Commerce Bancshares (CBSH) 8-K Commerce Bancshares, Inc. Announces Record Second Quarter Earnings Per Share of $.79

Exhibit 99.1

FOR IMMEDIATE RELEASE: {PRIVATE}
Thursday, July 14, 2011

COMMERCE BANCSHARES, INC. ANNOUNCES RECORD SECOND
QUARTER EARNINGS PER SHARE OF $.79

     Commerce Bancshares, Inc. announced record earnings of $.79 per share for the three months ended June 30, 2011 compared to $.68 per share in the second quarter of 2010, or an increase of 16.2%. Net income for the second quarter amounted to $69.0 million compared to $59.7 million in the same quarter last year. For the quarter, the return on average assets totaled 1.47%, the return on average equity was 13.1% and the efficiency ratio was 57.4%.

     For the six months ended June 30, 2011, earnings per share totaled $1.48 compared to $1.18 for the first six months of 2010, an increase of 25.4%. Net income amounted to $129.5 million for the first six months of 2011 compared with $103.9 million for the same period last year, or an increase of $25.6 million. The return on average assets for the first six months was 1.40%.

     In making this announcement, David W. Kemper, Chairman and CEO, said, “We are pleased to report a 15.6% increase in net income in the second quarter of 2011 compared with the same period last year. This solid growth in net income was mainly the result of a decline in our provision for loan losses of $10.0 million, strong fee income growth in bankcard and trust fees, and good expense control. In an environment of continued low loan demand, our net interest income grew $1.6 million compared to last year and the margin remained stable at 3.85%. Compared to the previous quarter, average deposit balances increased $283.6 million, or 7.5% annualized, reflecting growth in both consumer and business deposits, while average loans declined $179.0 million, or 7.5% annualized. Revenues from bankcard, trust and brokerage grew 9.7%, 10.7% and 21.4%, respectively, this quarter compared to the same quarter last year but deposit fees were lower this quarter due to regulatory changes in 2010. Non-interest expense declined $2.3 million compared to the same quarter last year reflecting lower costs, especially for salaries and benefits, deposit insurance and other operating expenses.”

     Further, Mr. Kemper noted, “Net loan charge-offs for the current quarter totaled $15.2 million, compared to $18.8 million in the previous quarter and $22.2 million in the second quarter of 2010. When compared to the previous quarter, net loan charge-offs were lower in nearly all loan categories. As a result of this improved credit environment, our allowance for loan losses declined by $3.0 million during the current quarter to $191.5 million, and represents 2.4 times our non-performing loans. Total non-performing assets increased slightly this quarter to $103.3 million, but represents only 1.1% of our total loans. Our ratio of tangible common equity to assets was 10.3%, while our loans to deposits ratio totaled 60.2%, reflecting strong capital and liquidity positions.”

(more)

     Total assets at June 30, 2011 were $19.6 billion, total loans were $9.3 billion, and total deposits were $15.7 billion.

     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 over 360 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

{PRIVATE}(Dollars in thousands)	3/31/11	6/30/11	6/30/10
Non-Accrual Loans	$77,914	$79,717	$90,267
Foreclosed Real Estate	$25,061	$23,551	$12,920
Total Non-Performing Assets	$102,975	$103,268	$103,187
Non-Performing Assets to Loans	1.10%	1.12%	1.06%
Non-Performing Assets to Total Assets	.54%	.53%	.56%
Loans 90 Days & Over Past Due — Still Accruing	$18,717	$23,598	$42,315

