Commerce Bancshares (CBSH) 8-K Commerce Bancshares, Inc. Announces Third Quarter Earnings Per Share of $.67

Exhibit 99.1

FOR IMMEDIATE RELEASE:
Thursday, October 14, 2010

COMMERCE BANCSHARES, INC. ANNOUNCES THIRD QUARTER
EARNINGS PER SHARE OF $.67

     Commerce Bancshares, Inc. announced earnings of $.67 per share for the three months ended September 30, 2010 compared to $.63 in the third quarter of 2009 and $.71 per share in the previous quarter. Net income for the third quarter amounted to $55.9 million compared to $51.6 million in the same period last year and $59.7 million in the previous quarter. The return on average assets for the three months ended September 30, 2010 was 1.19%, and the return on average equity was 11.0%.

     For the nine months ended September 30, 2010, earnings per share totaled $1.91, an increase of 30% compared to $1.47 per share during the same period in 2009. Net income for the first nine months of 2010 amounted to $159.8 million compared with $119.5 million in the same period last year. The return on average assets for the first nine months ended September 30, 2010 was 1.17%, and the return on average equity was 10.9%. The efficiency ratio was 59.5%.

     In making this announcement, David W. Kemper, Chairman and CEO, said, “Third quarter operating results reflect several continuing trends. Record low interest rates, a flat short-term yield curve and soft loan demand put pressure on our net interest income. Improved asset quality reduced our loan loss provision while non-performing assets declined further this quarter. Continuing strong revenues in debit and credit card products helped to offset lower consumer deposit fees resulting from new regulations on overdraft charges implemented on July 1. We continue to compete vigorously for new commercial loan opportunities and on September 28, 2010 we announced a new partnership with the State of Missouri with a goal of lending $100 million to small businesses in the State.”

     Mr. Kemper continued, “During the quarter, net loan charge-offs totaled $21.8 million compared to $22.2 million in the previous quarter, and $30.9 million in the same period last year. Non-performing assets at September 30, 2010 totaled $102.1 million compared to $103.2 million in the previous quarter. The provision for loan losses matched our net loan charge-offs this quarter and our allowance for loan losses was unchanged at $197.5 million, representing 2.2 times non-performing loans. Our capital and liquidity positions continued to strengthen, as the ratio of tangible common equity to assets increased to 10.3%, while our loans to deposits ratio amounted to 68.9%.”

     Total assets at September 30, 2010 were $18.8 billion, total loans were $10.0 billion, and total deposits were $14.4 billion.

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

Summary of Non-Performing Assets and Past Due Loans

(Dollars in thousands)	6/30/10			9/30/10			9/30/09
Non-Accrual Loans	$	90,267		$	89,609		$	121,698
Foreclosed Real Estate	$	12,920		$	12,539		$	7,535
Total Non-Performing Assets	$	103,187		$	102,148		$	129,233
Non-Performing Assets to Loans		1.06	%		1.05	%		1.26	%
Non-Performing Assets to Total Assets		.56	%		.54	%		.72	%
Loans 90 Days & Over Past Due — Still Accruing	$	42,315		$	42,723		$	45,614

