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): October 13, 2004

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))

TABLE OF CONTENTS

	Item 2.02 Results of Operations and Financial Condition
SIGNATURE
INDEX TO EXHIBITS
Press Release

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 October 13, 2004 by Commerce Bancshares, Inc. announcing Third Quarter 2004 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.

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: October 13, 2004

INDEX TO EXHIBITS

Exhibit
Number	Description
99.1	Press release dated October 13, 2004

EX-99.1

Exhibit 99.1

FOR IMMEDIATE RELEASE:
Wednesday, October 13, 2004

COMMERCE BANCSHARES, INC. REPORTS FIRST NINE
MONTHS EARNINGS PER SHARE GROWTH OF 14%

     Commerce Bancshares, Inc. announced record earnings of $2.47 per share for the nine months ended September 30, 2004, an increase of 14% compared to $2.17 per share during the same period in 2003. Net income for the first nine months of 2004 amounted to $167.7 million compared with $152.7 million in the same period last year, or an increase of 10%. During this period the return on average equity was 15.5%, the return on assets was 1.58%, and the efficiency ratio was 58.8%.

     For the three months ended September 30, 2004, earnings per share totaled $.93, an increase of 18% compared with $.79 in 2003. Net income amounted to $62.5 million compared with $54.9 million for 2003, an increase of 14%.

     In making this announcement, David W. Kemper, Chairman and CEO, said, “We are pleased to report double digit earnings per share growth for both the quarter and the first nine months of the year. For the first nine months, net income before taxes increased 11% as a result of growth in non-interest income, lower loan loss provisions and control over expenses. During this period, non-interest income grew by 11%, mainly the result of growth in bankcard income of 14%. Also, non-interest expense has grown by only 1% for the first nine months of this year. Net interest income this year, however, has remained flat when compared to the previous year as average loans have grown only 1% in this period. Net income for the third quarter of 2004 increased 14% over the same quarter last year and included the recognition of tax benefits of $14.0 million, which had been expected. Net income before taxes for the third quarter of 2004 increased 4%.”

     Mr. Kemper continued, “Asset quality remained solid this quarter with net charge-offs totaling $6.4 million compared with $6.2 million in the previous quarter and $9.7 million in the third quarter of last year. Our allowance for loan losses at September 30, 2004 totaled $133.4 million and was 522% of non-performing loans. Net charge-offs for the first nine months were .41% of average loans and our loan loss reserve remains at 1.63% of total loans.”

     Total assets at September 30, 2004 were $14.1 billion, total loans were $8.2 billion, and total deposits were $10.3 billion. Total non-performing loans amounted to $25.6 million or .31% of total loans.

(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 330 banking locations in Missouri, Illinois, and Kansas. The Company also has operating subsidiaries involved in mortgage banking, credit related insurance, venture capital, and real estate activities.

     Posted to the Company’s web site is management’s discussion of third quarter results. To see this information please visit our web site at www.commercebank.com.

* * * * * * * * * * * * * * *

For additional information, contact
Jeffery Aberdeen, Controller
at PO Box 13686, Kansas City, MO
or by telephone at (816) 234-2081
Web Site: http://www.commercebank.com
Email: mymoney@commercebank.com

(Amounts in thousands)	6/30/04			9/30/04			9/30/03
Non-Accrual Loans	$	27,654		$	25,554		$	32,372
Foreclosed Real Estate	$	1,877		$	1,540		$	2,036
Total Non-Performing Assets	$	29,531		$	27,094		$	34,408
Non-Performing Assets to Loans		.36	%		.33	%		.43	%
Non-Performing Assets to Total Assets		.20	%		.19	%		.25	%
Loans 90 Days & Over Past Due — Still Accruing	$	16,481		$	17,625		$	19,100

