Commerce Bancshares (CBSH) 8-K Commerce Bancshares, Inc. Reports Third Quarter Earnings Per Share

Exhibit 99.1

FOR IMMEDIATE RELEASE:
Wednesday, October 15, 2008

COMMERCE BANCSHARES, INC. REPORTS THIRD
QUARTER EARNINGS PER SHARE

     Commerce Bancshares, Inc. announced earnings of $.36 per share for the three months ended September 30, 2008, a decrease of 53.2% compared to $.77 per share in the third quarter of 2007. Net income for the third quarter amounted to $26.5 million compared with $55.9 million in the same period last year. The quarter was affected by the Company’s previously announced purchase of auction rate securities from its customers, which resulted in a pre-tax non-cash expense of $33.0 million, or $.29 per share. Additionally, the Company elected to increase its allowance for loan losses by $10.8 million this quarter, raising the allowance from 1.31% to 1.42% of average outstanding loans.

     For the nine months ended September 30, 2008, earnings per share totaled $2.02 compared to $2.22 for the first nine months of last year. Net income amounted to $146.6 million in 2008 compared with $163.0 million in 2007. For the first nine months of 2008, the return on average assets was 1.2%, and the return on average equity was 12.3%.

     In making this announcement, David W. Kemper, Chairman and CEO, said, “Against a backdrop of significant economic challenges facing our economy and the entire banking industry, we are pleased to report continued solid revenue growth this quarter. Net interest income grew by 12% over the same quarter last year as a result of a 6% increase in earning assets and improved net interest margins. Additionally, bankcard fees grew 11% during the third quarter compared with the same period last year reflecting continued strong growth in merchant, debit and corporate card fees. During the quarter, we elected to purchase, from our customers, auction rate securities totaling $530 million. Due to the temporary illiquid nature of these securities, under fair value accounting rules, we recorded a non-cash loss of $33.0 million. Excluding this item, non-interest expense in the current quarter remained well controlled and was up only 1% compared to the prior quarter.”

     Mr. Kemper continued, “The Company’s strong capital base of $1.6 billion has grown 7% over the same period last year; our liquidity levels are significant and improving. During the quarter, net loan charge-offs totaled $18.7 million, up from $14.5 million in the previous quarter, principally as a result of higher non-mortgage consumer loan losses. Non-performing assets, consisting of non-accrual loans and foreclosed property, grew this quarter from $36.7 million to $46.2 million, primarily because of the continued weak environment for residential construction. Non-performing assets represent a modest .42% of outstanding loans. Given the current economic conditions, during the quarter we elected to increase our allowance for loan losses by $10.8 million to $156 million. This allowance now represents 375% of total non-accrual loans and 1.42% of outstanding loans.”

1

     Total assets at September 30, 2008 were $17.0 billion, total loans were $11.4 billion, and total deposits were $12.3 billion. The Company’s bank financial strength rating was recently reaffirmed by Moody’s, and this rating ranks the bank among the top five of the fifty largest banks in the country.

     Late in the afternoon on October 14, 2008, Visa, Inc. issued a press release disclosing the settlement of its litigation with Discover Financial Services. The terms of the settlement and any potential impact on the Company’s third quarter earnings from indemnification charges (as disclosed in the most recent Form 10-K) is unknown at this time. It is anticipated that the details and any effect will be reflected in the Company’s Form 10-Q.

     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

(Dollars in thousands)	6/30/08			9/30/08			9/30/07
Non-Accrual Loans	$	29,184		$	41,600		$	25,962
Foreclosed Real Estate	$	7,525		$	4,622		$	15,408
Total Non-Performing Assets	$	36,709		$	46,222		$	41,370
Non-Performing Assets to Loans		.33	%		.42	%		.40	%
Non-Performing Assets to Total Assets		.22	%		.27	%		.26	%
Loans 90 Days & Over Past Due — Still Accruing	$	26,293		$	31,878		$	19,227

