<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------
FORM 10-Q
-----------
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1995
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NO. 0-2989
COMMERCE BANCSHARES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
MISSOURI
(STATE OF INCORPORATION) 43-0889454
(I.R.S. EMPLOYER IDENTIFICATION
NO.)
1000 WALNUT, KANSAS CITY, MO
(ADDRESS OF PRINCIPAL EXECUTIVE 64106
OFFICES) (ZIP CODE)
(816) 234-2000
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
X
Yes------- No -------
As of August 4, 1995, the registrant had outstanding 36,082,987 shares of its
$5 par value common stock, registrant's only class of common stock.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>
PART I: FINANCIAL INFORMATION
In the opinion of management, the consolidated financial statements of
Commerce Bancshares, Inc. and Subsidiaries as of June 30, 1995 and December 31,
1994 and the related notes include all material adjustments, which were
regularly recurring in nature and necessary for fair presentation of the
financial condition and the results of operations for the periods shown.
The consolidated financial statements of Commerce Bancshares, Inc. and
Subsidiaries and management's discussion and analysis of financial condition
and results of operations are presented in the schedules as follows:
Schedule 1: Comparison of Key Ratios and Selected Bank Data
Schedule 2: Consolidated Balance Sheets
Schedule 3: Consolidated Statements of Income
Schedule 4: Consolidated Statements of Changes in Stockholders' Equity
Schedule 5: Consolidated Statements of Cash Flows
Schedule 6: Notes to Consolidated Financial Statements
Schedule 7: Management's Discussion and Analysis of Financial Condition
and Results of Operations
PART II: OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The annual meeting of shareholders of Commerce Bancshares, Inc. was held on
April 19, 1995. Proxies for the meeting were solicited pursuant to Regulation
14 of the Securities Exchange Act of 1934, and there was no solicitation in
opposition to management's nominees as listed in the proxy statement. The five
nominees for the five directorships (constituting one-third of the Board of
Directors) being elected at this meeting received the following votes:
<TABLE>
<CAPTION>
NAME OF DIRECTOR VOTES FOR VOTES ABSTAIN
---------------- ---------- -------------
<S> <C> <C>
Fred L. Brown................................... 24,766,737 162,348
David W. Kemper................................. 24,769,874 159,211
B. Franklin Rassieur, Jr........................ 24,769,055 160,030
Andrew C. Taylor................................ 24,770,284 158,801
Robert H. West.................................. 24,770,284 158,801
</TABLE>
At the same meeting, the shareholders approved, as set forth in the proxy
statement for the meeting, the adoption of (a) The Commerce Bancshares, Inc.
1996 Incentive Stock Option Plan with a vote of 21,807,140 shares (representing
87.5% of the shares present or represented and entitled to vote) voting in
favor and 821,615 shares voting against, 181,131 shares abstaining from voting,
and 2,119,199 shares representing broker non-votes; and (b) an amendment and
restatement of The Commerce Bancshares, Inc. 1987 Non-Qualified Stock Option
Plan with a vote of 21,903,124 shares (representing 87.9% of the shares present
or represented and entitled to vote) voting in favor and 724,251 shares voting
against, 284,857 shares abstaining, and 2,016,853 shares representing broker
non-votes.
1
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
(10) Material Contracts:
(c) Copy of Commerce Bancshares, Inc. 1987 Non-Qualified Stock Option
Plan as amended and re-stated in its entirety at the shareholder
meeting on April 19, 1995
(h) Copy of Commerce Bancshares, Inc. 1996 Incentive Stock Option
Plan--a new plan adopted by the shareholders on April 19, 1995
(27) Financial Data Schedule
(b) No reports on Form 8-K were filed during the quarter ended June 30, 1995.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
COMMERCE BANCSHARES, INC.
/s/ T. Alan Peschka
By __________________________________
T. Alan Peschka
Vice President & Secretary
Date: August 9, 1995
/s/ Charles E. Templer
By __________________________________
Charles E. Templer
Treasurer & Controller
(Chief Accounting Officer)
Date: August 9, 1995
2
<PAGE>
SCHEDULE 1
COMMERCE BANCSHARES, INC. AND SUBSIDIARIES
COMPARISON OF KEY RATIOS AND SELECTED BANK DATA
(UNAUDITED)
COMPARISON OF KEY RATIOS
<TABLE>
<CAPTION>
1995 1994
----- -----
<S> <C> <C>
RATIOS--THREE MONTHS ENDED JUNE 30
(Based on average balance sheets):
Return on total assets.......................................... 1.19% 1.26%
Return on realized stockholders' equity......................... 12.50 13.32
Return on total stockholders' equity............................ 12.66 13.46
RATIOS--SIX MONTHS ENDED JUNE 30
(Based on average balance sheets):
Loans and leases to deposits.................................... 67.95% 59.63%
Non-interest bearing deposits to total deposits................. 19.67 19.49
Equity to loans and leases...................................... 16.27 18.37
Equity to deposits.............................................. 11.06 10.95
Equity to total assets.......................................... 9.38 9.47
Return on total assets.......................................... 1.22 1.19
Return on realized stockholders' equity......................... 12.50 12.89
Return on total stockholders' equity............................ 12.99 12.60
</TABLE>
SELECTED BANK DATA*
JUNE 30, 1995
<TABLE>
<CAPTION>
COMMERCE BANK LOANS AND
PRIMARY LOCATIONS SITES ASSETS DEPOSITS LEASES
----------------- ----- ---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
St. Louis, MO........................... 55 $2,667,142 $2,282,863 $1,695,881
Kansas City Metro, MO/KS................ 51 2,582,537 2,045,845 1,260,256
Springfield, MO......................... 20 717,976 639,559 485,538
Wichita, KS............................. 19 685,052 529,417 394,093
Peoria, IL.............................. 11 488,126 424,626 260,787
Bloomington, IL......................... 12 455,709 300,566 258,362
Columbia, MO............................ 15 373,132 343,798 278,268
St. Joseph, MO.......................... 3 322,332 270,455 197,877
Poplar Bluff, MO........................ 7 233,316 211,297 150,207
Joplin, MO.............................. 6 150,185 139,319 97,864
Manhattan, KS........................... 5 142,740 119,556 71,978
Hays, KS................................ 3 101,243 92,124 37,126
Lebanon, MO............................. 3 98,585 90,586 53,936
El Dorado, KS........................... 2 94,148 81,557 37,187
Cassville, MO........................... 3 78,143 71,514 40,129
Hannibal, MO............................ 2 76,175 70,289 47,295
Lawrence, KS............................ 6 65,911 57,548 38,970
Omaha, NE............................... 1 3,725 745 3,157
</TABLE>
--------
*Balances have not been reduced for inter-company activity.
OTHER OPERATING SUBSIDIARIES
CBI Insurance Company
CFB Venture Fund I, Inc.
Commerce Property and Casualty Agency, Inc.
Mid-America Financial Corp.
Commerce Mortgage Corp.
3
<PAGE>
SCHEDULE 2
COMMERCE BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER
JUNE 30 31
1995 1994
----------- ----------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Loans and lease financing, net of unearned............. $5,414,602 $4,432,662
Allowance for loan losses.............................. (99,221) (87,179)
---------- ----------
NET LOANS AND LEASE FINANCING...................... 5,315,381 4,345,483
---------- ----------
Investment securities:
Available for sale................................... 2,585,733 2,621,342
Trading account...................................... 6,556 5,539
Other non-marketable................................. 24,547 18,539
---------- ----------
TOTAL INVESTMENT SECURITIES........................ 2,616,836 2,645,420
---------- ----------
Federal funds sold and securities purchased under
agreements to resell.................................. 225,850 72,265
Cash and due from banks................................ 569,940 565,805
Land, buildings and equipment--net..................... 211,038 191,780
Customers' acceptance liability........................ 5,889 15,213
Other assets........................................... 251,754 199,608
---------- ----------
TOTAL ASSETS....................................... $9,196,688 $8,035,574
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Demand--non-interest bearing......................... $1,506,368 $1,448,422
Savings and interest bearing demand.................. 3,660,455 3,418,450
Time open and C.D.'s of less than $100,000........... 2,305,658 1,942,986
Time open and C.D.'s of $100,000 and over............ 223,640 180,572
---------- ----------
TOTAL DEPOSITS..................................... 7,696,121 6,990,430
Federal funds purchased and securities sold under
agreements to repurchase.............................. 533,072 290,647
Long-term debt and other borrowings.................... 17,762 6,487
Accrued interest, taxes and other liabilities.......... 59,198 4,213
Acceptances outstanding................................ 5,889 15,213
Minority interest in subsidiaries...................... 436 386
---------- ----------
TOTAL LIABILITIES.................................. 8,312,478 7,307,376
---------- ----------
Stockholders' equity:
Preferred stock, $1 par value.
Authorized and unissued 2,000,000 shares............ -- --
Common stock, $5 par value.
