Common and Preferred Stock

On December 15, 2014, the Company distributed a 5% stock dividend on its $5 par common stock for the 21^st consecutive year. All per common share data in this report has been restated to reflect the stock dividend.

The Company applies the two-class method of computing income per share, as nonvested share-based awards that pay nonforfeitable common stock dividends are considered securities which participate in undistributed earnings with common stock. The two-class method requires the calculation of separate income per share amounts for the nonvested share-based awards and for common stock. Income per share attributable to common stock is shown in the following table. Nonvested share-based awards are further discussed in Note 11 on Stock-Based Compensation.

Basic income per share is based on the weighted average number of common shares outstanding during the year. Diluted income per share gives effect to all dilutive potential common shares that were outstanding during the year. Presented below is a summary of the components used to calculate basic and diluted income per common share, which have been restated for all stock dividends.



(In thousands, except per share data)	2014		2013		2012
Basic income per common share:
Net income attributable to Commerce Bancshares, Inc.	$	261,754	$	260,961	$	269,329
Less preferred stock dividends	4,050		—		—
Net income available to common shareholders	257,704		260,961		269,329
Less income allocated to nonvested restricted stock	3,332		2,939		2,563
Net income allocated to common stock	$	254,372	$	258,022	$	266,766
Weighted average common shares outstanding	96,984		99,315		101,005
Basic income per common share	$	2.62	$	2.60	$	2.64
Diluted income per common share:
Net income available to common shareholders	$	257,704	$	260,961	$	269,329
Less income allocated to nonvested restricted stock	3,323		2,931		2,562
Net income allocated to common stock	$	254,381	$	258,030	$	266,767
Weighted average common shares outstanding	96,984		99,315		101,005
Net effect of the assumed exercise of stock-based awards -- based on the treasury stock method using the average market price for the respective periods	400		417		308
Weighted average diluted common shares outstanding	97,384		99,732		101,313
Diluted income per common share	$	2.61	$	2.59	$	2.63

Nearly all unexercised stock options and stock appreciation rights were included in the computations of diluted income per share for the years ended December 31, 2014, 2013 and 2012.

At the Annual Meeting of the Shareholders, held on April 16, 2014, a proposal to increase the shares of Company common stock authorized for issuance under its articles of incorporation was approved. This approval increased the authorized shares from 100,000,000 to 120,000,000.

On June 19, 2014, the Company issued and sold 6,000,000 depositary shares, representing 6,000 shares of 6.00% Series B Non-Cumulative Perpetual Preferred Stock, par value $1.00 per share, having an aggregate liquidation preference of $150.0 million (“Series B Preferred Stock”). Each depositary share has a liquidation preference of $25 per share. Dividends on the Series B Preferred Stock, if declared, accrue and are payable quarterly, in arrears, at a rate of 6.00%. The Series B Preferred Stock qualifies as Tier 1 capital for the purposes of the regulatory capital calculations. The net proceeds from the issuance and sale of the Series B Preferred Stock, after deducting underwriting discount and commissions, and the payment of expenses were approximately $144.8 million. The net proceeds from the offering were used to fund, in part, the accelerated share repurchase program discussed below.

In the event that the Company does not declare and pay dividends on the Series B Preferred Stock for the most recent dividend period, the ability of the Company to declare or pay dividends on, purchase, redeem or otherwise acquire shares of its common stock or any securities of the Company that rank junior to the Series B Preferred Stock is subject to certain restrictions under the terms of the Series B Preferred Stock. The Company paid dividends on the Preferred Stock totaling $4.1 million during 2014.

Concurrent with the issuance and sale of the Series B Preferred Stock, on June 19, 2014, the Company entered into an accelerated share repurchase agreement (the “ASR agreement”) with Morgan Stanley & Co. LLC (“Morgan Stanley”). Under the ASR agreement, the Company paid $200.0 million to Morgan Stanley and received from Morgan Stanley 3,055,434 shares of the Company’s common stock, representing approximately 70% of the estimated total number of shares to be delivered by Morgan Stanley at the conclusion of the accelerated stock repurchase program. Upon final settlement, which is expected to occur on or before June 2015, the Company expects to receive the balance of the shares repurchased under the ASR agreement. The specific number of shares that the Company ultimately will repurchase will be based on the volume-weighted-average price per share of the Company’s common stock during the repurchase period. During the term of the ASR agreement, the Company may only make repurchases of Company common stock with the consent of Morgan Stanley.

The ASR agreement is part of a stock repurchase program that was authorized by the Company’s board of directors in June 2014 to buy up to 5,000,000 shares of the Company's common stock. The Company accounted for the repurchase under the ASR agreement as two separate transactions: (i) as shares of common stock acquired in a treasury stock transaction recorded on the acquisition date; and (ii) as a forward contract indexed to the Company’s common stock that is classified as equity and reported as a component of surplus. At December 31, 2014, 1,898,007 shares of common stock remained available for purchase under the current board authorization.

The table below shows activity in the outstanding shares of the Company’s common stock during the past three years. Shares in the table below are presented on an historical basis and have not been restated for the annual 5% stock dividends.



	Years Ended December 31
(In thousands)	2014		2013		2012
Shares outstanding at January 1	95,881		91,414		88,952
Issuance of stock:
Awards and sales under employee and director plans	549		653		837
5% stock dividend	4,586		4,565		4,352
Summit acquisition	—		1,000		—
Purchases of treasury stock under accelerated stock buyback program	(3,055	)	—		—
Other purchases of treasury stock	(1,626	)	(1,742	)	(2,716	)
Other	(8	)	(9	)	(11	)
Shares outstanding at December 31	96,327		95,881		91,414