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

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

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

2

COMMERCE BANCSHARES, INC. and SUBSIDIARIES
FINANCIAL HIGHLIGHTS

	For the Three Months Ended									For the Nine Months Ended
	June 30			Sept. 30			Sept. 30			Sept. 30			Sept. 30
(Unaudited)	2010			2010			2009			2010			2009
FINANCIAL SUMMARY(In thousands, except per share data)
Net interest income	$	163,108		$	159,437		$	163,539		$	485,255		$	470,999
Taxable equivalent net interest income		167,826			164,773			168,408			500,133			484,673
Non-interest income		101,647			99,543			102,135			294,442			293,128
Investment securities gains (losses), net		660			16			(945	)		(2,989	)		(5,870	)
Provision for loan losses		22,187			21,844			35,361			78,353			119,695
Non-interest expense		155,982			155,119			154,489			466,888			467,386
Net income		59,734			55,885			51,649			159,789			119,453
Cash dividends		19,615			19,621			18,962			58,836			55,736
Net total loan charge-offs		22,187			21,844			30,896			75,295			101,848
Business		2,223			582			4,626			3,072			10,846
Real estate — construction and land		480			1,971			4,463			13,417			24,062
Real estate — business		1,022			776			1,253			2,229			3,062
Consumer credit card		12,338			12,592			12,577			37,995			36,554
Consumer		4,743			4,912			6,522			15,179			24,331
Revolving home equity		650			276			233			1,506			629
Student		—			2			2			5			4
Real estate — personal		515			379			797			1,095			1,557
Overdraft		216			354			423			797			803
Per common share:
Net income — basic	$	0.72		$	0.67		$	0.63		$	1.92		$	1.47
Net income — diluted	$	0.71		$	0.67		$	0.63		$	1.91		$	1.47
Cash dividends	$	0.235		$	0.235		$	0.229		$	0.705		$	0.686
Diluted wtd. average shares o/s		83,385			83,390			82,491			83,367			80,951
RATIOS
Average loans to deposits(1)		71.96	%		68.88	%		77.40	%		71.88	%		81.96	%
Return on total average assets		1.33	%		1.19	%		1.16	%		1.17	%		0.91	%
Return on total average equity		12.21	%		10.98	%		11.49	%		10.85	%		9.49	%
Non-interest income to revenue(2)		38.39	%		38.44	%		38.44	%		37.76	%		38.36	%
Efficiency ratio(3)		58.48	%		59.51	%		57.75	%		59.48	%		60.76	%
AT PERIOD END
Book value per share based on total equity	$	23.85		$	24.54		$	22.33
Market value per share	$	35.99		$	37.59		$	35.47
Allowance for loan losses as a percentage of loans		2.03	%		2.04	%		1.85	%
Tier I leverage ratio		10.01	%		9.93	%		9.65	%
Tangible equity to assets ratio(4)		10.15	%		10.26	%		9.60	%
Common shares outstanding		83,371,031			83,408,100			82,868,805
Shareholders of record		4,369			4,311			4,449
Number of bank/ATM locations		373			369			373
Full-time equivalent employees		5,051			5,011			5,148
OTHER QTD INFORMATION
High market value per share	$	43.22		$	40.34		$	38.08
Low market value per share	$	35.52		$	35.10		$	29.47

(1)	Includes loans held for sale.
(2)	Revenue includes net interest income and non-interest income.
(3)	The efficiency ratio is calculated as non-interest expense (excluding intangibles amortization) as a percent of revenue.
(4)	The tangible equity ratio is calculated as stockholders’ equity reduced by goodwill and other intangible assets (excluding mortgage servicing rights) divided by total assets reduced by goodwill and other intangible assets (excluding mortgage servicing rights).

3

COMMERCE BANCSHARES, INC. and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME

	For the Three Months Ended									For the Nine Months Ended
(Unaudited)	June 30			Sept. 30			Sept. 30			Sept. 30			Sept. 30
(In thousands, except per share data)	2010			2010			2009			2010			2009
Interest income	$	185,057		$	178,916		$	201,647		$	552,042		$	594,513
Interest expense		21,949			19,479			38,108			66,787			123,514
Net interest income		163,108			159,437			163,539			485,255			470,999
Provision for loan losses		22,187			21,844			35,361			78,353			119,695
Net interest income after provision for loan losses		140,921			137,593			128,178			406,902			351,304
NON-INTEREST INCOME
Bank card transaction fees		37,659			37,723			31,279			107,872			88,552
Deposit account charges and other fees		25,472			21,693			27,750			71,146			80,277
Trust fees		20,358			20,170			19,258			59,846			57,486
Bond trading income		5,387			5,133			5,187			15,524			17,529
Consumer brokerage services		2,372			2,390			2,692			6,879			8,418
Loan fees and sales		3,472			5,830			6,851			11,141			13,545
Other		6,927			6,604			9,118			22,034			27,321
Total non-interest income		101,647			99,543			102,135			294,442			293,128
INVESTMENT SECURITIES GAINS (LOSSES), NET
Impairment (losses) reversals on debt securities		4,415			5,645			(3,457	)		11,355			(35,422	)
Less noncredit-related losses (reversals) on securities not expected to be sold		(5,091	)		(7,690	)		1,993			(15,533	)		32,611
Net impairment losses		(676	)		(2,045	)		(1,464	)		(4,178	)		(2,811	)
Realized gains (losses) on sales and fair value adjustments		1,336			2,061			519			1,189			(3,059	)
Investment securities gains (losses), net		660			16			(945	)		(2,989	)		(5,870	)
NON-INTEREST EXPENSE
Salaries and employee benefits		87,108			85,442			87,267			259,988			260,299
Net occupancy		11,513			12,086			11,752			35,697			34,652
Equipment		5,938			5,709			6,306			17,548			18,883
Supplies and communication		6,829			6,724			8,061			20,891			24,994
Data processing and software		17,497			16,833			15,500			50,936			44,854
Marketing		5,002			5,064			4,846			14,784			14,099
Deposit insurance		4,939			4,756			4,833			14,445			21,908
Indemnification obligation		(1,683	)		—			(2,496	)		(1,683	)		(2,496	)
Other		18,839			18,505			18,420			54,282			50,193
Total non-interest expense		155,982			155,119			154,489			466,888			467,386
Income before income taxes		87,246			82,033			74,879			231,467			171,176
Less income taxes		27,428			26,012			23,415			71,817			52,264
Net income before non-controlling interest		59,818			56,021			51,464			159,650			118,912
Less non-controlling interest expense (income)		84			136			(185	)		(139	)		(541	)
Net income	$	59,734		$	55,885		$	51,649		$	159,789		$	119,453
Net income per common share — basic	$	0.72		$	0.67		$	0.63		$	1.92		$	1.47
Net income per common share — diluted	$	0.71		$	0.67		$	0.63		$	1.91		$	1.47

4

COMMERCE BANCSHARES, INC. and SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

(Unaudited)	June 30			Sept. 30			Sept. 30
(In thousands)	2010			2010			2009
ASSETS
Loans	$	9,735,049		$	9,706,265		$	10,282,690
Allowance for loan losses		(197,538	)		(197,538	)		(190,466	)
Net loans		9,537,511			9,508,727			10,092,224
Loans held for sale		489,826			248,108			317,913
Investment securities:
Available for sale		6,649,890			7,164,273			6,075,632
Trading		17,245			20,828			9,242
Non-marketable		107,343			110,487			133,732
Total investment securities		6,774,478			7,295,588			6,218,606
Short-term federal funds sold and securities purchased under agreements to resell		9,300			4,550			12,620
Long-term securities purchased under agreements to resell		—			350,000			—
Interest earning deposits with banks		302,354			4,047			118,745
Cash and due from banks		339,990			412,315			342,949
Land, buildings and equipment — net		393,133			387,792			403,900
Goodwill		125,585			125,585			125,585
Other intangible assets — net		12,278			11,285			15,060
Other assets		394,856			403,762			305,505
Total assets	$	18,379,311		$	18,751,759		$	17,953,107
LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits:
Non-interest bearing demand	$	1,666,649		$	1,752,930		$	1,512,529
Savings, interest checking and money market		9,631,428			9,712,088			8,678,985
Time open and C.D.’s of less than $100,000		1,677,251			1,607,664			2,004,276
Time open and C.D.’s of $100,000 and over		1,510,819			1,318,877			1,645,005
Total deposits		14,486,147			14,391,559			13,840,795
Federal funds purchased and securities sold under agreements to repurchase		1,006,356			1,530,555			1,130,193
Other borrowings		363,997			337,863			821,941
Other liabilities		534,197			445,177			309,534
Total liabilities		16,390,697			16,705,154			16,102,463
Stockholders’ equity:
Preferred stock		—			—			—
Common stock		417,617			417,827			395,182
Capital surplus		862,965			865,246			710,588
Retained earnings		633,221			669,485			696,876
Treasury stock		(2,153	)		(2,323	)		(825	)
Accumulated other comprehensive income		75,797			95,204			47,003
Total stockholders’ equity		1,987,447			2,045,439			1,848,824
Non-controlling interest		1,167			1,166			1,820
Total equity		1,988,614			2,046,605			1,850,644
Total liabilities and equity	$	18,379,311		$	18,751,759		$	17,953,107

