gains and unrealized fair value adjustments on the Company’s private equity investment portfolio.

Non-Interest Expense

Non-interest expense for the current quarter amounted to $181.3 million, which was virtually unchanged from the prior quarter. Compared to the same period last year, non-interest expense increased $5.5 million, or 3.1%. The increase over the same period in the previous year was mainly due to higher costs for salaries and benefits, occupancy, data processing costs, and professional fees, partially offset by lower supplies and communication expense.

Compared to the 4th quarter of last year, salaries and benefits expense increased $6.5 million, or 6.4%. Growth in salaries expense of $6.0 million, or 6.9%, was mainly the result of higher full-time salaries and incentive compensation costs. Benefits expense increased $505 thousand, mainly due to higher 401(k) expense over the same period last year. Growth in total salaries expense compared to the previous year resulted mainly from increased staffing costs in commercial banking, commercial card, residential mortgage, trust, and other support units. Full-time equivalent employees totaled 4,784 and 4,770 at December 31, 2016 and 2015, respectively.

Compared to the 4th quarter of last year, data processing and software costs and occupancy costs grew $1.1 million and $548 thousand, respectively, while costs for supplies and communication, equipment and marketing all declined. Higher occupancy costs were incurred this quarter compared to the same period last year, mainly due to demolition costs associated with a branch location which is currently being replaced. The increase in data processing and software expense was due to higher costs for commercial cash management software, online banking and other general information technology systems. The decrease in costs for supplies and communication was related mainly to the completion of the issuance of new chip cards in prior quarters, which has also helped to lower bank card fraud losses this year. Additionally this quarter, FDIC insurance costs increased $298 thousand compared to the same quarter last year due to higher deposit balances and insurance rates. The decline in other non-interest expense was the result of $1.6 million lower bank card fraud losses and a $729 thousand decline in other bank card costs this quarter, offset by higher professional fees.

Income Taxes

The effective tax rate for the Company was 31.1% in the current quarter, 31.1% in the previous quarter, and 30.3% in the 4th quarter of 2015.

Credit Quality

Net loan charge-offs in the 4th quarter of 2016 amounted to $9.0 million, compared to $6.6 million in the prior quarter and $9.2 million in the same period last year. The ratio of annualized net loan charge-offs to total average loans was .27% in the current quarter compared to .20% in the previous quarter and .30% in the 4th quarter of last year. During the 4th quarter of 2016, the Company recorded net recoveries on commercial loans of $517 thousand, compared to net recoveries of $2.5 million in the prior quarter. Net loan charge-offs in the personal banking portfolio totaled $9.5 million in the current quarter and $9.0 million in the previous quarter.

In the 4th quarter of 2016, annualized net loan charge-offs on average consumer credit card loans were 3.42%, compared with 3.37% in the previous quarter and 3.40% in the same period last year. Consumer loan net charge-offs were .49% of average consumer loans in the current quarter, .46% in the prior quarter and .47% in the same quarter last year. The provision for loan losses in the current quarter totaled $10.4 million, compared to $7.3 million in the prior quarter and $9.2 million in the 4th quarter of last year. This quarter, the provision for loan losses exceeded net loan charge-offs by $1.4 million. At December 31, 2016, the allowance totaled $155.9 million, which was 1.16% of total loans.

At December 31, 2016, total non-performing assets amounted to $14.6 million, a decrease of $1.9 million from the previous quarter. Non-performing assets are comprised of non-accrual loans and foreclosed real estate ($14.3 million and $366 thousand, respectively, at December 31, 2016). At December 31, 2016, the balance of non-accrual loans, which represented .11% of loans outstanding, included business loans of $8.7 million, business real estate loans of $1.6 million, personal real estate loans of $3.4 million, and construction and land loans of $564 thousand. Loans more than 90 days past due and still accruing interest totaled $16.4 million at December 31, 2016.

Other

During the 4th quarter of 2016, the Company distributed a 5% stock dividend on its common stock. This quarter the Company also paid a cash dividend of $.214 per common share, as restated for the 5% stock dividend, and an annualized 6% cash dividend on its preferred stock. During the quarter, the Company signed an agreement to purchase a new core deposit system from Temenos Group AG which is expected to be implemented in 2019.

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.

http://cts.businesswire.com/ct/CT?id=bwnews&sty=20170118005173r1&sid=cmtx6&distro=nx&lang=en

View source version on businesswire.com: http://www.businesswire.com/news/home/20170118005173/en/

SOURCE: Commerce Bancshares, Inc.

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


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