CBSH PIP 12.31.2011 11-K
Table of Contents



 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 11-K

(Mark One)

þ
ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2011


OR

                                                                                                                                           
o
TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the transition period from to

Commission File No. 0-2989

A. Full title of the plan and the address of the plan, if different from that of the issuer named below:

COMMERCE BANCSHARES PARTICIPATING INVESTMENT PLAN
B. Name of issuer of the securities held pursuant to the plan and the address of its principal executive office:    

COMMERCE BANCSHARES, INC.
1000 Walnut, Kansas City, MO 64106

 





COMMERCE BANCSHARES PARTICIPATING INVESTMENT PLAN

TABLE OF CONTENTS
 
 
 
Page Number
1,2

 
 
 
 
Financial Statements:
 
 
 
3

 
4

 
5

 
 
 
 
Supplemental Schedules:
 
 
 
15

Consent of Independent Registered Public Accounting Firm
 
 
 
 
 
 
 


    

        


                                










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SIGNATURES

The Plan. Pursuant to the requirements of the Securities Exchange Act of 1934, the trustees (or other persons who administer the employee benefit plan) have duly caused this annual report to be signed on its behalf by the undersigned hereunto duly authorized.

COMMERCE BANCSHARES
PARTICIPATING INVESTMENT PLAN

By: /s/ Jeffery D. Aberdeen    
Jeffery D. Aberdeen
Co-Chairperson, Retirement Committee

By: /s/ Sara E. Foster        
Sara E. Foster
Co-Chairperson, Retirement Committee


Date: June 20, 2012
                





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Report of Independent Registered Public Accounting Firm

The Retirement Committee of Commerce Bancshares, Inc.
Commerce Bancshares Participating Investment Plan:
We have audited the accompanying statements of net assets available for benefits of Commerce Bancshares Participant Investment Plan (the Plan) as of December 31, 2011 and 2010, and the related statements of changes in net assets available for benefits for the years ended December 31, 2011 and December 31, 2010. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. The accompanying statement of changes in net assets available for benefits of the Commerce Bancshares Participating Investment Plan as of December 31, 2009 was audited by other auditors whose report thereon dated June 24, 2010, expressed an unqualified opinion on the statement.
We conducted our audits in accordance with auditing standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Plan's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for benefits of the Plan as of December 31, 2011 and 2010, and the changes in net assets available for benefits for the years then ended in conformity with accounting principles generally accepted in the United States of America.
Our audits were performed for the purpose of forming an opinion on the basic financial statements taken as a whole. The accompanying supplemental schedule H, line 4i -- schedule of assets (held at year end) as of December 31, 2011 is presented for the purpose of additional analysis and is not a required part of the basic financial statements but is supplementary information required by the Department of Labor's Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. The supplemental schedule is the responsibility of the Plan's management. The supplemental schedule has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.

/s/ KPMG LLP
Kansas City, Missouri
June 20, 2012



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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Retirement Committee of Commerce Bancshares, Inc.
Commerce Bancshares Participating Investment Plan
Kansas City, Missouri

We have audited the accompanying statement of changes in net assets available for benefits of the Commerce Bancshares Participating Investment Plan (the Plan) for the year ended December 31, 2009. This financial statement is the responsibility of the Plan's management. Our responsibility is to express an opinion on this financial statement based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free of material misstatement. The Plan is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Plan's internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statement referred to above presents fairly, in all material respects, the changes in net assets available for benefits for the year ended December 31, 2009, in conformity with U.S. generally accepted accounting principles.
/s/ Mayer Hoffman McCann P.C.
Leawood, Kansas
June 24, 2010







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COMMERCE BANCSHARES PARTICIPATING INVESTMENT PLAN
Statements of Net Assets Available for Benefits
December 31, 2011 and 2010



 
 
 
 
 
 
2011
 
2010
ASSETS
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash, non-interest bearing
 
$

 
$

 
 
 
 
 
 
 
 
 
Investments, at fair value:
 
 
 
 
 
Commerce Bancshares, Inc. Common Stock Fund:
 
 
 
 
 
Commerce Bancshares, Inc. Common Stock
132,064,184

 
135,676,778

 
 
Fidelity Retirement Money Market Fund
3,873,680

 
4,006,583

 
 
 
Commerce Bancshares, Inc. Common Stock Fund
135,937,864

 
139,683,361

 
 
 
 
 
 
 
 
 
 
Mutual funds
239,555,571

 
233,903,734

 
 
 
Total investments
375,493,435

 
373,587,095

 
 
 
 
 
 
 
 
 
Notes receivable from participants
9,322,136

 
8,585,643

 
 
 
 
 
 
 
 
 
Total assets
384,815,571

 
382,172,738

 
 
 
 
 
 
 
 
 
LIABILITIES
 
 
 
 
 
 
 
 
 
 
 
 
Excess contributions payable
57,620

 
58,470

 
 
 
 
 
 
 
 
 
 
 
 
Net assets available for benefits
$
384,757,951

 
$
382,114,268

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
See accompanying notes to financial statements.
 