     The financial news release, including management’s discussion of third 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 Nine Months Ended
	June 30			Sept. 30			Sept. 30			Sept. 30			Sept. 30
(Unaudited)	2008			2008			2007			2008			2007
FINANCIAL SUMMARY(In thousands, except per share data)
Net interest income	$	144,779		$	151,564		$	135,262		$	436,450		$	400,605
Taxable equivalent net interest income		147,244			154,423			137,357			443,950			407,190
Non-interest income		102,733			95,593			95,137			290,486			273,480
Investment securities gains, net		1,008			1,149			1,562			25,480			4,964
Provision for loan losses		18,000			29,567			11,455			67,567			28,670
Non-interest expense		147,423			181,653			139,093			469,831			411,861
Net income		55,979			26,487			55,898			146,633			162,968
Cash dividends		18,000			18,018			17,133			54,003			51,811
Net total loan charge-offs		14,491			18,734			11,456			45,122			28,669
Business charge-offs		1,049			1,775			1,853			2,315			2,546
Consumer credit card charge-offs		7,935			8,314			5,331			22,842			17,092
Consumer charge-offs		4,530			6,060			2,318			14,546			5,996
Home equity charge-offs		136			208			131			338			241
Real estate — construction charge-offs		203			1,217			605			2,194			1,475
Real estate — business charge-offs		39			257			744			1,198			307
Real estate — personal charge-offs		73			182			71			356			125
Overdraft charge-offs		526			721			403			1,333			887
Per share:
Net income — basic	$	0.78		$	0.36		$	0.78		$	2.04		$	2.25
Net income — diluted	$	0.77		$	0.36		$	0.77		$	2.02		$	2.22
Cash dividends	$	0.250		$	0.250		$	0.238		$	0.750		$	0.714
Diluted wtd. average shares o/s		72,436			72,545			72,707			72,460			73,427
RATIOS
Average loans to deposits (1)		92.30	%		93.29	%		88.67	%		92.46	%		88.06	%
Return on total average assets		1.37	%		0.64	%		1.43	%		1.20	%		1.42	%
Return on total average stockholders’ equity		14.12	%		6.52	%		15.10	%		12.32	%		14.88	%
Non-interest income to revenue (2)		41.51	%		38.68	%		41.29	%		39.96	%		40.57	%
Efficiency ratio (3)		59.10	%		73.07	%		59.81	%		64.17	%		60.64	%
AT PERIOD END
Book value per share based on total stockholders’ equity	$	22.32		$	22.20		$	20.75
Market value per share	$	39.66		$	46.40		$	43.70
Allowance for loan losses as a percentage of loans		1.31	%		1.42	%		1.28	%
Tier I leverage ratio		9.03	%		9.12	%		8.79	%
Common shares outstanding		71,934,900			72,096,667			71,878,511
Shareholders of record		4,539			4,487			4,623
Number of bank/ATM locations		366			367			360
Full-time equivalent employees		5,181			5,202			5,077
				Sept. 30			Sept. 30
OTHER YTD INFORMATION					2008			2007
High market value per share				$	52.99		$	48.35
Low market value per share				$	36.50		$	41.22

(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.

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)	2008		2008		2007		2008		2007
INTEREST INCOME
Interest and fees on loans	$	161,007	$	161,816	$	188,863	$	497,161	$	549,142
Interest and fees on loans held for sale		3,623		3,774		5,049		11,314		17,314
Interest on investment securities		41,310		41,749		38,011		123,956		112,800
Interest on federal funds sold and securities purchased under agreements to resell		2,264		2,125		6,351		7,790		20,093
Total interest income		208,204		209,464		238,274		640,221		699,349
INTEREST EXPENSE
Interest on deposits:
Savings, interest checking and money market		14,353		14,802		31,173		49,769		88,622
Time open and C.D.’s of less than $100,000		20,468		16,128		28,541		61,855		82,777
Time open and C.D.’s of $100,000 and over		13,886		11,542		18,812		42,728		55,291
Interest on other borrowings		14,718		15,428		24,486		49,419		72,054
Total interest expense		63,425		57,900		103,012		203,771		298,744
Net interest income		144,779		151,564		135,262		436,450		400,605
Provision for loan losses		18,000		29,567		11,455		67,567		28,670
Net interest income after provision for loan losses		126,779		121,997		123,807		368,883		371,935
NON-INTEREST INCOME
Deposit account charges and other fees		28,260		27,854		30,148		83,189		86,740
Bank card transaction fees		29,394		29,317		26,409		85,019		75,347
Trust fees		20,286		20,518		19,823		60,917		58,448
Consumer brokerage services		3,411		3,439		3,056		10,259		9,431
Trading account profits and commissions		3,183		2,604		2,174		9,951		5,475
Loan fees and sales		1,150		1,594		2,919		4,884		6,916
Other		17,049		10,267		10,608		36,267		31,123
Total non-interest income		102,733		95,593		95,137		290,486		273,480
INVESTMENT SECURITIES GAINS, NET		1,008		1,149		1,562		25,480		4,964
NON-INTEREST EXPENSE
Salaries and employee benefits		83,247		83,766		77,312		250,023		230,335
Net occupancy		10,805		11,861		11,572		34,735		34,205
Equipment		6,244		6,122		5,761		18,273		17,875
Supplies and communication		8,545		9,276		8,546		26,545		25,638
Data processing and software		14,159		14,229		12,697		41,951		36,657
Marketing		5,447		4,926		4,775		15,660		13,952
Loss on purchase of auction rate securities		299		32,967		—		33,266		—
Other		18,677		18,506		18,430		49,378		53,199
Total non-interest expense		147,423		181,653		139,093		469,831		411,861
Income before income taxes		83,097		37,086		81,413		215,018		238,518
Less income taxes		27,118		10,599		25,515		68,385		75,550
NET INCOME	$	55,979	$	26,487	$	55,898	$	146,633	$	162,968
Net income per share — basic	$	0.78	$	0.36	$	0.78	$	2.04	$	2.25
Net income per share — diluted	$	0.77	$	0.36	$	0.77	$	2.02	$	2.22
Cash dividends per common share	$	0.250	$	0.250	$	0.238	$	0.750	$	0.714

