8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

__________________________

Form 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): April 13, 2016

Commerce Bancshares, Inc.

(Exact name of registrant as specified in its charter)

Missouri	0-2989	43-0889454
(State of Incorporation)	(Commission File Number)	(IRS Employer Identification No.)

1000 Walnut,
Kansas City, MO	64106
(Address of principal executive offices)	(Zip Code)

	(816) 234-2000
(Registrant’s telephone number, including area code)
(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

The information in this Current Report on Form 8-K, including the exhibit, is furnished pursuant to Item 2.02 and shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities under that Section. Furthermore, the information in this Current Report on Form 8-K, including the exhibit, shall not be deemed to be incorporated by reference into the filings of Commerce Bancshares, Inc. under the Securities Act of 1933, as amended.

Item 2.02 Results of Operations and Financial Condition

A copy of the press release issued April 13, 2016 by Commerce Bancshares, Inc. announcing First Quarter 2016 earnings is furnished under Item 2.02 of this Current Report on Form 8-K as Exhibit 99.1.

All information included in this Current Report on Form 8-K is available on the Company’s Internet site at http://www.commercebank.com.

Item 9.01 Financial Statements and Exhibits

Exhibits
99.1	Press release dated April 13, 2016

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

COMMERCE BANCSHARES, INC.
By:	/s/ Jeffery D. Aberdeen
	Jeffery D. Aberdeen
	Controller (Chief Accounting Officer)

Date: April 13, 2016

INDEX TO EXHIBITS

Exhibits
99.1	Press release dated April 13, 2016

EX-99.1

Exhibit 99.1

Exhibit 99.1

	CBSH
1000 Walnut Street / Suite 700 / Kansas City, Missouri 64106 / 816.234.2000

FOR IMMEDIATE RELEASE:

Wednesday, April 13, 2016

COMMERCE BANCSHARES, INC. ANNOUNCES

FIRST QUARTER EARNINGS PER COMMON SHARE OF $.65

Commerce Bancshares, Inc. announced earnings of $.65 per common share for the three months ended March 31, 2016 compared to $.63 per share in the prior quarter and $.58 per share in the first quarter of 2015. Net income attributable to Commerce Bancshares, Inc. for the first quarter amounted to $65.4 million, compared to $63.7 million in the prior quarter and $61.1 million in the same quarter last year. For the quarter, the return on average assets was 1.07%, the return on average common equity was 11.2% and the efficiency ratio was 62.62%.

In announcing these results, David W. Kemper, Chairman and CEO, said, “This quarter we are pleased to report solid top line revenue growth of 6% annualized along with continued strong average loan growth. Average total loans increased by $313.1 million, or 10% annualized, this quarter compared to the previous quarter, with most of this growth occurring in business, construction and business real estate lending. Average deposits also grew by $499.8 million, an annualized increase of 10%. This quarter our net interest income grew by $1.3 million over the prior quarter and increased $17.6 million, or 12%, over the same period last year. Non-interest income grew $3.0 million over the prior quarter and increased $12.5 million, or 12%, over the first quarter last year. Growth in fee income over the prior year was spread throughout a number of business lines but mainly resulted from higher deposit, bank card, trust, swap, tax credit and mortgage banking fees. Non-interest expense grew by $1.7 million over the previous quarter.”

Mr. Kemper continued, “Net loan charge-offs for the current quarter totaled $8.8 million, compared to $9.2 million in the previous quarter and $7.4 million in the first quarter of 2015. The decrease in net loan charge-offs compared to the previous quarter was mainly due to lower personal real estate and consumer credit card net loan losses but offset by slightly higher commercial loan charge-offs. During the current quarter, the provision for loan losses totaled $9.4 million, or $600 thousand higher than net loan charge-offs. The allowance for loan losses amounted to $152.1 million at March 31, 2016, or 1.20% of period end loans, and was 5.2 times non-performing loans. Total non-performing assets increased $2.0 million over the previous quarter to $31.4 million this quarter.”

Total assets at March 31, 2016 were $24.5 billion, total loans were $12.7 billion, and total deposits were $20.7 billion. During the quarter, the Company paid a common cash dividend of $.225 per share, representing a 5% increase over the rate paid in 2015 and also paid a 6% cash dividend on its preferred stock.

