SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarter ended June 30, 1995
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______ to ______
Commission File #0-12874
COMMERCE BANCORP, INC.
(Exact name of registrant as specified in its charter)
New Jersey 22-2433468
(State or other jurisdiction of (IRS Employer Identification
incorporation or organization) Number)
Commerce Atrium, 1701 Route 70 East, Cherry Hill, New Jersey 08034-5400
(Address of Principal Executive Offices) (Zip Code)
(609) 751-9000
(Registrant's telephone number, including area code)
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 report(s), and (2) has been subject to such filing
requirements for the past 90 days.
Yes __X__ No ____
<PAGE>
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the last practical date.
Common Stock 10,628,135
(Title of Class) (No. of Shares Outstanding
as of 08/04/95)
Series C ESOP Cumulative Con-
vertible Preferred Stock 417,000
(Title of Class) (No. of Shares Outstanding
as of 08/04/95)
<PAGE>
COMMERCE BANCORP, INC. AND SUBSIDIARIES
INDEX
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets (Unaudited)
June 30, 1995 and December 31, 1994 .....................4
Consolidated Statements of Income (Unaudited)
Three months ended June 30, 1995
and June 30, 1994 and six months
ended June 30, 1995 and June 30, 1994 ...................5
Consolidated Statements of Cash Flows (Unaudited)
Six months ended June 30, 1995 and
June 30, 1994 ...........................................6
Notes to Consolidated Financial Statements (Unaudited) ............7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operation ......................9
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders ..............17
Item 6. Exhibits and Reports on Form 8-K .................................18
<PAGE>
Commerce Bancorp, Inc. and Subsidiaries
Consolidated Balance Sheets
(unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
(dollars in thousands) 1995 1994
<S> <C> <C>
Assets
Cash and due from banks $ 126,169 $ 119,697
Federal funds sold 50,500 9,750
---------- ----------
Cash and cash equivalents 176,669 129,447
Mortgages held for sale 3,112 2,263
Securities available for sale 116,498 118,855
Securities held to maturity:
U.S. Government agency mortgage-backed obligations 1,077,658 1,113,359
Collateralized mortgage obligations 1,951 2,390
Obligations of state and political subdivisions 2,379 565
Other securities 30,066 28,819
---------- ----------
Total securities held to maturity
(market value 1995-$1,080,206; 1994-$1,039,311) 1,112,054 1,145,133
Trading securities 13,813
Loans 850,597 801,952
Less allowance for loan losses 13,084 12,036
---------- ----------
837,513 789,916
Bank premises and equipment, net 64,589 57,997
Other assets 45,992 47,679
---------- ----------
$2,370,240 $2,291,290
========== ==========
Liabilities
Deposits:
Demand:
Interest-bearing $ 597,131 $ 510,345
Noninterest-bearing 389,435 367,421
Savings 481,348 488,282
Time 689,392 468,524
---------- ----------
Total deposits 2,157,306 1,834,572
Other borrowed money 34,106 312,895
Other liabilities 454 3,565
Obligation to Employee Stock Ownership Plan (ESOP) 4,872 5,385
Long-term debt 23,000 23,000
---------- ----------
2,219,738 2,179,417
Stockholders'
Equity
Common stock, 10,702,887 shares issued (8,889,506 shares in 1994) 16,723 13,234
Series C preferred stock, 417,000 shares authorized, issued and
outstanding (liquidating preference: $18.00 per share totaling
$ 7,506) 7,506 7,506
Capital in excess of par or stated value 111,463 80,033
Retained earnings 21,306 17,757
---------- ----------
156,998 118,530
Less commitment to ESOP 4,872 5,385
Less treasury stock, at cost, 100,159 common shares
in 1995 (79,520 in 1994) 1,624 1,272
---------- ----------
Total stockholders' equity 150,502 111,873
---------- ----------
$2,370,240 $2,291,290
========== ==========
</TABLE>
See accompanying notes
-4-
<PAGE>
Commerce Bancorp, Inc. and Subsidiaries
Consolidated Statements of Income
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
