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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997 COMMISSION FILE NO. 0-2989
COMMERCE BANCSHARES, INC.
(Exact name of registrant as specified in its charter)
Missouri 43-0889454
(State of Incorporation) (IRS Employer Identification No.)
1000 Walnut, Kansas City, MO 64106
(Address of principal executive offices and Zip Code)
Registrant's telephone number, including area code: (816) 234-2000
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
$5 PAR VALUE COMMON STOCK
(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K ((S)229.405 of this chapter) is not contained herein,
and will not be contained, to the best of Registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendment to this Form 10-K. ___
As of February 20, 1998, the aggregate market value of the voting stock held
by non-affiliates of the Registrant was approximately $2,396,000,000.
As of February 20, 1998, there were 38,510,451 shares of Registrant's $5 Par
Value Common Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
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The Annual Report to Shareholders for the fiscal year ended December 31, 1997
is incorporated in Part I, Part II, and Part IV of the Form 10-K.
Portions of the definitive proxy statement with respect to the annual meeting
of shareholders to be held on April 15, 1998, are incorporated in Part III.
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PART I
ITEM 1. BUSINESS
Commerce Bancshares, Inc. (the "Company"), a bank holding company as defined
in the Bank Holding Company Act of 1956, as amended, was incorporated under
the laws of Missouri on August 4, 1966. The Company presently owns or controls
substantially all of the outstanding capital stock of one national banking
association located in Missouri, one national banking association located in
Illinois, three national banking associations in Kansas, and a credit card
bank which is located in Nebraska and is limited in its activities to the
issuance of credit cards. The Company also owns directly several non-banking
subsidiaries which are engaged in owning real estate which is leased to the
Company's banking subsidiaries, underwriting credit life and credit accident
and health insurance, selling property and casualty insurance (all such
insurance relating to extensions of credit made by the banking subsidiaries),
providing venture capital through both a small business investment corporation
as well as a venture capital limited partnership (in which the Company has a
50% interest and which is managed by the Company), and mortgage banking. The
Company also owns second tier holding companies which are the direct owners of
several of the above mentioned banks. The results of operations of each of the
non-banking subsidiaries of the Company are insignificant and do not
materially affect the results of operation of the Company.
As reflected on pages 28 through 31 of the 1997 Annual Report to
Shareholders, the loan portfolio of the Company is well diversified. It does,
however, contain certain risks as discussed on pages 31 through 32. The
Company is operating in a multi-state environment that consists of a
profitable blend of commercial, real estate, and consumer lending activities.
The Company is the second largest Missouri-based bank holding company in
terms of deposit market share. The banking subsidiary of the Company with
locations in Missouri regional markets (which comprise approximately 81% of
the banking assets of the Company) competes with approximately 500 Missouri
banks, together with savings and loans and other financial institutions. The
Illinois and Kansas subsidiary banks encounter the same or similar competition
in their markets where over 900 Illinois banks and over 500 Kansas banks
operate. In addition, the three states are served by numerous savings
associations, credit unions, finance companies, and other financial
intermediaries offering similar products to the customer base.
Missouri, being centrally located in the United States, provides a natural
site for production and distribution facilities and also serves as a
transportation hub. The economy is well-diversified with many major industries
represented, such as automobile manufacturing, aircraft manufacturing, food
production and agricultural production together with related industries.
Missouri has a relatively balanced real estate market and the Missouri
unemployment rate is generally at or below the national average. There are no
significant economic problems in general for the communities served by the
Company. The adjacent states of Kansas and Illinois share many of the same
characteristics in the communities being served and their local economies are
generally stable and not abnormally weakened by the national economy.
In the banking industry, Missouri is unique with two Federal Reserve Banks,
located in St. Louis and Kansas City, which results in operating efficiencies
for the subsidiary banks and their customers. In addition, the banking
subsidiary in Illinois is a member of the Federal Reserve Bank of Chicago
which provides additional flexibility to the operations area.
The banking subsidiaries compete with other financial institutions engaged
in the business of making loans or accepting deposit accounts, such as savings
and loan associations, insurance companies, small loan companies, credit
unions, finance companies, and other banking intermediaries, some or all of
which may be located in the communities where the Company's banking
subsidiaries are located. Such competition is based primarily on rates and
quality of service provided.
The Company, as a bank holding company, is primarily regulated by the Board
of Governors of the Federal Reserve System. The subsidiary banks of the
Company are all national banking associations and as such are primarily
regulated by the Comptroller of the Currency.
