Commerce Bancshares (CBSH) 8-K Results of Operations and Financial Condition

Exhibit 99.1

FOR IMMEDIATE RELEASE:
Wednesday, July 13, 2005

COMMERCE BANCSHARES, INC. REPORTS SECOND
QUARTER EARNINGS PER SHARE GROWTH OF 5%

     Commerce Bancshares, Inc. announced record earnings of $.80 per share for the three months ended June 30, 2005, an increase of 5% compared to $.76 per share in the second quarter 2004 and $.73 in the first quarter 2005. Net income for the second quarter 2005 amounted to $54.4 million compared to $53.8 million in the same period last year and $49.8 million in the first quarter 2005. For the second quarter, the return on average equity was 15.8% and the return on assets was 1.55%. The efficiency ratio for the quarter totaled 58.3%.

     For the first six months ended June 30, 2005, earnings per share totaled $1.53, an increase of 4% compared with $1.47 in 2004. Net income amounted to $104.2 million compared with $105.2 million for 2004. The return on average assets was 1.50% and the return on average equity was 15.1%.

     In announcing these results, David W. Kemper, Chairman and CEO, said, “Net income grew 9% in the second quarter 2005 compared with the previous quarter. This growth was driven by an improving net interest margin and solid expense control. Credit costs remained at low levels during the quarter. Annualized growth of 6% in both loans and deposits in the second quarter contributed to the improved net interest margin and allowed a planned reduction in the securities portfolio. Non-interest expense remained well controlled and declined in the second quarter compared with the previous quarter. In the first six months of 2005, revenues from both personal deposit and bank card transaction fees, two of our largest payment system products, experienced double-digit growth compared to the prior year and reflect continued strong results in these products.”

     Mr. Kemper continued, “Asset quality remained strong this quarter with net charge-offs totaling $7.0 million, or .33% of total average loans. Net charge-offs for the first six months of 2005 were .26% of average loans compared with .46% last year. Our allowance for loan losses at June 30, 2005 totaled $129.4 million and was 806% of non-performing loans. Our loan loss reserve amounted to 1.52% of total loans.”

     Total assets at June 30, 2005 were $14.1 billion, total loans were $8.5 billion, and total deposits were $10.7 billion. Non-performing loans amounted to $16.1 million or .19% of total loans. During the quarter the Company purchased 1.3 million shares of its common stock through its treasury buyback plan.

(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 second 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 419248, Kansas City, MO
or by telephone at (816) 234-2081
Web Site: http://www.commercebank.com
Email: mymoney@commercebank.com

(Amounts in thousands)	3/31/05			6/30/05			6/30/04
Non-Accrual Loans	$	17,333		$	16,060		$	27,654
Foreclosed Real Estate	$	1,262		$	542		$	1,877
Total Non-Performing Assets	$	18,595		$	16,602		$	29,531
Non-Performing Assets to Loans		.22	%		.20	%		.36	%
Non-Performing Assets to Total Assets		.13	%		.12	%		.20	%
Loans 90 Days & Over Past Due - - Still Accruing	$	15,972		$	15,070		$	16,481