COMMERCE BANCSHARES, INC. and SUBSIDIARIES
FINANCIAL HIGHLIGHTS

	For the Three Months Ended									For the Nine Months Ended
(Unaudited)	June 30			Sept. 30			Sept. 30			Sept. 30			Sept. 30
	2004			2004			2003			2004			2003
FINANCIAL SUMMARY (In thousands, except per share data)
Net interest income	$	126,461		$	123,684		$	121,988		$	373,129		$	374,885
Taxable equivalent net interest income		127,025			124,262			123,065			374,859			377,250
Non-interest income		84,289			78,920			76,940			249,178			225,247
Provision for loan losses		6,280			6,606			9,655			23,136			29,674
Non-interest expense		120,936			120,492			116,430			360,340			355,379
Net income		53,838			62,519			54,948			167,681			152,663
Cash dividends		15,340			15,218			14,788			46,059			36,653
Net total loan charge-offs		6,248			6,367			9,660			24,994			28,091
Net business charge-offs (recov)		(270	)		100			1,640			5,332			6,040
Net credit card charge-offs		5,040			4,658			4,925			14,632			14,275
Net personal banking charge-offs*		1,260			1,993			2,062			5,225			6,002
Net real estate charge-offs (recov)		73			(638	)		359			(463	)		128
Net overdraft charge-offs		145			254			674			268			1,646
Per share:
Net income — basic	$	0.80		$	0.94		$	0.79		$	2.50		$	2.19
Net income — diluted	$	0.79		$	0.93		$	0.79		$	2.47		$	2.17
Cash dividends	$	0.230		$	0.230		$	0.214		$	0.690		$	0.529
Diluted wtd. average shares o/s		67,937			67,333			69,936			68,014			70,357
RATIOS
Average loans to deposits		78.13	%		77.83	%		79.81	%		78.60	%		80.16	%
Return on total average assets		1.51	%		1.78	%		1.60	%		1.58	%		1.52	%
Return on total average stockholders’ equity		14.91	%		17.41	%		14.96	%		15.46	%		14.10	%
Efficiency ratio**		57.96	%		59.22	%		58.56	%		58.79	%		59.52	%
AT PERIOD END
Book value per share based on total stockholders’ equity	$	21.13		$	22.08		$	21.03
Market value per share	$	45.95		$	48.09		$	41.67
Allowance for loan losses as a percentage of loans		1.64	%		1.63	%		1.67	%
Tier I leverage ratio		9.47	%		9.77	%		9.88	%
Common shares outstanding		66,642,550			66,096,765			68,509,807
Shareholders of record		4,845			4,786			4,934
Number of bank/ATM locations		327			329			328
Number of bank charters		4			3			4
Full-time equivalent employees		4,822			4,821			4,986
				Sept. 30			Sept. 30
OTHER YTD INFORMATION					2004			2003
High market value per share				$	50.00		$	43.62
Low market value per share				$	44.00		$	33.52

* Includes consumer, student and home equity loans

** The efficiency ratio is calculated as non-interest expense (excluding intangibles amortization) as a percent of net interest income and non-interest income (excluding gains/losses on securities transactions).