4

COMMERCE BANCSHARES, INC. and SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

(Unaudited)	June 30			Sept. 30			Sept. 30
(In thousands)	2008			2008			2007
ASSETS
Loans	$	11,116,274		$	10,985,789		$	10,451,029
Allowance for loan losses		(145,198	)		(156,031	)		(133,588	)
Net loans		10,971,076			10,829,758			10,317,441
Loans held for sale		329,122			392,697			303,658
Investment securities:
Available for sale		3,628,061			3,659,488			3,411,804
Trading		21,923			12,353			17,189
Non-marketable		132,991			153,423			93,086
Total investment securities		3,782,975			3,825,264			3,522,079
Federal funds sold and securities purchased under agreements to resell		466,165			457,295			520,484
Cash and due from banks		620,472			496,970			543,626
Land, buildings and equipment — net		406,446			409,676			403,747
Goodwill		125,585			125,585			125,088
Other intangible assets — net		19,348			18,299			22,322
Other assets		297,274			396,791			265,864
Total assets	$	17,018,463		$	16,952,335		$	16,024,309
LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits:
Non-interest bearing demand	$	1,398,766		$	1,187,334		$	1,148,991
Savings, interest checking and money market		7,481,065			7,451,845			6,971,076
Time open and C.D.’s of less than $100,000		2,104,566			2,018,444			2,398,877
Time open and C.D.’s of $100,000 and over		1,551,228			1,654,464			1,432,831
Total deposits		12,535,625			12,312,087			11,951,775
Federal funds purchased and securities sold under agreements to repurchase		1,613,801			1,559,975			2,059,095
Other borrowings		1,075,685			1,250,510			345,749
Other liabilities		187,812			229,338			176,124
Total liabilities		15,412,923			15,351,910			14,532,743
Stockholders’ equity:
Preferred stock		—			—			—
Common stock		360,125			360,935			352,330
Capital surplus		476,497			482,441			421,733
Retained earnings		753,490			761,959			794,779
Treasury stock		(172	)		(161	)		(91,040	)
Accumulated other comprehensive income (loss)		15,600			(4,749	)		13,764
Total stockholders’ equity		1,605,540			1,600,425			1,491,566
Total liabilities and stockholders’ equity	$	17,018,463		$	16,952,335		$	16,024,309