Authorized 60,000,000 shares; issued 36,644,405
shares in 1995 and 33,970,106 shares in 1994....... 183,222 169,851
Capital surplus...................................... 47,355 54,575
Retained earnings.................................... 647,350 576,331
Treasury stock of 375,595 shares in 1995 and 401,087
shares in 1994, at cost............................. (11,515) (12,148)
Unearned employee benefits........................... (829) (295)
Unrealized securities gain (loss)--net of tax........ 18,627 (60,116)
---------- ----------
TOTAL STOCKHOLDERS' EQUITY......................... 884,210 728,198
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY......... $9,196,688 $8,035,574
========== ==========
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
SCHEDULE 3
COMMERCE BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FOR THE THREE FOR THE SIX
MONTHS ENDED MONTHS ENDED JUNE
JUNE 30 30
---------------- -----------------
1995 1994 1995 1994
-------- ------- -------- --------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE
DATA)
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans and leases....... $117,699 $79,466 $217,115 $153,499
Interest on investment securities........... 41,611 40,873 82,808 81,419
Interest on federal funds sold and
securities purchased
under agreements to resell................. 1,334 1,152 2,317 2,625
-------- ------- -------- --------
TOTAL INTEREST INCOME................... 160,644 121,491 302,240 237,543
-------- ------- -------- --------
INTEREST EXPENSE
Interest on deposits:
Savings and interest bearing demand....... 29,777 21,979 56,190 43,127
Time open and C.D.'s of less than
$100,000................................. 30,168 18,181 54,355 36,061
Time open and C.D.'s of $100,000 and over. 2,943 1,414 5,146 2,688
Interest on federal funds purchased and
securities sold
under agreements to repurchase............. 6,530 2,028 11,804 3,853
Interest on long-term debt and other
borrowings................................. 338 129 570 261
-------- ------- -------- --------
TOTAL INTEREST EXPENSE.................. 69,756 43,731 128,065 85,990
-------- ------- -------- --------
NET INTEREST INCOME..................... 90,888 77,760 174,175 151,553
Provision for loan losses................... 1,930 2,063 4,763 3,518
-------- ------- -------- --------
NET INTEREST INCOME AFTER PROVISION FOR
LOAN LOSSES............................ 88,958 75,697 169,412 148,035
-------- ------- -------- --------
NON-INTEREST INCOME
Trust income................................ 7,929 7,023 15,703 14,322
Deposit account charges and other fees...... 11,120 10,132 21,246 19,591
Trading account profits and commissions..... 1,346 1,134 2,714 2,379
Net gains on securities transactions........ 241 950 427 1,321
Miscellaneous credit card income............ 5,466 4,267 10,265 8,140
Other income................................ 5,797 9,044 12,132 14,743
-------- ------- -------- --------
TOTAL NON-INTEREST INCOME............... 31,899 32,550 62,487 60,496
-------- ------- -------- --------
OTHER EXPENSE
Salaries and employee benefits.............. 39,650 37,239 76,796 73,246
Net occupancy expense on bank premises...... 5,034 4,302 9,888 8,610
Equipment expense........................... 3,457 3,214 6,707 6,337
Supplies and communication expense.......... 6,005 4,731 11,310 9,519
Federal deposit insurance expense........... 4,312 3,837 8,246 7,624
Marketing expense........................... 2,408 1,852 4,401 3,726
Other operating expense..................... 17,718 17,272 32,846 30,040
-------- ------- -------- --------
TOTAL OTHER EXPENSE..................... 78,584 72,447 150,194 139,102
-------- ------- -------- --------
Income before income taxes.................. 42,273 35,800 81,705 69,429
Less income taxes........................... 15,514 11,216 29,923 22,799
-------- ------- -------- --------
NET INCOME.............................. $ 26,759 $24,584 $ 51,782 $ 46,630
======== ======= ======== ========
Net income per common and common equivalent
share...................................... $ .73 $ .72 $ 1.45 $ 1.38
======== ======= ======== ========
Weighted average common and common
equivalent shares outstanding.............. 36,614 33,907 35,729 33,761
======== ======= ======== ========
Dividends per common share.................. $ .180 $ .162 $ .360 $ .305
======== ======= ======== ========
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
SCHEDULE 4
COMMERCE BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
NUMBER OF UNEARNED NET
SHARES COMMON CAPITAL RETAINED TREASURY EMPLOYEE UNREALIZED
ISSUED STOCK SURPLUS EARNINGS STOCK BENEFITS GAIN (LOSS) TOTAL
---------- -------- ------- -------- -------- -------- ----------- --------
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE JANUARY 1, 1995. 33,970,106 $169,851 $54,575 $576,331 $(12,148) $ (295) $(60,116) $728,198
Net income............. 51,782 51,782
Year-to-date change in
fair value of
investment securities. 78,705 78,705
Purchases of 569,291
treasury shares....... (17,282) (17,282)
Sales of 144,673
treasury shares under
various stock option
plans................. (1,915) 4,378 2,463
Issuance of 176,854
treasury shares in
purchase acquisition.. (435) 5,315 4,880
Retirement of treasury
shares................ (286,967) (1,435) (7,190) 8,625 --
Issuance of new shares
in pooling
acquisition........... 2,961,266 14,806 2,318 32,360 38 49,522
Purchase of 33,600
treasury shares in
pooling acquisition... (1,000) (1,000)
Issuance of 19,889
shares under
restricted stock award
plan, net of
reversals............. 2 597 (599) --
Restricted stock award
amortization.......... 65 65
Cash dividends paid
($.360 per share)..... (13,123) (13,123)
---------- -------- ------- -------- -------- ------- -------- --------
BALANCE JUNE 30, 1995... 36,644,405 $183,222 $47,355 $647,350 $(11,515) $ (829) $ 18,627 $884,210
========== ======== ======= ======== ======== ======= ======== ========
Balance January 1, 1994. 33,850,360 $169,252 $52,915 $501,500 $ (8,982) $(2,065) $ -- $712,620
Net income............. 46,630 46,630
1/1/94 adoption of SFAS
115-adjustment of
investment securities
to fair value......... 47,116 47,116
Year-to-date change in
fair value of
investment securities. (69,772) (69,772)
Purchases of 960,531
treasury shares....... (28,146) (28,146)
Sales of 105,751
treasury shares to the
employee benefit
plans................. 307 2,788 3,095
Sales of 114,424
treasury shares under
various stock option
plans................. (1,025) 2,675 1,650
Issuance of 682,926
treasury shares in
purchase acquisitions. (366) 15,350 134 15,118
Issuance of new shares
in purchase
acquisition........... 119,746 599 3,116 (156) 3,559
Issuance of 2,887
shares under
restricted stock award
plan.................. 15 71 (86) --
ESOP benefit
allocation............ 18 375 393
Restricted stock award
amortization.......... 50 50
Cash dividends paid
($.305 per share)..... (10,286) (10,286)
---------- -------- ------- -------- -------- ------- -------- --------
Balance June 30, 1994... 33,970,106 $169,851 $54,980 $537,688 $(16,244) $(1,726) $(22,522) $722,027
========== ======== ======= ======== ======== ======= ======== ========
</TABLE>
See accompanying notes to financial statements.
6
<PAGE>
SCHEDULE 5
COMMERCE BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED JUNE 30
--------------------
1995 1994
--------- ---------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C>
OPERATING ACTIVITIES:
Net income.............................................. $ 51,782 $ 46,630
Adjustments to reconcile net income to net cash provided
by operating activities:
Provision for loan losses............................. 4,763 3,518
Provision for depreciation and amortization........... 14,787 12,653
Accretion of investment security discounts............ (2,870) (403)
Amortization of investment security premiums.......... 13,152 14,686
Net gains on sales of investment securities (A)....... (427) (1,321)
Net (increase) decrease in trading account securities. (3,496) 776
Decrease in interest receivable....................... 9,537 198
Increase (decrease) in interest payable............... 2,772 (1,877)
Other changes, net.................................... 933 12,946
--------- ---------
Net cash provided by operating activities........... 90,933 87,806
--------- ---------
INVESTING ACTIVITIES:
Net cash received (paid) in acquisitions................ (33,226) 7,757
Proceeds from sales of investment securities (A)........ 443,501 382,679
Proceeds from maturities of investment securities (A)... 316,130 182,097
Purchases of investment securities (A).................. (267,741) (506,034)
Net (increase) decrease in federal funds sold and
securities purchased
under agreements to resell............................. (126,750) 317,357
Net increase in loans................................... (309,348) (140,975)
Purchases of premises and equipment..................... (11,717) (10,318)
Sales of premises and equipment......................... 3,766 5,626
--------- ---------
Net cash provided by investing activities........... 14,615 238,189
--------- ---------
FINANCING ACTIVITIES:
Net decrease in non-interest bearing demand, savings
and interest bearing demand deposits................... (288,256) (177,992)
Net increase (decrease) in time open and C.D.'s......... 110,150 (41,679)
Net increase (decrease) in federal funds purchased and
securities sold under agreements to repurchase......... 110,326 (98,757)
Repayment of long-term debt............................. (5,572) (231)
Purchases of treasury stock............................. (17,117) (28,108)
Sales of treasury stock to employee benefit plans....... -- 3,095
Exercise of stock options by employees.................. 2,179 1,505
Cash dividends paid on common stock..................... (13,123) (10,286)
--------- ---------
Net cash used by financing activities............... (101,413) (352,453)
--------- ---------
Increase (decrease) in cash and cash equivalents.... 4,135 (26,458)
Cash and cash equivalents at beginning of year.......... 565,805 534,785
--------- ---------
Cash and cash equivalents at June 30................ $ 569,940 $ 508,327
========= =========
</TABLE>
--------
(A) Available for sale and other non-marketable securities, excluding trading
account securities.
Cash payments of income taxes for the six month period were $16,027,000 in
1995 and $26,645,000 in 1994. Interest paid on deposits and borrowings for the
six month period was $125,293,000 in 1995 and $87,867,000 in 1994.
See accompanying notes to financial statements.
7
<PAGE>
SCHEDULE 6
COMMERCE BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995
(UNAUDITED)
1. PRINCIPLES OF CONSOLIDATION AND PRESENTATION
The accompanying consolidated financial statements include the accounts of
Commerce Bancshares, Inc. and all majority-owned subsidiaries. All significant
intercompany accounts and transactions have been eliminated. Certain
reclassifications were made to 1994 data to conform to current year
presentation.
The significant accounting policies followed in the preparation of the
quarterly financial statements are the same as those disclosed in the 1994
Annual Report to stockholders to which reference is made.