5

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

	For the Three Months Ended
	June 30, 2010					September 30, 2010					September 30, 2009
			Avg. Rates					Avg. Rates					Avg. Rates
(Unaudited)	Average		Earned/			Average		Earned/			Average		Earned/
(Dollars in thousands)	Balance		Paid			Balance		Paid			Balance		Paid
ASSETS:
Loans:
Business(A)	$	2,880,616		3.93	%	$	2,917,798		3.82	%	$	3,019,018		3.77	%
Real estate — construction and land		568,417		3.90			530,472		4.00			698,876		3.74
Real estate — business		2,028,799		5.08			1,998,500		5.10			2,147,094		5.04
Real estate — personal		1,484,155		5.25			1,450,898		5.13			1,577,908		5.38
Consumer		1,270,243		6.72			1,234,138		6.65			1,423,911		6.99
Home equity		482,847		4.32			485,034		4.32			491,525		4.35
Student		322,010		2.38			315,150		2.40			341,516		2.37
Consumer credit card		737,798		12.32			762,987		11.29			728,547		12.60
Overdrafts		6,817		—			6,667		—			11,288		—
Total loans(B)		9,781,702		5.33			9,701,644		5.21			10,439,683		5.31
Loans held for sale		557,032		1.63			305,013		1.78			293,636		1.95
Investment securities:
U.S. government & federal agency		668,454		3.00			672,447		1.44			412,667		4.47
State & municipal obligations(A)		893,224		4.87			982,137		4.53			907,536		4.97
Mortgage and asset-backed securities		4,389,863		3.47			5,100,958		2.77			3,985,402		4.47
Other marketable securities(A)		192,647		4.55			182,966		5.18			194,802		5.20
Total available for sale securities(B)		6,144,188		3.66			6,938,508		2.95			5,500,407		4.58
Trading securities(A)		19,545		2.93			22,525		2.87			18,143		3.08
Non-marketable securities(A)		113,601		4.26			109,215		9.43			134,422		4.98
Total investment securities		6,277,334		3.67			7,070,248		3.05			5,652,972		4.58
Short-term federal funds sold and securities purchased under agreements to resell		6,840		0.76			6,903		0.69			31,360		0.66
Long-term securities purchased under agreements to resell		—		—			199,302		1.72			—		—
Interest earning deposits with banks		321,763		0.25			170,504		0.25			203,954		0.23
Total interest earning assets		16,944,671		4.49			17,453,614		4.19			16,621,605		4.93
Non-interest earning assets(B)		1,113,372					1,167,692					986,142
Total assets	$	18,058,043				$	18,621,306				$	17,607,747
LIABILITIES AND EQUITY:
Interest bearing deposits:
Savings	$	490,463		0.11		$	481,997		0.16		$	443,263		0.15
Interest checking and money market		9,871,640		0.31			9,979,287		0.28			8,653,109		0.35
Time open & C.D.’s of less than $100,000		1,702,895		1.43			1,642,200		1.32			2,107,778		2.54
Time open & C.D.’s of $100,000 and over		1,323,064		1.08			1,417,162		0.97			1,785,414		1.87
Total interest bearing deposits		13,388,062		0.52			13,520,646		0.47			12,989,564		0.90
Borrowings:
Federal funds purchased and securities sold under agreements to repurchase		1,026,763		0.32			1,023,961		0.23			937,728		0.35
Other borrowings		502,191		3.02			350,328		3.09			833,189		3.66
Total borrowings		1,528,954		1.21			1,374,289		0.96			1,770,917		1.90
Total interest bearing liabilities		14,917,016		0.59	%		14,894,935		0.52	%		14,760,481		1.02	%
Non-interest bearing demand deposits		979,768					1,006,578					877,500
Other liabilities		198,909					700,754					185,916
Equity		1,962,350					2,019,039					1,783,850
Total liabilities and equity	$	18,058,043				$	18,621,306				$	17,607,747
Net interest income (T/E)	$	167,826				$	164,773				$	168,408
Net yield on interest earning assets				3.97	%				3.75	%				4.02	%

(A)	Stated on a tax equivalent basis using a federal income tax rate of 35%.
(B)	The allowance for loan losses and unrealized gains/(losses) on available for sale securities are included in non-interest earning assets.