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)	2005			2005			2004			2005			2004
FINANCIAL SUMMARY(In thousands, except per share data)
Net interest income	$	121,477		$	127,387		$	126,461		$	248,864		$	249,445
Taxable equivalent net interest income		121,994			128,044			127,025			250,038			250,597
Non-interest income		80,691			84,980			84,289			165,671			170,258
Provision for loan losses		2,368			5,503			6,280			7,871			16,530
Non-interest expense		123,922			123,012			120,936			246,934			239,848
Net income		49,846			54,368			53,838			104,214			105,162
Cash dividends		16,133			15,970			15,340			32,103			30,841
Net total loan charge-offs		3,802			7,035			6,248			10,837			18,627
Net business charge-offs (recov)		(2,771	)		(48	)		(223	)		(2,819	)		5,337
Net credit card charge-offs		4,597			5,430			4,993			10,027			9,869
Net personal banking charge-offs*		1,948			1,474			1,260			3,422			3,232
Net real estate charge-offs (recov)		(56	)		(19	)		73			(75	)		175
Net overdraft charge-offs		84			198			145			282			14
Per share:
Net income — basic	$	0.74		$	0.81		$	0.77		$	1.55		$	1.49
Net income — diluted	$	0.73		$	0.80		$	0.76		$	1.53		$	1.47
Cash dividends	$	0.240		$	0.240		$	0.219		$	0.480		$	0.438
Diluted wtd. average shares o/s		68,582			67,653			71,334			68,115			71,775
RATIOS
Average loans to deposits		79.45	%		79.35	%		78.13	%		79.40	%		78.99	%
Return on total average assets		1.44	%		1.55	%		1.51	%		1.50	%		1.48	%
Return on total average stockholders’ equity		14.35	%		15.78	%		14.91	%		15.07	%		14.50	%
Non-interest income to revenue**		39.91	%		40.02	%		39.99	%		39.97	%		40.57	%
Efficiency ratio***		62.22	%		58.27	%		57.96	%		60.18	%		58.58	%
AT PERIOD END
Book value per share based on total stockholders’ equity	$	20.42		$	20.82		$	20.12
Market value per share	$	48.20		$	50.41		$	43.76
Allowance for loan losses as a percentage of loans		1.56	%		1.52	%		1.64	%
Tier I leverage ratio		9.46	%		9.37	%		9.47	%
Common shares outstanding		67,176,629			66,104,839			69,974,678
Shareholders of record		4,735			4,584			4,845
Number of bank/ATM locations		331			337			327
Number of bank charters		3			3			4
Full-time equivalent employees		4,836			4,826			4,822

	June 30		June 30
OTHER YTD INFORMATION	2005		2004
High market value per share	$	50.93		$47.62
Low market value per share	$	46.14		$41.90

*	Includes consumer, student and home equity loans
**	Revenue includes net interest income and non-interest income.
***	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

	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)	2005		2005		2004		2005		2004
INTEREST INCOME
Interest and fees on loans	$	118,523	$	125,242	$	102,753	$	243,765	$	206,762
Interest on investment securities		41,746		46,394		49,348		88,140		93,940
Interest on federal funds sold and securities purchased under agreements to resell		584		1,164		339		1,748		525
Total interest income		160,853		172,800		152,440		333,653		301,227
INTEREST EXPENSE
Interest on deposits:
Savings, interest checking and money market		10,457		12,192		6,320		22,649		12,492
Time open and C.D.’s of less than $100,000		10,392		12,051		9,592		22,443		19,491
Time open and C.D.’s of $100,000 and over		6,352		7,973		3,571		14,325		6,836
Interest on other borrowings		12,175		13,197		6,496		25,372		12,963
Total interest expense		39,376		45,413		25,979		84,789		51,782
Net interest income		121,477		127,387		126,461		248,864		249,445
Provision for loan losses		2,368		5,503		6,280		7,871		16,530
Net interest income after provision for loan losses		119,109		121,884		120,181		240,993		232,915
NON-INTEREST INCOME
Trust fees		16,394		17,040		16,128		33,434		32,292
Deposit account charges and other fees		24,301		27,476		26,930		51,777		52,452
Bank card transaction fees		19,507		21,295		19,348		40,802		36,948
Trading account profits and commissions		2,614		2,450		2,970		5,064		6,796
Consumer brokerage services		2,825		2,338		2,481		5,163		4,939
Loan fees and sales		3,440		4,805		5,254		8,245		8,907
Net gains on securities transactions		3,612		1,372		2,833		4,984		11,784
Other		7,998		8,204		8,345		16,202		16,140
Total non-interest income		80,691		84,980		84,289		165,671		170,258
NON-INTEREST EXPENSE
Salaries and employee benefits		70,180		67,585		65,696		137,765		133,712
Net occupancy		9,778		9,527		9,834		19,305		20,000
Equipment		5,691		5,701		5,678		11,392		11,536
Supplies and communication		8,213		8,257		8,342		16,470		16,286
Data processing and software		11,455		12,069		11,802		23,524		22,432
Marketing		3,862		4,687		4,424		8,549		8,128
Other intangible assets amortization		381		67		433		448		869
Other		14,362		15,119		14,727		29,481		26,885
Total non-interest expense		123,922		123,012		120,936		246,934		239,848
Income before income taxes		75,878		83,852		83,534		159,730		163,325
Less income taxes		26,032		29,484		29,696		55,516		58,163
NET INCOME	$	49,846	$	54,368	$	53,838	$	104,214	$	105,162
Net income per share — basic	$	0.74	$	0.81	$	0.77	$	1.55	$	1.49
Net income per share — diluted	$	0.73	$	0.80	$	0.76	$	1.53	$	1.47
Cash dividends per common share	$	0.240	$	0.240	$	0.219	$	0.480	$	0.438