 
 


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COMMERCE BANCSHARES PARTICIPATING INVESTMENT PLAN
Statements of Changes in Net Assets Available for Benefits
Years ended December 31, 2011, 2010, and 2009



 
 
 
 
 
2011
 
2010
 
2009
Additions to Net Assets Attributable to:
 
 
 
 
 
 
Investment income:
 
 
 
 
 
 
 
Interest
 
$
3,003

 
$
5,550

 
$
198,946

 
Dividends
 
8,700,763

 
6,964,186

 
6,353,281

 
Net (depreciation) appreciation in fair value of investments
(8,661,555
)
 
29,895,867

 
17,025,706

 
 
Total investment income
 
42,211

 
36,865,603

 
23,577,933

 
 
 
 
 
 
 
 
 
 
Interest income on notes receivable from participants
406,728

 
425,087

 
477,495

 
 
 
 
 
 
 
 
 
 
Contributions:
 
 
 
 
 
 
 
Participant
 
18,048,440

 
17,843,302

 
17,496,019

 
Employer
 
11,753,124

 
9,891,938

 
9,772,262

 
Participant rollover
 
1,107,284

 
946,248

 
463,575

 
 
Total contributions
 
30,908,848

 
28,681,488

 
27,731,856

 
 
Total additions
 
31,357,787

 
65,972,178

 
51,787,284

 
 
 
 
 
 
 
 
 
 
Deductions from Net Assets Attributable to:
 
 
 
 
 
 
Distributions to participants
 
(28,670,419
)
 
(20,063,810
)
 
(13,785,715
)
Administrative expenses
 
(43,685
)
 
(49,058
)
 
(44,204
)
 
 
Total deductions
(28,714,104
)
 
(20,112,868
)
 
(13,829,919
)
 
 
 
 
 
 
 
 
 
 
 
 
Net increase
 
 
2,643,683

 
45,859,310

 
37,957,365

Net assets available for benefits:
 
 
 
 
 
 
 
Beginning of year
 
382,114,268

 
336,254,958

 
298,297,593

 
End of year
 
$
384,757,951

 
$
382,114,268

 
$
336,254,958

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
See accompanying notes to financial statements.
 
 
 
 
 






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COMMERCE BANCSHARES PARTICIPATING INVESTMENT PLAN
Notes to Financial Statements
Years ended December 31, 2011, 2010, and 2009



(1)
Description of the Plan

General

The following description of the Commerce Bancshares Participating Investment Plan (the Plan) is provided for general informational purposes only. Terms of the Plan are more fully described in the Plan document, which is available to each participant. The Plan is a defined contribution plan that is qualified under section 401 of the Internal Revenue Code and covers employees of Commerce Bancshares, Inc. (the Company) or a participating subsidiary who are 21 years or older. Employees are eligible to participate as of January 1, April 1, July 1, or October 1 following the completion of thirty days of service. The Plan is subject to the provisions of the Employee Retirement Security Act of 1974 (ERISA).

The Company is the plan sponsor and is advised by the Retirement Committee of Commerce Bancshares, Inc., which acts as the plan administrator. Commerce Bank, a subsidiary of the Company, is the trustee of the Plan. There were 4,296 and 4,348 participants with balances in the Plan at December 31, 2011 and 2010, respectively.

Contributions

Participating employees may elect to contribute to the Plan a maximum of 25% of their eligible compensation, as defined by the Plan, and subject to certain limitations under the Internal Revenue Code (not to exceed $16,500 in each of the years 2011, 2010 and 2009). Additionally, participants who attained the age of 50 could contribute an additional $5,500 of catch-up contributions in each of the years 2011, 2010 and 2009. The catch-up contributions are not subject to the employer matching contribution. All participant contributions are made on a pretax basis.