6

COMMERCE BANCSHARES, INC.
Management Discussion of Third Quarter Results
September 30, 2010

For the quarter ended September 30, 2010, net income amounted to $55.9 million, an increase of $4.2 million over the same quarter last year, but a decrease of $3.8 million compared to the previous quarter. For the current quarter, the return on average assets was 1.19%, the return on average equity was 11.0%, and the efficiency ratio was 59.5%. Compared to the same quarter last year, net interest income (tax equivalent) decreased by $3.6 million to $164.8 million, while non-interest income decreased by $2.6 million to $99.5 million. Non-interest expense for the quarter totaled $155.1 million, an increase of $630 thousand, or .4%, over the same period last year. The provision for loan losses totaled $21.8 million, representing a decline of $13.5 million from the amount recorded in the same quarter last year.

Balance Sheet Review

During the 3^rd quarter of 2010, average loans, excluding loans held for sale, decreased $80.1 million, or .8%, compared to the previous quarter. Also, these same loans decreased $738.0 million, or 7.1%, this quarter compared to the same period last year. The decrease in average loans compared to the previous quarter was mainly the result of lower loan balances in all categories except business and consumer credit card loans, which grew on average by $37.2 million and $25.2 million, respectively. The growth in business loans resulted from seasonal borrowings by several larger commercial customers in addition to new loans made this quarter. The growth in consumer card balances is reflective of increased card usage and continued marketing efforts to attract new balances.

During the 3^rd quarter of 2010, average construction and business real estate loans declined $37.9 million and $30.3 million, respectively, while average personal real estate loans declined $33.3 million as loan demand remained weak. Average consumer loans, consisting mainly of automobile and marine and RV loans, declined $36.1 million as loan pay-downs, mostly from marine and RV loans, exceeded new loan originations. Average credit card balances increased $25.2 million over the previous quarter. The average balance of loans held for sale (comprised mostly of student loans) declined $252.0 million this quarter due to planned sales of $246.0 million of student loans from the recent school year, most of which were originated under the Department of Education’s program. At September 30, 2010, it is expected that the remaining loans under this program, totaling approximately $178 million, will be sold in the 4^th quarter. Additionally, effective October 8, 2010 the Company sold all of its held to maturity student loans, totaling $312 million, and will recognize a gain of $6.9 million in the 4^th quarter of 2010.

Total available for sale investment securities (excluding fair value adjustments) averaged $6.9 billion this quarter, up $794.3 million compared to the previous quarter. The increase was mainly the result of purchases of municipal, agency mortgage-backed and other asset-backed securities which totaled $188.9 million, $509.6 million and $556.1 million, respectively, in the 3^rd quarter. At September 30, 2010 the duration of the investment portfolio was 2.0 years, and maturities of approximately $1.7 billion are expected to occur during the next 12 months.

Total average deposits increased $159.4 million, or 1.1%, during the 3^rd quarter of 2010 compared to the previous quarter. This increase in average deposits resulted mainly from growth in business demand, money market, and certificate of deposit (CD) accounts of $45.7 million, $158.1 million, and $33.4 million, respectively, partly offset by a decline in interest checking accounts of $50.5 million. The increase in average deposits this quarter was mainly due to higher commercial deposit balances. The average loans to deposits ratio in the current quarter was 68.9%, compared to 72.0% in the previous quarter.

During the current quarter, the Company’s average borrowings decreased $154.7 million compared to the previous quarter. This decrease was mainly due to maturities of Federal Home Loan Bank (FHLB) advances during the previous quarter, which totaled $300.4 million and had a weighted average rate of 4.8%. Federal funds purchased and repurchase agreements also declined on average by $2.8 million.

