8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): April 13, 2005

Commerce Bancshares, Inc.

(Exact name of registrant as specified in its charter)

Missouri	0-2989	43-0889454
(State of Incorporation)	(Commission File Number)	(IRS Employer Identification No.)
1000 Walnut,
Kansas City, MO		64106
(Address of principal executive offices)		(Zip Code)

(816) 234-2000

(Registrant’s telephone number, including area code)

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

[   ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

[   ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

[   ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

[   ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

The information in this Current Report on Form 8-K, including the exhibit, is furnished pursuant to Item 2.02 and shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities under that Section. Furthermore, the information in this Current Report on Form 8-K, including the exhibit, shall not be deemed to be incorporated by reference into the filings of Commerce Bancshares, Inc. under the Securities Act of 1933, as amended.

Item 2.02 Results of Operations and Financial Condition

A copy of the press release issued April 13, 2005 by Commerce Bancshares, Inc. announcing First Quarter 2005 earnings is furnished under Item 2.02 of this Current Report on Form 8-K as Exhibit 99.1.

All information included in this Current Report on Form 8-K is available on the Company’s Internet site at http://www.commercebank.com.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	COMMERCE BANCSHARES, INC.
	By:	\s\ Jeffery D. Aberdeen
		Jeffery D. Aberdeen
		Controller
		(Chief Accounting Officer)
Date: April 13, 2005

INDEX TO EXHIBITS

Exhibit
Number	Description
99.1	Press release dated April 13, 2005

EX-99.1

Exhibit 99.1

FOR IMMEDIATE RELEASE:
Wednesday, April 13, 2005

COMMERCE BANCSHARES, INC. REPORTS FIRST QUARTER
EARNINGS PER SHARE GROWTH

     Commerce Bancshares, Inc. announced earnings of $.73 per share for the three months ended March 31, 2005, an increase of 3% compared to $.71 per share in the first quarter of 2004. Net income for the first quarter amounted to $49.8 million compared with $51.3 million in the same period last year, or a decrease of 3%. The annualized return on average assets for the three months ended March 31, 2005 was 1.44%, the annualized return on average equity was 14.4%, and the efficiency ratio was 62.2%.

     In making this announcement, David W. Kemper, Chairman & CEO, said, “Earnings per share grew 3% in the first quarter of 2005 compared to the same period last year. Favorable credit experience reduced our provision for loan losses while investment securities gains were significantly lower than last year. Although average loans have grown at an annualized rate of 7% over the last two quarters, a planned reduction in our securities portfolio led to slightly lower net interest income. Recurring fee income was flat for the quarter compared to a year ago while non-interest expenses increased 4.2%.”

     Mr. Kemper added, “Asset quality was strong in the first quarter with net loan charge-offs totaling .18% compared with .61% last year. Our allowance for loan losses totaled $131.0 million, or 1.56% of total outstanding loans and 756% of non-performing loans.”

     Total assets at March 31, 2005 were $14.1 billion, total loans were $8.4 billion, and total deposits were $10.7 billion. At March 31, 2005, total non-performing assets were $18.6 million or ..22% of total loans. During the quarter, the Company increased its cash dividend to shareholders by 10%, making this the 37th consecutive year of per share dividend increases. Also during the quarter, the Company bought back 1.3 million shares of its common stock through its treasury stock buyback plan.

     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 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.

(more)

     Posted to the Company’s web site is management’s discussion of first quarter results. To see this information, please visit our web site at www.commercebank.com. The Company’s Annual Shareholders’ meeting is scheduled for Wednesday, April 20, 2005 at 9:30AM CDT. The meeting will be held in the Auditorium on the 15^th floor of the Commerce Trust Building at 922 Walnut Street, Kansas City, Missouri. The meeting will be web-cast and presentation materials will be available on our web site the day of the meeting.