2
As discussed on page 47 of the 1997 Annual Report to Shareholders, the
Company completed the acquisitions of two Kansas banks in 1997 and a third
Kansas bank effective March 1, 1998.
During 1997, the Company continued to merge its subsidiary bank charters in
an effort to improve customer service and minimize operating overhead.
Commerce Bank, N.A. (Wichita, KS) was merged into Commerce Bank, N.A. (Hays,
KS) and the main location of the surviving bank was changed to Wichita, KS.
Commerce Bank, N.A. (Clayton, MO) was merged into Commerce Bank, N.A. (Kansas
City, MO), with the surviving bank designated as Commerce Bank, N.A.
(Missouri).
The Company and its subsidiaries employed 4,497 persons on a full-time basis
and 784 persons on a part-time basis at December 31, 1997.
The information required under the caption "Statistical Disclosure by Bank
Holding Companies" is included in the "Management's Discussion and Analysis of
Consolidated Financial Condition and Results of Operations" and the "Notes to
Financial Statements" sections of the 1997 Annual Report to Shareholders as
indicated below and is hereby incorporated by reference. The following
schedule reflects the page number of the Annual Report where the various
captioned information is shown.
ANNUAL REPORT
PAGE
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I. Distribution of Assets, Liabilities and Stockholders' Equity;
Interest Rates and Interest Differential 23, 38-41
II. Investment Portfolio 32, 49
III. Loan Portfolio
Types of Loans 28
Maturities and Sensitivities of Loans
to Changes in Interest Rates 28
Risk Elements 31-32
IV. Summary of Loan Loss Experience 24-26
V. Deposits 36, 38-39
VI. Return on Equity and Assets 22
VII. Short-Term Borrowings 50
3
ITEM 2. PROPERTIES
The larger banking subsidiaries maintain their main offices in various
buildings listed below. These are owned by the banking subsidiary or a
subsidiary. The banks lease unoccupied premises to the public. The buildings
are located in the downtown areas of the cities they serve.
NET RENTABLE % OCCUPIED % OCCUPIED
BUILDING SQUARE FOOTAGE IN TOTAL BY BANK
-------- -------------- ---------- ----------
922 Walnut
Kansas City, MO...................... 205,000 84% 57%
1000 Walnut
Kansas City, MO...................... 384,000 93 30
720 Main
Kansas City, MO...................... 180,000 98 85
8000 Forsyth
Clayton, MO.......................... 197,000 94 86
416 Main
Peoria, IL........................... 224,000 80 25
150 N. Main
Wichita, KS.......................... 191,000 82 55
The main offices of the other subsidiary banks and branch locations are
owned by the respective bank with the exception of Commerce Bank of Omaha,
N.A., which leases its main office. Additionally, a number of branch locations
are located in leased premises, including retail, convenience and grocery
stores.
ITEM 3. LEGAL PROCEEDINGS
The information required by this item is set forth under the caption
"Commitments and Contingencies" on page 58 of the Annual Report to
Shareholders for the fiscal year ended December 31, 1997, and is hereby
incorporated by reference.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted during the fourth quarter of 1997 to a vote of
security holders through the solicitation of proxies or otherwise.
EXECUTIVE OFFICERS OF THE REGISTRANT
The following are the executive officers of the Company, each of whom is
elected annually, and there are no arrangements or understandings between any
of the persons so named and any other person pursuant to which such person was
elected as an executive officer.
NAME AND AGE POSITIONS WITH REGISTRANT
Jeffery D. Aberdeen, 44 Controller of the Company since December, 1995.
Assistant Controller of the Company and
Controller of Commerce Bank, N.A. (Kansas City,
MO), a former subsidiary of the Company, prior
thereto.
Andrew F. Anderson, 46 Chairman of the Board, President and Chief
Executive Officer of Commerce Bank, N.A.
(Illinois), a subsidiary of the Company, since
August, 1995. President and Chief Executive
Officer of The Peoples Bank of Bloomington, IL
prior thereto.
John O. Brown, 64 Vice Chairman of the Company and Commerce Bank,
N.A. (Missouri), a subsidiary of the Company,
since February, 1995. Chairman of the Board of
Commerce Bank, N.A. (Kansas City, MO) prior
thereto.
4
A. Bayard Clark, 52 Chief Financial Officer, Executive Vice
President and Treasurer of the Company since
December, 1995. Executive Vice President of the
Company prior thereto.
Robert A. Hammerschmidt, Jr., Executive Vice President of Commerce Bank, N.A.
46 (Missouri) since July, 1996. President and
Chief Executive Officer of Commerce Bank, N.A.