     This financial news release, including management’s discussion of second quarter results, is posted to the Company’s web site atwww.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 Six Months Ended
	March 31			June 30			June 30			June 30			June 30
(Unaudited)	2011			2011			2010			2011			2010
FINANCIAL SUMMARY(In thousands, except per share data)
Net interest income	$	160,973		$	164,710		$	163,108		$	325,683		$	325,818
Taxable equivalent net interest income		166,479			170,779			167,826			337,258			335,360
Non-interest income		95,906			101,344			101,458			197,250			194,647
Investment securities gains (losses), net		1,327			1,956			660			3,283			(3,005	)
Provision for loan losses		15,789			12,188			22,187			27,977			56,509
Non-interest expense		153,960			153,513			155,793			307,473			311,517
Net income attributable to
Commerce Bancshares, Inc.		60,453			69,034			59,734			129,487			103,904
Cash dividends		20,054			20,056			19,615			40,110			39,215
Net total loan charge-offs		18,789			15,188			22,187			33,977			53,451
Business		2,010			1,439			2,223			3,449			2,490
Real estate — construction and land		1,986			1,125			480			3,111			11,446
Real estate — business		1,064			339			1,022			1,403			1,453
Consumer credit card		9,038			8,490			12,338			17,528			25,403
Consumer		4,013			2,229			4,743			6,242			10,267
Revolving home equity		367			344			650			711			1,230
Student		—			—			—			—			3
Real estate — personal		274			1,027			515			1,301			716
Overdraft		37			195			216			232			443
Per common share:
Net income — basic	$	0.69		$	0.80		$	0.69		$	1.49		$	1.19
Net income — diluted	$	0.69		$	0.79		$	0.68		$	1.48		$	1.18
Cash dividends	$	0.230		$	0.230		$	0.224		$	0.460		$	0.448
Diluted wtd. average shares o/s		86,836			86,927			87,554			86,882			87,523
RATIOS
Average loans to deposits(1)		62.47	%		60.17	%		71.96	%		61.30	%		73.44	%
Return on total average assets		1.32	%		1.47	%		1.33	%		1.40	%		1.16	%
Return on total average equity		11.95	%		13.12	%		12.21	%		12.54	%		10.79	%
Non-interest income to revenue(2)		37.34	%		38.09	%		38.35	%		37.72	%		37.40	%
Efficiency ratio(3)		59.64	%		57.40	%		58.45	%		58.50	%		59.45	%
AT PERIOD END
Book value per share based on total equity	$	23.77		$	24.55		$	22.72
Market value per share	$	40.44		$	43.00		$	34.28
Allowance for loan losses as a percentage of loans		2.08	%		2.07	%		2.03	%
Tier I leverage ratio		10.27	%		10.32	%		10.01	%
Tangible common equity to assets ratio(4)		10.24	%		10.27	%		10.15	%
Common shares outstanding		87,089,601			86,840,077			87,539,583
Shareholders of record		4,302			4,253			4,369
Number of bank/ATM locations		365			364			373
Full-time equivalent employees		4,814			4,786			5,051
OTHER QTD INFORMATION
High market value per share	$	42.67		$	43.90		$	41.16
Low market value per share	$	38.54		$	40.05		$	33.83