(more)

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

This financial news release, including management's discussion of first quarter results, is posted to the Company's web site atwww.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

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COMMERCE BANCSHARES, INC. and SUBSIDIARIES

FINANCIAL HIGHLIGHTS

	For the Three Months Ended
(Unaudited) (Dollars in thousands, except per share data)	March 31, 2016			December 31, 2015			March 31, 2015
FINANCIAL SUMMARY
Net interest income		$163,775			$162,487			$146,138
Non-interest income	119,024			116,042			106,574
Total revenue	282,799			278,529			252,712
Investment securities gains (losses), net	(995		)	(1,480		)	6,035
Provision for loan losses	9,439			9,186			4,420
Non-interest expense	177,473			175,777			163,845
Income before taxes	94,892			92,086			90,482
Income taxes	29,370			27,661			28,468
Non-controlling interest expense	148			715			959
Net income attributable to Commerce Bancshares, Inc.	65,374			63,710			61,055
Preferred stock dividends	2,250			2,250			2,250
Net income available to common shareholders		$63,124			$61,460			$58,805
Earnings per common share:
Net income — basic		$.65			$.63			$.58
Net income — diluted		$.65			$.63			$.58
Effective tax rate	31.00		%	30.27		%	31.80		%
Taxable equivalent net interest income		$171,425			$170,141			$153,348
Diluted wtd. average shares outstanding	95,782,109			96,486,100			100,367,348
RATIOS
Average loans to deposits (1)	62.81		%	62.80		%	59.71		%
Return on total average assets	1.07			1.05			1.05
Return on average common equity(2)	11.20			10.88			10.69
Non-interest income to total revenue	42.09			41.66			42.17
Efficiency ratio (3)	62.62			62.97			64.65
Net yield on interest earning assets	2.95			2.94			2.76
EQUITY SUMMARY
Cash dividends per share		$.225			$.214			$.214
Cash dividends on common stock		$21,760			$20,920			$21,752
Cash dividends on preferred stock		$2,250			$2,250			$2,250
Book value per common share (4)		$23.85			$22.86			$22.30
Market value per common share (4)		$44.95			$42.54			$40.30
High market value per common share		$45.96			$47.10			$41.86
Low market value per common share		$37.44			$41.40			$37.65
Common shares outstanding (4)	96,537,955			97,226,000			101,368,889
Tangible common equity to tangible assets (5)	8.84		%	8.48		%	8.83		%
Tier I leverage ratio	9.11		%	9.23		%	9.31		%
OTHER QTD INFORMATION
Number of bank/ATM locations	346			346			353
Full-time equivalent employees	4,765			4,770			4,769

(1) Includes loans held for sale.

(2) Annualized net income available to common shareholders divided by average total equity less preferred stock.

(3) The efficiency ratio is calculated as non-interest expense (excluding intangibles amortization) as a percent of revenue.

(4) As of period end.

(5) 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).

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COMMERCE BANCSHARES, INC. and SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