* * * * * * * * * * * * * * *

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)	12/31/04			3/31/05			3/31/04
Non-Accrual Loans	$	17,618		$	17,333		$	33,292
Foreclosed Real Estate	$	1,157		$	1,262		$	2,593
Total Non-Performing Assets	$	18,775		$	18,595		$	35,885
Non-Performing Assets to Loans		.23	%		.22	%		.44	%
Non-Performing Assets to Total Assets		.13	%		.13	%		.25	%
Loans 90 Days & Over Past Due - - Still Accruing	$	13,067		$	15,972		$	14,772

COMMERCE BANCSHARES, INC. and SUBSIDIARIES
FINANCIAL HIGHLIGHTS

(Unaudited)	For the Three Months Ended
	December 31			March 31			March 31
	2004			2005			2004
Financial Summary (In thousands, except per share data)
Net interest income	$	124,202		$	121,477		$	122,984
Taxable equivalent net interest income		124,738			121,994			123,572
Non-interest income		77,753			80,691			85,969
Provision for loan losses		7,215			2,368			10,250
Non-interest expense		122,429			123,922			118,912
Net income		52,660			49,846			51,324
Cash dividends		15,076			16,133			15,501
Net total loan charge-offs		8,184			3,802			12,379
Net business charge-offs (recoveries)		128			(2,796	)		5,502
Net credit card charge-offs		4,983			4,622			4,934
Net personal banking charge-offs*		2,251			1,948			1,972
Net real estate charge-offs (recoveries)		453			(56	)		102
Net overdraft charge-offs (recoveries)		369			84			(131	)
Per share:
Net income — basic	$	0.77		$	0.74		$	0.72
Net income — diluted	$	0.75		$	0.73		$	0.71
Cash dividends	$	0.219		$	0.240		$	0.219
Diluted wtd. average shares o/s		70,029			68,582			72,217
RATIOS
Average loans to deposits		79.03	%		79.45	%		79.87	%
Return on total average assets		1.48	%		1.44	%		1.45	%
Return on total average stockholders’ equity		14.40	%		14.35	%		14.09	%
Non-interest income to revenue**		38.50	%		39.91	%		41.14	%
Efficiency ratio***		60.26	%		62.22	%		59.24	%
AT PERIOD END
Book value per share based on total stockholders’ equity	$	20.90		$	20.42		$	20.99
Market value per share	$	50.20		$	48.20		$	45.44
Allowance for loan losses as a percentage of loans		1.59	%		1.56	%		1.63	%
Tier I leverage ratio		9.60	%		9.46	%		9.53	%
Common shares outstanding		68,257,531			67,176,629			70,682,907
Shareholders of record		4,776			4,735			4,906
Number of bank/ATM locations		330			331			327
Number of bank charters		3			3			4
Full-time equivalent employees		4,821			4,836			4,847
OTHER YTD INFORMATION				March 31			March 31
					2005			2004
High market value per share				$	50.00		$	47.62
Low market value per share				$	46.32		$	42.62

*	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

(Unaudited)	For the Three Months Ended
(In thousands, except per share data)	December 31			March 31		March 31
	2004			2005		2004
INTEREST INCOME
Interest and fees on loans	$	112,358		$	118,523	$	104,009
Interest on investment securities		44,555			41,746		44,592
Interest on federal funds sold and securities purchased under agreements to resell		358			584		186
Total interest income		157,271			160,853		148,787
INTEREST EXPENSE
Interest on deposits:
Savings, interest checking and money market		8,335			10,457		6,172
Time open and C.D.’s of less than $100,000		9,908			10,392		9,899
Time open and C.D.’s of $100,000 and over		4,193			6,352		3,265
Interest on other borrowings		10,633			12,175		6,467
Total interest expense		33,069			39,376		25,803
Net interest income		124,202			121,477		122,984
Provision for loan losses		7,215			2,368		10,250
Net interest income after provision for loan losses		116,987			119,109		112,734
NON-INTEREST INCOME
Trust fees		15,918			16,394		16,164
Deposit account charges and other fees		25,858			24,301		25,522
Bank card transaction fees		21,629			19,507		17,600
Trading account profits and commissions		2,680			2,614		3,826
Consumer brokerage services		2,328			2,497		2,354
Loan fees and sales		1,804			3,440		3,653
Net gains (losses) on securities transactions		(544	)		3,612		8,951
Other		8,080			8,326		7,899
Total non-interest income		77,753			80,691		85,969
NON-INTEREST EXPENSE
Salaries and employee benefits		66,208			70,180		68,016
Net occupancy		9,818			9,778		10,166
Equipment		5,733			5,691		5,858
Supplies and communication		8,321			8,213		7,944
Data processing and software		12,099			11,455		10,630
Marketing		4,008			3,862		3,704
Other intangible assets amortization		399			381		436
Other		15,843			14,362		12,158
Total non-interest expense		122,429			123,922		118,912
Income before income taxes		72,311			75,878		79,791
Less income taxes		19,651			26,032		28,467
NET INCOME	$	52,660		$	49,846	$	51,324
Net income per share — basic	$	0.77		$	0.74	$	0.72
Net income per share — diluted	$	0.75		$	0.73	$	0.71
Cash dividends per common share	$	0.219		$	0.240	$	0.219