Net Interest Income

Net interest income (tax equivalent) in the 3^rd quarter of 2010 amounted to $164.8 million, a decrease of $3.1 million compared with the previous quarter, and a decrease of $3.6 million compared to the 3^rd quarter of last year. During the 3^rd quarter of 2010, the net yield on earning assets (tax equivalent) was 3.75%, compared with 3.97% in the previous quarter and 4.02% in the same period last year.

The decrease in net interest income (tax equivalent) in the 3^rd quarter of 2010 from the previous quarter was primarily due to lower rates earned on average loans and investment securities, but offset by higher average balances of investment securities and lower interest expense on deposits and borrowings. The decrease in interest earned on loans this quarter was mainly due to lower average balances on most loan products, except business and consumer credit card loans, coupled with lower overall rates earned, especially on consumer credit card loans. Interest income on investment securities (tax equivalent) decreased $3.0 million as rates earned on investment securities declined 62 basis points to an average yield of 3.05%, while the average balance increased to $7.1 billion. Additionally during the quarter, the Company acquired $550 million (par value) of agency mortgage-backed securities on a forward delivery basis (TBA). This was done as part of asset/liability strategies to lock in higher rates; however, interest was not earned on these securities for part of the quarter. The effect of this transaction was to reduce interest income approximately $1.9 million this quarter, but it allows the Company to earn higher rates in future quarters. Also at September 30, 2010, the Company held Treasury inflation-protected securities with a book value of $425.4 million. During the current quarter, there was virtually no inflation-adjusted income earned on these bonds compared to $2.6 million earned in the previous quarter. The estimated effect of the lower inflation income coupled with the purchase of the TBA securities mentioned above was to lower the net yield on earning assets in the 3^rd quarter by 10 basis points.

Interest expense on deposits declined $1.2 million in the 3^rd quarter of 2010 compared with the previous quarter as a result of lower rates paid on virtually all deposit products, but offset by higher average CD balances. The higher average CD balances increased interest expense by $194 thousand this quarter, while lower overall rates reduced interest expense by $1.4 million. Interest expense on borrowings decreased $1.3 million, due

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COMMERCE BANCSHARES, INC.
Management Discussion of Third Quarter Results
September 30, 2010

mainly to lower average balances of FHLB advances as discussed above.

The tax equivalent yield on interest earning assets in the 3^rd quarter of 2010 decreased 30 basis points from the previous quarter to 4.19%, while the overall cost of interest bearing liabilities decreased 7 basis points to .52%.

Non-Interest Income

For the 3^rd quarter of 2010, total non-interest income amounted to $99.5 million, a decrease of $2.6 million compared to $102.1 million in the same period last year. Also, current quarter non-interest income decreased $2.1 million compared to $101.6 million recorded in the previous quarter.

Bank card fees in the current quarter increased 20.6% over the 3^rd quarter of last year due to continued growth in transaction fees earned on corporate card (growth of 44.8%), merchant (growth of 13.7%) and debit card (growth of 13.6%) transactions. The growth in corporate card fees continued to result from both new customer transactions and increased volumes from existing customers. Debit card fees in the 3^rd quarter of 2010 totaled $14.6 million and comprised 38.6% of total bank card fees, while corporate card fees comprised 33.0%. Trust fees for the quarter increased 4.7% compared to the same period last year, and resulted from growth in both personal and institutional trust business, but continued to be negatively affected by low interest rates on money market investments held in trust accounts.

Deposit account fees decreased $6.1 million, or 21.8%, from the 3^rd quarter of 2009, as overdraft fees were down $6.0 million from the same period last year and down $4.2 million from the previous quarter. The reduced overdraft fees resulted from the Company’s implementation on July 1, 2010 of new overdraft regulations on debit card transactions. Corporate cash management fees, which comprised 37.8% of total deposit account fees in the current quarter, declined 5.0% compared to the same period in the previous year.

Bond trading income for the current quarter totaled $5.1 million, a decrease of 1.0% from the same period last year. Loan fees and sales totaled $5.8 million this quarter, down $1.0 million, and included gains of $3.7 million on sales of $246.0 million of student loans.