(Columbia, MO), a former subsidiary of the
Company, prior thereto.
David W. Kemper, 47 Chairman of the Board of Directors of the
Company since November, 1991, Chief Executive
Officer of the Company since June, 1986, and
President of the Company since April, 1982.
Chairman of the Board and President of Commerce
Bank, N.A. (Missouri). He is the son of James
M. Kemper, Jr. (a former Director and former
Chairman of the Board of the Company) and the
brother of Jonathan M. Kemper, Vice Chairman of
the Company.
Jonathan M. Kemper, 44 Vice Chairman of the Company since November,
1991 and Vice Chairman of Commerce Bank, N.A.
(Missouri) since December, 1997. Prior thereto,
he was Chairman of the Board and Chief
Executive Officer from February, 1995 and
President from July, 1996 of Commerce Bank,
N.A. (Kansas City, MO). President and Chief
Executive Officer of Commerce Bank, N.A.
(Kansas City, MO) prior thereto. He is the son
of James M. Kemper, Jr. (a former Director and
former Chairman of the Board of the Company)
and the brother of David W. Kemper, Chairman,
President, and Chief Executive Officer of the
Company.
Charles G. Kim, 37 Executive Vice President of the Company since
April, 1995. Prior thereto, he was Senior Vice
President of Commerce Bank, N.A. (Clayton, MO),
a former subsidiary of the Company, from April,
1993. Vice President of Commerce Bank, N.A.
(Clayton, MO) prior thereto.
Seth M. Leadbeater, 47 Executive Vice President of Commerce Bank, N.A.
(Missouri) since December, 1997. Prior thereto,
he was President of Commerce Bank, N.A.
(Clayton, MO) from October, 1992. Prior
thereto, he was Executive Vice President of
Commerce Bank, N.A. (Clayton, MO) from April,
1991. Executive Vice President of Commerce
Bank, N.A. (Kansas City, MO) prior thereto.
Peter F. Mackie, 57 Vice President of the Company and Executive
Vice President of Commerce Bank, N.A.
(Missouri).
Robert C. Matthews, Jr., 50 Executive Vice President of the Company since
December, 1989.
Michael J. Petrie, 41 Senior Vice President of the Company since
April, 1995. Prior thereto, he was Vice
President of the Company from April, 1993.
Prior thereto, he was Vice President of
Commerce Bank, N.A. (Kansas City, MO).
William A. Sullins, Jr., 59 Vice Chairman of the Company since August,
1992. Vice Chairman of Commerce Bank, N.A.
(Clayton, MO) prior thereto.
5
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SECURITY HOLDER
MATTERS
The information required by this item is set forth on page 21 of the Annual
Report to Shareholders for the fiscal year ended December 31, 1997, and is
hereby incorporated by reference.
ITEM 6. SELECTED FINANCIAL DATA
The information required by this item is set forth on page 22 of the Annual
Report to Shareholders for the fiscal year ended December 31, 1997, and is
hereby incorporated by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The information required by this item is set forth on pages 22 through 41 of
the Annual Report to Shareholders for the fiscal year ended December 31, 1997,
and is hereby incorporated by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this item is set forth on pages 42 through 62 of
the Annual Report to Shareholders for the fiscal year ended December 31, 1997,
and is hereby incorporated by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by Item 401 and 405 of Regulation S-K regarding
executive officers is included in Part I--Item 4 of this Form 10-K under the
caption "Executive Officers of the Registrant" and the caption "Election of
Directors" in the definitive proxy statement, which is incorporated herein by
reference.
ITEM 11. EXECUTIVE COMPENSATION
The information required by Item 402 of Regulation S-K regarding executive
compensation is included under the captions "Executive Compensation",
"Retirement Benefits", "Compensation Committee Report on Executive
Compensation", and "Compensation Committee Interlocks and Insider
Participation" in the definitive proxy statement, which is incorporated herein
by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by Item 403 of Regulation S-K is covered under the
caption "Voting Securities and Ownership Thereof by Certain Beneficial Owners
and Management" in the definitive proxy statement, which is incorporated
herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by Item 404 of Regulation S-K is covered under the
caption "Election of Directors" in the definitive proxy statement, which is
incorporated herein by reference.
6
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as a part of this report:
(1) Financial Statements--The Consolidated Balance Sheets, Consolidated
Statements of Income, Consolidated Statements of Cash Flows, Statements of
Stockholders' Equity, Notes to Financial Statements and Summary of
Quarterly Statements of Income
(2) Financial Statement Schedules--All schedules are omitted as such
information is inapplicable or is included in the financial statements.