COMMERCE BANCSHARES, INC. and SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

(Unaudited)	December 31			March 31			March 31
(In thousands)	2004			2005			2004
ASSETS
Loans, net of unearned income	$	8,305,359		$	8,406,110		$	8,149,141
Allowance for loan losses		(132,394	)		(130,960	)		(133,092	)
Net loans		8,172,965			8,275,150			8,016,049
Investment securities:
Available for sale		4,754,941			4,442,210			5,307,223
Trading		9,403			13,154			29,027
Non-marketable		73,024			74,965			76,657
Total investment securities		4,837,368			4,530,329			5,412,907
Federal funds sold and securities purchased under agreements to resell		68,905			179,107			71,645
Cash and due from banks		585,815			502,362			409,924
Land, buildings and equipment — net		336,446			368,512			335,084
Goodwill		48,522			48,522			48,522
Other intangible assets — net		499			118			1,747
Other assets		199,848			199,172			189,339
Total assets	$	14,250,368		$	14,103,272		$	14,485,217
LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits:
Non-interest bearing demand	$	1,943,771		$	1,347,994		$	1,697,680
Savings, interest checking and money market		6,072,115			6,552,169			6,039,062
Time open and C.D.’s of less than $100,000		1,656,002			1,700,853			1,701,258
Time open and C.D.’s of $100,000 and over		762,421			1,084,407			814,635
Total deposits		10,434,309			10,685,423			10,252,635
Federal funds purchased and securities sold under agreements to repurchase		1,913,878			1,566,914			2,068,165
Other borrowings		389,542			388,328			499,465
Other liabilities		85,759			91,038			181,156
Total liabilities		12,823,488			12,731,703			13,001,421
Stockholders’ equity:
Preferred stock		- - -			- - -			- - -
Common stock		347,049			347,049			343,183
Capital surplus		392,156			389,945			356,732
Retained earnings		703,293			737,006			742,959
Treasury stock		(51,646	)		(103,696	)		(59,198	)
Other		(3,542	)		(4,153	)		(3,118	)
Accumulated other comprehensive income		39,570			5,418			103,238
Total stockholders’ equity		1,426,880			1,371,569			1,483,796
Total liabilities and stockholders’ equity	$	14,250,368		$	14,103,272		$	14,485,217

COMMERCE BANCSHARES, INC. and SUBSIDIARIES
AVERAGE BALANCES

(Unaudited)	For the Three Months Ended
(Dollars in thousands)	December 31			March 31			March 31
	2004			2005			2004
Loans:
Business	$	2,129,818		$	2,186,828		$	2,045,287
Real estate — construction		420,179			442,471			426,182
Real estate — business		1,755,767			1,758,141			1,881,209
Real estate — personal		1,339,865			1,335,024			1,331,014
Consumer		1,205,381			1,193,063			1,151,911
Home equity		405,830			412,356			357,103
Student		344,258			410,020			382,057
Credit card		576,658			606,406			551,957
Overdrafts		14,379			16,297			17,477
Total loans		8,192,135			8,360,606			8,144,197
Investment securities (excluding unrealized gains and losses):
Available for sale		4,707,651			4,504,318			4,857,126
Trading		13,145			11,369			8,433
Non-marketable		74,744			76,853			74,651
Total investment securities		4,795,540			4,592,540			4,940,210
Federal funds sold and securities purchased under agreements to resell		63,769			84,987			60,398
Total interest earning assets		13,051,444			13,038,133			13,144,805
Total assets		14,112,455			14,070,385			14,193,600
Deposits:
Non-interest bearing deposits		1,351,240			772,869			1,233,919
Interest bearing deposits:
Savings		397,679			403,844			392,690
Interest checking		552,036			262,460			482,905
Money market		5,653,086			6,439,761			5,627,660
Time open & C.D.’s of less than $100,000		1,657,463			1,664,823			1,715,038
Time open & C.D.’s of $100,000 and over		753,928			979,011			745,101
Total interest bearing deposits		9,014,192			9,749,899			8,963,394
Total deposits		10,365,432			10,522,768			10,197,313
Borrowings:
Federal funds purchased and securities sold under agreements to repurchase		1,791,567			1,655,050			1,947,207
Long-term debt and other borrowings		390,150			388,771			441,019
Total borrowings		2,181,717			2,043,821			2,388,226
Total interest bearing liabilities		11,195,909			11,793,720			11,351,620
Total stockholders’ equity		1,455,062			1,408,414			1,464,915
Net yield on interest earning assets (tax-equivalent basis)		3.80	%		3.79	%		3.78	%