5

COMMERCE BANCSHARES, INC. and SUBSIDIARIES
AVERAGE BALANCES

	For the Three Months Ended									For the Nine Months Ended
(Unaudited)	June 30			Sept. 30			Sept. 30			Sept. 30			Sept. 30
(Dollars in thousands)	2008			2008			2007			2008			2007
Loans:
Business	$	3,549,811		$	3,473,797		$	3,103,903		$	3,509,030		$	3,075,994
Real estate — construction		699,502			698,420			705,232			694,119			670,077
Real estate — business		2,282,139			2,324,683			2,220,136			2,280,431			2,197,714
Real estate — personal		1,510,346			1,508,736			1,538,279			1,515,084			1,514,058
Consumer		1,675,389			1,717,075			1,605,879			1,676,139			1,529,894
Home equity		466,240			479,025			446,208			468,060			440,030
Consumer credit card		785,451			790,303			670,973			779,025			650,345
Overdrafts		10,662			12,381			14,468			12,387			12,701
Total loans		10,979,540			11,004,420			10,305,078			10,934,275			10,090,813
Loans held for sale		331,366			352,283			293,610			332,134			332,944
Investment securities (excluding unrealized gains and losses):
Available for sale		3,414,176			3,352,799			3,222,014			3,354,667			3,235,568
Trading		22,312			23,278			16,343			31,834			19,768
Non-marketable		129,495			144,476			98,177			128,525			88,645
Total investment securities		3,565,983			3,520,553			3,336,534			3,515,026			3,343,981
Federal funds sold and securities purchased under agreements to resell		421,539			419,628			511,834			444,042			523,747
Total interest earning assets		15,298,428			15,296,884			14,447,056			15,225,477			14,291,485
Total assets		16,404,444			16,387,099			15,529,022			16,340,131			15,340,914
Deposits:
Non-interest bearing deposits		660,063			668,191			660,681			663,087			643,702
Interest bearing deposits:
Savings		409,848			410,201			392,317			400,551			398,660
Interest checking		186,802			185,984			211,469			191,506			190,180
Money market		7,226,086			7,312,621			6,814,225			7,172,071			6,781,490
Time open & C.D.’s of less than $100,000		2,186,889			2,041,276			2,389,019			2,181,529			2,348,467
Time open & C.D.’s of $100,000 and over		1,585,354			1,554,804			1,485,637			1,576,578			1,474,521
Total interest bearing deposits		11,594,979			11,504,886			11,292,667			11,522,235			11,193,318
Total deposits		12,255,042			12,173,077			11,953,348			12,185,322			11,837,020
Borrowings:
Federal funds purchased and securities sold under agreements to repurchase		1,419,523			1,368,050			1,628,453			1,471,561			1,688,512
Other borrowings		998,506			1,103,224			346,076			944,516			225,125
Total borrowings		2,418,029			2,471,274			1,974,529			2,416,077			1,913,637
Total interest bearing liabilities		14,013,008			13,976,160			13,267,196			13,938,312			13,106,955
Total stockholders’ equity		1,594,110			1,616,468			1,468,600			1,590,222			1,464,118
Net yield on interest earning assets (tax-equivalent basis)		3.87	%		4.02	%		3.77	%		3.89	%		3.81	%

6

COMMERCE BANCSHARES, INC.
Management Discussion of Third Quarter Results
September 30, 2008

For the quarter ended September 30, 2008, net income amounted to $26.5 million, a decline of $29.4 million from the same quarter last year and a decline of $29.5 million from the previous quarter. For the current quarter, the return on average assets was .64%, the return on average equity was 6.5%, and the efficiency ratio was 73.1%. The current quarter included a charge against earnings of $33.0 million as a result of the Company’s previously announced purchase of auction rate securities from its customers. Additionally, the Company increased its allowance for loan losses by $10.8 million this quarter. The 2^nd quarter of 2008 included a pre-tax gain of $6.9 million on the sale of a small branch in southeast Kansas.

Balance Sheet Review

During the 3^rd quarter of 2008, average loans, excluding loans held for sale, increased $24.9 million, or .2%, compared to the previous quarter, representing annualized growth of less than 1%. Also, average loans increased $699.3 million, or 6.8%, this quarter compared to the same period last year. Overall during the quarter, the increase in average loans compared with the previous quarter consisted mainly of growth in business real estate ($42.5 million), consumer ($41.7 million) and home equity line of credit loans ($12.8 million), offset by a $76.0 million decline in business loans. The decline in average business loans resulted from decreases in loans to a number of agribusiness customers, coupled with seasonal reductions in line of credit usage from several larger borrowers. The growth in average business real estate loans this quarter was due to new lending and greater line of credit usage, mostly occurring in the 2^nd quarter, but affecting 3^rd quarter averages. Growth in consumer loans was mainly due to higher lending totals for both auto and marine/recreational loans. During the 3^rd quarter, the Company elected to reduce its loan originations for certain types of marine and recreational vehicle loans due to current economic conditions.

Available for sale investment securities (excluding fair value adjustments) decreased on average by $61.4 million to $3.4 billion this quarter compared with the previous quarter. Period end investment securities balances (excluding fair value adjustments) totaled $3.7 billion, or $64.2 million greater than at June 30, 2008. During the current quarter, the Company purchased from its customers $529.9 million par of auction rate securities which had become illiquid. These securities were recorded in the municipal category. Maturities and principal pay-downs of securities totaled $232.5 million, while the Company reinvested $168.0 million in mortgage-backed securities, $1.3 million in U.S. treasury securities, and $535 thousand in other municipal securities. During the current quarter, $375.1 million of investments in government mutual funds were sold, of which $312.0 million related to a specific repurchase agreement transaction mentioned in the previous quarterly discussion.