The Company's matching contribution is a graded matching percentage from 50% - 100% determined by age plus years of employment on the first 7% of eligible compensation.  Additionally, the Company may make a discretionary contribution.  In 2011, the Company made a discretionary contribution of $1.5 million which is included in Employer Contributions in the statement of changes in net assets available for benefits.  The Company did not make any discretionary contributions in 2010 or 2009. 

Participants have the option to direct the investment of their contributions and the matching employer's contributions in any combination of the Commerce Bancshares, Inc. Common Stock Fund (Company Stock Fund), Commerce Bond Fund, Commerce Growth Fund, Commerce Short Term Government Bond Fund, Vanguard Total Stock Market Index Fund, AIM Funds Group Small Cap Growth “A” Fund, Vanguard Small Cap Value Index Fund, Fidelity Freedom Income Fund, Fidelity Freedom 2005 Fund, Fidelity Freedom 2010 Fund, Fidelity Freedom 2015 Fund, Fidelity Freedom 2020 Fund, Fidelity Freedom 2025 Fund, Fidelity Freedom 2030 Fund, Fidelity Freedom 2035 Fund, Fidelity Freedom 2040 Fund, Fidelity Freedom 2045 Fund, Fidelity Freedom 2050 Fund, Fidelity Retirement Money Market Fund, Fidelity Retirement Government Money Market Fund, Fidelity Mid Cap Value Fund, Spartan 500 Index Fund, 3rd Ave. Real Estate Value Fund, ABF Large Cap Value Fund, Dodge & Cox International Stock Fund, Vanguard Morgan Growth Fund and the American Century Inflation Adjusted Fund. During 2011, the Spartan 500 Index Fund - Institutional Class and the Spartan U.S. Bond Index Fund - Institutional Class were added to the Plan's investment options. The Plan eliminated the Spartan 500 Index Fund - Investor Class and the Fidelity U.S. Bond Index Fund as investment options in 2011.



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Participants may roll over funds into the Plan from any qualified plan, subject to the approval of the plan administrator. Rollover contributions earn investment income and share in investment gains or losses. Participants are 100% vested in rollover contributions. Participants direct the investment of their rollover contributions to any of the various investment options offered by the Plan.

Assets of the Company Stock Fund include Commerce Bancshares, Inc. common stock. As a result, cash dividends on Commerce Bancshares, Inc. common stock are paid directly to the Company Stock Fund and allocated to the participants. Participants with balances in the Company Stock Fund have the option to reinvest their cash dividends in the Company Stock Fund or have dividends paid to them directly.

Participant Accounts

Each participant's account is credited with the participant's contribution, the Company's matching and discretionary contributions, and an allocation of Plan earnings and administrative expenses. The earnings allocation is based on the performance of the participant's allocated investment fund balances. The benefit to which a participant is entitled is the vested portion of the participant's account.

Participants may make transfers between existing fund balances at any time. Participating employees may change future investment elections at any time upon notification to the Plan. Both transactions are done in 1% increments.
 
Participant Vesting

Participants are vested immediately in their contributions plus actual earnings thereon, however, only upon termination of employment are participants entitled to receive their contributions and accumulated earnings thereon. Current Company matching contributions and Company discretionary contributions are subject to the following vesting schedule:

Years of vesting service
 
Percentage vested
 
 
 
Less than 3
 
%
3 or more
 
100


A participant will become fully vested in the value of all Company contributions in the event of death, permanent and total disability, or retirement on or after age 65, regardless of the participant's years of vesting service. A year of vesting service generally is each Plan year during which the participant earns at least 1,000 hours of service and is over the age of 18.

Forfeitures

Forfeitures are based on the nonvested portion of the Company's contribution upon employee termination. Forfeited amounts are applied as a reduction of contributions by the Company or by participating subsidiaries. Forfeitures were used to reduce the Company's contribution by $150,129 in 2011, $236,856 in 2010 and $147,979 in 2009. The balance of unallocated forfeitures available to offset future Company contributions amounted to $10,184 and $9,912 at December 31, 2011 and 2010, respectively.

Notes Receivable from Participants

A participant may borrow from the Plan amounts collateralized by the vested portion of his or her Plan account. These loans may not exceed the lesser of $50,000 or 50% of the participant's vested account balance (excluding employee stock ownership plan account balances). The loans are repaid through payroll deductions over terms which are based upon the amounts borrowed and normally do not exceed five years. The loans are secured

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by the balance in the participant's account. Interest rates charged on participant loans are based on the Commerce Prime Rate plus 1% at the date of the distribution and are fixed throughout the life of the loan. The participant may continue to make contributions to the Plan throughout the term of the loan.