COMMERCE BANCSHARES, INC.
Management Discussion of First Quarter Results
March 31, 2005

     For the quarter ended March 31, 2005, net income amounted to $49.8 million, a decrease of 2.9% from the 1^st quarter of the previous year. Growth in earnings per share (EPS) totaled 2.8% over the previous year. Excluding net securities gains on an after tax basis, growth in EPS totaled 9.5%. The return on average assets was 1.4% and the return on average equity totaled 14.4%. For the quarter, the efficiency ratio amounted to 62.2%. The decrease in net income compared to the 1^st quarter of last year resulted mainly from a decrease in gains on investment security sales, lower net interest income and higher expenses. However, higher expenses were offset by a decrease in the provision for loan losses.

Balance Sheet Review

     During the 1^st quarter of 2005, average loans increased $168.5 million or 2.1% compared with the previous quarter and represented annualized growth of 8.2%. Average loans also increased $216.4 million or 2.7% compared to the same period last year. Growth this quarter was evenly spread between commercial and retail lending. Compared to the 4^th quarter of 2004, average business (includes commercial, lease and tax-free), construction and business real estate loans grew by $57.0 million, $22.3 million, and $2.4 million, respectively. Moderate growth in the economy this quarter helped increase demand for business and construction loans and improved line of credit usage. Average student loans increased $65.8 million due to seasonal borrowing activity, while credit card loans showed continued growth from the previous quarter. Personal real estate loans declined $4.8 million during the quarter as a result of lower mortgage loan originations due to lower seasonal demand. Average consumer banking loans also declined from the previous quarter by $12.3 million as a result of weaker demand for auto lending, offset by continued growth in marine and recreational vehicle loans.

     Available for sale investment securities, excluding fair value adjustments, decreased on average $203.3 million, or 4.3%, this quarter compared with the previous quarter. During the quarter, the Company undertook initiatives to review and re-position its investment securities portfolio to address such things as concentration, duration and interest rate risk. Accordingly, during the 1^st quarter the Company sold investment securities totaling $922.3 million, comprised mainly of U.S. government agency ($322.5 million), asset-backed ($338.1 million), and inflation- indexed treasury ($170.0 million) securities. Net gains of $2.8 million were recognized on sales of available for sale securities. During the quarter, purchases of investment securities totaled $940.8 million, and consisted of mortgage-backed ($628.0 million), asset-backed ($258.6 million) and treasury and agency ($54.2 million) securities. At March 31, 2005, available for sale securities totaled 31% of total assets, down from 37% at March 31, 2004.

     Total average deposits grew by $157.3 million, or 1.5%, during the 1^st quarter compared to the 4^th quarter of last year, and increased 3.2% compared to the same period last year. At the beginning of the 1^st quarter, the Company re-characterized certain additional demand and interest checking accounts as money market accounts, in accordance with Federal Reserve rules. As a result, an additional $530 million of average demand deposits and $344 million of average interest checking accounts were reclassified as money market accounts during the 1^st quarter of 2005. Average deposits increased over the 4^th quarter of last year mainly due to growth in personal demand, interest checking and short-term jumbo certificates of deposit.

     During the 1^st quarter of 2005, average borrowings decreased $137.9 million from the previous quarter, primarily due to a decline in federal funds purchased.

Net Interest Income

     In the 1^st quarter of 2005, net interest income amounted to $121.5 million, a decrease of approximately $2.7 million, or 2.2%, compared to the 4^th quarter of last year, and $1.5 million less than the 1^st quarter of 2004. The net yield on earning assets amounted to 3.79% in the current quarter compared to 3.80% in the 4^th quarter of last year.

     The decrease in net interest income in the 1^st quarter of 2005 compared to the previous quarter mainly resulted from the effects of higher rates on deposits and short-term borrowings and a reduction in average balances of investment securities all of which reduced net interest income by $7.6 million. Offsetting these reductions to net interest income were the effects of higher rates on loans and growth in average loan balances, which had the combined effect of increasing net interest income by $6.2 million. Interest earned on the Company’s inflation-indexed treasury securities decreased $2.8 million in the current quarter compared with the 4^th quarter 2004, as a result of a higher inflation index in the 4^th quarter and sales of $170.0 million of these securities in the 1^st quarter of 2005.