COMMERCE BANCSHARES, INC. and SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

(Unaudited)	March 31			June 30			June 30
(In thousands)	2005			2005			2004
ASSETS
Loans, net of unearned income	$	8,406,110		$	8,499,301		$	8,107,924
Allowance for loan losses		(130,960	)		(129,428	)		(133,124	)
Net loans		8,275,150			8,369,873			7,974,800
Investment securities:
Available for sale		4,442,210			4,358,178			4,792,606
Trading		13,154			12,359			17,673
Non-marketable		74,965			73,674			72,141
Total investment securities		4,530,329			4,444,211			4,882,420
Federal funds sold and securities purchased under agreements to resell		179,107			128,204			134,805
Cash and due from banks		502,362			544,922			860,203
Land, buildings and equipment — net		368,512			372,291			339,269
Goodwill		48,522			48,522			48,522
Other intangible assets — net		118			54			1,321
Other assets		199,172			210,116			183,547
Total assets	$	14,103,272		$	14,118,193		$	14,424,887
LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits:
Non-interest bearing demand	$	1,347,994		$	1,351,186		$	1,723,109
Savings, interest checking and money market		6,552,169			6,547,940			6,130,449
Time open and C.D.’s of less than $100,000		1,700,853			1,744,629			1,669,858
Time open and C.D.’s of $100,000 and over		1,084,407			1,022,361			847,332
Total deposits		10,685,423			10,666,116			10,370,748
Federal funds purchased and securities sold under agreements to repurchase		1,566,914			1,594,735			2,157,542
Other borrowings		388,328			371,781			393,625
Other liabilities		91,038			109,392			94,883
Total liabilities		12,731,703			12,742,024			13,016,798
Stockholders’ equity:
Preferred stock		—			—			—
Common stock		347,049			347,049			343,183
Capital surplus		385,792			384,166			353,359
Retained earnings		737,006			775,404			781,457
Treasury stock		(103,696	)		(155,749	)		(89,473	)
Accumulated other comprehensive income		5,418			25,299			19,563
Total stockholders’ equity		1,371,569			1,376,169			1,408,089
Total liabilities and stockholders’ equity	$	14,103,272		$	14,118,193		$	14,424,887