Administrative Expenses

Certain administrative functions are performed by officers or employees of Commerce Bancshares, Inc. (the Company). No such officer or employee receives compensation from the Plan. Administrative expenses incidental to the administration of the Plan may be paid by the Company, and, if not paid by the Company, shall be paid by the Plan. A setup fee for new loans is deducted from the respective participant's account. The Company elected to pay substantially all other administration fees for the years ended December 31, 2011, 2010 and 2009 and presently intends to continue to do so, although the Company can, at its discretion, discontinue this practice.

Distributions

Distributions of vested account balances are available upon termination, retirement, death or permanent and total disability. Distributions are made in lump sum amounts to the participant or designated beneficiaries.


(2)
Summary of Significant Accounting Policies

Basis of Presentation

The accompanying financial statements have been prepared on the accrual basis in conformity with accounting principles generally accepted in the United States of America. Certain amounts for prior years have been reclassified to conform to the current year presentation. Such reclassifications had no effect on net income or total assets.

Investments

The Plan's investments are held in an account at Fidelity Management Trust Company. On each valuation date, as defined by the Plan, securities held by the Plan are valued at fair value, and the increase or decrease in the value of securities held, plus any net income or loss of the Plan, is allocated to the participant's accounts. Refer to the Fair Value Measurements note for additional valuation information.

Net appreciation (depreciation) in fair value of investments includes realized and unrealized gains and losses. Also included is the reinvestment of interest and dividends earned on funds invested in the mutual and Company Stock funds. Purchases and sales of securities are recorded on a trade-date basis (the date the order to buy or sell is executed). Interest is accrued as earned and dividend income is recorded on the ex-dividend date.

Notes Receivable from Participants

Loans to participants are carried at amortized cost and are measured as the unpaid principal balance plus any accrued but unpaid interest. Delinquent participation loans are reclassified as distributions, based upon the terms of the Plan document.

Use of Estimates

The Plan utilizes a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities to prepare its financial statements in conformity with U.S. generally accepted accounting principles. Actual results could differ from those estimates.



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Payment of Benefits

Distributions to the participants of the Plan are recorded when paid.


(3)
Risks and Uncertainties

The Plan invests in various investment securities. Investment securities are exposed to various risks, such as interest rate, market, and credit risks. Due to the level of risk associated with certain investment securities, it is at least reasonably possible that changes in the values of investment securities will occur in the near term and that such changes could materially affect participants' account balances and the amounts reported in the statements of net assets available for benefits.



(4)
Company Stock Fund

The Company Stock Fund is accounted for on a unit accounting basis. The fund has a cash reserve in order to provide the liquidity necessary to process daily fund transactions by the close of market each business day. The cash reserve generally represents between one and five percent of the total fund value and varies depending upon account activity. The reserve may consist of cash or cash equivalents. As of December 31, 2011 and 2010, the cash reserve totaled approximately $3.9 million and $4.0 million, respectively.

In January 1995, all assets held by the Company's qualified employee stock ownership plan were merged into the Plan and remain under a portion of the Plan that qualifies as an employee stock ownership plan (ESOP). All Company common stock attributable to the ESOP has been fully allocated to participant account balances at December 31, 2011 and 2010 and is held as units of the Company Stock Fund. At December 31, 2011 and 2010, 799 and 824 participants, respectively, had an ESOP related account balance.

Information about changes in ESOP assets included in the Company Stock Fund for the years ended December 31, 2011, 2010 and 2009, is as follows:
 
 
 
2011
 
2010
 
2009
Beginning balance:
$
26,096,312

 
$
25,038,611

 
$
27,277,351

 
Net (depreciation) appreciation in
 
 
 
 
 
 
     fair value of investments
157,942

 
1,898,335

 
(1,514,355
)
 
Distributions to participants
(794,042
)
 
(840,634
)
 
(724,385
)
 
 
Ending balance
$
25,460,212

 
$
26,096,312

 
$
25,038,611



In addition, the Company Stock Fund utilizes available cash from participant and employer directed contributions and dividends to purchase Commerce Bancshares Inc. common stock on the open market. During 2011, 2010 and 2009, total dividends paid on shares of Company stock held by the Company Stock Fund and the amount thereof which was distributed directly to the participants is as follows:

 
 
 
2011
 
2010
 
2009
Portion of dividend reinvested in Company stock
$
1,210,211

 
$
1,182,707

 
$
1,125,923

Portion of dividend distributed to participants
1,812,424

 
1,947,308

 
1,980,166

Dividends paid on shares of Company stock
$
3,022,635

 
$
3,130,015

 
$
3,106,089

 
 
 
 
 
 
 


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(5)
Investments

The following table sets forth investments that represent 5% or more of the market value of the Plan's net assets at December 31, 2011 or 2010:

 
 
 
 
 
2011
 
2010
Company Stock Fund:
 
 
 
 
Commerce Bancshares, Inc. Common Stock
$
132,064,184

 
$
135,676,778

 
Fidelity Retirement Money Market Fund
3,873,680

 
4,006,583

 
 
Company Stock Fund
135,937,864

 
139,683,361

Fidelity Retirement Money Market Fund
22,758,952

 
25,327,925

Spartan 500 Index Fund
21,347,812

 
20,927,576

Commerce Growth Fund
19,546,495

 
21,193,485

Commerce Bond Fund
29,560,855

 
25,329,161



During 2011, 2010 and 2009 the Plan's investments appreciated (depreciated) in value as follows:

 
 
 
 
2011
 
2010
 
2009
Company Stock Fund
$
1,407,681

 
$
10,188,683

 
$
(10,019,889
)
Mutual Funds
(10,069,236
)
 
19,707,184

 
27,045,595

 
 
 
 
$
(8,661,555
)
 
$
29,895,867

 
$
17,025,706



(6)
Federal Income Taxes

In a determination letter dated July 11, 2002, the Internal Revenue Service stated that the Plan, as amended through August 16, 2001, met the requirements of section 401(a) of the Internal Revenue Code (IRC) and the Trust established thereunder was exempt from federal tax under section 501(a) of the IRC. Although the Plan has been amended since receiving the determination letter, the plan administrator believes that the Plan, as designed and operated, is in compliance with the applicable provisions of the IRC.

The Company is entitled to deduct for federal income tax purposes the amount of contributions made by the Company and each of its participating subsidiaries for the benefit of employees. In general, neither such contributions nor the income from the trust will be taxable to participants as income prior to the time such participants receive a distribution from the Plan. Participant contributions are not required to be included in the employees' taxable income until the year or years in which they are distributed or made available to them.

Accounting principles generally accepted in the United States of America require Plan management to evaluate tax positions taken by the Plan and recognize a tax liability if the Plan has taken an uncertain position that more likely than not would not be sustained upon examination by the Internal Revenue Service.  The Plan administrator has analyzed the tax positions taken by the Plan and has concluded that as of December 31, 2011 and 2010, there are no uncertain positions taken or expected to be taken that would require recognition of a liability or disclosure in the financial statements. The Plan is subject to routine audits by taxing jurisdictions; however, there are currently no audits for any tax periods in progress. The Plan administrator believes it is no longer subject to income tax examinations for years prior to 2008.

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(7)
Transactions with Related Parties

Certain Plan investments are shares of mutual funds managed by The Commerce Trust Company, a division of Commerce Bank. The Company Stock Fund also includes shares of Company common stock. Transactions in these funds qualify as party-in-interest transactions. Plan investments also include shares of mutual funds managed by Fidelity Management Trust Company, custodian of the Plan, and Fidelity Investments Institutional Operations Company, Inc., record keeper of the Plan. Transactions in these funds are exempt party-in-interest transactions under ERISA.

Transactions with the Company and its affiliates during the years ended December 31, 2011, 2010, and 2009 were as follows:

 
Purchases
 
Sales
 
 
 
 
 
 
 
 
 
Realized
 
Units
 
Cost
 
Units
 
Proceeds
 
Gains (Losses)
2011:
 
 
 
 
 
 
 
 
 
Company Stock Fund
1,081,068

 
$
22,431,122

 
1,305,078

 
$
27,584,300

 
$
4,620,906

Commerce Mutual Funds
763,346

 
15,473,665

 
594,204

 
12,325,040

 
535,025

 
 
 
 
 
 
 
 
 
 
2010:
 
 
 
 
 
 
 
 
 
Company Stock Fund
960,001

 
$
18,744,632

 
1,237,876

 
$
24,666,479

 
$
4,172,140

Commerce Mutual Funds
783,994

 
15,769,463

 
463,651

 
9,292,419

 
215,487

 
 