(dollars in thousands, except per share amounts) 1995 1994 1995 1994
<S> <C> <C> <C> <C>
Interest income
Interest and fees on loans $19,670 $15,728 $38,349 $31,003
Interest on investments 20,783 20,658 41,865 38,648
Other interest 1,141 169 1,797 411
------- ------- ------- -------
Total interest income 41,594 36,555 82,011 70,062
------- ------- ------- -------
Interest expense
Interest on deposits:
Demand 3,878 2,322 7,286 4,495
Savings 2,795 2,981 5,481 5,879
Time 8,627 4,678 15,537 9,584
------- ------- ------- -------
Total interest on deposits 15,300 9,981 28,304 19,958
Interest on other borrowed money 2,132 3,445 6,159 5,737
Interest on long-term debt 506 506 1,012 1,012
------- ------- ------- -------
Total interest expense 17,938 13,932 35,475 26,707
------- ------- ------- -------
Net interest income 23,656 22,623 46,536 43,355
Provision for loan losses 388 1,060 1,245 2,110
------- ------- ------- -------
Net interest income after provision for
loan losses 23,268 21,563 45,291 41,245
Noninterest income
Deposit charges and service fees 3,778 3,433 7,462 6,895
Other operating income 1,019 790 1,928 1,557
Net investment securities gains 18 18
------- ------- ------- -------
Total noninterest income 4,815 4,223 9,408 8,452
------- ------- ------- -------
Noninterest expense
Salaries 6,347 5,524 12,599 10,909
Benefits 1,789 1,603 3,648 3,203
Occupancy 1,997 2,024 3,937 3,805
Furniture and equipment 2,409 2,059 4,555 3,856
Office 1,710 1,465 3,343 2,873
Audit and regulatory fees and assessments 1,240 1,172 2,481 2,347
Marketing 669 707 1,326 1,246
Other real estate (net) 593 655 1,291 1,455
Other 2,157 2,243 4,110 4,391
------- ------- ------- -------
Total noninterest expenses 18,911 17,452 37,290 34,085
------- ------- ------- -------
Income before income taxes 9,172 8,334 17,409 15,612
Provision for federal and state income taxes 3,356 3,045 6,350 5,686
------- ------- ------- -------
Net income 5,816 5,289 11,059 9,926
Dividends on preferred stocks 140 393 281 786
------- ------- ------- -------
Net income applicable to common stock $ 5,676 $ 4,896 $10,778 $ 9,140
======= ======= ======= =======
Net income per common and common equivalent share:
Primary $ 0.52 $ 0.61 $ 1.03 $ 1.14
------- ------- ------- -------
Fully diluted $ 0.50 $ 0.54 $ 1.00 $ 1.02
------- ------- ------- -------
Average common and common equivalent shares outstanding:
Primary 10,848 8,063 10,396 8,024
------ ----- ------ -----
Fully diluted 11,461 9,616 11,018 9,603
------ ----- ------ -----
Cash dividends declared, common stock $ 0.16 $ 0.14 $ 0.31 $ 0.28
======= ======= ======= =======
</TABLE>
-5-
<PAGE>
Commerce Bancorp, Inc. And Subsidiaries
Consolidated Statements of Cash Flows
(unaudited)
<TABLE>
<CAPTION>
Six Months Ended June 30,
(dollars in thousands) 1995 1994
<S> <C> <C>
Operating
activities
Net income $ 11,059 $ 9,926
Adjustments to reconcile net income to net cash (used)
provided by operating activities:
Provision for loan losses 1,245 2,110
Provision for depreciation, amortization and accretion 6,333 9,596
Proceeds from sales of mortgages held for sale 7,291 65,667
Originations of mortgages held for sale (8,140) (26,232)
Net loan (chargeoffs) (197) (1,127)
Net increase in trading securities (13,813)
Increase in other assets (816) (1,810)
Decrease in other liabilities (3,111) (17,779)
--------- ---------
Net cash (used) provided by operating activities (149) 40,351
Investing
activities
Proceeds from the maturity of securities available for sale 8,056 26,839
Proceeds from the maturity of securities held to maturity 35,028 92,139
Purchase of securities available for sale (312)
Purchase of securities held to maturity (3,741) (345,975)
Net increase in loans (51,029) (42,948)
Proceeds from sales of loans 2,384 2,278
Purchases of premises and equipment (10,294) (7,606)
--------- ---------
Net cash (used) by investing activities (19,908) (275,273)
Financing
activities
Net increase in demand and savings deposits 101,866 61,894
Net increase (decrease) in time deposits 220,868 (31,594)