COMMERCE BANCSHARES, INC. and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)	For the Three Months Ended							For the Nine Months Ended
(In thousands, except per share data)	June 30		Sept. 30			Sept. 30		Sept. 30		Sept. 30
	2004		2004			2003		2004		2003
INTEREST INCOME
Interest and fees on loans	$	102,753	$	106,218		$	107,379	$	312,980	$	327,758
Interest on investment securities		49,348		44,945			40,940		138,885		135,438
Interest on federal funds sold and securities purchased under agreements to resell		339		429			210		954		565
Total interest income		152,440		151,592			148,529		452,819		463,761
INTEREST EXPENSE
Interest on deposits:
Savings, interest checking and money market		6,320		7,130			6,292		19,622		22,479
Time open and C.D.’s of less than $100,000		9,592		9,525			11,354		29,016		37,915
Time open and C.D.’s of $100,000 and over		3,571		3,883			3,363		10,719		11,214
Interest on other borrowings		6,496		7,370			5,532		20,333		17,268
Total interest expense		25,979		27,908			26,541		79,690		88,876
Net interest income		126,461		123,684			121,988		373,129		374,885
Provision for loan losses		6,280		6,606			9,655		23,136		29,674
Net interest income after provision for loan losses		120,181		117,078			112,333		349,993		345,211
NON-INTEREST INCOME
Trust fees		16,128		16,047			15,446		48,339		45,044
Deposit account charges and other fees		26,930		27,072			26,205		79,524		69,821
Bank card transaction fees		19,348		19,676			16,771		56,624		49,674
Trading account profits and commissions		2,970		2,812			3,653		9,608		11,613
Consumer brokerage services		2,371		2,376			2,306		7,101		6,811
Mortgage banking revenue		274		545			907		1,307		3,558
Net gains (losses) on securities transactions		2,833		(148	)		896		11,636		5,337
Other		13,435		10,540			10,756		35,039		33,389
Total non-interest income		84,289		78,920			76,940		249,178		225,247
NON-INTEREST EXPENSE
Salaries and employee benefits		65,696		65,549			65,036		199,261		199,635
Net occupancy		9,834		9,740			9,451		29,740		29,228
Equipment		5,678		5,634			5,849		17,170		17,936
Supplies and communication		8,342		9,153			8,539		25,439		25,479
Data processing and software		11,802		11,469			10,303		33,901		30,068
Marketing		4,424		4,552			3,936		12,680		10,999
Other intangible assets amortization		433		431			453		1,300		1,352
Other		14,727		13,964			12,863		40,849		40,682
Total non-interest expense		120,936		120,492			116,430		360,340		355,379
Income before income taxes		83,534		75,506			72,843		238,831		215,079
Less income taxes		29,696		12,987			17,895		71,150		62,416
NET INCOME	$	53,838	$	62,519		$	54,948	$	167,681	$	152,663
Net income per share — basic	$	0.80	$	0.94		$	0.79	$	2.50	$	2.19
Net income per share — diluted	$	0.79	$	0.93		$	0.79	$	2.47	$	2.17
Cash dividends per common share	$	0.230	$	0.230		$	0.214	$	0.690	$	0.529

COMMERCE BANCSHARES, INC. and SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

(Unaudited)	June 30			Sept. 30			Sept. 30
(In thousands)	2004			2004			2003
ASSETS
Loans, net of unearned income	$	8,107,924		$	8,162,845		$	7,945,119
Allowance for loan losses		(133,124	)		(133,363	)		(132,701	)
Net loans		7,974,800			8,029,482			7,812,418
Investment securities:
Available for sale		4,792,606			4,775,883			4,555,494
Trading		17,673			29,803			12,009
Non-marketable		72,141			73,298			74,021
Total investment securities		4,882,420			4,878,984			4,641,524
Federal funds sold and securities purchased under agreements to resell		134,805			117,505			96,745
Cash and due from banks		860,203			533,856			542,905
Land, buildings and equipment — net		339,269			341,904			332,940
Goodwill		48,522			48,522			48,522
Other intangible assets — net		1,321			889			2,623
Other assets		183,547			195,016			169,637
Total assets	$	14,424,887		$	14,146,158		$	13,647,314
LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits:
Non-interest bearing demand	$	1,723,109		$	1,750,318		$	1,545,546
Savings, interest checking and money market		6,130,449			6,110,594			6,024,602
Time open and C.D.’s of less than $100,000		1,669,858			1,654,399			1,779,186
Time open and C.D.’s of $100,000 and over		847,332			766,260			605,181
Total deposits		10,370,748			10,281,571			9,954,515
Federal funds purchased and securities sold under agreements to repurchase		2,157,542			1,863,059			1,725,449
Other borrowings		393,625			392,586			418,456
Other liabilities		94,883			149,278			107,858
Total liabilities		13,016,798			12,686,494			12,206,278
Stockholders’ equity:
Preferred stock		—			—			—
Common stock		343,183			343,183			336,940
Capital surplus		356,186			353,705			294,900
Retained earnings		781,457			828,758			823,443
Treasury stock		(89,473	)		(115,190	)		(82,876	)
Other		(2,827	)		(2,706	)		(2,135	)
Accumulated other comprehensive income		19,563			51,914			70,764
Total stockholders’ equity		1,408,089			1,459,664			1,441,036
Total liabilities and stockholders’ equity	$	14,424,887		$	14,146,158		$	13,647,314