(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 common 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 Six Months Ended
(Unaudited)	March 31			June 30			June 30			June 30			June 30
(In thousands, except per share data)	2011			2011			2010			2011			2010
Interest income	$	175,826		$	178,087		$	185,057		$	353,913		$	373,126
Interest expense		14,853			13,377			21,949			28,230			47,308
Net interest income		160,973			164,710			163,108			325,683			325,818
Provision for loan losses		15,789			12,188			22,187			27,977			56,509
Net interest income after provision for loan losses		145,184			152,522			140,921			297,706			269,309
NON-INTEREST INCOME
Bank card transaction fees		37,462			41,304			37,659			78,766			70,149
Trust fees		21,572			22,544			20,358			44,116			39,676
Deposit account charges and other fees		19,300			20,789			25,472			40,089			49,453
Bond trading income		4,720			4,979			5,387			9,699			10,391
Consumer brokerage services		2,663			2,880			2,372			5,543			4,489
Loan fees and sales		1,824			2,075			3,472			3,899			5,311
Other		8,365			6,773			6,738			15,138			15,178
Total non-interest income		95,906			101,344			101,458			197,250			194,647
INVESTMENT SECURITIES GAINS (LOSSES), NET
Impairment (losses) reversals on debt securities		6,305			(2,119	)		4,415			4,186			5,710
Noncredit-related losses (reversals) on securities not expected to be sold		(6,579	)		1,469			(5,091	)		(5,110	)		(7,843	)
Net impairment losses		(274	)		(650	)		(676	)		(924	)		(2,133	)
Realized gains (losses) on sales and fair value adjustments		1,601			2,606			1,336			4,207			(872	)
Investment securities gains (losses), net		1,327			1,956			660			3,283			(3,005	)
NON-INTEREST EXPENSE
Salaries and employee benefits		87,392			84,223			87,108			171,615			174,546
Net occupancy		12,037			11,213			11,513			23,250			23,611
Equipment		5,577			5,702			5,938			11,279			11,839
Supplies and communication		5,532			5,692			6,829			11,224			14,167
Data processing and software		16,467			17,531			17,497			33,998			34,103
Marketing		4,258			4,495			5,002			8,753			9,720
Deposit insurance		4,891			2,780			4,939			7,671			9,689
Indemnification obligation		(1,359	)		—			(1,683	)		(1,359	)		(1,683	)
Other		19,165			21,877			18,650			41,042			35,525
Total non-interest expense		153,960			153,513			155,793			307,473			311,517
Income before income taxes		88,457			102,309			87,246			190,766			149,434
Less income taxes		27,507			32,692			27,428			60,199			45,805
Net income		60,950			69,617			59,818			130,567			103,629
Less non-controlling interest expense (income)		497			583			84			1,080			(275	)
Net income attributable to Commerce Bancshares, Inc.	$	60,453		$	69,034		$	59,734		$	129,487		$	103,904
Net income per common share — basic	$	0.69		$	0.80		$	0.69		$	1.49		$	1.19
Net income per common share — diluted	$	0.69		$	0.79		$	0.68		$	1.48		$	1.18

4

COMMERCE BANCSHARES, INC. and SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

(Unaudited)	March 31			June 30			June 30
(In thousands)	2011			2011			2010
ASSETS
Loans	$	9,374,923		$	9,237,078		$	9,735,049
Allowance for loan losses		(194,538	)		(191,538	)		(197,538	)
Net loans		9,180,385			9,045,540			9,537,511
Loans held for sale		53,411			42,359			489,826
Investment securities:
Available for sale		7,499,577			7,717,634			6,649,890
Trading		17,000			32,074			17,245
Non-marketable		104,721			109,867			107,343
Total investment securities		7,621,298			7,859,575			6,774,478
Short-term federal funds sold and securities purchased under agreements to resell		3,600			10,845			9,300
Long-term securities purchased under agreements to resell		700,000			850,000			—
Interest earning deposits with banks		203,940			535,696			302,354
Cash and due from banks		362,148			340,594			339,990
Land, buildings and equipment — net		378,721			374,732			393,133
Goodwill		125,585			125,585			125,585
Other intangible assets — net		10,182			9,394			12,278
Other assets		378,026			376,540			394,856
Total assets	$	19,017,296		$	19,570,860		$	18,379,311
LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits:
Non-interest bearing	$	4,558,630		$	4,834,750		$	4,013,005
Savings, interest checking and money market		8,074,055			8,139,989			7,285,072
Time open and C.D.’s of less than $100,000		1,388,004			1,273,961			1,677,251
Time open and C.D.’s of $100,000 and over		1,518,786			1,407,866			1,510,819
Total deposits		15,539,475			15,656,566			14,486,147
Federal funds purchased and securities sold under agreements to repurchase		923,014			1,282,470			1,006,356
Other borrowings		111,972			111,929			363,997
Other liabilities		372,345			388,328			534,197
Total liabilities		16,946,806			17,439,293			16,390,697
Stockholders’ equity:
Preferred stock		—			—			—
Common stock		436,043			436,481			417,617
Capital surplus		976,101			979,247			862,965
Retained earnings		596,177			645,155			633,221
Treasury stock		(733	)		(14,515	)		(2,153	)
Accumulated other comprehensive income		61,134			83,000			75,797
Total stockholders’ equity		2,068,722			2,129,368			1,987,447
Non-controlling interest		1,768			2,199			1,167
Total equity		2,070,490			2,131,567			1,988,614
Total liabilities and equity	$	19,017,296		$	19,570,860		$	18,379,311