Net (decrease) increase in other borrowed money (278,789) 228,210
Issuance of common stock 25,774
Dividends paid (3,376) (2,946)
Proceeds from issuance of common stock under
dividend reinvestment and other stock plans 1,190 1,041
Purchase of treasury stock (352) (117)
Other 98 98
--------- ---------
Net cash provided by financing activities 67,279 256,586
Increase in cash and cash equivalents 47,222 21,664
Cash and cash equivalents at beginning of year 129,447 105,725
--------- ---------
Cash and cash equivalents at end of period $ 176,669 $ 127,389
--------- ---------
Supplemental disclosures of cash flow
information: Cash paid during the period for:
Interest $ 35,475 $25,063
Income taxes 7,088 5,754
--------- ---------
</TABLE>
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<PAGE>
COMMERCE BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
A. Consolidated Financial Statements
The consolidated financial statements included herein have
been prepared without audit pursuant to the rules and regulations of
the Securities and Exchange Commission. Certain information and
footnote disclosures normally included in financial statements prepared
in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations. The
accompanying condensed consolidated financial statements reflect all
adjustments which are, in the opinion of management, necessary to a
fair statement of the results for the interim periods presented. Such
adjustments are of a normal recurring nature. These condensed
consolidated financial statements should be read in conjunction with
the audited financial statements and the notes thereto included in the
registrant's Annual Report for the period ended December 31, 1994. The
results for the three months ended June 30, 1995, and for the six
months ended June 30, 1995 are not necessarily indicative of the
results that may be expected for the year ended December 31, 1995.
The consolidated financial statements include the accounts of
Commerce Bancorp, Inc. (the "Company") and all of its subsidiaries,
including Commerce Bank, N.A. ("Commerce NJ"), Commerce
Bank/Pennsylvania, N.A. and Commerce Bank/Shore, N.A. All material
intercompany transactions have been eliminated. Certain amounts from
1994 have been reclassified to conform with 1995 presentation.
B. Commitments
In the normal course of business, there are various
outstanding commitments to extend credit, such as letters of credit and
unadvanced loan commitments, which are not reflected in the
accompanying consolidated financial statements. Management does not
anticipate any material losses as a result of these transactions.
C. Employee Stock Ownership Plan (ESOP) Debt Guarantee
The Company has guaranteed a debt obligation of its Employee
Stock Ownership Plan ("ESOP") which originated at $7,500,000 and has
been reduced to $4,872,000 through principal reductions. Accordingly,
the loan amount is reflected in the Company's consolidated balance
sheet as a liability and an equal amount, representing deferred
employee benefits, has been recorded as a deduction from stockholders'
equity. The ESOP obtained the loan in 1990 to acquire a new class of
Company Cumulative Convertible Preferred Stock (Series C) at a price of
$18.00 per share. The loan was refinanced in 1994, and is payable in
quarterly installments with the final payment due January 28, 2000. The
loan bears interest at a variable rate, although the rate can be fixed
at
-7-
<PAGE>
future repricing dates in accordance with the loan agreement. As the
Company makes annual contributions to the ESOP, these contributions,
plus dividends from the Company's Series C Preferred Stock held by the
ESOP, will be used to repay the loan.
D. Issuance of Common Stock
On February 15, 1995, the Company publicly issued 1,725,000
shares of common stock. Net proceeds to the Company were $25,774,000
after deducting expenses of $1,826,000. The proceeds are earmarked for
general corporate purposes, including providing additional equity
capital to the Company's bank subsidiaries to support the Company's
branch expansion growth strategy.