Investment Securities Gains and Losses

Net securities gains amounted to $16 thousand in the 3^rd quarter of 2010, compared to net gains of $660 thousand in the previous quarter and net losses of $945 thousand in the same quarter last year. During the current quarter, the Company recorded additional credit-related impairment losses of $2.0 million on certain non-agency guaranteed mortgage-backed securities identified as other than temporarily impaired, compared to $1.5 million in the 3^rd quarter of 2009. The cumulative credit-related impairment reserve on these bonds totaled $6.7 million at quarter end. At September 30, 2010, the par value of non-agency guaranteed mortgage-backed securities identified as other than temporarily impaired totaled $197.5 million, compared to $171.6 million at December 31, 2009.

The current quarter also included a pre-tax gain of $2.1 million, which included $1.3 million in fair value adjustments on certain of the Company’s private equity investments.

Non-Interest Expense

Non-interest expense for the current quarter amounted to $155.1 million, a decrease of $863 thousand from the previous quarter and an increase of $630 thousand, or .4%, compared to the same period last year. Compared to the 3^rd quarter of last year, salaries and benefits expense decreased $1.8 million, or 2.1%, mainly due to lower salaries, benefit plan expense, and medical claims costs. Full time equivalent employees totaled 5,011 and 5,148 at September 30, 2010 and 2009, respectively.

Compared with the 3^rd quarter of last year, supplies and communication costs declined 16.6%, reflecting initiatives to reduce both paper and courier costs. Costs for equipment, loan collection and other outside fees were all lower than the same period last year. Marketing costs increased 4.5% over the same period last year, while data processing and software costs increased 8.6%, mainly the result of higher costs for bankcard processing fees (related to higher bankcard revenues). Foreclosed real estate and other foreclosed property expense this quarter totaled $2.1 million compared to $846 thousand in the same period last year.

Income Taxes

The effective tax rate for the Company was 31.8% for the current quarter, compared with 31.5% in the previous quarter and 31.2% in the 3^rd quarter of 2009.

Credit Quality

Net loan charge-offs for the 3^rd quarter of 2010 amounted to $21.8 million, compared with $22.2 million in the prior quarter and $30.9 million in the 3^rd quarter of last year. The $343 thousand decrease in net loan charge-offs in the 3^rd quarter of 2010 compared to the previous quarter was mainly the result of lower business, business real estate, and revolving home equity loan losses but offset by an increase in construction loan losses of $1.5 million. Net loan losses on both consumer banking and consumer credit card loans were slightly higher than the previous quarter. The ratio of annualized net loan charge-offs to total average loans was .89% in the current quarter compared to .91% in the previous quarter.

For the 3^rd quarter of 2010, annualized net charge-offs on average consumer credit card loans amounted to 6.55%, compared with 6.71% in the previous quarter and 6.85% in the same period last year. Consumer loan net charge-offs for the quarter amounted to 1.58% of average consumer loans, compared to 1.50% in the previous quarter and 1.82% in the same quarter last year. The provision for loan losses for the current quarter totaled $21.8 million, matching net loan charge-offs, and was $13.5 million lower than in the same period last year. The allowance for loan losses, which was unchanged from the previous quarter, totaled $197.5 million, or 2.04% of total loans, excluding loans held for sale. At September 30, 2010, the allowance for loan losses was 220% of total non-accrual loans.

At September 30, 2010, total non-performing assets amounted to $102.1 million, a decrease of $1.0 million from the previous quarter. Non-performing assets are comprised of non-accrual loans ($89.6 million) and foreclosed real estate ($12.5 million). At September 30, 2010, the balance of non-accrual loans, which represented .9% of loans outstanding, included construction and land loans of $53.1 million, business real estate loans of $17.9 million and business loans of $11.2 million. Loans past due more than 90 days and still accruing interest totaled $42.7 million at

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COMMERCE BANCSHARES, INC.
Management Discussion of Third Quarter Results
September 30, 2010

September 30, 2010, but included $19.9 million in federally guaranteed student loans which, as noted above, were sold in October 2010.

Other

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

Forward Looking Information

This information contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements include future financial and operating results, expectations, intentions and other statements that are not historical facts. Such statements are based on current beliefs and expectations of the Company’s management and are subject to significant risks and uncertainties. Actual results may differ materially from those set forth in the forward-looking statements.

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