	For the Three Months Ended
(Unaudited) (In thousands, except per share data)	March 31, 2016			December 31, 2015			September 30, 2015			June 30, 2015			March 31, 2015
Interest income		$172,128			$169,742			$169,115			$170,577			$152,982
Interest expense	8,353			7,255			7,077			6,920			6,844
Net interest income	163,775			162,487			162,038			163,657			146,138
Provision for loan losses	9,439			9,186			8,364			6,757			4,420
Net interest income after provision for loan losses	154,336			153,301			153,674			156,900			141,718
NON-INTEREST INCOME
Bank card transaction fees	44,470			46,320			44,635			45,672			42,299
Trust fees	30,370			30,054			29,630			30,531			29,586
Deposit account charges and other fees	20,691			21,606			20,674			19,637			18,499
Capital market fees	2,725			3,116			2,620			2,738			3,002
Consumer brokerage services	3,509			3,254			3,687			3,507			3,336
Loan fees and sales	2,510			2,101			1,855			2,183			2,089
Other	14,749			9,591			8,187			9,967			7,763
Total non-interest income	119,024			116,042			111,288			114,235			106,574
INVESTMENT SECURITIES GAINS (LOSSES), NET	(995		)	(1,480		)	(378		)	2,143			6,035
NON-INTEREST EXPENSE
Salaries and employee benefits	106,859			102,098			100,874			99,655			98,074
Net occupancy	11,303			10,981			11,247			10,999			11,561
Equipment	4,634			4,915			4,789			4,679			4,703
Supplies and communication	6,829			6,554			5,609			5,226			5,581
Data processing and software	22,899			22,274			21,119			21,045			19,506
Marketing	3,813			3,539			4,343			4,307			3,918
Deposit insurance	3,165			3,145			2,981			3,019			3,001
Other	17,971			22,271			20,440			16,533			17,501
Total non-interest expense	177,473			175,777			171,402			165,463			163,845
Income before income taxes	94,892			92,086			93,182			107,815			90,482
Less income taxes	29,370			27,661			27,969			32,492			28,468
Net income	65,522			64,425			65,213			75,323			62,014
Less non-controlling interest expense	148			715			601			970			959
Net income attributable to Commerce Bancshares, Inc.	65,374			63,710			64,612			74,353			61,055
Less preferred stock dividends	2,250			2,250			2,250			2,250			2,250
Net income available to common shareholders		$63,124			$61,460			$62,362			$72,103			$58,805
Net income per common share — basic		$.65			$.63			$.63			$.72			$.58
Net income per common share — diluted		$.65			$.63			$.63			$.72			$.58
OTHER INFORMATION
Return on total average assets	1.07		%	1.05		%	1.09		%	1.26		%	1.05		%
Return on average common equity (1)	11.20			10.88			11.25			12.91			10.69
Efficiency ratio (2)	62.62			62.97			62.55			59.39			64.65
Effective tax rate	31.00			30.27			30.21			30.41			31.80
Net yield on interest earning assets	2.95			2.94			3.00			3.04			2.76
Net interest income (T/E)		$171,425			$170,141			$169,512			$171,037			$153,348

(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.

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COMMERCE BANCSHARES, INC. and SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS - PERIOD END

(Unaudited) (In thousands)	March 31, 2016			December 31, 2015			March 31, 2015
ASSETS
Loans
Business	$	4,575,081		$	4,397,893		$	4,183,977
Real estate — construction and land	745,369			624,070			423,928
Real estate — business	2,395,933			2,355,544			2,282,988
Real estate — personal	1,903,969			1,915,953			1,887,557
Consumer	1,904,320			1,924,365			1,766,888
Revolving home equity	423,005			432,981			426,964
Consumer credit card	744,364			779,744			739,543
Overdrafts	5,829			6,142			10,115
Total loans	12,697,870			12,436,692			11,721,960
Allowance for loan losses	(152,132		)	(151,532		)	(153,532		)
Net loans	12,545,738			12,285,160			11,568,428
Loans held for sale	60,078			7,607			2,770
Investment securities:
Available for sale	9,552,179			9,777,004			9,917,242
Trading	23,130			11,890			15,501
Non-marketable	117,259			112,786			110,560
Total investment securities	9,692,568			9,901,680			10,043,303
Federal funds sold and short-term securities purchased under agreements to resell	9,075			14,505			12,450
Long-term securities purchased under agreements to resell	825,000			875,000			1,050,000
Interest earning deposits with banks	171,651			23,803			123,712
Cash and due from banks	375,481			464,411			416,109
Land, buildings and equipment — net	350,423			352,581			356,309
Goodwill	138,921			138,921			138,921
Other intangible assets — net	6,539			6,669			7,143
Other assets	331,478			534,625			330,338
Total assets	$	24,506,952		$	24,604,962		$	24,049,483
LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits:
Non-interest bearing	$	7,065,066		$	7,146,398		$	6,785,221
Savings, interest checking and money market	11,205,357			10,834,746			10,656,139
Time open and C.D.’s of less than $100,000	766,810			785,191			853,842
Time open and C.D.’s of $100,000 and over	1,649,076			1,212,518			1,281,297
Total deposits	20,686,309			19,978,853			19,576,499
Federal funds purchased and securities sold under agreements to repurchase	957,388			1,963,552			1,610,463
Other borrowings	103,806			103,818			103,854
Other liabilities	312,167			191,321			353,260
Total liabilities	22,059,670			22,237,544			21,644,076
Total stockholders’ equity	2,442,028			2,361,990			2,400,614
Non-controlling interest	5,254			5,428			4,793
Total equity	2,447,282			2,367,418			2,405,407
Total liabilities and equity	$	24,506,952		$	24,604,962		$	24,049,483