Total average deposits decreased $82.0 million, or .7%, during the 3^rd quarter of 2008 compared to the previous quarter, and increased $219.7 million, or 1.8%, compared to the 3^rd quarter of 2007. Compared to the previous quarter, the decline in average deposits resulted from decreases in certificates of deposit ($176.2 million), partly offset by an increase in money market accounts ($86.5 million). The average loans to deposits ratio in the current quarter was 93.3%, compared to 92.3% in the previous quarter.

During the current quarter, the Company’s average borrowings increased $53.2 million compared to the prior quarter. This overall increase was mainly due to increases in funding from the Federal Home Loan Bank ($158.5 million) but was partly offset by lower average borrowings from the Federal Reserve Bank ($53.8 million) and a reduction in federal funds purchased and repurchase agreements of $51.5 million.

Net Interest Income

Net interest income in the 3^rd quarter of 2008 amounted to $151.6 million, an increase of $6.8 million, or 4.7%, compared with the previous quarter and an increase of $16.3 million, or 12.1%, compared to the 3^rd quarter of last year. During the 3^rd quarter of 2008, the net yield on earning assets (tax equivalent) was 4.02%, compared with 3.87% in the previous quarter and 3.77% in the same period last year.

The increase of $6.8 million in net interest income in the 3^rd quarter of 2008 over the previous quarter was primarily the result of lower rates paid and lower average balances on deposits, coupled with higher average loan balances and higher rates earned on investment securities. Interest income on loans (tax equivalent) increased by $843 thousand this quarter, mainly due to an increase in business real estate and consumer loans. The Company earned higher rates on consumer credit card loans this quarter, partly offset by lower rates earned on business and business real estate loans. Interest income on investment securities increased $757 thousand (tax equivalent) as a result of higher rates earned on the portfolio. This increase was partly offset by lower overall average balances in the portfolio, except in municipal obligations which increased due to the auction rate security purchases mentioned earlier.

Interest expense on deposits declined $6.2 million in the 3^rd quarter of 2008 compared with the previous quarter as a result of lower rates paid on certificates of deposit, in addition to lower average certificates of deposit balances. Interest expense on other borrowings increased $710 thousand due to higher balances outstanding of Federal Home Loan Bank advances. This increase was partly offset by declines in other borrowings and lower rates paid on federal funds purchased.

The overall tax equivalent yield on interest earning assets in the 3^rd quarter decreased 2 basis points from the previous quarter to 5.52%, while the overall cost of interest bearing liabilities decreased 17 basis points to 1.65%.

Non-Interest Income

For the 3^rd quarter of 2008, total non-interest income amounted to $95.6 million, an increase of .5% compared to $95.1 million in the same period last year, and a decrease of 7.0% compared to $102.7 million recorded in the previous

7

COMMERCE BANCSHARES, INC.
Management Discussion of Third Quarter Results
September 30, 2008

quarter. The decline in non-interest income from the 2^nd quarter of 2008 was partly due to a pre-tax gain of $6.9 million on the sale of a bank branch in the previous quarter. The increase in non-interest income over the 3^rd quarter of last year resulted mainly from continued double-digit growth in bank card, brokerage and bond trading income. Bank card fees for the quarter increased 11.0% over the 3^rd quarter of last year, primarily due to growth in fees earned on debit, merchant and corporate card transactions, which grew by 9.5%, 9.1% and 27.3%, respectively. Trust fees for the quarter increased 3.5% over the same period last year mainly as a result of growth in personal trust fees (up 7.2%) but were partly offset by lower institutional trust fee income. Deposit account fees declined 7.6% this quarter from the same period last year as a result of a 10.9% decline in overdraft fee income, offset by growth in corporate cash management fees of 5.9%. Overdraft fee income was negatively impacted by lower transaction volume compared to the same quarter last year. Brokerage fee income for the current quarter totaled $3.4 million, an increase of 12.5% over the same period last year, and bond trading income for the quarter increased 19.8%. Gains on sales of student loans in the current quarter declined $1.3 million as fewer loans were sold this quarter.