 
 
 
 
 
 
 
 
2009:
 
 
 
 
 
 
 
 
 
Company Stock Fund
1,128,062

 
$
19,447,254

 
1,017,125

 
$
17,505,745

 
$
1,285,415

Commerce Mutual Funds
717,257

 
13,081,202

 
723,351

 
12,862,390

 
(1,486,610
)


(8)
Excess Contributions Payable

Contributions received from participants for 2011 and 2010 are net of payments of $57,620 made in February 2012 and payments of $58,470 made in March 2011 to certain active participants to return to them excess deferral contributions as required to satisfy the relevant nondiscrimination provisions of the Plan.  At December 31, 2011 and 2010, $57,620 and $58,470, respectively, have been included in the Plan's statements of net assets available for benefits as excess contributions payable.


(9)
Fair Value Measurements

Effective January 1, 2008, the Plan adopted the Financial Accounting Standards Board's (FASB) guidance for fair value measurements. Under this guidance, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Depending on the nature of the asset or liability, the Plan uses various valuation techniques and assumptions when estimating fair value, which are in accordance with the FASB's guidance. The guidance establishes a three-level valuation hierarchy for disclosure of fair value measurements. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. The three

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levels are defined as follows:

Level 1 - inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets.
Level 2 - inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the assets or liabilities, either directly or indirectly (such as interest rates, yield curves, and prepayment speeds).
Level 3 - inputs to the valuation methodology are unobservable and significant to the fair value. These may be internally developed, using the Plan's best information and assumptions that a market participant would consider.

When determining the fair value measurements for assets and liabilities required or permitted to be recorded or disclosed at fair value, the Plan considers the principal or most advantageous market in which it would transact and considers assumptions that market participants would use when pricing the asset or liability. When possible, the Plan looks to active and observable markets to price identical assets or liabilities. When identical assets and liabilities are not traded in active markets, the Plan looks to observable market data for similar assets and liabilities. To the extent certain assets and liabilities are not actively traded in observable markets and the Plan must use alternative valuation techniques to derive an estimated fair value measurement.

Following is a description of the Plan's valuation methodologies used for assets measured at fair value on a recurring basis:

Common Stock

Common stocks are valued at the closing price reported on the active market on which the individual securities are traded. Because the inputs to these assets are quoted prices in an active market, the measurements are classified as Level 1.

Mutual Funds

Mutual funds are valued at the net asset value (NAV) of shares held by the Plan at year end. Because the inputs to these assets are quoted prices in an active market, the measurements are classified as Level 1.






















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The following tables set forth by level, within the fair value hierarchy, the Plan's assets at fair value as of December 31, 2011 and 2010. There were no transfers between levels in the hierarchy in 2011.


 
 
 
 
 
 
Quoted Prices
 
Significant
 
Significant
 
 
 
 
 
 
in Active
 
Other
 
Other
 
 
 
 
 
 
Markets for
 
Observable
 
Unobservable
 
 
 
 
December 31,
 
Identical Assets
 
Inputs
 
Inputs
 
 
 
 
2011
 
(Level 1)
 
(Level 2)
 
(Level 3)
 
 
 
 
 
 
 
 
 
 
 
Company Stock Fund:
 
 
 
 
 
 
 
 
Commerce Bancshares, Inc.
 
 
 
 
 
 
 
 
 
Common Stock
$
132,064,184

 
$
132,064,184

 
$

 
$

 
Short Term Fixed Income
 
 
 
 
 
 
 
 
 
Mutual Fund
3,873,680

 
3,873,680

 

 

 
 
 
 
 
 
 
 
 
 
 
Mutual Funds:
 
 
 
 
 
 
 
 
Large Cap
77,230,730

 
77,230,730

 

 

 
Mid Cap
16,580,726

 
16,580,726

 

 

 
Small Cap
13,756,339

 
13,756,339

 

 

 
International
17,664,453

 
17,664,453

 

 

 
Specialty
1,153,704

 
1,153,704

 

 

 
Target Date
 
 
 
 
 
 
 
 
 
Blended Fund
35,036,279

 
35,036,279

 

 

 
Other Blended
 
 
 
 
 
 
 
 
 
Fund
817,861

 
817,861

 

 

 
Fixed Income
42,947,683

 
42,947,683

 

 

 
Other Income
3,344,176

 
3,344,176

 

 

 
Short-Term
 
 
 
 
 
 
 
 
 