-8-
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operation Capital Resources
At June 30, 1995, stockholders' equity totaled $150.5 million
or 6.35% of total assets, compared to $111.9 million or 4.88% of total
assets at December 31, 1994. On February 15, 1995, the Company issued
1,725,000 shares of common stock, resulting in net proceeds of $25.8
million.
The table below presents a comparison of the Company's and
each of its three bank subsidiaries risk-based capital ratios and
leverage ratios to the minimum regulatory requirements for the periods
indicated.
<TABLE>
<CAPTION>
Capital
Excess
Minimum as of
June 30, June 30, Regulatory June 30,
1995 1994 Requirements 1995
---- ---- ------------ ----
(in thousands)
<S> <C> <C> <C> <C>
Company
Risk based capital ratios:
Tier 1 12.62% 9.60% 4.00% $98,650
Total capital 15.77 12.77 8.00 88,930
Leverage ratio 6.17 4.49 3.00-5.00 74,090 (1)
Commerce NJ
Risk based capital ratios:
Tier 1 14.45% 11.17% 4.00% $95,290
Total capital 15.59 12.19 8.00 69,250
Leverage ratio 6.99 5.15 3.00-5.00 75,320 (1)
Commerce PA
Risk based capital ratios:
Tier 1 12.24% 11.67% 4.00% $ 9,140
Total capital 13.34 12.72 8.00 5,920
Leverage ratio 6.35 5.83 3.00-5.00 7,170 (1)
Commerce Shore Risk based capital
ratios:
Tier 1 12.39% 13.44% 4.00% $10,760
Total capital 13.49 14.70 8.00 7,050
Leverage ratio 6.08 6.26 3.00-5.00 8,050 (1)
<FN>
(1) Based on a minimum regulatory requirement of 3.00%
</FN>
</TABLE>
At June 30, 1995, the Company's consolidated capital levels and
each of the Company's bank subsidiaries met the regulatory definition
of a "well capitalized" financial institution, i.e., a leverage capital
ratio exceeding 5%, a Tier 1 risk-based capital ratio exceeding 6%, and
a total risk-based capital ratio exceeding 10%.
-9-
<PAGE>
Deposits
Total deposits at June 30, 1995 were $2.16 billion, up $382.1
million, or 22% over total deposits of $1.78 billion at June 30, 1994,
and up by $322.7 million, or 18% from year-end 1994. Deposit growth
during the first six months of 1995 was largely from the public sector,
supported by growth in core deposits, particularly savings and time
deposits.
Interest Rate Sensitivity and Liquidity
An interest rate sensitive asset or liability is one that,
within a defined time period, either matures or experiences an interest
rate change in line with general market interest rates. Historically,
the most common method of estimating interest rate risk was to measure
the maturity and repricing relationships between interest-earning
assets and interest-bearing liabilities at specific points in time
("GAP"), typically one year. Under this method, a company is considered
liability sensitive when the amount of its interest-bearing liabilities
exceeds the amount of its interest-earning assets within the one year
horizon. The following table illustrates the GAP position of the
Company as of June 30, 1995:
<TABLE>
<CAPTION>
1-90 91-180 181-365 1-5 Beyond
Days Days Days Years 5 Years Total
<S> <C> <C> <C> <C> <C> <C>
Rate Sensitive:
Interest-earning assets
Loans $ 437 $13 $27 $246 $120 $ 843
Investment securities 46 32 73 397 694 1,242
Federal funds sold 51 51
------ ------ ----- ----- ----- -----
Total interest-earning assets 534 45 100 643 814 2,136
------ ------ ----- ----- ----- -----
Interest-bearing liabilities
Deposits
Transaction accounts 347 731 1,078
Time 341 67 145 124 13 690
Other borrowed money 34 34
Long-term debt 23 23
------ ------ ----- ----- ----- -----
Total interest-bearing liabilities 722 67 145 124 767 1,825
------ ------ ----- ----- ----- -----
Period GAP (188) (22) (45) 519 47 $ 311
------ ------ ----- ----- ----- -----
Cumulative GAP $ (188) $(210) $(255) $ 264 $311
======= ====== ====== ===== ====
</TABLE>
The Company's negative GAP position has been significantly reduced
during the first six months of 1995, primarily through the reduction in
the balance of short-term borrowings from $312.9 million at December
31, 1994 to $34.1 million at June 30, 1995.