2. ALLOWANCE FOR LOAN LOSSES
The following is a summary of the allowance for loan losses (in thousands):
<TABLE>
<CAPTION>
FOR THE FOR THE
THREE MONTHS SIX MONTHS
ENDED JUNE 30 ENDED JUNE 30
--------------- ---------------
1995 1994 1995 1994
------- ------- ------- -------
<S> <C> <C> <C> <C>
Balance, beginning of period............. $92,055 $86,993 $87,179 $85,830
------- ------- ------- -------
Additions:
Provision for loan losses.............. 1,930 2,063 4,763 3,518
Allowance for loan losses of acquired
banks................................. 8,195 -- 12,932 1,583
------- ------- ------- -------
Total additions...................... 10,125 2,063 17,695 5,101
------- ------- ------- -------
Deductions:
Loan losses............................ 4,969 4,434 9,173 7,812
Less recoveries on loans............... 2,010 1,417 3,520 2,920
------- ------- ------- -------
Net loan losses...................... 2,959 3,017 5,653 4,892
------- ------- ------- -------
Balance, June 30......................... $99,221 $86,039 $99,221 $86,039
======= ======= ======= =======
</TABLE>
At June 30, 1995, interest income was not being recognized on an accrual
basis for loans totaling approximately $14,225,000.
3. INVESTMENT SECURITIES
Investment securities, at fair value, consist of the following at June 30,
1995 and December 31, 1994 (in thousands):
<TABLE>
<CAPTION>
JUNE 30 DECEMBER 31
1995 1994
---------- -----------
<S> <C> <C>
Available for sale:
U.S. government and federal agency obligations.. $1,677,862 $1,797,291
Obligations of states and political
subdivisions................................... 150,858 56,422
CMO's and asset-backed securities............... 690,369 692,822
Other debt securities........................... 29,385 45,748
Equity securities............................... 37,259 29,059
Trading account securities........................ 6,556 5,539
Other non-marketable securities................... 24,547 18,539
---------- ----------
Total investment securities................... $2,616,836 $2,645,420
========== ==========
</TABLE>
8
<PAGE>
4. ACQUISITION ACTIVITY
Effective March 1, 1995, the Company acquired the Cotton Exchange Bank in
Kennett, Missouri, for 176,854 shares of treasury stock and $4.1 million in
cash, using the "purchase" method of accounting. The Peoples Bank of
Bloomington, Illinois, was acquired March 1, 1995, for accounting purposes in a
pooling transaction in which 2,961,266 shares of new common stock were issued.
At acquisition date, these banks had combined assets of $510 million, loans of
$262 million and deposits of $362 million. They did not have a material impact
on the earnings per share of the Company. Therefore, prior year statements were
not restated for these transactions.
On April 17, 1995, the Company acquired the Union National Bank in Wichita,
Kansas, for cash of $86.7 million. The Chillicothe State Bank in Chillicothe,
Illinois, was acquired on May 1, 1995, for $3.3 million in cash. At acquisition
date, these banks had combined assets of $697 million, loans of $416 million
and deposits of $522 million. They were accounted for as "purchases" and did
not have a material effect on the earnings per share of the Company.
9
<PAGE>
SCHEDULE 7
COMMERCE BANCSHARES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
JUNE 30, 1995
(UNAUDITED)
The following discussion and analysis should be read in conjunction with the
consolidated financial statements and related notes and with the statistical
information and financial data appearing in this report as well as the
Company's 1994 Annual Report on Form 10-K. Results of operations for the six
month period ended June 30, 1995 are not necessarily indicative of results to
be attained for any other period.
SUMMARY
The Company's consolidated net income for the first six months of 1995
totaled $51.8 million; $5.2 million greater than the same period for 1994. The
increase was mainly due to a $22.6 million increase in net interest income,
partially offset by an $11.1 million increase in other expense and a $7.1
million increase in income tax expense. Net income for the second quarter of
1995 was $2.2 million greater than the second quarter of 1994 due to a $13.1
million increase in net interest income, partially offset by a $6.1 million
increase in other expense and a $4.3 million increase in income tax expense.
Net income for the second quarter of 1995 was $1.7 million greater than the
first quarter of 1995 due to an increase of $7.6 million in net interest
income, partially offset by an increase of $7.0 million in other expense.
The Company is continually evaluating acquisition opportunities, and
frequently conducts due diligence activities in connection with possible
acquisitions both on an assisted and unassisted basis. Acquisition candidates
that may be under consideration at any time include depository institutions,
thrift or savings type associations and related companies. They are generally
based in markets in which the Company presently operates or in markets in
proximity to one of the Company's existing markets.
On March 1, 1995, the Company acquired the Cotton Exchange Bank in Kennett,
Missouri, for 176,854 shares of treasury stock and $4.1 million in cash, using
the purchase method of accounting. The Peoples Bank of Bloomington, Illinois,
was acquired effective March 1, 1995 for accounting purposes, in a pooling
transaction in which 2,961,266 shares of new stock were issued. These
acquisitions brought $510 million in assets to the balance sheet of the
organization but did not have a material impact on the earnings per share of
the Company.
Two additional acquisitions were completed in the second quarter of 1995.
Union National Bank of Wichita, Kansas, was acquired on April 17, 1995, for
cash of $86.7 million and increased assets by approximately $673 million.
Chillicothe State Bank of Chillicothe, Illinois, was purchased on May 1, 1995,
for $3.3 million in cash and brought $24 million in assets to the organization.
These acquisitions did not have a material impact on the earnings per share of
the Company.
As of July 1, 1995, the Commerce Bank locations in the Metro Kansas City area
have merged together to form one bank, thus better serving those customers at
approximately 50 sites on both sides of the Missouri-Kansas state line.
INTEREST INCOME AND EARNING ASSETS
Total interest income increased $64.7 million, or 27.2%, compared to the
first six months of 1994 due to an increase of 109 basis points in tax
equivalent rates earned and an increase of $703.7 million in average earning
asset balances, (which caused an increase of $28.9 million in tax equivalent
interest income). Excluding banks acquired after January 1, 1994, total
interest income increased $36.1 million, or 15.4%, in the first six months of
1995 over the same period in 1994. Compared to the second quarter of 1994,
interest income increased $39.2 million due to an increase of $1.02 billion in
average earning asset balances and an increase of 110 basis points in tax
equivalent rates earned. Total interest income increased $19.0 million over the
first quarter of 1995 mainly due to a $686.3 million increase in average
earning asset balances. The average
10
<PAGE>
tax equivalent yield was 7.93% for the first six months of 1995, 6.84% for the
first six months of 1994, 8.04% for the second quarter of 1995, 6.94% for the
second quarter of 1994 and 7.80% for the first quarter of 1995.
Loans, the highest yielding category of earning assets, were 64% of average
earning assets for the first six months of 1995. Loan and lease interest income
increased $63.6 million over the first six months of 1994 due to an increase of
$879.1 million in average loan balances and an increase of 123 basis points in
average tax equivalent rates earned. Increases in business loan rates accounted
for a significant portion of the rate increase. The 1995 to 1994 year to year
comparative increase is $44.8 million when the effect of 1994 and 1995
acquisitions is excluded. Loan and lease interest income increased $38.2
million over the second quarter of 1994 due to an increase of $1.16 billion in
average balances and an increase of 121 basis points in tax equivalent rates
earned. Compared to the first quarter of 1995, loan interest income increased
$18.3 million mainly due to a $677.4 million increase in average loan balances.
Interest income on investment securities increased $1.4 million over the
first six months of 1994 due to an increase of 37 basis points in tax
equivalent rates earned (mainly in U. S. government and federal agency and
CMO's and asset-backed securities), partially offset by a decrease of $101.2
million in average balances invested (mainly in U. S. government and federal
agency securities). If the effect of 1994 and 1995 acquisitions is excluded,
investment securities interest income decreased $7.9 million in 1995 compared
to 1994. Interest income on investment securities increased $738 thousand over
the second quarter of 1994 and increased $414 thousand over the first quarter
of 1995 due to increases in tax equivalent rates earned, partially offset by
decreases in average balances invested. The unrealized loss in fair value of
available for sale investment securities improved from a $97.1 million loss at
December 31, 1994, to an unrealized gain of $28.2 million at June 30, 1995. The
amount of the related after tax unrealized gain reported in stockholders'
equity at June 30, 1995, was $18.6 million.
Interest income on federal funds sold and securities purchased under
agreements to resell decreased $308 thousand from the first six months of 1994
due to a decrease of $74.2 million in average balances invested, partially
offset by an increase of 265 basis points in average rates earned. Compared to
the second quarter of 1994, federal funds sold and resell agreement interest
income increased $182 thousand due to an increase in average rates earned,
partially offset by a decrease in the average balances invested. Federal funds
sold and resell agreement interest income increased $351 thousand compared to
the first quarter of 1995 mainly due to a $21.3 million increase in average
balances invested.
Summaries of average earning assets and liabilities and the corresponding
average rates earned/paid appear on pages 12 through 15.
RISK ELEMENTS OF LOAN PORTFOLIO
The loan portfolio contained loans on non-accrual status of $14.2 million at
June 30, 1995, compared to $11.4 million at December 31, 1994. These loans were
placed on non-accrual status because management does not expect to collect
payments consistent with acceptable and agreed upon terms of repayment
(generally, loans that are 90 days past due as to principal and/or interest
payments). Loans which were 90 days past due and still accruing interest
amounted to $14.3 million at June 30, 1995, and were made primarily to
borrowers in Missouri and the surrounding region. The subsidiary banks issue
Visa and MasterCard credit cards, and the balance of these consumer loans
generated through credit card sales drafts and cash advances was $408.5 million
at June 30, 1995. Because credit card loans traditionally have a higher than
average ratio of net charge-offs to loans outstanding, management requires that
a specific allowance for losses on credit card loans be maintained, which was
$10.4 million, or 2.5% of credit card loans at June 30, 1995. Included in the
"Personal" loan category is a home equity loan product, the "Anytime Line",
which had $153.7 million in loans outstanding and $249.0 million in unused
lines of credit at June 30, 1995. At June 30, 1995, a mortgage banking
subsidiary held residential real estate loans of $9.1 million at lower of cost
or market, which are to be resold to secondary markets within approximately
three months. Foreclosed real estate amounted to approximately $5.9 million at
June 30, 1995. The risk presented by the above loans and foreclosed real estate
is not considered by management to be materially adverse in relation to normal
credit risks generally taken by lenders.
11
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONT'D.)