Fixed Income
31,023,620

 
31,023,620

 

 

 
 
 
 
$
375,493,435

 
$
375,493,435

 
$

 
$




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Quoted Prices
 
Significant
 
Significant
 
 
 
 
 
 
in Active
 
Other
 
Other
 
 
 
 
 
 
Markets for
 
Observable
 
Unobservable
 
 
 
 
December 31,
 
Identical Assets
 
Inputs
 
Inputs
 
 
 
 
2010
 
(Level 1)
 
(Level 2)
 
(Level 3)
 
 
 
 
 
 
 
 
 
 
 
Company Stock Fund:
 
 
 
 
 
 
 
 
Commerce Bancshares, Inc.
 
 
 
 
 
 
 
 
 
Common Stock
$
135,676,778

 
$
135,676,778

 
$

 
$

 
Short Term Fixed Income
 
 
 
 
 
 
 
 
 
Mutual Fund
4,006,583

 
4,006,583

 

 

 
 
 
 
 
 
 
 
 
 
 
Mutual Funds:
 
 
 
 
 
 
 
 
Large Cap
78,758,816

 
78,758,816

 

 

 
Mid Cap
16,788,521

 
16,788,521

 

 

 
Small Cap
14,176,441

 
14,176,441

 

 

 
International
20,912,213

 
20,912,213

 

 

 
Specialty
1,185,612

 
1,185,612

 

 

 
Target Date
 
 
 
 
 
 
 
 
 
Blended Fund
32,047,391

 
32,047,391

 

 

 
Other Blended
 
 
 
 
 
 
 
 
 
Fund
851,497

 
851,497

 

 

 
Fixed Income
36,978,569

 
36,978,569

 

 

 
Other Income
1,546,402

 
1,546,402

 

 

 
Short-Term
 
 
 
 
 
 
 
 
 
Fixed Income
30,658,272

 
30,658,272

 

 

 
 
 
 
$
373,587,095

 
$
373,587,095

 
$

 
$




(10)
Plan Termination

Although it has not expressed any intent to do so, the Company has the right under the Plan to discontinue its contributions at any time and to terminate the Plan subject to the provisions of ERISA. In the event of Plan termination, participants would become 100% vested in their employer contributions.


(11)
Plan Amendment

During 2011, the Plan was amended to comply with the Worker, Retiree and Employer Recovery Act of 2008, which allowed the Plan to suspend age 70-1/2 minimum required distributions for the 2009 calendar year only.

There were no amendments to the Plan during 2010.

During 2009, the Plan was amended as follows:

Sections 1.13 and 3.05 were amended to comply with the final regulations under Internal Revenue Code Section 415.
Sections 3.01, 3.07(b), and 3.07(c) were amended to provide that a corrective distribution includes income through the date of distribution (i.e., gap period income) in accordance with Treasury Regulation Section 1.401(k)-2(b)(2)(iv) for the 2007 Plan Year, and to provide that a corrective distribution for Plan Years beginning on and after January 1, 2008 includes income only through the end of the year in which the excess contributions were made (i.e., no gap period income), to comply with the Pension Protection Act of 2006.
Section 3.09 was amended to provide additional rights for participants in military service, to comply with the Heroes Assistance and Relief Tax Act of 2008.

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Sections 5.05 and 5.09 were amended to allow a distribution notice to be provided up to 180 days before distribution instead of 90 days in accordance with the Pension Protection Act of 2006.
Section 5.10 was amended in its entirety to allow direct rollovers by non-spousal beneficiaries, allow direct rollover of after-tax contributions to any qualified plan or a 403(b) annuity that agrees to separately account for such amounts, and allow direct rollovers to a Roth IRA, all to comply with the Pension Protection Act of 2006.


(12)
New Accounting Pronouncements

During 2011 there were no new accounting pronouncements adopted by the Plan.


(13)
Subsequent Events

The Plan has evaluated subsequent events through June 20, 2012.  No significant matters were identified for disclosure during this evaluation.






