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.
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.
Item 2.
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.
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.
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.
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.
PART II
Item 5.
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.
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.
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.
Item 7a.
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.
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.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures
None.
PART III
Item 10.
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.
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.
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.
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.
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 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
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.
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
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