5

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

	For the Three Months Ended
	March 31, 2011					June 30, 2011					June 30, 2010
			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)	$	3,052,611		3.65	%	$	2,959,012		3.64	%	$	2,880,616		3.93	%
Real estate — construction and land		451,536		4.49			429,649		4.51			568,417		3.90
Real estate — business		2,081,359		4.92			2,100,726		4.94			2,028,799		5.08
Real estate — personal		1,443,707		5.00			1,440,747		4.87			1,484,155		5.25
Consumer		1,147,049		6.47			1,112,315		6.32			1,270,243		6.72
Revolving home equity		475,437		4.28			468,380		4.24			482,847		4.32
Student		—		—			—		—			322,010		2.38
Consumer credit card		775,271		10.92			743,317		11.13			737,798		12.32
Overdrafts		7,121		—			6,654		—			6,817		—
Total loans(B)		9,434,091		5.15			9,260,800		5.12			9,781,702		5.33
Loans held for sale		58,148		2.08			52,390		2.37			557,032		1.63
Investment securities:
U.S. government & federal agency		643,522		3.26			576,693		6.67			668,454		3.00
State & municipal obligations(A)		1,112,740		4.63			1,160,164		4.75			893,224		4.87
Mortgage and asset-backed securities		5,250,582		2.83			5,460,506		2.61			4,389,863		3.47
Other marketable securities(A)		175,860		5.91			172,754		4.18			192,647		4.55
Total available for sale securities(B)		7,182,704		3.22			7,370,117		3.30			6,144,188		3.66
Trading securities(A)		19,016		2.88			20,456		2.78			19,545		2.93
Non-marketable securities(A)		103,810		7.04			105,015		6.24			113,601		4.26
Total investment securities		7,305,530		3.28			7,495,588		3.34			6,277,334		3.67
Short-term federal funds sold and securities purchased under agreements to resell		5,100		0.80			16,513		0.53			6,840		0.76
Long-term securities purchased under agreements to resell		567,778		1.54			803,846		1.58			—		—
Interest earning deposits with banks		146,493		0.25			179,763		0.25			321,763		0.25
Total interest earning assets		17,517,140		4.20			17,808,900		4.15			16,944,671		4.49
Non-interest earning assets(B)		1,034,350					1,054,328					1,113,372
Total assets	$	18,551,490				$	18,863,228				$	18,058,043
LIABILITIES AND EQUITY:
Interest bearing deposits:
Savings	$	500,386		0.14		$	537,364		0.14		$	490,463		0.11
Interest checking and money market		7,398,662		0.37			7,580,895		0.33			6,809,251		0.45
Time open & C.D.’s of less than $100,000		1,426,157		1.06			1,324,192		0.90			1,702,895		1.43
Time open & C.D.’s of $100,000 and over		1,433,564		0.76			1,466,214		0.67			1,323,064		1.08
Total interest bearing deposits		10,758,769		0.50			10,908,665		0.43			10,325,673		0.67
Borrowings:
Federal funds purchased and securities sold under agreements to repurchase		1,022,784		0.25			952,032		0.29			1,026,763		0.32
Other borrowings		112,381		3.30			112,099		3.29			502,191		3.02
Total borrowings		1,135,165		0.55			1,064,131		0.61			1,528,954		1.21
Total interest bearing liabilities		11,893,934		0.51	%		11,972,796		0.45	%		11,854,627		0.74	%
Non-interest bearing deposits		4,437,032					4,570,721					4,042,157
Other liabilities		168,248					208,606					198,909
Equity		2,052,276					2,111,105					1,962,350
Total liabilities and equity	$	18,551,490				$	18,863,228				$	18,058,043
Net interest income (T/E)	$	166,479				$	170,779				$	167,826
Net yield on interest earning assets				3.85	%				3.85	%				3.97	%