Management utilizes additional tools, including income
simulation analysis, which provide a more meaningful measure of
interest rate risk. Income simulation analysis captures not only the
potential of all assets and liabilities to mature or reprice, but also
the probability that they will do so. Income simulation also attends to
the relative interest rate sensitivities of these items, and projects
their behavior over an extended period of time. Finally, income
simulation permits management to assess the probable effects on the
balance sheet not only of changes in interest rates, but also of
proposed strategies for responding to them.
-10-
<PAGE>
The Company's income simulation model is used to predict the
impact on net interest income of a 200 basis point increase in general
market interest rates over the next twelve months. The Company's Asset
Liability Committee has determined that in the current economic
environment, as much as a 5% decrease in net interest income over a two
year period compared to projected net interest income in a flat rate
scenario is an acceptable level of interest rate risk. Based on its
interest rate sensitivity analysis prepared as of June 30, 1995, it is
projected that net interest income would be reduced by approximately
1.6% over the next two years as a result of a 200 basis point increase
in general market interest rates occurring proportionately over the
next twelve months.
In the event the Company's interest rate risk models indicate
an unacceptable level of risk, the Company could undertake a number of
actions that would reduce this risk, including the sale of a portion of
its available for sale portfolio, the use of risk management strategies
such as interest rate swaps and caps, or the extension of the
maturities of its short-term borrowings. In order to reduce the
potential impact from a dramatic increase in interest rates, the
Company entered into interest-rate cap agreements during the first
quarter of 1995. The strike price of the agreements exceeds current
market interest rates. The agreements are for a notional amount of $200
million for a period of two years.
Liquidity involves the Company's ability to raise funds to
support asset growth or decrease assets to meet deposit withdrawals and
other borrowing needs, to maintain reserve requirements and to
otherwise operate the Company on an ongoing basis. The Company's
liquidity needs are met by growth in core deposits, its cash and
federal funds sold position, cash flow from its amortizing investment
and loan portfolios, as well as the use of short-term borrowings.
Short-Term Borrowings
Short-term borrowings consist of securities sold under
agreement to repurchase. These borrowings were used as an additional
source of funding for the investment portfolio and to fund loan growth
during 1994. At December 31, 1994, short-term borrowings aggregated
$312.9 million and had an average rate of 5.94%. During the first six
months of 1995, the Company significantly reduced its outstanding
short-term borrowings, primarily through increased deposits. At June
30, 1995, short-term borrowings aggregated $34.1 million and had an
average rate of 5.65%.
Interest Earning Assets
For the six month period ended June 30, 1995, interest earning
assets increased $68.6 million from $2.07 billion to $2.15 billion.
This increase was primarily in the loan portfolio which increased $48.6
million.
Loans
During the first six months of 1995, loans increased $48.6
million from $802.0 million to $850.6 million. At June 30, 1995, loans
represented 39% of total deposits and 36% of total assets.
-11-
<PAGE>
The increase in the loan portfolio was due primarily to loans
secured by 1-4 family residential properties (including home equity
loans) and loans secured by commercial real estate properties.
Investments
During the first six months of 1995, total securities decreased
$21.6 million from $1.26 billion to $1.24 billion, as a result of
payments on the existing portfolio. For the six month period,
securities available for sale decreased from $118.9 million to $116.5
million, and securities held to maturity decreased from $1.15 billion
to $1.11 billion. Trading securities increased to $13.8 million as a
result of the establishment of Commerce Capital, a bank securities
dealer department of Commerce NJ. At June 30, 1995, the average life of
the investment portfolio is approximately 7.7 years.
Short-term investments (Federal funds sold) increased $40.7
million from $9.8 million to $50.5 million. At June 30, 1995, total
securities and Federal funds sold aggregated $1.29 billion and
represented 55% of total assets.