AVERAGE BALANCE SHEETS--AVERAGE RATES AND YIELDS
SIX MONTHS ENDED JUNE 30, 1995 AND 1994
<TABLE>
<CAPTION>
SIX MONTHS 1995 SIX MONTHS 1994
------------------------------- -------------------------------
INTEREST AVG. RATES INTEREST AVG. RATES
AVERAGE INCOME/ EARNED/ AVERAGE INCOME/ EARNED/
BALANCE EXPENSE PAID BALANCE EXPENSE PAID
---------- -------- ---------- ---------- -------- ----------
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Loans and leases:
Business (including
foreign) (A).......... $1,625,307 $ 67,851 8.42% $1,376,252 $ 45,228 6.63%
Construction and
development........... 127,071 6,026 9.56 105,644 3,841 7.33
Real estate--business.. 665,806 29,838 9.04 524,379 19,660 7.56
Real estate--personal.. 916,550 34,875 7.67 738,938 25,568 6.98
Personal banking....... 1,207,634 51,852 8.66 961,664 37,006 7.76
Credit card............ 397,803 27,460 13.92 354,197 22,867 13.02
---------- -------- ----- ---------- -------- -----
Total loans and
leases.............. 4,940,171 217,902 8.89 4,061,074 154,170 7.66
---------- -------- ----- ---------- -------- -----
Investment securities:..
U.S. government &
federal agency........ 1,761,859 53,783 6.16 2,211,493 63,868 5.82
State & municipal
obligations (A)....... 107,391 4,071 7.64 44,455 1,722 7.81
CMO's and asset-backed
securities............ 755,081 23,595 6.30 486,577 14,163 5.87
Trading account
securities (A)........ 3,261 106 6.54 4,266 83 3.92
Other marketable
securities (A)........ 82,007 2,508 6.17 66,684 1,989 6.01
Other non-marketable
securities............ 23,320 298 2.58 20,596 386 3.78
---------- -------- ----- ---------- -------- -----
Total investment
securities.......... 2,732,919 84,361 6.22 2,834,071 82,211 5.85
---------- -------- ----- ---------- -------- -----
Federal funds sold and
securities purchased
under agreements to
resell................. 75,660 2,317 6.18 149,881 2,625 3.53
---------- -------- ----- ---------- -------- -----
Total interest
earning assets...... 7,748,750 304,580 7.93 7,045,026 239,006 6.84
-------- ----- -------- -----
Less allowance for loan
losses................. (93,529) (86,447)
Unrealized gain (loss)
on investment
securities............. (51,000) 25,607
Cash and due from banks. 572,182 553,002
Land, buildings and
equipment--net......... 201,222 195,153
Other assets............ 193,907 143,104
---------- ----------
Total assets......... $8,571,532 $7,875,445
========== ==========
LIABILITIES AND EQUITY:
Interest bearing
deposits:
Savings................ $ 306,510 3,898 2.56 $ 269,797 3,143 2.35
Interest bearing
demand................ 3,202,548 52,292 3.29 3,288,048 39,984 2.45
Time open & C.D.'s of
less than $100,000.... 2,130,456 54,355 5.14 1,777,674 36,061 4.09
Time open & C.D.'s of
$100,000 and over..... 200,886 5,146 5.17 147,815 2,688 3.67
---------- -------- ----- ---------- -------- -----
Total interest
bearing deposits.... 5,840,400 115,691 3.99 5,483,334 81,876 3.01
---------- -------- ----- ---------- -------- -----
Borrowings:
Federal funds
purchased and
securities sold under
agreements to
repurchase............ 439,118 11,804 5.42 265,481 3,853 2.93
Long-term debt and
other borrowings...... 16,957 575 6.84 6,949 268 7.78
---------- -------- ----- ---------- -------- -----
Total borrowings..... 456,075 12,379 5.47 272,430 4,121 3.05
---------- -------- ----- ---------- -------- -----
Total interest
bearing liabilities. 6,296,475 128,070 4.10% 5,755,764 85,997 3.01%
-------- ----- -------- -----
Demand--non-interest
bearing deposits....... 1,429,960 1,327,491
Other liabilities....... 41,122 46,176
Stockholders' equity.... 803,975 746,014
---------- ----------
Total liabilities and
equity.............. $8,571,532 $7,875,445
========== ==========
Net interest margin
(T/E).................. $176,510 $153,009
======== ========
Net yield on interest
earning assets......... 4.59% 4.38%
===== =====
</TABLE>
--------
(A) Stated on a tax equivalent basis using a federal income tax rate of 35%.
12
<PAGE>
ANALYSIS OF VARIANCE IN NET INTEREST MARGIN (T/E) DUE TO VOLUMES AND RATES
SIX MONTHS ENDED JUNE 30, 1995 AND 1994
<TABLE>
<CAPTION>
1995 VS 1994
-----------------------------
INCREASE OR
(DECREASE) DUE
TO CHANGE IN
----------------- TOTAL
AVERAGE AVERAGE INCREASE
VOLUME RATE (B) (DECREASE)
------- -------- ----------
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
VARIANCE IN INTEREST INCOME ON:
Loans and leases:
Business (including foreign) (A)................. $ 7,887 $14,736 $22,623
Construction and development..................... 779 1,406 2,185
Real estate--business............................ 5,302 4,876 10,178
Real estate--personal............................ 6,148 3,159 9,307
Personal banking................................. 9,465 5,381 14,846
Credit card...................................... 2,815 1,778 4,593
------- ------- -------
Total loans and leases......................... 32,396 31,336 63,732
------- ------- -------
Investment securities:
U.S. government & federal agency................. (12,977) 2,892 (10,085)
State & municipal obligations (A)................ 2,437 (88) 2,349
CMO's and asset-backed securities................ 7,856 1,576 9,432
Trading account securities (A)................... (20) 43 23
Other marketable securities (A).................. 457 62 519
Other non-marketable securities.................. 51 (139) (88)
------- ------- -------
Total investment securities.................... (2,196) 4,346 2,150
------- ------- -------
Federal funds sold and securities purchased under
agreements to resell............................. (1,264) 956 (308)
------- ------- -------
Total interest income.......................... 28,936 36,638 65,574
------- ------- -------
VARIANCE IN INTEREST EXPENSE ON:
Interest bearing deposits:
Savings.......................................... 428 327 755
Interest bearing demand.......................... (1,129) 13,437 12,308
Time open & C.D.'s of less than $100,000......... 6,507 11,787 18,294
Time open & C.D.'s of $100,000 and over.......... 824 1,634 2,458
------- ------- -------
Total interest bearing deposits................ 6,630 27,185 33,815
------- ------- -------
Borrowings:
Federal funds purchased and securities sold
under agreements to repurchase.................. 2,609 5,342 7,951
Long-term debt and other borrowings.............. 386 (79) 307
------- ------- -------
Total borrowings............................... 2,995 5,263 8,258
------- ------- -------
Total interest expense......................... 9,625 32,448 42,073
------- ------- -------
Change in net interest margin (T/E)............... $19,311 $ 4,190 $23,501
======= ======= =======
Percentage increase in net interest margin (T/E)
over the same period of the prior year........... 15.36%
=======
</TABLE>
--------
(A) Stated on a tax equivalent basis.
(B) Changes not solely due to volume or rate changes are allocated to rate.
Management believes this allocation method, applied on a consistent basis,
provides meaningful comparisons between the respective periods.
13
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONT'D.)
AVERAGE BALANCE SHEETS--AVERAGE RATES AND YIELDS
THREE MONTHS ENDED JUNE 30, 1995 AND MARCH 31, 1995
<TABLE>
<CAPTION>
SECOND QUARTER 1995 FIRST QUARTER 1995
------------------------------- -------------------------------
INTEREST AVG. RATES INTEREST AVG. RATES
AVERAGE INCOME/ EARNED/ AVERAGE INCOME/ EARNED/
BALANCE EXPENSE PAID BALANCE EXPENSE PAID
---------- -------- ---------- ---------- -------- ----------
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Loans and leases:
Business (including
foreign) (A).... ..... $1,764,666 $ 37,405 8.50% $1,484,400 $ 30,446 8.32%
Construction and
development........... 124,676 2,948 9.48 129,493 3,078 9.64
Real estate--business.. 715,818 16,320 9.14 615,238 13,518 8.91
Real estate--personal.. 983,982 19,047 7.76 848,369 15,828 7.57
Personal banking....... 1,282,396 28,074 8.78 1,132,041 23,778 8.52
Credit card............ 405,447 14,343 14.19 390,074 13,117 13.64
---------- -------- ----- ---------- -------- -----
Total loans and
leases.............. 5,276,985 118,137 8.98 4,599,615 99,765 8.80
---------- -------- ----- ---------- -------- -----
Investment securities:
U.S. government &
federal agency........ 1,721,733 26,572 6.19 1,802,431 27,211 6.12
State & municipal
obligations (A)....... 141,060 2,792 7.94 73,348 1,279 7.07
CMO's and asset-backed
securities............ 760,937 11,902 6.27 749,160 11,693 6.33
Trading account
securities (A)........ 3,286 61 7.45 3,236 45 5.65
Other marketable
securities (A)........ 74,764 1,118 6.00 89,330 1,390 6.31
Other non-marketable
securities............ 25,030 187 3.00 21,591 111 2.08
---------- -------- ----- ---------- -------- -----
Total investment
securities.......... 2,726,810 42,632 6.27 2,739,096 41,729 6.18
---------- -------- ----- ---------- -------- -----
Federal funds sold and
securities purchased
under agreements to
resell................. 86,232 1,334 6.20 64,971 983 6.14
---------- -------- ----- ---------- -------- -----
Total interest
earning assets...... 8,090,027 162,103 8.04 7,403,682 142,477 7.80
-------- ----- -------- -----
Less allowance for loan
losses................. (98,541) (88,461)
Unrealized loss on
investment securities.. (18,714) (83,645)
Cash and due from banks. 589,434 554,738
Land, buildings and
equipment--net......... 208,561 193,801
Other assets............ 220,970 166,543
---------- ----------
Total assets......... $8,991,737 $8,146,658
========== ==========
LIABILITIES AND EQUITY:
Interest bearing
deposits:
Savings................ $ 329,934 2,101 2.56 $ 282,826 1,797 2.58
Interest bearing
demand................ 3,289,088 27,676 3.38 3,115,046 24,616 3.20
Time open & C.D.'s of
less than $100,000.... 2,266,837 30,168 5.34 1,992,560 24,187 4.92
Time open & C.D.'s of
$100,000 and over..... 217,137 2,943 5.44 184,454 2,203 4.84
---------- -------- ----- ---------- -------- -----
Total interest
bearing deposits.... 6,102,996 62,888 4.13 5,574,886 52,803 3.84
---------- -------- ----- ---------- -------- -----
Borrowings:
Federal funds
purchased and
securities sold under
agreements to
repurchase............ 474,654 6,530 5.52 403,187 5,274 5.30
Long-term debt and
other borrowings...... 18,425 341 7.42 15,473 234 6.14
---------- -------- ----- ---------- -------- -----
Total borrowings..... 493,079 6,871 5.59 418,660 5,508 5.34
---------- -------- ----- ---------- -------- -----
Total interest
bearing liabilities. 6,596,075 69,759 4.24% 5,993,546 58,311 3.95%
-------- ----- -------- -----
Demand--non-interest
bearing deposits....... 1,494,111 1,365,096
Other liabilities....... 53,525 28,582
Stockholders' equity.... 848,026 759,434
---------- ----------
Total liabilities and
equity.............. $8,991,737 $8,146,658
========== ==========
Net interest margin
(T/E).................. $ 92,344 $ 84,166
======== ========
Net yield on interest
earning assets......... 4.58% 4.61%
===== =====
</TABLE>
-------
(A) Stated on a tax equivalent basis using a federal income tax rate of 35%.