(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 Second Quarter Results
June 30, 2011

For the quarter ended June 30, 2011, net income attributable to Commerce Bancshares, Inc. (net income) amounted to $69.0 million, an increase of $9.3 million over the same quarter last year, and an increase of $8.6 million compared to the previous quarter. For the current quarter, the return on average assets was 1.47%, the return on average equity was 13.1%, and the efficiency ratio was 57.4%. Compared to the same quarter last year, net interest income (tax equivalent) increased by $3.0 million to $170.8 million, while non-interest income decreased slightly to $101.3 million. Non-interest expense for the current quarter totaled $153.5 million, a decrease of $2.3 million from the same period last year. The provision for loan losses totaled $12.2 million, representing a decline of $10.0 million from the amount recorded in the same quarter last year.

Balance Sheet Review

During the 2^nd quarter of 2011, average loans, including loans held for sale, decreased $179.0 million, or 1.9%, compared to the previous quarter. Also, these same loans decreased $1.0 billion, or 9.9%, this quarter compared to the same period last year, primarily due to $823.8 million in student loan sales, most of which were sold in 2010. The decrease in average loans compared to the previous quarter was mainly due to declines in business, construction, consumer and consumer credit cards loans but offset by growth of $19.4 million in business real estate loans. The decline in consumer credit card loans from the previous quarter was primarily seasonal, while the decline in consumer loans resulted from the Company’s decision to exit the marine/RV loan origination business. Demand for business and construction loans remained weak as customers continue to pay down balances.

Total available for sale investment securities (excluding fair value adjustments) averaged $7.4 billion this quarter, up $187.4 million compared to the previous quarter. The increase was mainly the result of purchases of agency mortgage-backed and other asset-backed securities, totaling $435.1 million and $313.4 million, respectively, in the 2^nd quarter. At June 30, 2011, the duration of the investment portfolio was 2.3 years, and maturities of approximately $601.9 million are expected to occur during the remainder of 2011. Total average long-term securities purchased under agreements to resell (reverse repurchase agreements) increased $236.1 million this quarter and totaled $803.8 million. These agreements, which are collateralized and due from other large financial institutions, have remaining lives ranging from 1 to 3 years.

Total average deposits increased $283.6 million, or 1.9%, during the 2^nd quarter of 2011 compared to the previous quarter. This increase in average deposits resulted mainly from growth in non-interest bearing and money market deposit balances of $133.7 million and $182.2 million, respectively, however certificates of deposit (CD) balances declined $69.3 million. Approximately 61% of the deposit growth this quarter came from consumer type accounts. The average loans to deposits ratio in the current quarter was 60.2%, compared to 62.5% in the previous quarter.

Certain non-interest bearing deposit accounts, which were previously included in interest bearing money market deposit totals, were reclassified to non-interest bearing deposits effective January 1, 2011. All prior periods have been revised to reflect this reclassification. The effect of this reclassification for the quarter ended June 30, 2010 was to increase average non-interest bearing deposits by $3.1 billion.

During the current quarter, the Company’s average borrowings decreased $71.0 million compared to the previous quarter. This decrease was mainly due to a decline in the average balance of federal funds purchased and repurchase agreements.