(3) Exhibits:
3--Articles of Incorporation and By-Laws:
(a) Restated Articles of Incorporation, as amended, were filed in
quarterly report on Form 10-Q dated August 9, 1996, and the same are
hereby incorporated by reference.
(b) Restated By-Laws were filed in quarterly report on Form 10-Q dated
August 9, 1996, and the same are hereby incorporated by reference.
4--Instruments defining the rights of security holders, including
indentures:
(a) Pursuant to paragraph 4(iii) of Item 601 Regulation S-K, Registrant
will furnish to the Commission upon request copies of long-term debt
instruments.
(b) Shareholder Rights Plan contained in an Amended and Restated Rights
Agreement was filed on Form 8-A12G/A dated June 7, 1996, and the same
is hereby incorporated by reference.
(c) Form of Rights Certificate and Election to Exercise was filed on Form
8-A12G/A dated June 7, 1996, and the same is hereby incorporated by
reference.
(d) Form of Certificate of Designation of Preferred Stock was filed on
Form 8-A12G/A dated June 7, 1996, and the same is hereby incorporated
by reference.
10--Material Contracts (Each of the following is a management contract or
compensatory plan arrangement.):
(a) Commerce Bancshares, Inc. Executive Incentive Compensation Plan
amended and restated as of October 4, 1996 was filed in quarterly
report on Form 10-Q dated November 8, 1996, and the same is hereby
incorporated by reference.
(b) Commerce Bancshares, Inc. Incentive Stock Option Plan amended and
restated as of October 4, 1996 was filed in quarterly report on Form
10-Q dated November 8, 1996, and the same is hereby incorporated by
reference.
(c) Commerce Bancshares, Inc. 1987 Non-Qualified Stock Option Plan amended
and restated as of October 4, 1996 was filed in quarterly report on
Form 10-Q dated November 8, 1996, and the same is hereby incorporated
by reference.
(d) Commerce Bancshares, Inc. Stock Purchase Plan for Non-Employee
Directors amended and restated as of October 4, 1996 was filed in
quarterly report on Form 10-Q dated November 8, 1996, and the same is
hereby incorporated by reference.
(e) Copy of Supplemental Retirement Income Plan established by Commerce
Bancshares, Inc. for James M. Kemper, Jr. was filed in annual report
on Form 10-K dated March 6, 1992, and the same is hereby incorporated
by reference.
(f) Commerce Bancshares, Inc. 1996 Incentive Stock Option Plan amended and
restated as of October 4, 1996 was filed in quarterly report on Form
10-Q dated November 8, 1996, and the same is hereby incorporated by
reference.
7
(g) Commerce Executive Retirement Plan was filed in annual report on Form
10-K dated March 8, 1996, and the same is hereby incorporated by
reference.
(h) Commerce Bancshares, Inc. Restricted Stock Plan amended and restated
as of October 4, 1996 was filed in quarterly report on Form 10-Q dated
November 8, 1996, and the same is hereby incorporated by reference.
(i) Form of Severance Agreement between Commerce Bancshares, Inc. and
certain of its executive officers entered into as of October 4, 1996
was filed in quarterly report on Form 10-Q dated November 8, 1996, and
the same is hereby incorporated by reference.
13--Annual Report to Security Holders
21--Subsidiaries of the Registrant
23--Independent Accountants' Consent
24--Powers of Attorney (in the following form):
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned do hereby appoint J.
Daniel Stinnett and Jeffery D. Aberdeen, or either of them, attorney for
the undersigned to sign the Annual Report on Form 10-K of Commerce
Bancshares, Inc., for the fiscal year ended December 31, 1997, together
with any and all amendments which might be required from time to time with
respect thereto, to be filed with the Securities and Exchange Commission
under the Securities Exchange Act of 1934, with respect to Commerce
Bancshares, Inc., with full power and authority in either of said attorneys
to do and perform in the name of and on behalf of the undersigned every act
whatsoever necessary or desirable to be done in the premises as fully and
to all intents and purposes as the undersigned might or could do in person.
IN WITNESS WHEREOF, the undersigned have executed these presents this 6th
day of February, 1998.
Signed by the following directors:
Messrs. Giorgio Balzer; Fred L. Brown; James B. Hebenstreit; David W.
Kemper; Jonathan M. Kemper; Terry O. Meek; Benjamin F. Rassieur III; L. W.
Stolzer, Andrew C. Taylor; and Robert H. West.
27--Financial Data Schedule
(b) Reports on Form 8-K:
No report on Form 8-K was filed during the last quarter of 1997.