Net Income
Net income for the second quarter of 1995 was $5.8 million, an
increase of $527 thousand over the $5.3 million recorded for the second
quarter of 1994. Net income for the first six months of 1995 was $11.1
million, an increase of $1.2 million over the $9.9 million recorded in
the first six months of 1994. These increases were due to increases in
net interest income, as well as reduced loan loss provisions and
increases in noninterest income which offset increased overhead
expenses. On a per share basis, fully-diluted net income for the second
quarter of 1995 and for the six months of 1995 were $.50 and $1.00 per
common share compared to $.54 and $1.02 per common share for the
respective 1994 periods. Net income per share for the second quarter of
1995 and for the first six months of 1995 were impacted by the issuance
of 1,725,000 shares of common stock via an underwritten public offering
in the first quarter of 1995.
Return on average assets (ROA) and return on average equity
(ROE) for the second quarter of 1995 were 0.99% and 16.05%,
respectively, compared to 0.94% and 20.36%, respectively, for the same
1994 period. ROA and ROE for the first six months of 1995 were 0.95%
and 16.30%, respectively, compared to 0.90% and 19.40% a year ago.
Net Interest Income
Net interest income totaled $23.7 million for the second
quarter of 1995, an increase of $1.1 million or 5%, from $22.6 million
in the second quarter of 1994. Net interest income for the first six
months of 1995 totaled $46.5 million, up $3.2 million or 7% from the
first six months of 1994. The improvement in net interest income for
both reporting periods was due primarily to volume increases in the
loan portfolio.
Noninterest Income
Noninterest income in 1995 increased $592 thousand and $956
thousand for the three and six months ended June 30, respectively, over
the comparable 1994 periods. These increases were due primarily to
increased deposit charges and service fees.
-12-
<PAGE>
Noninterest Expense
For the second quarter of 1995, noninterest expense totaled
$18.9 million, an increase of $1.4 million, or 8.4%, over the same
period in 1994. Contributing to this increase was new branch activity
over the past twelve months. As a result of the addition of these
offices, staff, facilities, and related expenses rose accordingly.
Salaries increased $823 thousand due primarily to the 5.1%
increase in the number of full time equivalent (FTE) employees from
1,118 at June 30,1994 to 1,175 at June 30,1995. The increase in the
number of FTE employees results primarily from the branch expansion
activities which have occurred during the past year. Benefits
associated with these increased salaries rose $186 thousand. Furniture
and equipment and office expenses increased by $350 thousand and $245
thousand, respectively, due to additional branch offices and the
ongoing refurbishment of existing facilities. Increased expenses
included depreciation, software, postage and stationery and supplies.
Occupancy expenses decreased by $27 thousand, as a result of the second
quarter of 1994 being impacted by the costs associated with the
termination of a maintenance contract.
Audit and regulatory fees and assessments increased $68
thousand over the second quarter of 1994 due to increased deposits and
associated Federal deposit insurance premiums on such deposits.
Marketing expense decreased by $38 thousand due to a refocusing of
advertising programs. Other real estate expenses decreased by $62
thousand as compared to the second quarter of 1994. This decrease is
consistent with the decrease in the other real estate portfolio. Other
noninterest expenses for the second quarter of 1995 decreased $86
thousand from 1994. The decrease resulted primarily from decreased
printing expenses and lower provisions for non-credit-related losses.
For the first six months of 1995, noninterest expense totaled
$37.3 million, an increase of $3.2 million, or 9.4%, over the first six
months of 1994. Contributing to this increase was new branch activity
as noted above.
Salaries and benefits increased $1.7 million and $445 thousand,
respectively, due to the increase in the number of FTE employees
resulting primarily from branch expansion activities. Occupancy,
furniture and equipment, and office expenses increased by $132
thousand, $699 thousand, and $470 thousand, respectively, due to
expenses associated with the increased number of branch facilities.
Increased expenses included building rent and real estate taxes,
depreciation, software, telecommunications, postage, and stationary and
supplies.
Audit and regulatory fees and assessments increased by $134
thousand over the first six months of 1994 due to increased deposits
and associated Federal deposit insurance premiums on such deposits.