Net Interest Income

Net interest income (tax equivalent) in the 2^nd quarter of 2011 amounted to $170.8 million, compared with $166.5 million in the previous quarter, or an increase of $4.3 million. Net interest income this quarter was also up $3.0 million compared to the 2^nd quarter of last year. During the 2^nd quarter of 2011, the net yield on earning assets (tax equivalent) was 3.85%, compared with 3.85% in the previous quarter and 3.97% in the same period last year.

The increase in net interest income (tax equivalent) in the 2^nd quarter of 2011 over the previous quarter was primarily due to higher inflation income received on the Company’s inflation protected securities (TIPS) coupled with lower rates paid, primarily on money market and CD accounts, and lower average CD balances. Interest on loans, including held for sale loans, declined $1.6 million, mainly due to lower average balances on business, consumer and consumer credit card loans, and lower rates earned on personal real estate and consumer loans. Interest income on investment securities increased $3.4 million compared to the previous quarter, mainly due to a $3.9 million increase in inflation income earned on TIPS, coupled with higher average balances, mainly in municipal, mortgage-backed and asset-backed securities. Offsetting these increases were the effects of lower rates earned on mortgage-backed and asset-backed securities. Also, interest on long-term reverse repurchase agreements increased $1.0 million, mainly due to higher average balances.

Interest expense on deposits declined $1.5 million in the 2^nd quarter of 2011 compared with the previous quarter as a result of continued low rates paid on money market and CD accounts. Overall rates paid on total interest bearing deposits declined 7 basis points to .43% this quarter. Interest expense on borrowings increased slightly, due mainly to higher average rates paid on repurchase agreement balances.

The tax equivalent yield on interest earning assets in the 2^nd quarter of 2011 was 4.15%, a decline of 5 basis points from the 1^st quarter of 2011, while the overall cost of interest bearing liabilities decreased 6 basis points to .45%.

Non-Interest Income

For the 2^nd quarter of 2011, total non-interest income amounted to $101.3 million, a slight decrease compared to $101.5 million in the same period last year. Also, current quarter non-interest income increased $5.4 million compared to $95.9 million recorded in the previous quarter.

Bank card fees in the current quarter increased 9.7% over the 2^nd quarter of last year due to growth in transaction fees earned on corporate card (growth of 13.1%), debit card (growth of 7.8%) and merchant (growth of 12.5%) transactions. Corporate card fees, which totaled $14.1 million this quarter, saw continued expansion

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COMMERCE BANCSHARES, INC.
Management Discussion of Second Quarter Results
June 30, 2011

in transaction volumes from existing customers and activity from new customers. Debit card income in the 2^nd quarter of 2011 totaled $15.7 million and reflected continued volume growth. In June 2011, the Federal Reserve finalized regulations for pricing debit card transactions, which are effective October 1, 2011. As a result the Company estimates that debit card revenues will decline approximately $7.0 million in the 4^th quarter of 2011.

Trust fees for the quarter increased 10.7% compared to the same period last year and mainly resulted from 11.8% growth in personal trust fees. Trust fees continue to be negatively affected by low interest rates on money market investments held in trust accounts. Deposit account fees decreased $4.7 million, or 18.4%, compared to the 2^nd quarter of 2010, but increased $1.5 million compared to the previous quarter. Compared to the same period last year, most of this decline was due to lower overdraft fees, which declined $5.1 million. This decline resulted from new regulations on overdraft fees which were not effective until the 2^nd half of 2010, and thus the overdraft fees recorded in the 2^nd quarter of 2010 did not reflect the impact of these rules. Bond trading income for the current quarter totaled $5.0 million, a decrease of 7.6% from the same period last year, but consumer brokerage fees increased 21.4% on higher equity and annuity sales.