8
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized this 11th day of
March, 1998.
COMMERCE BANCSHARES, INC.
/s/J. Daniel Stinnett
By: _____________________
J. Daniel Stinnett
Vice President and Secretary
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated on the 11th day of March, 1998.
/s/Jeffery D. Aberdeen
-------------------------
Jeffery D. Aberdeen
Controller
(Chief Accounting Officer)
/s/A. Bayard Clark
-------------------------
A. Bayard Clark
Chief Financial Officer
David W. Kemper )
(Chief Executive Officer) )
Giorgio Balzer )
Fred L. Brown )
James B. Hebenstreit )
Jonathan M. Kemper } A majority of the
James M. Kemper, Jr. ) Board of Directors*
Terry O. Meek )
Benjamin F. Rassieur III )
L. W. Stolzer )
Andrew C. Taylor )
Robert H. West )
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*David W. Kemper, Director and Chief Executive Officer, and the other
Directors of Registrant listed, executed a power of attorney authorizing J.
Daniel Stinnett, their attorney-in-fact, to sign this report on their behalf.
/s/J. Daniel Stinnett
-------------------------
J. Daniel Stinnett, Attorney-in-Fact
9
INDEX TO EXHIBITS
3--Articles of Incorporation and By-Laws:
(a) Restated Articles of Incorporation, as amended, were filed in
quarterly report on Form 10-Q dated August 9, 1996, and the same are
hereby incorporated by reference.
(b) Restated By-Laws were filed in quarterly report on Form 10-Q dated
August 9, 1996, and the same are hereby incorporated by reference.
4--Instruments defining the rights of security holders, including
indentures:
(a) Pursuant to paragraph 4(iii) of Item 601 Regulation S-K, Registrant
will furnish to the Commission upon request copies of long-term debt
instruments.
(b) Shareholder Rights Plan contained in an Amended and Restated Rights
Agreement was filed on Form 8-A12G/A dated June 7, 1996, and the same
is hereby incorporated by reference.
(c) Form of Rights Certificate and Election to Exercise was filed on Form
8-A12G/A dated June 7, 1996, and the same is hereby incorporated by
reference.
(d) Form of Certificate of Designation of Preferred Stock was filed on
Form 8-A12G/A dated June 7, 1996, and the same is hereby incorporated
by reference.
10--Material Contracts (Each of the following is a management contract or
compensatory plan arrangement.):
(a) Commerce Bancshares, Inc. Executive Incentive Compensation Plan
amended and restated as of October 4, 1996 was filed in quarterly
report on Form 10-Q dated November 8, 1996, and the same is hereby
incorporated by reference.
(b) Commerce Bancshares, Inc. Incentive Stock Option Plan amended and
restated as of October 4, 1996 was filed in quarterly report on Form
10-Q dated November 8, 1996, and the same is hereby incorporated by
reference.
(c) Commerce Bancshares, Inc. 1987 Non-Qualified Stock Option Plan amended
and restated as of October 4, 1996 was filed in quarterly report on
Form 10-Q dated November 8, 1996, and the same is hereby incorporated
by reference.
(d) Commerce Bancshares, Inc. Stock Purchase Plan for Non-Employee
Directors amended and restated as of October 4, 1996 was filed in
quarterly report on Form 10-Q dated November 8, 1996, and the same is
hereby incorporated by reference.
(e) Copy of Supplemental Retirement Income Plan established by Commerce
Bancshares, Inc. for James M. Kemper, Jr. was filed in annual report
on Form 10-K dated March 6, 1992, and the same is hereby incorporated
by reference.
(f) Commerce Bancshares, Inc. 1996 Incentive Stock Option Plan amended and
restated as of October 4, 1996 was filed in quarterly report on Form
10-Q dated November 8, 1996, and the same is hereby incorporated by
reference.
(g) Commerce Executive Retirement Plan was filed in annual report on Form
10-K dated March 8, 1996, and the same is hereby incorporated by
reference.
(h) Commerce Bancshares, Inc. Restricted Stock Plan amended and restated
as of October 4, 1996 was filed in quarterly report on Form 10-Q dated
November 8, 1996 and the same is hereby incorporated by reference.
10
(i) Form of Severance Agreement between Commerce Bancshares, Inc. and
certain of its executive officers entered into as of October 4, 1996
was filed in quarterly report on Form 10-Q dated November 8, 1996, and
the same is hereby incorporated by reference.
13--Annual Report to Security Holders
21--Subsidiaries of the Registrant
23--Independent Accountants' Consent
24--Powers of Attorney
27--Financial Data Schedule
11