COMMERCE BANCSHARES, INC. and SUBSIDIARIES
AVERAGE BALANCES

(Unaudited)	For the Three Months Ended									For the Nine Months Ended
(Dollars in thousands)	June 30			Sept. 30			Sept. 30			Sept. 30			Sept. 30
	2004			2004			2003			2004			2003
Loans:
Business	$	2,076,813		$	2,032,375		$	2,060,389		$	2,051,422		$	2,184,576
Real estate — construction		439,082			426,562			399,141			430,594			401,964
Real estate — business		1,850,935			1,806,227			1,851,866			1,845,978			1,818,562
Real estate — personal		1,329,562			1,338,895			1,312,740			1,333,178			1,294,129
Consumer		1,184,229			1,210,117			1,152,436			1,182,188			1,118,114
Home equity		371,136			390,005			329,301			372,811			318,079
Student		288,636			289,730			355,771			320,030			336,875
Credit card		557,029			571,264			533,213			560,124			523,254
Overdrafts		10,779			10,659			12,277			12,963			11,927
Total loans		8,108,201			8,075,834			8,007,134			8,109,288			8,007,480
Investment securities (excluding unrealized gains and losses):
Available for sale		4,950,254			4,695,510			4,401,412			4,833,790			4,232,761
Trading		25,151			10,326			10,565			14,621			19,576
Non-marketable		77,663			75,123			78,180			75,810			73,474
Total investment securities		5,053,068			4,780,959			4,490,157			4,924,221			4,325,811
Federal funds sold and securities purchased under agreements to resell		111,170			101,152			65,026			90,944			55,726
Total interest earning assets		13,272,439			12,957,945			12,562,317			13,124,453			12,389,017
Total assets		14,323,830			13,969,121			13,590,902			14,161,479			13,427,256
Deposits:
Non-interest bearing deposits		1,275,569			1,292,276			1,112,998			1,267,346			1,049,274
Interest bearing deposits:
Savings		411,260			406,112			386,470			403,364			377,585
Interest checking		503,039			516,021			415,946			500,711			393,482
Money market		5,661,088			5,689,247			5,660,130			5,659,441			5,582,153
Time open & C.D.’s of less than $100,000		1,685,584			1,657,022			1,806,005			1,685,776			1,865,995
Time open & C.D.’s of $100,000 and over		841,283			814,984			651,504			800,509			721,161
Total interest bearing deposits		9,102,254			9,083,386			8,920,055			9,049,801			8,940,376
Total deposits		10,377,823			10,375,662			10,033,053			10,317,147			9,989,650
Borrowings:
Federal funds purchased and securities sold under agreements to repurchase		1,911,587			1,661,568			1,555,161			1,839,469			1,461,653
Other borrowings		453,931			392,374			413,284			428,974			389,514
Total borrowings		2,365,518			2,053,942			1,968,445			2,268,443			1,851,167
Total interest bearing liabilities		11,467,772			11,137,328			10,888,500			11,318,244			10,791,543
Total stockholders’ equity		1,452,019			1,428,908			1,456,858			1,448,542			1,447,173
Net yield on interest earning assets (tax-equivalent basis)		3.85	%		3.82	%		3.89	%		3.82	%		4.07	%

COMMERCE BANCSHARES, INC.
Management Discussion of Third Quarter Results
September 30, 2004

For the quarter ended September 30, 2004, net income amounted to $62.5 million, an increase of 13.8% over the 3rd quarter of the previous year. Return on assets was 1.78% and the return on equity totaled 17.4%. For the quarter, the efficiency ratio was 59.2%. The increase in net income over the 3rd quarter of last year was the result of a reduction in income tax expense of $4.9 million coupled with growth in non-interest income of $2.0 million, and a $3.0 million reduction in the provision for loan losses. Non-interest expense increased 3.5% compared to the same quarter last year, and net interest income increased $1.7 million.