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Schedule 1
COMMERCE BANCSHARES PARTICIPATING INVESTMENT PLAN
Schedule H, line 4i - Schedule of Assets (Held at End of Year)
EIN #: 43-0889454
Plan #: 002
December 31, 2011
 
 
 
 
 
 Number
 
 
 
 
(a)
 
(b) Identity of issue
 of shares/units
 
 (d) Cost
 
 (e) Fair Value
 
 
 
 
 
 
 
 
 
 
*
Commerce Bancshares, Inc. Common Stock Fund:
 
 
 
 
 
*
 
Commerce Bancshares, Inc. Common Stock
3,459,250

 
 **
 
$
132,064,184

*
 
Fidelity Retirement Money Market Fund
3,873,680

 
 **
 
3,873,680

 
 
     Total Common Stock Fund
6,421,250

 
 
 
135,937,864

 
 
 
 
 
 
 
 
 
 
 
Mutual Funds
 
 
 
 
 
 
 
3rd Ave. Real Estate Value Fund
56,833

 
 **
 
1,153,704

 
 
ABF Large Cap Value Fund
875,283

 
 **
 
15,439,988

 
 
AIM Funds Group Small Cap Growth "A" Fund
246,864

 
 **
 
6,840,601

 
 
American Century Inflation Adjusted Fund
262,494

 
 **
 
3,344,176

 
 
Columbia Acorn International Fund
27,847

 
 **
 
955,446

*
 
Commerce Bond Fund
1,452,622

 
 **
 
29,560,855

*
 
Commerce Growth Fund
770,761

 
 **
 
19,546,495

*
 
Commerce Short Term Government Bond Fund
420,170

 
 **
 
7,596,673

 
 
DFA Emerging Markets Value Fund
94,072

 
 **
 
2,442,121

 
 
Dodge & Cox International Stock Fund
462,794

 
 **
 
13,532,090

*
 
Fidelity Freedom 2005 Fund
97,134

 
 **
 
1,021,852

*
 
Fidelity Freedom 2010 Fund
218,346

 
 **
 
2,860,333

*
 
Fidelity Freedom 2015 Fund
519,786

 
 **
 
5,681,264

*
 
Fidelity Freedom 2020 Fund
539,908

 
 **
 
7,083,592

*
 
Fidelity Freedom 2025 Fund
428,531

 
 **
 
4,632,425

*
 
Fidelity Freedom 2030 Fund
426,889

 
 **
 
5,481,253

*
 
Fidelity Freedom 2035 Fund
206,176

 
 **
 
2,175,152

*
 
Fidelity Freedom 2040 Fund
452,627

 
 **
 
3,331,335

*
 
Fidelity Freedom 2045 Fund
128,759

 
 **
 
1,118,918

*
 
Fidelity Freedom 2050 Fund
193,227

 
 **
 
1,650,155

*
 
Fidelity Freedom Income Fund
72,763

 
 **
 
817,861

*
 
Fidelity Mid Cap Value Fund
180,880

 
 **
 
2,742,135

*
 
Fidelity Retirement Government Money Market Fund
8,264,668

 
 **
 
8,264,668

*
 
Fidelity Retirement Money Market Fund
22,758,952

 
 **
 
22,758,952

 
 
Morgan Stanley Institutional Mid Cap Growth Fund
435,587

 
 **
 
13,838,591

*
 
Spartan 500 Index Fund - Institutional Class
479,726

 
 **
 
21,347,812

*
 
Spartan International Index Fund
24,699

 
 **
 
734,796

*
 
Spartan U.S. Bond Index Fund - Institutional Class
491,524

 
 **
 
5,790,155

 
 
Vanguard Morgan Growth Fund
293,625

 
 **
 
5,129,634

 
 
Vanguard Small Cap Value Index Fund
459,823

 
 **
 
6,915,738

 
 
Vanguard Total Stock Market Index Fund
503,732

 
 **
 
15,766,801

 
 
     Total Mutual Funds
 
 
 
 
239,555,571

 
 
 
 
 
 
 
 
 
 
 
 
Total assets held for investment purposes
 
 
 
 
375,493,435

 
 
 
 
 
 
 
 
 
 
 
Loans to Participants--Interest rates on these loans
 
 
 
 
 
 
 
range from 4.25% to 10.50%
 
 

 
9,322,136

 
 
Total assets
 
 
 
 
$
384,815,571

 
 
 
 
 
 
 
 
 
 
 
 
* Party-in-interest as defined by ERISA.
 
 
 
 
 
 
 
** In accordance with instructions to the Form 5500, the Plan is no longer required to disclose the cost
 
 
 
 
component of participant-directed investments.
 
 

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EXHIBIT INDEX


23.1    Consent of Independent Registered Public Accounting Firm - KPMG LLP

23.2    Consent of Independent Registered Public Accounting Firm - Mayer Hoffman McCann P.C.







16