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COMMERCE BANCSHARES, INC. and SUBSIDIARIES

AVERAGE BALANCE SHEETS

(Unaudited) (Dollars in thousands)	For the Three Months Ended
	March 31, 2016			December 31, 2015			September 30, 2015			June 30, 2015			March 31, 2015
ASSETS:
Loans:
Business	$	4,491,556		$	4,351,756		$	4,221,478		$	4,135,362		$	4,031,904
Real estate — construction and land	682,557			584,185			476,331			432,008			414,908
Real estate — business	2,382,094			2,320,439			2,284,928			2,287,885			2,281,777
Real estate — personal	1,909,532			1,916,219			1,911,469			1,891,109			1,877,580
Consumer	1,934,577			1,908,540			1,861,636			1,815,699			1,731,146
Revolving home equity	429,682			429,582			434,355			429,644			430,525
Consumer credit card	752,098			756,743			746,066			734,289			748,831
Overdrafts	4,772			6,303			5,233			4,510			5,612
Total loans	12,586,868			12,273,767			11,941,496			11,730,506			11,522,283
Allowance for loan losses	(151,308		)	(150,856		)	(150,890		)	(152,994		)	(156,097		)
Net loans	12,435,560			12,122,911			11,790,606			11,577,512			11,366,186
Loans held for sale	9,360			6,118			4,471			3,969			1,851
Investment securities:
U.S. government and federal agency obligations	703,212			580,816			402,591			424,823			455,633
Government-sponsored enterprise obligations	776,488			824,066			887,631			988,120			1,057,666
State and municipal obligations	1,718,587			1,779,704			1,805,931			1,799,355			1,759,511
Mortgage-backed securities	3,424,716			3,335,627			3,217,589			3,161,050			2,938,575
Asset-backed securities	2,537,472			2,574,426			2,546,982			2,839,483			3,140,086
Other marketable securities	342,382			337,340			302,323			249,075			160,634
Unrealized gain on investment securities	149,319			130,231			118,404			170,039			169,486
Total available for sale securities	9,652,176			9,562,210			9,281,451			9,631,945			9,681,591
Trading securities	18,190			23,217			22,283			19,758			16,719
Non-marketable securities	127,769			114,321			114,062			109,522			107,511
Total investment securities	9,798,135			9,699,748			9,417,796			9,761,225			9,805,821
Federal funds sold and short-term securities purchased under agreements to resell	17,378			18,694			21,012			12,812			12,092
Long-term securities purchased under agreements to resell	850,275			902,174			1,007,606			1,049,999			1,049,998
Interest earning deposits with banks	219,636			178,486			160,687			198,407			288,589
Other assets	1,172,916			1,119,602			1,106,739			1,135,601			1,127,864
Total assets	$	24,503,260		$	24,047,733		$	23,508,917		$	23,739,525		$	23,652,401
LIABILITIES AND EQUITY:
Non-interest bearing deposits	$	6,905,673		$	6,995,666		$	6,781,592		$	6,744,536		$	6,621,110
Savings	761,020			736,824			739,172			738,769			701,987
Interest checking and money market	10,128,543			9,805,457			9,619,621			9,759,608			9,828,203
Time open & C.D.’s of less than $100,000	775,221			796,639			820,792			844,675			868,179
Time open & C.D.’s of $100,000 and over	1,483,700			1,219,803			1,171,617			1,227,322			1,280,110
Total deposits	20,054,157			19,554,389			19,132,794			19,314,910			19,299,589
Borrowings:
Federal funds purchased and securities sold under agreements to repurchase	1,404,754			1,707,430			1,677,322			1,674,682			1,558,118
Other borrowings	377,711			103,819			103,875			103,846			103,999
Total borrowings	1,782,465			1,811,249			1,781,197			1,778,528			1,662,117
Other liabilities	254,437			295,718			250,626			260,945			314,163
Total liabilities	22,091,059			21,661,356			21,164,617			21,354,383			21,275,869
Equity	2,412,201			2,386,377			2,344,300			2,385,142			2,376,532
Total liabilities and equity	$	24,503,260		$	24,047,733		$	23,508,917		$	23,739,525		$	23,652,401

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COMMERCE BANCSHARES, INC. and SUBSIDIARIES