Balance Sheet Review
During the 3rd quarter, average loans were down slightly compared to the 2nd quarter of 2004, and were up almost 1% compared with the same period last year. Compared to the 2nd quarter of this year, average consumer, home equity, credit card and personal real estate loans grew by $25.9 million, $18.9 million, $14.2 million and $9.3 million, respectively, while business real estate loans, business loans and construction loans declined by $44.7 million, $44.4 million and $12.5 million, respectively. The increase in consumer loans was mainly the result of increases in marine and recreational vehicle lending. The decline in business loans, which occurred in the 3rd quarter, continued to reflect weak demand and lower line of credit usage. The decline in business real estate loans during the quarter was the result of larger pay offs during the quarter and customer refinancing activities.

Available for sale investment securities, excluding fair value adjustments, decreased on average by $254.7 million, or 5.1%, this quarter compared with the previous quarter. Most of this decline occurred towards the end of the previous quarter. Available for sale securities maturing during the 3rd quarter totaled $91.0 million while the principal amount of securities sold was $9.5 million. Early principal prepayments of mortgage and asset-backed securities totaled $246.0 million. Investment securities purchased in the current quarter totaled $278.4 million and were comprised of federal agency securities ($135.2 million), mortgage-backed securities ($85.2 million) and asset-backed securities ($34.7 million).

Total average deposits decreased slightly during the 3rd quarter compared to the 2nd quarter of this year. Average non-interest bearing deposits were relatively unchanged from the 2nd quarter. While total average interest bearing deposits were also flat compared with the previous quarter, money market accounts grew $28.2 million and interest checking accounts grew $13.0 million. Certificates of deposit, however, declined $54.9 million.

During the quarter, average borrowings decreased $311.6 million, primarily due to a decline in securities sold under agreements to repurchase.

The average loans to deposits ratio for the quarter decreased slightly to 77.8% in the 3rd quarter of 2004. The decrease in this ratio resulted from decreases in the average balances of both deposits and loans.

Net Interest Income
In the 3rd quarter, net interest income amounted to $123.7 million, an increase of $1.7 million, or 1.4%, compared to the 3rd quarter of last year, and a decrease of $2.8 million, or 2.2%, compared with the previous quarter of this year. The net yield on earning assets decreased 3 basis points from the previous quarter to 3.82% in the current quarter.

The decrease in net interest income in the 3rd quarter compared to the 2nd quarter of 2004 was the result of lower earnings on the Company’s inflation indexed treasury securities, lower average investment securities balances, and higher rates on short-term borrowings. This was partly offset by higher rates earned on virtually all lending products as a result of recent increases in rates by the Federal Reserve. Also, rates paid on interest bearing deposits grew only slightly during the current quarter. Compared to the 2nd quarter of 2004, average rates earned on loans increased 13 basis points while rates paid on interest bearing deposits increased 4 basis points. Average rates earned on investment securities decreased by 19 basis points, mainly a result of a $2.5 million decrease in inflation related earnings recognized in the 3rd quarter. The overall decline in securities balances reduced interest income by approximately $2.8 million.

During the quarter, rates on other borrowings increased by 32 basis points to 1.43% as a result of the higher rate environment, which especially affected short-term rates. The rate impact was partly offset by a decline in average borrowings of $311.6 million. This combination caused interest expense on other borrowings to grow by $874 thousand.

Non-Interest Income
For the 3rd quarter of 2004, total non-interest income amounted to $78.9 million compared with $76.9 million in the same quarter last year, an increase of 2.6%. This increase resulted from growth in deposit, bank card and trust fee income. Bond trading and mortgage banking fee income declined from amounts recorded in the same period last year due to slower customer demand. Bank card fees for the quarter increased 17.3% over the same period last year, due mainly to higher fees earned on merchant, debit card and credit card transactions, all of which grew by more than 10%. Deposit account fees, in the 3rd

COMMERCE BANCSHARES, INC.
Management Discussion of Third Quarter Results
September 30, 2004

quarter, grew 3.3% over last year due mainly to higher overdraft fees earned, while trust fees were up 3.9%, as a result of higher fees on institutional and corporate trust accounts. Other income in the 2nd quarter of 2004 included a gain on a branch sale of $1.1 million, which did not reoccur in the current quarter.