14
<PAGE>
ANALYSIS OF VARIANCE IN NET INTEREST MARGIN (T/E) DUE TO VOLUMES AND RATES
THREE MONTHS ENDED JUNE 30, 1995 AND MARCH 31, 1995
<TABLE>
<CAPTION>
CURRENT QUARTER VS
PRIOR QUARTER
-----------------------------
INCREASE OR
(DECREASE) DUE
TO CHANGE IN
----------------- TOTAL
AVERAGE AVERAGE INCREASE
VOLUME RATE (B) (DECREASE)
------- -------- ----------
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
VARIANCE IN INTEREST INCOME ON:
Loans and leases:
Business (including foreign) (A)................. $ 5,814 $ 1,145 $ 6,959
Construction and development..................... (116) (14) (130)
Real estate--business............................ 2,234 568 2,802
Real estate--personal............................ 2,559 660 3,219
Personal banking................................. 3,194 1,102 4,296
Credit card...................................... 523 703 1,226
------- ------- -------
Total loans and leases......................... 14,208 4,164 18,372
------- ------- -------
Investment securities:
U.S. government & federal agency................. (1,231) 592 (639)
State & municipal obligations (A)................ 1,194 319 1,513
CMO's and asset-backed securities................ 186 23 209
Trading account securities (A)................... 1 15 16
Other marketable securities (A).................. (229) (43) (272)
Other non-marketable securities.................. 18 58 76
------- ------- -------
Total investment securities.................... (61) 964 903
------- ------- -------
Federal funds sold and securities purchased under
agreements to resell............................. 326 25 351
------- ------- -------
Total interest income.......................... 14,473 5,153 19,626
------- ------- -------
VARIANCE IN INTEREST EXPENSE ON:
Interest bearing deposits:
Savings.......................................... 303 1 304
Interest bearing demand.......................... 1,308 1,752 3,060
Time open & C.D.'s of less than $100,000......... 3,403 2,578 5,981
Time open & C.D.'s of $100,000 and over.......... 393 347 740
------- ------- -------
Total interest bearing deposits................ 5,407 4,678 10,085
------- ------- -------
Borrowings:
Federal funds purchased and securities sold
under agreements to repurchase.................. 966 290 1,256
Long-term debt and other borrowings.............. 45 62 107
------- ------- -------
Total borrowings............................... 1,011 352 1,363
------- ------- -------
Total interest expense......................... 6,418 5,030 11,448
------- ------- -------
Change in net interest margin (T/E)............... $ 8,055 $ 123 $ 8,178
======= ======= =======
Percentage increase in net interest margin (T/E)
over the prior quarter........................... 9.72%
=======
</TABLE>
--------
(A) Stated on a tax equivalent basis.
(B) Changes not solely due to volume or rate changes are allocated to rate.
Management believes this allocation method, applied on a consistent basis,
provides meaningful comparisons between the respective periods.
15
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONT'D.)
PROVISION FOR LOAN LOSSES
Management records the provision for loan losses, on an individual bank
basis, in amounts that result in an allowance for loan losses sufficient to
cover all potential net charge-offs and risks believed to be inherent in the
loan portfolio of each bank. Management's evaluation includes such factors as
past loan loss experience as related to current loan portfolio mix, evaluation
of actual and potential losses in the loan portfolio, prevailing regional and
national economic conditions that might have an impact on the portfolio,
regular reviews and examinations of the loan portfolio conducted by internal
loan reviewers supervised by Commerce Bancshares, Inc. (the Parent), reviews
and examinations by bank regulatory authorities, and other factors that
management believes deserve current recognition. As a result of these factors,
the provision for loan losses increased $1.2 million compared to the first six
months of 1994, decreased $133 thousand from the second quarter of 1994 and
decreased $903 thousand from the first quarter of 1995. The allowance for loan
losses as a percentage of loans and leases outstanding was 1.83% at June 30,
1995, compared to 1.97% at year-end 1994 and 2.03% at June 30, 1994. Management
believes that the allowance for loan losses, which is a general reserve, is
adequate to cover actual and potential losses in the loan portfolio under
current conditions. Other than as previously noted, management is not aware of
any significant risks in the current loan portfolio due to concentrations of
loans within any particular industry, nor of any separate types of loans within
a particular category of non-performing loans that are unusually significant as
to possible loan losses when compared to the entire loan portfolio. Net charge-
offs on loans totaled $5.7 million for the first six months of 1995 compared to
net charge-offs of $4.9 million for the first six months of 1994, $3.0 million
for the second quarter of 1995, $3.0 million for the second quarter of 1994 and
$2.7 million for the first quarter of 1995.
INTEREST EXPENSE AND RELATED LIABILITIES
Total interest expense (net of capitalized interest) increased $42.1 million,
or 48.9%, compared to the first six months of 1994 due mainly to increases in
average rates paid. Excluding banks acquired after January 1, 1994, total
interest expense increased $28.5 million, or 33.7%, in the first six months of
1995 compared to the first six months of 1994. Total interest expense increased
$26.0 million and $11.4 million over the 1994 second and 1995 first quarters,
respectively, due to increases in both average rates paid and average balances
of interest bearing liabilities. The average cost of funds was 4.10% for the
first six months of 1995, 3.01% for the first six months of 1994, 4.24% for the
second quarter of 1995, 3.05% for the second quarter of 1994 and 3.95% for the
first quarter of 1995.
Average core deposits (deposits excluding short-term certificates of deposit
over $100,000) for the first six months of 1995 were $7.2 billion, an increase
of 6.1% over the same period last year. Core deposits supported 93% of average
earning assets in 1995. Interest on deposits increased $33.8 million over the
first six months of 1994. Average rates paid on time open and certificates of
deposit under $100,000 increased 105 basis points and rates paid on interest
bearing demand deposits increased 84 basis points. A significant portion of the
increase in average deposits was due to acquisitions in 1994 and 1995; if their
effect is excluded, deposit interest expense increased $22.3 million in 1995
compared to 1994. Deposit interest expense increased $21.3 million over the
second quarter of 1994 and increased $10.1 million over the first quarter of
1995 mainly due to increases in average rates paid on time open and
certificates of deposit under $100,000, rates paid on interest bearing demand
deposits and average balances of time open and certificates of deposit under
$100,000.
Interest expense on federal funds purchased and securities sold under
agreements to repurchase increased $8.0 million over the first six months of
1994, increased $4.5 million over the second quarter of 1994, and increased
$1.3 million over the first quarter of 1995 due to both increases in average
rates paid and increases in average borrowings.
16
<PAGE>
NON-INTEREST INCOME
Non-interest income increased $2.0 million compared to the first six months
of 1994. Miscellaneous credit card income increased $2.1 million, deposit
account charges and other fees increased $1.7 million and trust income
increased $1.4 million. These increases were partially offset by an $894
thousand decrease in gains on securities transactions and a $2.6 million
decrease in other income (which included a $985 thousand decrease in gains on
loan and lease sales and $1.1 million in fees collected in 1994 in conjunction
with the payoff of a specific loan). Excluding the non-interest income of banks
acquired after January 1, 1994, non-interest income decreased $1.7 million
compared to the first six months of 1994. Most of the above-mentioned increase
in deposit account charges and other fees and trust income was due to activity
at recently acquired banks. Non-interest income decreased $651 thousand
compared to the second quarter of 1994 mainly due to a decrease of $3.2 million
in other income, which included a $2.1 million decrease in gains on loan and
lease sales and the fee decrease mentioned above. These decreases were
partially offset by an increase of $1.2 million in miscellaneous credit card
income. Compared to the first quarter of 1995, non-interest income increased
$1.3 million due to increases of $994 thousand in deposit account charges and
other fees and $667 thousand in miscellaneous credit card income, partially
offset by an $866 thousand decrease in gains on loan and lease sales. During
the first six months of 1995, the affiliate banks sold securities from the
available for sale category for proceeds of $432.3 million and realized net
gains of $254 thousand. The Parent sold securities for proceeds of $11.2
million, realizing a net gain of $173 thousand. During the first six months of
1994, the affiliate banks sold securities from the available for sale category
for proceeds of $380.2 million and realized net gains of $1.0 million. The
Parent and a non-bank subsidiary sold equity securities for proceeds of $2.5
million and realized net gains of $305 thousand.