Investment Securities Gains and Losses

Net securities gains amounted to $2.0 million in the 2^nd quarter of 2011, compared to net gains of $1.3 million in the previous quarter and net gains of $660 thousand in the same quarter last year. During the current quarter, the Company recorded additional credit-related impairment losses of $650 thousand on certain non-agency guaranteed mortgage-backed securities identified as other-than-temporarily impaired, compared to losses of $274 thousand in the previous quarter and $676 thousand in the same quarter last year. The cumulative credit-related impairment reserve on these bonds totaled $8.4 million at quarter end. At June 30, 2011, the par value of non-agency guaranteed mortgage-backed securities identified as other-than-temporarily impaired totaled $163.6 million, compared to $178.0 million at June 30, 2010.

The current quarter also included a pre-tax gain of $2.6 million, which mostly related to fair value adjustments on certain of the Company’s private equity investments.

Non-Interest Expense

Non-interest expense for the current quarter amounted to $153.5 million, a decrease of $2.3 million, or 1.5%, from the same quarter last year and a decrease of $447 thousand compared to the previous quarter. During the current quarter, the Company accrued $5.0 million related to potential loss contingencies for litigation. Compared to the 2^nd quarter of last year, salaries and benefits expense declined $2.9 million, or 3.3%, mainly due to lower salaries and 401k benefit plan expense. Full time equivalent employees totaled 4,786 and 5,051 at June 30, 2011 and 2010, respectively.

Compared to the 2^nd quarter of last year, supplies and communication costs declined 16.6% to $5.7 million, reflecting a continuation of initiatives to reduce paper supplies, customer checks, and postage costs. Costs for FDIC insurance declined $2.2 million as a result of new assessment rules which became effective in the 2^nd quarter of 2011. Also, costs for foreclosed property declined $2.4 million, partly due to gains on sales of certain commercial properties in the current quarter. Costs for occupancy, outside fees, and a number of other smaller expenses declined from the previous year, as the Company continued its focus on expense discipline.

Income Taxes

The effective tax rate for the Company was 32.1% in the current quarter, compared with 31.3% in the previous quarter and 31.5% in the 2^nd quarter of 2010.

Credit Quality

Net loan charge-offs in the 2^nd quarter of 2011 amounted to $15.2 million, compared with $18.8 million in the prior quarter and $22.2 million in the 2^nd quarter of last year. The $3.6 million decrease in net loan charge-offs in the 2^nd quarter of 2011 compared to the previous quarter was mainly the result of lower consumer and consumer credit card loan losses, which decreased by $1.8 million and $548 thousand, respectively, reflecting continued improved delinquency and loss rates. Business, business real estate and construction net loan charge-offs also declined by $571 thousand, $725 thousand and $861 thousand, respectively. The ratio of annualized net loan charge-offs to total average loans was .66% in the current quarter compared to .81% in the previous quarter.

For the 2^nd quarter of 2011, annualized net charge-offs on average consumer credit card loans amounted to 4.58%, compared with 4.73% in the previous quarter and 6.71% in the same period last year. Consumer loan net charge-offs for the quarter amounted to .80% of average consumer loans, compared to 1.42% in the previous quarter and 1.50% in the same quarter last year. The provision for loan losses for the current quarter totaled $12.2 million, a decrease of $3.6 million from the previous quarter and $10.0 million lower than in the same period last year. The current quarter provision for loan losses was $3.0 million less than net loan charge-offs for the current quarter, thereby reducing the allowance to $191.5 million. At June 30, 2011 the allowance for loan losses was 2.07% of total loans, excluding loans held for sale, and was 240% of total non-accrual loans.

At June 30, 2011, total non-performing assets amounted to $103.3 million, an increase of $293 thousand over the previous quarter. Non-performing assets are comprised of non-accrual loans ($79.7 million) and foreclosed real estate ($23.6 million). At June 30, 2011, the balance of non-accrual loans, which represented .9% of loans outstanding, included construction and land loans of $28.7 million, business loans of $26.0 million and business real estate loans of $16.8 million. Loans more than 90 days past due and still accruing interest totaled $23.6 million at June 30, 2011.

Other

During the quarter ended June 30, 2011, the Company purchased 343,270 shares of treasury stock at an average cost of $40.87.

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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