Net securities losses amounted to $148 thousand for the 3rd quarter of 2004, compared to net gains of $2.8 million in the 2nd quarter of 2004 and $896 thousand in the 3rd quarter of last year.

Non-Interest Expense
Non-interest expense for the quarter amounted to $120.5 million, an increase of $4.1 million, or 3.5%, compared with $116.4 million recorded in the 3rd quarter of last year. Year to date, non-interest expense in 2004 grew only 1.4% over the previous year, and was substantially unchanged when compared with the previous quarter.

Compared with the 3rd quarter of last year, salaries and benefits expense increased slightly as a result of higher salaries and health care expense offset partly by lower pension and incentive payments. Full-time equivalent employees totaled 4,821 and 4,986 at September 30, 2004 and 2003, respectively. Costs for supplies and communication, professional fees and operating losses all increased over amounts recorded in the 3rd quarter last year. Data processing costs grew $1.2 million, or 11.3%, mainly as a result of higher bank card processing network fees and software expense. Increased costs were also incurred for marketing and occupancy.

Income Taxes
During the 3rd quarter, income tax expense amounted to $13.0 million, a decrease of $16.7 million from the previous quarter and $4.9 million less than the same quarter last year. The lower income tax expense in the current quarter was the result of the recognition of tax benefits, totaling $14.0 million, associated with certain corporate tax reorganization initiatives which were finalized during the quarter. The Company will recognize an additional $5.0 million tax benefit related to these initiatives in the 4th quarter of this year. The effective tax rate for the Company was 17.2% for the 3rd quarter of 2004, compared with an effective tax rate of 35.5% in the 2nd quarter of 2004 and 24.6% in the 3rd quarter of 2003. The Company has additional income tax benefits totaling approximately $13.7 million associated with other corporate reorganization activities, which will not be recognized into income until certain conditions are satisfied. It is projected that such conditions may be resolved as early as the 3rd quarter of 2005.

Credit Quality
Net loan charge-offs for the 3rd quarter of 2004 amounted to $6.4 million compared with $6.2 million in the 2nd quarter of 2004 and $9.7 million in the 3rd quarter of last year. The ratio of annualized net loan charge-offs to total average loans this quarter was .31% compared with .48% in the same quarter last year and .31% in the 2nd quarter of 2004. The slight increase in net charge-offs this quarter compared with the 2nd quarter of this year was mainly the result of increases in consumer and business loan net charge-offs offset by a decrease in real estate net charge-offs.

For the 3rd quarter of 2004, annualized net charge-offs on average credit card loans decreased to 3.24%, compared with 3.66% in the 3rd quarter of last year. Personal loan (consumer, home equity and student) charge-offs increased this quarter over the 2nd quarter, and amounted to .42% of average personal loans compared to .27% in the 2nd quarter of 2004 and .45% in the same period last year. The provision for loan losses for the current quarter totaled $6.6 million, an increase of $326 thousand over the provision recorded in the 2nd quarter of this year, and was down $3.0 million from the amount recorded in the 3rd quarter of 2003. The allowance for loan losses at September 30, 2004 amounted to $133.4 million, or 1.63% of total loans, and represents 522% of total non-performing loans.

Total non-performing assets amounted to $27.1 million, a decrease of $2.4 million from the previous quarter, and amounted to .33% of loans. Non-performing assets are comprised of non-accrual loans ($25.6 million) and foreclosed real estate ($1.5 million). Loans past due more than 90 days and still accruing interest totaled $17.6 million at September 30, 2004.

Other
The Company maintains a treasury stock buyback program; and effective January 2004, was authorized by the Board of Directors to repurchase up to 3 million shares of its common stock. During the quarter ended September 30, 2004, the Company purchased 752,000 shares of treasury stock at an average cost of $46.98 per share.

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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