OTHER EXPENSE
Other expense increased $11.1 million compared to the first six months of
1994 due to an increase of $3.6 million in salaries and employee benefits, a
$1.8 million increase in supplies and communication expense, a $1.3 million
increase in net occupancy expense on bank premises, and a $2.8 million increase
in other operating expense (which included increases in various outside fees
and goodwill/core deposit premium amortization, partially offset by a decrease
in charitable contribution expense). A portion of the above increases were due
to expenses at acquired banks. Excluding the expenses of banks acquired after
January 1, 1994, total other expense decreased $3.2 million in the first six
months of 1995 compared to the same period in 1994. Excluding the 1994 and 1995
acquisitions, salaries and employee benefits declined by $2.1 million with a
decrease of 273 full-time equivalent employees. Compared to the second quarter
of 1994, other expense increased $6.1 million mainly due to a $2.4 million
increase in salaries and employee benefits and a $1.3 million increase in
supplies and communication expense. Other expense increased $7.0 million over
the first quarter of 1995 mainly due to an increase of $2.5 million in salaries
and employee benefits and a $2.6 million increase in other operating expense
(including increased goodwill/core deposit premium amortization).
INCOME TAXES
Income tax expense increased $7.1 million compared to the first six months of
1994, increased $4.3 million compared to the second quarter of 1994 and
increased $1.1 million over the first quarter of 1995 due to increases in
taxable income.
LIQUIDITY AND CAPITAL RESOURCES
The liquid assets of the Parent company consist primarily of short-term
investments, U.S. government and federal agency securities and equity
securities, most of which are readily marketable. The fair value of these
investments was $53.9 million at June 30, 1995 compared to $122.8 million at
December 31, 1994. Cash requirements for bank acquisitions during the first six
months of 1995 caused most of the decrease. The Parent company liabilities
totaled $38.4 million at June 30, 1995, compared to $9.9 million at December
31, 1994.
17
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONT'D.)
This increase was mainly due to transfers of funds from subsidiary bank holding
companies in order to combine resources for short-term investment in liquid
assets. The Parent company had no short-term borrowings from affiliate banks or
long-term debt at June 30, 1995. The Parent company's commercial paper, which
management believes is readily marketable, has a P1 rating from Moody's and an
A1 rating from Standard & Poor's. The Company is also rated A by Thomson
BankWatch with a corresponding short-term rating of TBW-1. This credit
availability should provide adequate funds to meet any outstanding or future
commitments of the Parent.
The liquid assets held by bank subsidiaries include federal funds sold and
securities purchased under agreements to resell and available for sale
securities, which consist mainly of U.S. government and federal agency
securities and CMO's and asset-backed securities. These liquid assets had a
fair value of $2.76 billion at June 30, 1995, compared to $2.64 billion at
December 31, 1994. The available for sale bank portfolio included an unrealized
net gain of $16.9 million at June 30, 1995.
In June, 1995, the Board of Directors authorized the Company to purchase up
to 2,000,000 shares of common stock in either the open market or privately
negotiated transactions. This action began after the completion of the stock
repurchase program authorized in 1994. It reflects the Company's view that the
stock is undervalued and that such purchases will enhance long-term shareholder
value and provide future funding for stock acquisitions and employee benefit
programs.
The Company (on a consolidated basis) had an equity to asset ratio of 9.38%
based on 1995 average balances. As shown in the following table, the Company's
capital exceeded the minimum risk-based capital and leverage requirements of
the regulatory agencies:
<TABLE>
<CAPTION>
JUNE 30, JUNE 30,
1995 1994
---------- ----------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Risk-Adjusted Assets.............................. $6,021,365 $4,880,126
Tier I Capital.................................... 758,939 708,507
Total Capital..................................... 831,734 768,443
Tier I Capital Ratio.............................. 12.60% 14.52%
Total Capital Ratio............................... 13.81% 15.75%
Leverage Ratio.................................... 8.55% 9.08%
</TABLE>
The Company's cash and cash equivalents (defined as "Cash and due from
banks") were $569.9 million at June 30, 1995, an increase of $4.1 million over
the balance at December 31, 1994. Contributing to the net cash inflow were
proceeds of $759.6 million from sales and maturities of investment securities,
a net increase of $110.2 million in time open and certificates of deposit and a
net increase of $110.3 million in borrowings of federal funds purchased and
securities sold under agreements to repurchase. These cash inflows were
partially offset by purchases of investment securities of $267.7 million,
$309.3 million in additional loans made, net of repayments, and a net decrease
of $288.3 million in demand deposits.
The Company has various commitments and contingent liabilities which are
properly not reflected on the balance sheet. Loan commitments (excluding lines
of credit related to credit card loan agreements) totaled approximately $1.86
billion, standby letters of credit totaled $127.5 million, and commercial
letters of credit totaled $27.1 million at June 30, 1995. The Company has
little risk exposure in off-balance-sheet derivative contracts. The notional
value of these contracts (interest rate and foreign exchange rate contracts)
was $172.8 million at June 30, 1995. The current credit exposure (or
replacement cost) across all off-balance-sheet derivative contracts covered by
the risk-based capital standards was $5.7 million at June 30, 1995. Management
does not anticipate any material losses to arise from these contingent items
and believes there are no material commitments to extend credit that represent
risks of an unusual nature.
18
<PAGE>
INDEX TO EXHIBITS
10 - MATERIAL CONTRACTS
(C) COPY OF COMMERCE BANCSHARES, INC. 1987 NON-QUALIFIED STOCK
OPTION PLAN AS AMENDED AND RESTATED IN ITS ENTIRETY AT THE
SHAREHOLDER MEETING ON APRIL 19, 1995
(H) COPY OF COMMERCE BANCSHARES, INC. 1996 INCENTIVE STOCK OPTION
PLAN - A NEW PLAN ADOPTED BY THE SHAREHOLDERS ON APRIL 19, 1995
27 - FINANCIAL DATA SCHEDULE
19
<PAGE>
EXHIBIT 10(c)
COMMERCE BANCSHARES, INC.
1987 NON-QUALIFIED STOCK OPTION PLAN
AMENDED AND RESTATED AS OF FEBRUARY 3, 1995
Commerce Bancshares, Inc. (the "Company"), hereby establishes this Non-
Qualified Stock Option Plan, (the "Plan"), for key employees of the Company and
its subsidiaries. The Plan is designed to meet the criteria of performance-
based compensation under Section 162 of the Internal Revenue Code, as amended.
1. Purpose. The purpose of the Plan is to aid the Company and its
subsidiaries in obtaining and retaining qualified and competent management
personnel and to encourage significant contributions by such personnel to
the success of the Company and its subsidiaries by providing additional,
long-term incentive to those employees who contribute conspicuously to the
successful and profitable operations of the Company and its subsidiaries.
It is believed that this purpose will be furthered through the granting to
key employees of options to purchase shares of the common stock of the
Company ("options"), as provided herein, so that such employees
("optionees") will be encouraged and enabled to acquire a larger personal
interest in the continued success of the Company and its subsidiaries,
thereby providing additional incentive to such employees to operate the
Company and its subsidiaries in a manner to benefit all shareholders.
2. Administration.
(a) Grants of Options. All grants of options shall be made by the
Compensation and Benefits Committee (the "Committee") of the Board of
Directors of the Company (the "Board of Directors"). The Board of Directors
may from time to time remove from or add members to the Committee,
provided, however that no member of the Board of Directors who is an
employee or former officer of the Company or any of its subsidiaries will
be a member of the Committee. The Committee shall consist of three or more
members.
(b) General Administration. The Committee shall have full power and
authority to administer and interpret the Plan, subject to the provisions
of the Plan and as to such matters as are reserved under the Plan to the
Board of Directors. Any interpretation of the Plan or other act of the
Committee in administering the Plan shall be final and binding on all
employees. The Committee may adopt such procedures as it deems necessary or
helpful in administering the Plan. No member of the Committee shall be
liable for action or determination made in good faith with respect to the
Plan or any option granted under the Plan.
3. Eligibility. Officers and other key employees of the Company and its
subsidiaries who are making, and who are expected to continue to make,
substantial contributions to the success of the Company and its
subsidiaries shall be eligible to receive grants of options. An option may
not be granted to a member of the Board of Directors who is not also an
employee of the Company or a subsidiary.
4. Shares Subject to the Plan. Not more than 1,500,000 shares of the
common stock, $5 par value, of the Company (the "Common Stock") shall be
issuable in respect of options granted under the Plan. Shares reserved
under the Plan shall be appropriately adjusted as provided in Section 7 in
the event of a change in the corporate structure or the shares of Common
Stock of the Company. Shares subject to option under the Plan may be either
authorized and unissued shares or issued shares which are reacquired by the
Company and held in its treasury. Shares of common stock subject to an
option shall, upon the expiration or termination of such option, to the
extent unexercised, again be available for grant under the Plan.
1
<PAGE>
5. Grants to Employees. Options may be granted to eligible employees with
respect to such number of shares of common stock and at such times during
the term of this Plan as the Committee shall determine; provided, however,
that not more than .5 percent of the outstanding shares of Common Stock as
of the preceding December 31 may be awarded in any one year to any one
person. The granting of options pursuant to the Plan shall occur when the
Committee by resolution, written consent or other appropriate action
determines to grant such option to a particular employee. An optionee may
be granted additional options under the Plan without regard to whether any
option previously granted to such optionee has been exercised in whole or
in part.
6. Terms and Conditions of Options. Each option shall be evidenced by a
written grant (the "option grant") in a form approved by the Committee, to
be duly executed and delivered by or on behalf of the Company to the
optionee. The option grant shall contain provisions not inconsistent with
the following:
(a) Price. The purchase price per share of common stock deliverable
upon the exercise of an option shall be the last sale price as reported
by the Automated Quotation System of the National Association of
Securities Dealers on the date the option is granted. In the event a
sale shall not have been effected on the date of the grant, the last
sale price first reported prior to the date of grant shall be the
purchase price per share.
(b) Number of Shares. The option grant shall specify the number of
shares of common stock to which it pertains.