AVERAGE RATES

(Unaudited) (Dollars in thousands)	For the Three Months Ended
	March 31, 2016		December 31, 2015		September 30, 2015		June 30, 2015		March 31, 2015
ASSETS:
Loans:
Business(1)	2.87	%	2.78	%	2.73	%	2.79	%	2.82	%
Real estate — construction and land	3.51		3.41		3.52		3.65		3.81
Real estate — business	3.70		3.68		3.71		3.83		3.73
Real estate — personal	3.77		3.76		3.73		3.77		3.83
Consumer	3.87		3.91		4.00		3.92		4.05
Revolving home equity	3.52		3.44		3.50		3.60		3.63
Consumer credit card	11.42		11.23		11.59		11.74		11.62
Overdrafts	—		—		—		—		—
Total loans	3.89		3.85		3.89		3.95		3.99
Loans held for sale	5.80		5.40		4.26		3.94		4.65
Investment securities:
U.S. government and federal agency obligations	.40		.17		4.39		6.09		(5.32	)	(2)
Government-sponsored enterprise obligations	1.93		1.89		1.77		1.82		1.90
State and municipal obligations(1)	3.66		3.64		3.44		3.49		3.55
Mortgage-backed securities	2.45		2.54		2.47		2.61		2.62
Asset-backed securities	1.39		1.25		1.15		1.03		.88
Other marketable securities(1)	2.79		2.83		2.65		2.61		2.50
Total available for sale securities	2.20		2.20		2.32		2.38		1.76
Trading securities(1)	2.87		2.65		2.72		2.86		2.74
Non-marketable securities (1)	6.54		8.19		8.28		8.90		8.94
Total investment securities	2.26		2.27		2.39		2.45		1.84
Federal funds sold and short-term securities purchased under agreements to resell	.56		.32		.40		.47		.30
Long-term securities purchased under agreements to resell	1.64		1.40		1.29		1.40		1.18
Interest earning deposits with banks	.49		.28		.25		.25		.25
Total interest earning assets	3.10		3.07		3.12		3.16		2.89
LIABILITIES AND EQUITY:
Interest bearing deposits:
Savings	.12		.12		.13		.11		.12
Interest checking and money market	.13		.13		.13		.13		.13
Time open & C.D.’s of less than $100,000	.38		.37		.38		.39		.41
Time open & C.D.’s of $100,000 and over	.54		.51		.53		.49		.45
Total interest bearing deposits	.19		.18		.18		.18		.18
Borrowings:
Federal funds purchased and securities sold under agreements to repurchase	.25		.14		.11		.10		.10
Other borrowings	1.33		3.47		3.43		3.44		3.43
Total borrowings	.48		.33		.31		.30		.30
Total interest bearing liabilities	.23	%	.20	%	.20	%	.19	%	.19	%
Net yield on interest earning assets	2.95	%	2.94	%	3.00	%	3.04	%	2.76	%

(1) Stated on a tax equivalent basis using a federal income tax rate of 35%.

(2) Includes losses of $7.0 million in inflation interest on U.S. Treasury inflation-protected securities in the first quarter of 2015.