COMMERCE BANCSHARES, INC. and SUBSIDIARIES
AVERAGE BALANCES

	For the Three Months Ended									For the Six Months Ended
(Unaudited)	March 31			June 30			June 30			June 30			June 30
(Dollars in thousands)	2005			2005			2004			2005			2004
Loans:
Business	$	2,246,288		$	2,305,000		$	2,124,532		$	2,275,806		$	2,105,495
Real estate — construction		442,471			478,675			439,082			460,673			432,632
Real estate — business		1,758,141			1,765,896			1,850,935			1,762,040			1,866,072
Real estate — personal		1,335,024			1,344,203			1,329,562			1,339,639			1,330,288
Consumer		1,193,063			1,225,386			1,184,229			1,209,314			1,168,070
Home equity		412,356			422,637			371,135			417,525			364,119
Student		410,020			374,176			288,637			391,999			335,347
Credit card		546,946			553,965			509,310			550,475			510,048
Overdrafts		16,297			11,651			10,779			13,961			14,128
Total loans		8,360,606			8,481,589			8,108,201			8,421,432			8,126,199
Investment securities (excluding unrealized gains and losses):
Available for sale		4,504,318			4,345,329			4,950,254			4,424,384			4,903,690
Trading		11,369			7,864			25,151			9,607			16,792
Non-marketable		76,853			75,968			77,663			76,408			76,157
Total investment securities		4,592,540			4,429,161			5,053,068			4,510,399			4,996,639
Federal funds sold and securities purchased under agreements to resell		84,987			145,135			111,170			115,227			85,784
Total interest earning assets		13,038,133			13,055,885			13,272,439			13,047,058			13,208,622
Total assets		14,070,385			14,024,246			14,323,830			14,047,188			14,258,715
Deposits:
Non-interest bearing deposits		772,869			633,473			1,275,569			702,786			1,254,744
Interest bearing deposits:
Savings		403,844			417,059			411,260			410,488			401,975
Interest checking		262,460			175,820			503,039			218,900			492,972
Money market		6,439,761			6,644,696			5,661,088			6,542,796			5,644,374
Time open & C.D.’s of less than $100,000		1,664,823			1,732,288			1,685,584			1,698,742			1,700,311
Time open & C.D.’s of $100,000 and over		979,011			1,085,769			841,283			1,032,685			793,192
Total interest bearing deposits		9,749,899			10,055,632			9,102,254			9,903,611			9,032,824
Total deposits		10,522,768			10,689,105			10,377,823			10,606,397			10,287,568
Borrowings:
Federal funds purchased and securities sold under agreements to repurchase		1,655,050			1,481,135			1,911,587			1,567,611			1,929,397
Oher borrowings		388,771			380,043			453,931			384,383			447,475
Total borrowings		2,043,821			1,861,178			2,365,518			1,951,994			2,376,872
Total interest bearing liabilities		11,793,720			11,916,810			11,467,772			11,855,605			11,409,696
Total stockholders’ equity		1,408,414			1,381,560			1,452,019			1,394,913			1,458,467
Net yield on interest earning assets (tax-equivalent basis)		3.79	%		3.93	%		3.85	%		3.86	%		3.82	%

COMMERCE BANCSHARES, INC.
Management Discussion of Second Quarter Results
June 30, 2005

For the quarter ended June 30, 2005, net income amounted to $54.4 million, an increase of 9.1% over the previous quarter and 1.0% over the 2^nd quarter of the prior year. For the current quarter, return on assets was 1.6%, the return on average equity was 15.8%, and the efficiency ratio was 58.3%. The increase in net income over the previous quarter was the result of growth in net interest income coupled with lower non-interest expense. When compared with the 2^nd quarter of last year, net income growth resulted from slightly higher net interest income and non-interest income, coupled with a lower provision for loan losses.

Balance Sheet Review

During the 2^nd quarter, average loans increased by $121.0 million, or 1.4%, compared to the previous quarter and represented annualized growth of 5.6%. Average loans also increased $373.4 million, or 4.6%, compared to the same period last year. Compared to the 1^st quarter of this year, average business and construction loans grew $58.7 million and $36.2 million, respectively, as a result of improved economic conditions and customer demand. Consumer loans increased $32.3 million as a result of continued growth in marine and recreational vehicle lending. However, such growth was offset by lower automobile lending. Student loan totals declined during the quarter due to the sale of $74.1 million from the portfolio. Average personal real estate loans increased slightly during the quarter as loan originations improved. Commercial credit card balances were reclassified this quarter and recorded as business loans. Such amounts were $68.8 million and $47.4 million at June 30, 2005 and 2004 and $61.4 million at March 31, 2005.

