About Commerce Bancshares

Commerce Bancshares, Inc. (Commerce) operates as the bank holding company for Commerce Bank that engages in general banking business. The company is providing a broad range of retail, mortgage banking, corporate, investment, trust, and asset management products and services to individuals and businesses. The company also owns, directly or through the bank, various non-banking subsidiaries. Their activities include private equity investment, securities brokerage, insurance agency, specialty lending, and leasing activities. The company's principal markets, which are served by branch facilities, are located throughout Missouri, Kansas, and central Illinois, as well as Tulsa and Oklahoma City, Oklahoma and Denver, Colorado. Its two largest markets are St. Louis and Kansas City, which serve as central hubs for the company. The company also has offices in Dallas, Houston, Cincinnati, Nashville, Des Moines, Indianapolis, Grand Rapids, and Naples that support customers in its commercial and/or wealth segments and operates a commercial payments business with sales representatives covering the continental United States of America ('U.S.'). The markets the bank serves are mainly located in the lower Midwest, which provides natural sites for production and distribution facilities and serve as transportation hubs. The personal real estate lending operations of the bank are predominantly centered in its principal markets. In the second quarter of 2023, the company acquired L.J. Hart & Company, a municipal bond underwriter and advisor. Operating Segments The company is managed in three operating segments: Commercial, Consumer, and Wealth. The Commercial segment provides a full array of corporate lending, merchant and commercial bank card products, payment solutions, leasing, and international services, as well as business and government deposit, investment, institutional brokerage, and cash management services. The Consumer segment includes the retail branch network, consumer installment lending, personal mortgage banking, and consumer debit and credit bank card activities. The Wealth segment provides traditional trust and estate planning services, consumer brokerage services, and advisory and discretionary investment portfolio management services to both personal and institutional corporate customers. Loan Portfolio Commercial Loans Business Total business loans include loans used mainly to fund customer accounts receivable, inventories, and capital expenditures. The business loan portfolio includes tax-advantaged loans and leases which carry tax-free interest rates. In addition to tax-advantaged leases, the business loan portfolio includes other direct financing and sales type leases. These loans are used by commercial customers to finance capital purchases ranging from computer equipment to office and transportation equipment. Also included in the business portfolio are corporate card loans and are made in conjunction with the company's corporate card business for corporate trade purchases. Corporate card loans are made to corporate, non-profit and government customers nationwide, but have very short-term maturities, which limits credit risk. Business loans, excluding corporate card loans, are made primarily to customers in the regional trade area of the company, generally the central Midwest, encompassing the states of Missouri, Kansas, Illinois, and nearby Midwestern markets, including Iowa, Oklahoma, Colorado, Texas, Tennessee, Michigan, Indiana, and Ohio. This portfolio is diversified from an industry standpoint and includes businesses engaged in manufacturing, wholesaling, retailing, agribusiness, insurance, financial services, public utilities, health care, and other service businesses. Real Estate-Construction and Land Commercial construction loans are made during the construction phase for small and medium-sized office and medical buildings, manufacturing and warehouse facilities, apartment complexes, shopping centers, hotels and motels, and other commercial properties. Commercial land development loans relate to land owned or developed for use in conjunction with business properties. Real Estate-Business Total business real estate loans include mortgage loans for small and medium-sized office and medical buildings, manufacturing and warehouse facilities, distribution facilities, multi-family housing, farms, shopping centers, hotels and motels, churches, and other commercial properties. The business real estate borrowers and/or properties are generally located in local and regional markets where the company does business. Personal Banking Loans Real Estate-Personal The mortgage loans in this category are mainly for owner-occupied residential properties. The company originates both adjustable and fixed rate mortgage loans. The company does not purchase any loans from outside parties or brokers. The company originates certain mortgage loans with the intent to sell to the secondary market, generally FNMA or FHLMC conforming fixed rate loans. The remaining loans are originated with the intent to hold to maturity. Consumer Consumer loans consist of private banking, automobile, motorcycle, marine, tractor/trailer, recreational vehicle (RV), fixed rate home equity, patient health care financing and other types of consumer loans. Approximately 39% of the consumer portfolio consists of automobile loans, 32% in private banking loans, 11% in fixed rate home equity loans, and 10% in healthcare financing loans. Revolving Home Equity Revolving home equity loans are 100% adjustable rate loans. Home equity loans are secured mainly by second mortgages (and less frequently, first mortgages) on residential property of the borrower. Consumer Credit Card The credit card portfolio is concentrated within regional markets served by the company. The company offers a variety of credit card products, including affinity cards, rewards cards, and standard and premium credit cards, and emphasizes its credit card relationship product, Special Connections. Approximately 37% of the households that own a Commerce credit card product also maintain a deposit relationship with the subsidiary bank. Investment Securities As of December 31, 2023, the company's investment securities were U.S. government and federal agency obligations; government-sponsored enterprise obligations; state and municipal obligations; agency mortgage-backed securities; non-agency mortgage-backed securities; asset-backed securities; and other debt securities. Deposits Deposits, including both individual and corporate customer deposits, are the primary funding source for the bank and are acquired from a broad base of local markets. As of December 31, 2023, the company's deposits were non-interest bearing deposits; savings, interest checking and money market deposits; certificates of deposit of less than $100,000; and certificates of deposit of $100,000 and over. Supervision and Regulation 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, as amended (BHC Act). When reviewing bank acquisition applications for approval, the Federal Reserve Board considers, among other things, the bank's record in meeting the credit needs of the communities it serves in accordance with the Community Reinvestment Act of 1977, as amended (CRA). Under the terms of the CRA, banks have a continuing obligation, consistent with safe and sound operation, to help meet the credit needs of their communities, including providing credit to individuals residing in low- and moderate-income areas. The bank has a CRA rating of 'outstanding'. The company is required to file various reports and additional information with the Federal Reserve Board. The Federal Reserve Board regularly performs examinations of the company. The bank is a state-chartered Federal Reserve member bank and is subject to regulation, supervision and examination by the Federal Reserve Bank of Kansas City and the Missouri Division of Finance. The bank is also subject to regulation by the Federal Deposit Insurance Corporation (FDIC). The bank is subject to federal and state consumer protection laws, including laws designed to protect customers and promote fair lending. These laws include the Equal Credit Opportunity Act, the Fair Credit Reporting Act, the Truth in Lending Act, the Home Mortgage Disclosure Act, the Real Estate Settlement Procedures Act, and their respective state law counterparts. The company operates as a bank holding company, as defined by the Gramm-Leach-Bliley Financial Modernization Act of 1999 (GLB Act), and the bank qualifies as a financial subsidiary under the GLB Act, which allows it to engage in investment banking, insurance agency, brokerage, and underwriting activities that were not available to banks prior to the GLB Act. The company must also comply with the requirements of the bank Secrecy Act (BSA). The company is subject to regulation under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2011 (Dodd-Frank Act). The company is subject to examinations by the Consumer Financial Protection Bureau (CFPB). Substantially all of the deposits held by the bank are insured up to applicable limits (generally $250,000 per depositor for each account ownership category) by the FDIC's Deposit Insurance Fund (DIF) and are subject to deposit insurance assessments to maintain the DIF. The Federal Reserve Board regulates transactions between the bank and its subsidiaries. Generally, the Federal Reserve Act and Regulation W, as amended by the Dodd-Frank Act, limit the company's banking subsidiary and its subsidiaries to lending and other 'covered transactions' with affiliates. History Commerce Bancshares, Inc. was founded in 1865. The company was incorporated under the laws of Missouri in 1966.