(c) Waiting Period and Duration of Options. Options shall be
exercisable at such times and under such conditions as may be set forth
in the option grant but in no event shall any option be exercised
subsequent to the tenth annual anniversary of such date.
(d) Exercise of Options. To the extent that the right to purchase
shares has accrued under the option grant, options may be exercised by
written notice to the Company. Such notice shall be in such form and
directed to such person as the Committee shall determine. An option may
be exercised without regard to whether any option previously granted to
the same optionee has been exercised in whole or in part.
(e) Payment and Delivery. Shares of common stock purchased pursuant
to an option grant shall be paid for in full at the time of exercise,
either (i) in cash (including check, bank draft or money order), (ii)
by delivering common stock of the Company already owned by the
optionee, or (iii) a combination of common stock and cash. The fair
market value of the common stock so delivered shall be the last sale
price as reported by the Automated Quotation System of the national
Association of Securities Dealers on the date of exercise. No shares
shall be issued or delivered until full payment therefor has been made.
(f) Non-Transferability. Options granted to an optionee may during
his lifetime be exercised only by the optionee and may not be
transferred except by will or the laws of descent and distribution.
(g) Prior to Exercise. An optionee shall have none of the rights of a
stockholder with respect to shares subject to the option until such
shares of common stock have been purchased by the optionee.
(h) Adjustments for Stock Splits, Etc. The number of shares of common
stock subject to an option and the option price shall be appropriately
adjusted as provided in Section 7 in the event of a change in the
corporation structure or shares of the Company.
(i) Investment Purpose. The Committee may require any optionee to
furnish to the Company at the time of any exercise of the option a
written representation (in form satisfactory to the Committee) that he
is acquiring the shares resulting from such exercise with the intention
of holding the same for investment and not for public distribution.
2
<PAGE>
(j) Continued Employment. Nothing contained in the Plan, or in any
option granted pursuant to the Plan, shall confer upon any optionee any
right with respect to continuance of employment by the Company, or a
subsidiary of the Company, or interfere in any way with the right of
the Company, or a subsidiary of the Company, to terminate the
optionee's employment at any time, with or without cause.
(k) Employment Status at Exercise. Except as provided in Section
6(1), no option may be exercised unless the optionee is in the employ
of the Company, or a subsidiary of the Company, at the time of such
exercise. The Committee may make such provision as it deems appropriate
with respect to optionees on leave of absence.
(l) Termination of Employment. Each option shall be subject to the
following provision sin the case of the termination of the optionee's
employment the term of the option:
(i) Retirement. If an optionee shall cease tobe employed by the
Company, or a subsidiary of the Company, by reason of retirement
pursuant to a pension or retirement plan of the Company, or of a
subsidiary of the Company, the optionee may within a period of not
more than thirty-six (36) months next succeeding such cessation of
employment (but in no event after the expiration of the option
period), exercise any and all of the optionee's options with respect
to all or any part of the shares as to which such options remain
unexercised.
(ii) Disability. If an optionee shall cease to be employed by the
Company, or a subsidiary of the Company, by reason of permanent
disability as determined by the optionee establishing the optionee's
eligibility to receive Social Security disability benefits, the
optionee may within a period of not more than thirty-six (36) months
next succeeding such cessation of employment (but in no event after
the expiration of the option period), exercise the optionee's option
with respect to all or any part of the shares as to which such
option remains unexercised.
(iii) Death of Optionee. In the event of the death of an optionee
while in the employ of the Company, or a subsidiary of the Company,
or within twelve (12) months after the date of termination of such
employment under "(i) Retirement," or under "(ii) Disability," any
option granted to the optionee shall be exercisable with respect to
all or any part of the shares as to which such option remains
unexercised by the optionee's legal representative or other person
or persons to whom the optionee's rights under the option shall pass
by the optionee's will or the laws of descent and distribution, but
only before the expiration of the option period or of the twelve
(12) month period next succeeding the optionee's termination of
employment, whichever first occurs.
(iv) Other Reasons. If an optionee shall cease to be employed by
the Company, or a subsidiary of the Company, for any reason other
than those provided above under "(i) Retirement," "(ii) Disability,"
or "(iii) Death of Optionee," the optionee (or, in the event of the
optionee's death, such optionee's legal representative) may within a
period of not more than three (3) months next succeeding such
cessation of employment (but in no event after the expiration of the
option period) exercise the optionee's option if and to the extent
it was exercisable at the date of such cessation of employment.
Notwithstanding the foregoing, if an optionee's employment is
terminated voluntarily by the optionee or is terminated due to the
optionee's theft, embezzlement, willful violation of any rules of
the Company pertaining to the conduct of employees or the commission
of a willful felonious act while an employee, then any optionor
unexercised portion thereof granted to the optionee shall
immediately expire upon termination of employment.
(m) Withholding for Taxes. At the time of exercise of an option
granted under this Plan, the optionee shall provide for the payment to
the Company of federal, state, local and payroll withholding taxes
attributable to such exercise. The optionee shall advise the
3
<PAGE>
Company at the time of exercise of the amount of desired withholding
but such withholding may not be less than the minimum required by law,
which minimum amount shall be withheld in the absence of other
instruction from the optionee. The optionee may direct the Company to
withhold from the exercise of the option that number of whole shares of
common stock as shall equal in value the nearest whole share equivalent
of the indicated tax withholding requirement. Stock to be used for
withholding shall be valued at the last sale price as reported by the
Automated Quotation System of the National Association of Securities
Dealers on the date of exercise. To the extent the withholding amount
is not satisfied in stock, the optionee shall satisfy the remaining
amount to be withheld by remitting such amount in cash to the Company.
7. Change in Stock, Adjustments, Etc. If the shares of common stock of
the Company shall be changed into or exchanged for a different number of
kind of shares of stock or other securities of the Company or of another
corporation (whether by reason of merger, consolidation, recapitalization,
reclassification, split-up, combination of shares, or otherwise), or if the
number of such shares of common stock shall be increased through the
payment of a stock dividend or stock split, there shall be substituted for
or added to each share of common stock of the Company theretofore reserved
for the purposes of the Plan, whether or not such shares are at the time
subject to outstanding options, the number and kind of shares of stock or
other securities into which each outstanding share of common stock of the
Company shall be so changed or for which it shall be so exchanged or to
which each such share shall be entitled, as the case may be. Outstanding
options shall also be considered to be appropriately amended as to price
and other terms as may be necessary or appropriate to reflect the foregoing
events. If there shall be any other change in the number or kind of the
outstanding shares of common stock of the Company, or of any stock or other
securities into which such common stock shall have been changed, or for
which it shall have been exchanged, then if the Board of Directors shall in
its sole discretion determine that such change equitably requires an
adjustment in the number or kind or option price of the shares then
reserved for the purposes of the Plan, or in any option theretofore granted
or which may be granted under the Plan, such adjustment shall be made by
the Board of Directors and shall be effective and binding for all purposes
of the Plan. In making any such substitution or adjustment, pursuant to
this Section 7, fractional shares shall be ignored.
The Board of Directors shall have the power, in the event of any merger
or consolidation of the Company with or into any other corporation, or the
merger or consolidation of any other corporation into the Company, to amend
all outstanding options to permit the exercise thereof in whole or in part
at any time, or from time to time, prior to the effective date of any such
merger or consolidation and to terminate each option as of such effective
date.
8. Duration; Amendment; Termination. The Plan shall be effective if
approved by the holders of a majority of the outstanding shares of the
Company present or represented and voting thereon at the Annual Meeting of
the Stockholders of the Company scheduled for April 19, 1995, or at any
adjournment thereof and, if approved, shall continue until December 31,
2005, unless terminated before that time by the Board of Directors. Options
shall not be awarded or granted after the end of such period or the earlier
termination of the Plan, but options theretofore granted shall continue
after that date unless terminated in accordance with the terms of the Plan.
The Board of Directors may at any time terminate the Plan, and may from
time to time alter or amend the Plan or any part thereof provided that,
except as permitted by Sections 6 and 7, no amendment shall (a) increase
the total number of shares of common stock issuable upon the exercise of
options granted under the Plan, (b) reduce the minimum option price, or (c)
impair any outstanding option.
9. Construction. The Plan shall be interpreted and construed in
accordance with the laws of the State of Missouri.
4
<PAGE>
EXHIBIT 10(h)
COMMERCE BANCSHARES, INC.
1996 INCENTIVE STOCK OPTION PLAN
This 1996 INCENTIVE STOCK OPTION PLAN (hereinafter the "Plan") is adopted by
Commerce Bancshares, Inc. (hereinafter the "Company") on the 3rd day of
February, 1995, and is designed to provide incentive stock options within the
meaning of Section 422 and meet the criteria of performance-based compensation
under Section 162 of the Internal Revenue Code, as amended.
SECTION I
Definitions
As used herein, the following definitions shall apply:
1.1 "Board" shall mean the Board of Directors of the Company.
1.2 "Common Stock" shall mean the Common Stock, $5 Par Value per share, of
the Company.
1.3 "Committee" shall mean the Compensation and Benefits Committee appointed
by the Board in accordance with Section IV of the Plan.
1.4 "Employee" shall mean officers and other key employees employed by the
Company, or any subsidiary of the Company which now exists, is hereafter
organized, or is acquired by the Company.
1.5 "Option" shall mean an incentive stock option granted pursuant to the
Plan.
1.6 "Optionee" shall mean any employee who is granted an option under the
Plan.
1.7 "Share" shall mean the common stock of the Company as adjusted in
accordance with Section VIII of the Plan.
SECTION II
Purpose
2.1 The Plan is designed to encourage officers and other key employees to
acquire a proprietary interest in the Company, thereby aligning their interests
with those of the shareholders. It is also seeks to encourage their continued
employment with the Company and to render outstanding performance during such
employment by providing additional, long-term incentive to such employees.
SECTION III
Eligibility
3.1 Options may be granted only to Employees.
3.2 No director, other than a director who is also an Employee, shall be
eligible to receive an Option under the Plan.