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COMMERCE BANCSHARES, INC. and SUBSIDIARIES
CREDIT QUALITY
	For the Three Months Ended
(Unaudited) (In thousands, except per share data)	March 31, 2016			December 31, 2015			September 30, 2015			June 30, 2015			March 31, 2015
ALLOWANCE FOR LOAN LOSSES
Balance at beginning of period	$	151,532		$	151,532		$	151,532		$	153,532		$	156,532
Provision for losses	9,439			9,186			8,364			6,757			4,420
Net charge-offs (recoveries):
Commercial portfolio:
Business	463			(133		)	(175		)	(239		)	159
Real estate — construction and land	(11		)	60			(67		)	(309		)	(946		)
Real estate — business	(242		)	(626		)	(22		)	764			(249		)
	210			(699		)	(264		)	216			(1,036		)
Personal banking portfolio:
Consumer credit card	5,918			6,479			5,784			6,424			6,352
Consumer	2,599			2,251			2,435			1,849			1,743
Overdraft	219			487			429			212			222
Real estate — personal	(195		)	458			(69		)	(47		)	99
Revolving home equity	88			210			49			103			40
	8,629			9,885			8,628			8,541			8,456
Total net loan charge-offs	8,839			9,186			8,364			8,757			7,420
Balance at end of period	$	152,132		$	151,532		$	151,532		$	151,532		$	153,532
NET CHARGE-OFF RATIOS*
Commercial portfolio:
Business	.04		%	(.01		)%	(.02		)%	(.02		)%	.02		%
Real estate — construction and land	(.01		)	.04			(.06		)	(.29		)	(.92		)
Real estate — business	(.04		)	(.11		)	—			.13			(.04		)
	.01			(.04		)	(.01		)	.01			.06
Personal banking portfolio:
Consumer credit card	3.16			3.40			3.08			3.51			3.44
Consumer	.54			.47			.52			.41			.41
Overdraft	18.46			30.65			32.52			18.85			16.04
Real estate — personal	(.04		)	.09			(.01		)	(.01		)	.02
Revolving home equity	.08			.19			.04			.10			.04
	.69			.78			.69			.70			.72
Total	.28		%	.30		%	.28		%	.30		%	.26		%
CREDIT QUALITY RATIOS
Non-performing assets to total loans	.25		%	.24		%	.24		%	.26		%	.35		%
Non-performing assets to total assets	.13			.12			.12			.13			.17
Allowance for loan losses to total loans	1.20			1.22			1.24			1.27			1.31
NON-PERFORMING ASSETS
Non-accrual loans:
Business	$	16,098		$	10,874		$	11,699		$	11,856		$	9,961
Real estate — construction and land	2,710			3,090			4,046			3,600			4,488
Real estate — business	6,234			7,863			5,054			5,643			15,028
Real estate — personal	4,205			4,425			4,980			5,446			6,341
Consumer	—			—			—			100			—
Revolving home equity	120			323			—			—			—
Total	29,367			26,575			25,779			26,645			35,818
Foreclosed real estate	1,997			2,819			3,053			4,185			4,967
Total non-performing assets	$	31,364		$	29,394		$	28,832		$	30,830		$	40,785
Loans past due 90 days and still accruing interest	$	15,360		$	16,467		$	14,707		$	14,218		$	12,181

*as a percentage of average loans (excluding loans held for sale)

8

COMMERCE BANCSHARES, INC.

Management Discussion of First Quarter Results

March 31, 2016

For the quarter ended March 31, 2016, net income attributable to Commerce Bancshares, Inc. (net income) amounted to $65.4 million, compared to $63.7 million in the previous quarter and $61.1 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 $1.3 million coupled with higher non-interest income $3.0 million. The provision for loan losses increased by $253 thousand, while non-interest expense grew this quarter by $1.7 million compared to the previous quarter. For the current quarter, the return on total average assets was 1.07%, the return on average common equity was 11.2%, and the efficiency ratio was 62.6%.

Balance Sheet Review

During the 1^st quarter of 2016, average total loans increased $313.1 million, or 10% annualized, compared to the previous quarter and increased $1.1 billion, or 9.2%, compared to the same period last year. Compared to the previous quarter, the increase in average loans resulted mainly from growth in business (up $139.8 million), construction (up $98.4 million), business real estate (up $61.7 million) and consumer loans (growth of $26.0 million). The increase in business loans came from continued growth in commercial and industrial, leasing and tax-free lending activities, while commercial construction projects continued to drive growth in construction loans. Average consumer loan growth was largely the result of continued demand for automobile and other consumer type loans, which grew $36.4 million, partly offset by a decline of $9.6 million in marine and RV loans. Average personal real estate loans declined $6.7 million this quarter; however, the Company also sold certain fixed rate loans totaling $22.0 million during the quarter, as part of an origination initiative that began in 2015. In March 2016, the Company identified certain automobile loans totaling $50.4 million which it intends to sell, and reclassified these loans as held for sale.

During the 1^st quarter of 2016, total average available for sale investment securities increased $90.0 million to $9.7 billion. Purchases of new securities totaled $215.1 million in the 1^st quarter of 2016 and were offset by sales, maturities and pay downs of $541.9 million. U.S. government and federal agency securities increased on average by $122.4 million, while mortgage-backed securities increased $89.1 million. At March 31, 2016, the duration of the investment portfolio was 2.8 years, and maturities and pay downs of approximately $1.6 billion are expected to occur during the next 12 months.