Available for sale investment securities, excluding fair value adjustments, decreased on average by $159.0 million, or 3.5%, this quarter compared with the previous quarter as the Company continued to modify its investment securities portfolio to address such things as concentration, duration and interest rate risk. Accordingly, during the quarter, sales, maturities and principal pay-downs of securities totaled $683.6 million. During the quarter, purchases of securities totaled $574.2 million, and consisted of mortgage-backed ($244.3 million), asset-backed ($229.4 million), and U.S. government agency ($85.2 million).

Total average deposits increased by $166.3 million during the 2^nd quarter when compared to the 1^st quarter of this year (annualized growth rate of 6.4%). This increase was due mainly to increases in jumbo ($106.8 million) and retail ($67.5 million) certificates of deposit, partly offset by a decline in premium money market accounts ($64.6 million). Lower average balances in demand and interest checking deposit accounts resulted from the reclassification of certain of these balances to money market accounts in the middle of the 1^st quarter 2005. The average loans to deposits ratio for the quarter decreased slightly from the 1^st quarter to 79.3%.

During the current quarter, average borrowings decreased by $182.6 million due to declines in federal funds purchased, partly offset by higher securities sold under agreements to repurchase.

Net Interest Income

In the 2^ndquarter, net interest income amounted to $127.4 million, an increase of $5.9 million, or 4.9%, compared with the previous quarter and an increase of $926 thousand, or .7%, compared to the 2^nd quarter of last year. During the second quarter of 2005 the net yield on earning assets increased 14 basis points to 3.93%, compared with 3.79% in the previous quarter and 3.85% in the 2^nd quarter of last year.

The increase in net interest income in the 2^nd quarter over the 1^st quarter of 2005 was the result of higher rates earned on both the loan and investment securities portfolios, which had the effect of increasing net interest income by $11.0 million. However, the effects of higher rates on both deposits and other borrowings totaled $6.4 million, offsetting part of this increase. Growth in loan balances also added approximately $1.7 million to net interest income this quarter, while the decline in average balances of federal funds purchased added $1.4 million to net interest income. Compared to the 1^st quarter of 2005, average rates earned on loans and investment securities increased 17 and 52 basis points, respectively, while rates paid on interest bearing deposits and other borrowings increased 16 and 42 basis points, respectively. The increase in average rates earned on investment securities resulted mainly from an increase of $3.0 million in inflation related earnings recognized in the 2^nd quarter from the Company’s inflation indexed Treasury securities.

During the quarter, the overall yield on interest earning assets increased 31 basis points to 5.33%, while the overall cost of interest bearing liabilities increased 17 basis points to 1.53%.

Non-Interest Income

For the 2^nd quarter of 2005, total non-interest income amounted to $85.0 million compared with $80.7 million in the previous quarter and $84.3 million in the same quarter last year. Excluding investment securities gains, non-interest income grew 8.5% compared with the previous quarter and 2.6% over the same period last year. Compared with the previous quarter, this increase resulted from growth in deposit account and bank card transaction fees coupled with higher gains on student loan sales. Compared with the same period last year, this growth was mainly the result of higher bank card, deposit and trust fee

COMMERCE BANCSHARES, INC.
Management Discussion of Second Quarter Results
June 30, 2005

income. Bond trading income declined from amounts recorded in the same period last year due to the impact that higher interest rates have on this business. Bank card fees for the quarter increased 10.1% over the same period last year, due mainly to higher fees earned on debit and credit card transactions, which grew by 15.4% and 12.1%, respectively. Deposit account fees increased 2.0% over the 2^nd quarter of last year due mainly to a 15.8% increase in deposit overdraft fees, but were partially offset by lower corporate cash management fee income, which declined 18.5%. The increase in overdraft fees was the result of higher transaction volumes, while the current higher interest rate environment had the effect of lowering corporate cash management fee income. Trust fees for the quarter increased 5.7% over the same quarter last year mainly as a result of higher fees on personal trust accounts. Other income in the 2^nd quarter of 2004 included a gain on a branch sale of $1.1 million that did not reoccur in 2005. Additionally, gains on student loan sales were $3.6 million in the 2^nd quarter 2005, compared to gains of $2.3 million in the previous quarter and $4.1 million in the same period last year.

