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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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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, 1998
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 19, 1999, the aggregate market value of the voting stock
held by non-affiliates of the Registrant was approximately $2,257,000,000.
As of February 19, 1999, there were 60,893,055 shares of Registrant's $5
Par Value Common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
The Annual Report to Shareholders for the fiscal year ended December 31,
1998 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 21, 1999, 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 banks and one state bank 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
(relating to extensions of credit made by the banking subsidiaries), providing
venture capital, and mortgage banking. The Company also owns second tier
holding companies which are the direct owners of several of the above
mentioned banks.
The Company is the second largest Missouri-based bank holding company in
terms of deposit market share. The Company's Missouri bank charter has
locations in regional markets throughout Missouri, (which comprise
approximately 79% of the banking assets of the Company) and 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, insurance
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 Company, as a bank holding company, is primarily regulated by the Board
of Governors of the Federal Reserve System under the Bank Holding Company Act
of 1956. The Company owns six banking subsidiaries which are organized as
national banking associations and are subject to regulation, supervision and
examination by the Office of the Comptroller of the Currency. The state-
chartered bank is regulated by Kansas banking authorities. All banks are also
subject to regulation by the Federal Deposit Insurance Corporation.
Information regarding capital adequacy standards of the Federal banking
regulators is discussed on page 58 of the 1998 Annual Report to Shareholders.
Information regarding dividend restrictions is on page 63 of the 1998
Annual Report to Shareholders.
In the normal course of business, the Company evaluates the potential
acquisition of, and holds discussions with, various financial institutions
eligible for bank holding company ownership or control. As a general rule,
the Company publicly announces any material acquisitions when a definitive
agreement has been reached. As discussed on page 51 of the 1998 Annual Report
to Shareholders, the Company completed the acquisitions of four Kansas banks
in 1998.
1
On March 30, 1998, the Company completed a three-for-two stock split of its
$5 par common stock. All financial data in the Annual Report on Form 10-K has
been restated to reflect the impact of the split.
The Company and its subsidiaries employed 5,105 persons on a full-time
basis and 957 persons on a part-time basis at December 31, 1998.
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 1998 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
-------------
I. Distribution of Assets, Liabilities and Stockholders'
Equity; Interest Rates and Interest Differential....... 28, 42-45
II. Investment Portfolio.................................... 36, 52-53
III. Loan Portfolio
Types of Loans........................................ 33
Maturities and Sensitivities of Loans to Changes in
Interest Rates..................................... 33
Risk Elements......................................... 35-36
IV. Summary of Loan Loss Experience......................... 29-31
V. Deposits................................................ 39, 42-43
VI. Return on Equity and Assets............................. 27
VII. Short-Term Borrowings................................... 53
Item 2. Properties
The larger bank subsidiaries maintain their main offices in various
buildings listed below. These are owned by the bank subsidiary or a subsidiary
of the bank. 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 79% 58%
1000 Walnut
Kansas City, MO..................... 384,000 89 31
720 Main
Kansas City, MO..................... 180,000 100 86
8000 Forsyth
Clayton, MO......................... 197,000 96 90
416 Main
Peoria, IL.......................... 224,000 84 25
150 N. Main
Wichita, KS......................... 191,000 76 50
2
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 61 of the Annual Report to
Shareholders for the fiscal year ended December 31, 1998, and is hereby
incorporated be reference.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted during the fourth quarter of 1998 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, 45. 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, 47.. Senior Vice Present of the Company since October, 1998.
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.
Kevin G. Barth, 38...... Senior Vice President of the Company and Vice Chairman
of Commerce Bank, N.A. (Missouri), a subsidiary of the
Company, since October, 1998. Executive Vice President
of Commerce Bank, N.A. (Missouri) prior thereto.
A. Bayard Clark, 53..... Chief Financial Officer, Executive Vice President and
Treasurer of the Company since December, 1995. Executive
Vice President of the Company prior thereto.
Sara E. Foster, 38...... Senior Vice President of the Company since December,
1997. Vice President of the Company prior thereto.
David W. Kemper, 48..... 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.
3
Name and Age Positions with Registrant
------------ -------------------------
Jonathan M. Kemper, 45.. 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, 38...... 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, 48.. Executive Vice President of the Company since October,
1998. 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.
Robert C. Matthews, Jr., Executive Vice President of the Company since December,
51..................... 1989.
Michael J. Petrie, 42... 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).
Robert J. Rauscher, 41.. Senior Vice President of the Company since October,
1997. Senior Vice President of Commerce Bank, N.A.
(Missouri) since October, 1995.
William A. Sullins, Jr., Vice Chairman of the Company since August, 1992. Vice
60..................... Chairman of Commerce Bank, N.A. (Clayton, MO) prior
thereto.
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 26 of the Annual
Report to Shareholders for the fiscal year ended December 31, 1998, and is
hereby incorporated by reference.
Item 6. Selected Financial Data
The information required by this item is set forth on page 27 of the Annual
Report to Shareholders for the fiscal year ended December 31, 1998, 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 27 through 45
of the Annual Report to Shareholders for the fiscal year ended December 31,
1998, and is hereby incorporated by reference.
4
Item 7a. Quantitative and Qualitative Disclosures About Market Risk
The information required by this item is set forth on pages 38, 39, 50 and
61 of the Annual Report to Shareholders for the fiscal year ended December 31,
1998, and is hereby incorporated by reference.
Item 8. Financial Statements and Supplementary Data
The information required by this item is set forth on pages 46 through 66
of the Annual Report to Shareholders for the fiscal year ended December 31,
1998, 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.
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.
5
(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 July 31, 1998 was filed in
quarterly report on Form 10-Q dated August 10, 1998, 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.
(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
6
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, 1998, 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 5th day of February, 1999.
Signed by the following directors:
Messrs. Fred L. Brown; W. Thomas Grant II, James B. Hebenstreit;
David W. Kemper; Jonathan M. Kemper; Terry O. Meek; Benjamin F.
Rassieur III; William A. Sullins, Jr., Andrew C. Taylor; and Robert
H. West.
27--Financial Data Schedule (filed only with electronic
transmission)
(b) Reports on Form 8-K:
The Company filed a report on Form 8-K on December 22, 1998 containing
Commerce Bancshares, Inc. and Subsidiaries consolidated balance sheet and
statements of income as of November 30, 1998 as required by the agreement
to acquire Fidelity Bankshares, Inc.
7
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, 1999.
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, 1999.
/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)
Fred L. Brown
W. Thomas Grant II
James B. Hebenstreit A majority of the
Jonathan M. Kemper Board of Directors*
Terry O. Meek
Benjamin F. Rassieur III
William A. Sullins, Jr.
Andrew C. Taylor
Robert H. West
- --------
*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
8
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 July 31, 1998 was filed in quarterly report
on Form 10-Q dated August 10, 1998, 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 incoporated 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 incoporated 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 incoporated 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