The ratio of non-interest income to total revenue was 38.7% in the 3^rd quarter of 2008 compared with 41.3% in the same period last year. The decline in the ratio of non-interest income to total revenue was mainly due to the large increase in net interest income this quarter, which was up 12.1% compared to last year.

Investment Securities Gains and Losses

Net securities gains amounted to $1.1 million in the 3^rd quarter of 2008, compared to net gains of $1.0 million in the previous quarter and net gains of $1.6 million in the same quarter last year. Net gains in the current quarter were mostly related to fair value adjustments on certain of the Company’s private equity investments. Minority interest expense (recorded in non-interest expense) related to the fair value adjustments on private equity investments was not significant.

Non-Interest Expense

Non-interest expense for the current quarter amounted to $181.7 million, an increase of $42.6 million compared with amounts recorded in the same period last year. As described previously, non-interest expense for the current quarter includes a non-cash pre-tax loss of $33.0 million related to the purchase of auction rate securities from customers. Exclusive of this item, non-interest expense would have amounted to $148.7 million or an increase of 6.9% over the previous year, and only .9% higher than the previous quarter. Compared to the 3^rd quarter of last year, salaries and benefits expense increased $6.5 million, or 8.3%, resulting partly from increased staffing related to several growth initiatives, higher incentives earned, and increased medical costs. Full-time equivalent employees totaled 5,202 and 5,077 at September 30, 2008 and 2007, respectively.

Compared with the 3^rd quarter of last year, occupancy costs increased 2.5% and were well controlled. Equipment costs and supplies and communications costs increased by 6.3% and 8.5%, respectively, but were both affected by certain non-recurring expense reductions recorded in the previous year, totaling $605 thousand combined. Exclusive of these non-recurring reductions in the prior year, equipment expense would have been flat with the previous year while supplies and communications would have shown growth of 4.8%. Data processing costs increased 12.1%, mainly reflecting higher bank card processing costs which increased in relation to higher bank card revenues this quarter.

Income Taxes

The effective tax rate for the Company was 28.6% for the current quarter, compared with 32.6% in the previous quarter and 31.3% in the 3^rd quarter of 2007. The lower effective tax rate this quarter was the result of lower pre-tax income, largely due to the loss on auction rate securities and the higher loan loss provision recorded this quarter.

Credit Quality

Net loan charge-offs for the 3^rd quarter of 2008 amounted to $18.7 million, compared with $14.5 million in the prior quarter and $11.5 million in the 3^rd quarter of last year. The increase in net charge-offs in the 3^rd quarter of 2008 compared to the previous quarter was mainly the result of a combined increase of $1.9 million in consumer banking and consumer credit card loan losses, coupled with a $1.0 million increase in construction loan net charge-offs, which was mainly the result of one large construction loan charge-off. Additionally, business loan net charge-offs this quarter included $1.1 million relating to an equipment loan. Combined net loan charge-offs for business, business real estate and construction loans totaled $5.7 million year-to-date, up $1.4 million from amounts reported for the first nine months of 2007. The ratio of annualized net loan charge-offs to total average loans was .68% in the current quarter compared to .53% in the previous quarter.

For the 3^rd quarter of 2008, annualized net charge-offs on average consumer credit card loans increased to 4.19%, compared with 4.06% in the previous quarter and 3.15% in the same period last year. Additionally, consumer loan net charge-offs for the quarter amounted to 1.40% of average consumer loans, compared to 1.09% in the previous quarter and .57% in the same quarter last year. The provision for loan losses for the quarter totaled $29.6 million, and was $11.6 million higher than the previous quarter and $18.1 million higher than the 3^rd quarter of 2007. The Company increased the allowance for loan losses by $10.8 million, reflecting greater risk in the broader economy. The allowance for loan losses at September 30, 2008 amounted to $156.0 million, or 1.42% of total loans, excluding loans held for sale, and was 375% of total non-accrual loans.

Total non-performing assets amounted to $46.2 million, an increase of $9.5 million over the previous quarter, and represented .42% of loans outstanding. Non-performing assets are comprised of non-accrual loans ($41.6 million) and foreclosed real estate ($4.6 million). Loans past due more than 90 days and still accruing interest totaled $31.9 million at September 30, 2008.

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COMMERCE BANCSHARES, INC.
Management Discussion of Third Quarter Results
September 30, 2008

Other

The Company maintains a treasury stock buyback program. The Company’s purchases of treasury stock during the current quarter were not significant. During the quarter the Company’s Bank Strength Rating was reaffirmed by Moody’s and remains among the top 5 of the fifty largest banks in the country.

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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