     During the quarter, the overall yield on interest earning assets increased 21 basis points to 5.02%, while the cost of interest bearing liabilities increased 18 basis points to 1.36%.

Non-Interest Income

     In the 1^st quarter of 2005, total non-interest income amounted to $80.7 million compared with $86.0 million in the same quarter last year, a decrease of 6.1%. Excluding net investment securities gains, non-interest income grew slightly. Bank card fees for the quarter increased by 10.8% over the same period last

COMMERCE BANCSHARES, INC.
Management Discussion of First Quarter Results
March 31, 2005

     year, primarily as a result of strong growth in debit card (up 17.8%) and credit card (up 13.5%) interchange fees, reflecting continued strong payment systems transaction volumes. Deposit account fees declined by 4.8% in the 1^st quarter compared to the same period last year as a result of lower commercial cash management fees, which were down $1.5 million this year. Since many of these services are paid for with compensating balances, rising interest rates have made deposits more valuable thus lowering fees paid by customers for these services. Trust fees showed only modest growth over the same period last year, but revenues from brokerage activities increased by 6.1%.

     As previously mentioned, during the three months ending March 31, 2005 net securities gains amounted to $3.6 million compared with net securities gains of $9.0 million in the same period last year.

Non-Interest Expense

     Non-interest expense for the 1^st quarter of 2005 amounted to $123.9 million, an increase of 4.2% compared with $118.9 million recorded in the 1^st quarter of last year. Non-interest expense was 1.2% higher compared to the 4^th quarter of 2004.

     Compared with the 1^st quarter of last year, salaries and benefits increased 3.2% mainly due to normal merit increases. Full-time equivalent employees totaled 4,836 and 4,847 at March 31, 2005 and 2004, respectively. Data processing and software costs increased 7.8% mainly as a result of higher bank card processing costs (related to the higher bank card revenues). Costs also increased for supplies and communication and marketing, while equipment and occupancy expenses decreased somewhat. Other non-interest expense increased $2.2 million over the same quarter last year primarily due to increases in operating losses, professional fees, and minority interest expense.

Income Taxes

     During the 1^st quarter, income tax expense amounted to $26.0 million, an increase of $6.4 million over the previous quarter and $2.4 million less than the same quarter last year. The effective tax rate for the Company was 34.3% in the 1^st quarter of 2005, compared with 27.2% in the 4^th quarter of 2004 and 35.7% in the 1^st quarter of 2004. The Company recognized tax benefits pertaining to certain corporate tax reorganization initiatives of $5.0 million in the 4^th quarter of 2004. The Company has additional income tax benefits totaling approximately $13.7 million associated with other corporate reorganization activities, 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. It is not expected that material tax benefits of this nature will continue beyond 2005.

Credit Quality

     Net loan charge-offs for the 1^st quarter of 2005 amounted to $3.8 million, compared with $8.2 million in the 4^th quarter of 2004 and $12.4 million in the 1^st quarter of 2004. The ratio of annualized net charge-offs to total average loans was .18% in the current quarter, compared with .61% in the same quarter last year and .40% in the 4^th quarter of 2004. The decrease in net charge-offs for the current quarter compared with the same period last year was mainly due to a $6.0 million charge-down of a large commercial loan in 2004 coupled with a recovery on this same loan of $1.4 million during the current quarter.

     For the 1^st quarter of 2005, net charge-offs on average credit card loans decreased to 3.09%, compared with 3.60% last year. Also, personal loan charge-offs decreased this quarter and amounted to .39% of average personal loans compared to .42% in the same period last year. The provision for loan losses for the quarter totaled $2.4 million, down from $10.3 million in the 1^st quarter of last year, and down from $7.2 million recorded in the 4th quarter of last year. The allowance for loan losses at March 31, 2005 amounted to $131.0 million, or 1.56% of total loans, and represented 756% of total non-performing loans.

     Total non-performing assets amounted to $18.6 million, a decrease of $180 thousand from the previous quarter, and amounted to .22% of loans. Non-performing assets are comprised of non-accrual loans ($17.3 million) and foreclosed real estate ($1.3 million). Loans past due more than 90 days and still accruing interest totaled $16.0 million at March 31, 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 March 31, 2005, the Company purchased 1.3 million shares of treasury stock at an average cost of $48.11 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, including estimates made on income taxes, expectations on the economy and other 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.