1
<PAGE>
SECTION IV
Limits on Options and Shares
4.1 The total number of Shares for which Options may be granted under this
Plan shall not exceed 2,000,000 Shares, subject to the provisions of Section
VIII. Such Shares may be authorized but unissued or may be Treasury Shares.
4.2 If an Option should expire or terminate without having been exercised in
full, the Shares allocable to the unexercised portion of such Option shall
become available for other Options under the Plan unless the Plan shall have
been terminated.
4.3 No option shall be granted under the Plan to an Employee who, at the time
the Option is granted, owns stock representing more than ten percent (10%) of
the total combined voting power of all classes of stock of the Company.
SECTION V
Administration of Plan and Granting of Options
5.1 The Compensation and Benefits Committee of the Board, which shall consist
of three or more non-employee members of the Board who are not former officers
of the Company, shall administer the Plan. The Board may from time to time
remove members from or add members to the Committee. Vacancies on the
Committee, howsoever caused, shall be filled by the Board.
5.2 The Committee shall hold meetings at such times and places as it may
determine and a majority of the Committee at which a quorum is present, or acts
reduced to or approved in writing by a majority of the members of the
Committee, shall be the valid acts of the Committee.
5.3 Subject to the provisions of the Plan, the Committee shall have
authority:
(a) To determine the Employees to whom and the time or times at which
Options shall be granted and the number of Shares to be represented by each
Option;
(b) To interpret the Plan;
(c) To prescribe, amend, and rescind rules and regulations relating to
the Plan;
(d) To authorize any person to execute on behalf of the Company any
instrument required to effect the grant of an Option granted by the
Committee; and
(e) To make all other determinations deemed necessary or advisable for
the administration of the Plan.
5.4 The decisions, determinations, and interpretations of the Committee shall
be final and binding on all Optionees and any other holders of any Option
granted under the Plan. No member of the Committee shall be liable for any
action or determination made in good faith with respect to the Plan or any
option granted under the Plan.
SECTION VI
Terms of Stock Options
6.1 The option price for Shares to be issued pursuant to any Option granted
under the Plan shall be the last sale price as reported by the Automated
Quotation System of the National Association of Securities Dealers on the date
of the grant. In the event a sale shall not have been effected on the date of
the grant, the last sale price first reported prior to the date of grant shall
be used.
2
<PAGE>
6.2 The date of grant of an Option under the Plan shall, for all purposes, be
the date on which the Committee makes a determination granting such Option.
Notice of the determination shall be given to each Employee to whom an Option
is so granted within a reasonable time after the date of such grant.
6.3 The Committee shall fix the term or duration of all Options under this
Plan provided that no term shall exceed ten (10) years after the date on which
the Option was granted. Options granted under the Plan shall not be
transferable other than by will or the laws of descent and distribution and
shall be exercisable during the Optionee's lifetime only by the Optionee.
6.4 In the event that an Optionee should cease to be employed by the Company
for any reason other than death or permanent disability, the Optionee shall
have the right to exercise the Option to the extent the Option was then
exercisable at any time within three (3) months after the termination of
employment; provided, however, if an Optionee's employment is terminated
voluntarily by the Optionee or is terminated because of the Optionee's
dishonesty, theft, embezzlement from the Company, willful violation of any
rules of the Company pertaining to the conduct of Employees or the commission
of a willful felonious act while an Employee, then any Option or unexercised
portion thereof granted to said Optionee shall expire upon termination of
employment.
6.5 If an Optionee shall die while an Employee and shall not have fully
exercised the Option, an Option may be exercised to the extent that the
Optionee's right to exercise such Option had accrued at the time of his death
and had not previously been exercised, at any time within one (1) year after
the Optionee's death by the executors or administrators of the Optionee or by
any person or persons who shall have acquired the Option directly from the
Optionee by bequest or inheritance.
6.6 If an Optionee shall cease to be an Employee by reason of a permanent
disability (as determined by the Optionee officially establishing his
eligibility to receive Social Security disability benefits), an Option may be
exercised to the extent that the Optionee's right to exercise such Option had
accrued immediately prior to said disability, and had not previously been
exercised, at any time within one (1) year from the date such Optionee ceased
being an Employee.
6.7 The fair market value of Common Stock for which any Option may be granted
in any calendar year under the Plan shall be in such amount as the Committee
shall determine; provided, however, that the aggregate fair market value of
Common Stock for which Options granted under the Plan (or any other incentive
stock option plan of the Company or any subsidiary) are first exercisable in
any one calendar year by an Optionee may not exceed $100,000 (determined as of
the date of grant).
SECTION VII
Exercise of Option
7.1 An Option shall be deemed to be exercised when written notice of such
exercise has been received by the Company in accordance with the terms of the
Option by the person entitled to exercise the Option, and full payment for the
Shares with respect to which the Option is exercised has been received by the
Company. Payment may be made (i) in cash, (ii) by delivering Common Stock of
the Company already owned by the Optionee, or (iii) a combination of cash and
Common Stock. Until the issuance of the stock certificates, no right to vote or
receive dividends or any other rights as a shareholder shall exist with respect
to the Shares as to which the Option has been exercised. No adjustment will be
made for a dividend or other rights for which a record date is established
prior to the date the stock certificates are issued, except as provided in
Section VIII of the Plan.
3
<PAGE>
SECTION VIII
Reorganization of the Company
8.1 If the shares of common stock of the Company shall be changed into or
exchanged for a different number or kind of shares of stock or other securities
of the Company or of another corporation (whether by reason of merger,
consolidation, recapitalization, reclassification, split-up, combination of
shares, or otherwise), or if the number of such shares of common stock shall be
increased through the payment of a stock dividend or stock split, there shall
be substituted for or added to each share of common stock of the Company
theretofore reserved for the purposes of the Plan, whether or not such shares
are at the time subject to outstanding options, the number and kind of shares
of stock or other securities into which each outstanding share of common stock
of the Company shall be so changed or for which it shall be so exchanged, or to
which each such share shall be entitled, as the case may be. Outstanding
options shall also be considered to be appropriately amended as to price and
other terms as may be necessary or appropriate to reflect the foregoing events.
If there shall be any other change in the number or kind of the outstanding
shares of common stock of the Company, or of any stock or other securities into
which such common stock shall have been changed, or for which it shall have
been exchanged, then if the Board of Directors shall in its sole discretion
determine that such change equitably requires an adjustment in the number or
kind or option price of the shares then reserved for the purposes of the Plan,
or in any option theretofore granted or which may be granted under the Plan,
such adjustment shall be made by the Board of Directors and shall be effective
and binding for all purposes of the Plan. In making any such substitution or
adjustment, pursuant to this Section 7, fractional shares shall be ignored.
The Board of Directors shall have the power, in the event of any merger or
consolidation of the Company with or into any other corporation, or the merger
or consolidation of any other corporation into the Company, to amend all
outstanding options to permit the exercise thereof in whole or in part at any
time, or from time to time, prior to the effective date of any such merger or
consolidation and to terminate each option as of such effective date.
SECTION IX
Amendment and Termination of Plan
9.1 The Board may amend the Plan from time to time as it deems desirable and
shall make any amendments which may be required so that Options intended to be
incentive stock options shall at all times continue to be incentive stock
options for purposes of the Internal Revenue Code.
9.2 This Plan shall terminate on December 31, 2005, provided that the Board
may in its discretion terminate this Plan at any time prior thereto.
9.3 Any amendment to or the termination of the Plan shall not affect Options
already granted and such Options shall remain in full force and effect as if
this Plan had not been amended or terminated.
9.4 This Plan is effective on January 1, 1996, and Options hereunder may be
granted thereafter, subject to the terms of the Plan, provided this Plan is
approved by a vote of the holders of a majority of the outstanding shares of
the Company at a meeting of shareholders of the Company held within twelve (12)
months following the adoption date.
9.5 This Plan shall be interpreted and construed in accordance with the laws
of the State of Missouri.
4
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains summary financial information extracted from
Commerce Bancshares, Inc. 6/30/95 Form 10-Q and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 569,940
<INT-BEARING-DEPOSITS> 0<F1>
<FED-FUNDS-SOLD> 225,850
<TRADING-ASSETS> 6,556
<INVESTMENTS-HELD-FOR-SALE> 2,585,733<F2>
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 5,414,602<F3>
<ALLOWANCE> 99,221
<TOTAL-ASSETS> 9,196,688
<DEPOSITS> 7,696,121
<SHORT-TERM> 544,147
<LIABILITIES-OTHER> 65,523
<LONG-TERM> 6,687
<COMMON> 183,222
0
0
<OTHER-SE> 700,988
<TOTAL-LIABILITIES-AND-EQUITY> 9,196,688
<INTEREST-LOAN> 217,115
<INTEREST-INVEST> 82,702<F4>
<INTEREST-OTHER> 2,317
<INTEREST-TOTAL> 302,240
<INTEREST-DEPOSIT> 115,691
<INTEREST-EXPENSE> 128,065
<INTEREST-INCOME-NET> 174,175
<LOAN-LOSSES> 4,763
<SECURITIES-GAINS> 427
<EXPENSE-OTHER> 150,194
<INCOME-PRETAX> 81,705
<INCOME-PRE-EXTRAORDINARY> 51,782
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 51,782
<EPS-PRIMARY> 1.45
<EPS-DILUTED> 0
<YIELD-ACTUAL> 4.59<F5>
<LOANS-NON> 14,225
<LOANS-PAST> 14,330
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 87,179
<CHARGE-OFFS> 9,173
<RECOVERIES> 3,520
<ALLOWANCE-CLOSE> 99,221
<ALLOWANCE-DOMESTIC> 99,221
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
<FN>
<F1>Certificates of deposit of $1,147,000 are included in Investments-Held-
For-Sale.
<F2>Excludes non-marketable investment securities of $24,547,000.
<F3>Gross of allowance for loan losses.
<F4>Excludes interest of $106,000 on trading account securities.
<F5>Yield is computed on a tax equivalent basis.
</FN>
</TABLE>