Total average deposits increased $499.8 million, or 2.6%, this quarter compared to the previous quarter. The increase in average deposits resulted mainly from increases in money market (increase of $324.6 million), savings (increase of $24.2 million), and short-term jumbo certificate of deposit (increase of $264.7 million) accounts. Business demand deposits declined $159.6 million this quarter. Compared to the previous quarter, total average commercial, consumer and private banking deposits increased $250.7 million, $172.4 million, and $80.7 million, respectively. The average loans to deposits ratio was 62.8% in both the current quarter and in the prior quarter.

The Company’s average borrowings declined $28.8 million to $1.8 billion as a result of a decline of $302.7 million in federal funds purchased and repurchase agreements, partly offset by an increase in FHLB debt of $272.5 million.

Net Interest Income

Net interest income (tax equivalent) in the 1^st quarter of 2016 amounted to $171.4 million compared with $170.1 million in the previous quarter, an increase of $1.3 million. Net interest income (tax equivalent) for the current quarter increased $18.1 million compared to the 1^st quarter of last year. During the 1^st quarter of 2016, the net yield on earning assets (tax equivalent) was 2.95%, compared with 2.94% in the previous quarter and 2.76% in the same period last year.

The increase in net interest income (tax equivalent) in the current quarter compared to the prior period was due mainly to an increase in interest on loans of $2.5 million and higher earnings on U.S. Treasury and asset-backed securities of $1.2 million. Inflation income on inflation-protected securities amounted to negative $1.5 million, compared to negative $1.4 million in the prior quarter as a result of a slight decline in the Consumer Price Index published this quarter. Inflation income in the same period last year totaled negative $7.0 million. Excluding the effects of inflation income, the net yield on earning assets would have been 2.98% in the current quarter, 2.97% in the prior quarter, and 2.89% in the same period last year. During the current quarter, adjustments to premium amortization expense on certain mortgage-backed and asset-backed securities, due to increasing prepayment speed assumptions, decreased interest income by $147 thousand compared with an increase of $966 thousand in the prior quarter.

Compared to the previous quarter, interest income (tax-equivalent) on loans increased $2.5 million and was mainly due to higher average balances, especially in business, construction, business real estate, and consumer loans. However, these increases in interest income were partly offset by lower yields on consumer banking loans. Overall, the average yield on the loan portfolio increased 4 basis points this quarter to 3.89%. Total interest income (tax-equivalent) on investment securities declined $573 thousand from the previous quarter as a result of increasing prepayment speeds on mortgage-backed securities noted above, coupled with lower earnings on municipal securities due to lower average balances. The yield on investment securities totaled 2.26% in the current quarter compared to 2.27% in the prior quarter.

Interest expense on deposits increased $454 thousand this quarter compared with the previous quarter due to higher balances and slightly higher deposit rates. Borrowing costs increased $644 thousand due to higher average FHLB debt balances and higher rates paid on repurchase agreements.

Non-Interest Income

In the 1^st quarter of 2016, total non-interest income amounted to $119.0 million, an increase of $12.5 million, or 11.7%, compared to the same period last year. Also, current quarter non-interest income increased $3.0 million, or 2.6%, 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 higher bank card, deposit, swap, trust, and tax credit fee income. Additionally a former branch property was sold for a pre-tax gain of $3.3 million, while in 2015, losses on sales or fair value adjustments of branch locations held for sale totaled $1.6 million.

Total bank card fees in the current quarter increased $2.2 million, or 5.1%, over the same period last year. The increase was mainly the result of growth in merchant, debit, and corporate card

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COMMERCE BANCSHARES, INC.

Management Discussion of First Quarter Results

March 31, 2016

interchange fees of 16.8%, 5.3% and 2.0%, respectively. Credit card fees also increased 4.3% this quarter. Total bank card fees this quarter were comprised of fees on corporate card ($22.3 million), debit card ($9.4 million), merchant ($7.1 million) and credit card ($5.6 million) transactions.

In the current quarter, trust fees increased $784 thousand, or 2.6%, compared to the same period last year, resulting mainly from continued growth in both private client and institutional trust activities. Deposit account fees also increased $2.2 million, or 11.8%, compared to the same period last year as a result of higher deposit account service fees and growth of 7.5% in overdraft fees.