Net securities gains amounted to $1.4 million for the 2^nd quarter of 2005, compared to $3.6 million in the 1^st quarter of 2005 and $2.8 million in the 2^nd quarter of last year.

Non-Interest Expense

Non-interest expense for the quarter amounted to $123.0 million, an increase of $2.1 million, or 1.7%, compared with amounts recorded in the 2^nd quarter of last year, and declined slightly from amounts recorded in the previous quarter.

Compared with the 2^nd quarter of last year, salaries and benefits expense increased 2.9% mainly as a result of normal merit increases. Full time equivalent employees totaled 4,826 and 4,822 at June 30, 2005 and 2004, respectively. Costs for supplies and communication, occupancy, loan collection, and professional fees all declined from amounts recorded in the 2^nd quarter of last year. Data processing costs grew 2.3%, mainly as a result of higher bank card processing network fees. Increased costs were also incurred for marketing.

Income Taxes

The effective tax rate for the Company was 35.2% for the 2^nd quarter of 2005, compared with an effective tax rate of 34.3% in the previous quarter and 35.5% in the 2^nd quarter of 2004. As reported in the Company’s previously filed 10-Q and Annual Report on Form 10-K, the Company has tax benefits related to corporate reorganization initiatives 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 3^rd quarter of 2005 which would allow the remaining benefits of approximately $13.7 million to be recognized into income in the 3^rd and 4^th quarters of 2005. It is not expected that material tax benefits of this nature will continue beyond 2005.

Credit Quality

Net loan charge-offs for the 2^nd quarter of 2005 amounted to $7.0 million compared with $3.8 million in the 1^st quarter of 2005 and $6.2 million in the 2^nd quarter of last year. The ratio of annualized net loan charge-offs to total average loans this quarter was ..33% compared with .31% in the same quarter last year and .18% in the 1^st quarter of 2005. The increase in net charge-offs in the 2^nd quarter of 2005 compared to the previous quarter was mainly the result of net recoveries totaling $2.8 million received in the first quarter from previously charged off commercial and lease loans, and an increase in credit card net loan charge offs during the 2^nd quarter of 2005.

For the 2^nd quarter of 2005, annualized net charge-offs on average credit card loans were 3.93% compared with 3.94% in the same quarter last year and 3.41% in the first quarter of 2005. Additionally, personal loan charge-offs remained at low levels this quarter and amounted to ..29% of average loans compared to .27% in the same period last year. The provision for loan losses for the quarter totaled $5.5 million and increased $3.1 million over amounts recorded in the 1^st quarter of this year, but decreased $777 thousand from amounts recorded in the 2^nd quarter of 2004. The allowance for loan losses at June 30, 2005 amounted to $129.4 million, or 1.52% of total loans, and represents 806% of total non-performing loans.

Total non-performing assets amounted to $16.6 million, a decrease of $2.0 million from the previous quarter, and amounted to .20% of loans outstanding. Non-performing assets are comprised of non-accrual loans ($16.1 million) and foreclosed real estate ($542 thousand). Loans past due more than 90 days and still accruing interest totaled $15.1 million at June 30, 2005.

Other

The Company maintains a treasury stock buyback program and effective October 2004, was authorized by the Board of Directors to repurchase up to 5 million shares of its common stock. During the quarter ended June 30, 2005, the Company purchased 1.3 million shares of treasury stock at an average cost of $48.53 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.