Capital market fees decreased $277 thousand, or 9.2%, from the same quarter last year on lower sales volumes from correspondent banks; while mortgage banking revenue increased $322 thousand, or 31.8%, due to sales of newly-originated residential mortgages, as the Company began a new program of selling longer-term fixed rate mortgages in 2015. Fees from sales of interest rate swaps (included in other non-interest income) totaled $2.2 million thousand this quarter, an increase of $1.0 million compared to the same period last year. Fees from sales of tax credits totaled $1.5 million in the current quarter, an increase of $678 thousand over the same quarter last year. Non-interest income comprised 42.1% of the Company’s total revenue this quarter.

Investment Securities Gains and Losses

The Company recorded net securities losses of $995 thousand this quarter, compared with net losses of $1.5 million last quarter and net gains of $6.0 million in the same period last year. These losses mainly resulted from unrealized fair value adjustments to the Company’s private equity investment portfolio.

Non-Interest Expense

Non-interest expense for the current quarter amounted to $177.5 million, an increase of $13.6 million, or 8.3%, over the same period last year, and was higher than the previous quarter’s total by $1.7 million, or 1.0%. The increase over the same period in the previous year was mainly due to higher costs for salaries and benefits (increase of $8.8 million), supplies and communication (increase of $1.2 million), data processing (increase of $3.4 million), and operating losses (increase of $815 thousand).

Compared to the 1^st quarter of last year, salaries expense grew $6.1 million, or 7.5%, mainly due to higher full-time salaries and incentive compensation costs. Benefits expense increased $2.7 million mostly due to higher medical and payroll tax costs. Growth in salaries expense resulted partly from higher staffing costs in commercial card, trust, information technology and other support units. Full-time equivalent employees totaled 4,765 and 4,769 at March 31, 2016 and 2015, respectively.

Compared to the 1^st quarter of last year, data processing costs increased $3.4 million this quarter, mainly due to higher bank card processing costs, software expense and outsourced lockbox costs, while supplies and communication costs increased $1.2 million, mainly due to higher reissuance costs for new chip cards distributed to customers. Operating losses totaled $1.5 million this quarter compared to $636 thousand in the 1^st quarter of 2015, mainly due to a recovery of $468 thousand in litigation costs recorded in 2015 that did not reoccur. Costs for bank card related fraud (included

in operating losses) totaled $845 thousand this quarter compared to $885 thousand in the same period last year and are down from $2.5 million in the prior quarter.

Income Taxes

The effective tax rate for the Company was 31.0% in the current quarter compared to 30.3% in the previous quarter and 31.8% in the 1^st quarter of 2015.

Credit Quality

Net loan charge-offs in the 1^st quarter of 2016 amounted to $8.8 million, compared with $9.2 million in the prior quarter and $7.4 million in the 1^st quarter of last year. The ratio of annualized net loan charge-offs to total average loans was .28% in the current quarter compared to .30% in the previous quarter and .26% in the 1^st quarter of last year.

In the 1^st quarter of 2016, annualized net loan charge-offs on average consumer credit card loans were 3.16%, compared with 3.40% in the previous quarter and 3.44% in the same period last year. Consumer loan net charge-offs were .54% of average consumer loans in the current quarter, .47% in the prior quarter and .41% in the same quarter last year. The provision for loan losses in the current quarter totaled $9.4 million, compared to $9.2 million in the prior quarter and $4.4 million in the 1^st quarter of last year. At March 31, 2016, the allowance totaled $152.1 million, was 1.20% of total loans, and was 518% of total non-accrual loans.

At March 31, 2016, total non-performing assets amounted to $31.4 million, an increase of $2.0 million over the previous quarter. Non-performing assets are comprised of non-accrual loans and foreclosed real estate ($29.4 million and $2.0 million, respectively, at March 31, 2016). At March 31, 2016, the balance of non-accrual loans, which represented .23% of loans outstanding, included business loans of $16.1 million, business real estate loans of $6.2 million, personal real estate loans of $4.2 million and construction and land loans of $2.7 million. Loans more than 90 days past due and still accruing interest totaled $15.4 million at March 31, 2016.

Other

During the 1^st quarter of 2016, the Company paid a cash dividend of $.225 per common share, representing an increase of 5% over the rate paid in 2015. Also, a cash dividend of $2.3 million was paid on its preferred stock. Additionally, the Company purchased 900,929 shares of treasury stock this quarter at an average price of $40.44.

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.

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