Marketing expense increased by $80 thousand, due to a refocusing of
advertising programs. Other real estate expenses decreased $164
thousand as compared to the first six months of 1994, reflecting the
decrease in the other real estate portfolio. Other noninterest expenses
for the first six months of 1995 decreased $281 thousand from 1994. The
decrease resulted primarily from decreased printing expenses and lower
provisions for non-credit-related losses.
One key measure used to monitor progress in controlling
overhead expenses is the ratio of noninterest expenses to average
assets. For the first six months of 1995, this ratio equaled 3.21%
versus 3.09% for the comparable 1994 period. The operating efficiency
ratio (noninterest expenses, less other real estate expenses, divided
by net interest income plus noninterest income excluding non-recurring
gains) was 64.35% for the first six months of 1995 as compared to
62.98% for the same 1994 period.
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<PAGE>
Loan and Asset Quality
Total non-performing assets (non-performing loans and other
real estate, excluding loans past due 90 days or more and still
accruing interest) at June 30, 1995 were $18.8 million, or .79% of
total assets compared to $22.3 million or .97% of total assets at
December 31, 1994 and $25.7 million or 1.12% of total assets at June
30, 1994.
Total non-performing loans (non-accrual loans and restructured
loans, excluding loans past due 90 days or more and still accruing
interest) at June 30, 1995 were $10.2 million or 1.20% of total loans
compared to $11.8 million or 1.47% of total loans at December 31, 1994
and $9.7 million or 1.31% of total loans at June 30, 1994. At June 30,
1995, loans past due 90 days or more and still accruing interest
amounted to $86 thousand compared to $211 thousand at December 31, 1994
and $154 thousand at June 30, 1994. Additional loans considered as
potential problem loans by the Company's internal loan review
department ($7.8 million at June 30, 1995, $7.0 million at December 31,
1994 and $6.7 million at June 30, 1994) have been evaluated as to risk
exposure in determining the adequacy of the allowance for loan losses.
Other real estate (ORE) at June 30, 1995 totaled $8.6 million
compared to $10.5 million at December 31, 1994 and $16.0 million at
June 30, 1994. These properties have been written down to the lower of
cost or fair value less disposition costs.
On pages 15 and 16 are tabular presentation showing detailed
information about the Company's non-performing loans and assets and an
analysis of the Company's allowance for loan losses and other related
data for June 30, 1995, December 31, 1994, and June 30, 1994.
-14-
<PAGE>
The following summary presents information regarding non-performing loans and
assets as of June 30, 1995 and the preceding four quarters: (dollar amounts in
thousands)
<TABLE>
<CAPTION>
June 30, March 31, Dec. 31, Sept. 30, June 30,
1995 1995 1994 1994 1994
<S> <C> <C> <C> <C> <C>
Non-accrual loans:
Commercial $ 897 $ 1,379 $ 1,624 $ 1,810 $ 2,369
Consumer 1,063 1,025 1,427 1,629 1,603
Real Estate:
Construction 911 955 955 922 956
Mortgage 7,003 7,201 7,240 5,908 4,477
------- ------- ------- ------- -------
Total non-accrual loans 9,874 10,560 11,246 10,269 9,405
------- ------- ------- ------- -------
Restructured loans
Commercial 140 142 143 157 160
Consumer 70 29 29
Real Estate:
Construction
Mortgage 85 302 404 280 132
------- ------- ------- ------- -------
Total restructured loans 295 473 576 437 292
------- ------- ------- ------- -------
Total non-performing loans 10,169 11,033 11,822 10,706 9,697
------- ------- ------- ------- -------
Other real estate 8,591 9,880 10,517 13,170 15,953
------- ------- ------- ------- -------
Total non-performing assets 18,760 20,913 22,339 23,876 25,650
------- ------- ------- ------- -------
Loans past due 90 days or more
and still accruing 86 92 211 199 154
------- ------- ------- ------- -------
Total non-performing assets and
loans past due 90 days or more $18,846 $21,005 $22,550 $24,075 $25,804
======= ======= ======= ======= =======
Total non-performing loans as a
percentage of total period-end
loans 1.20% 1.35% 1.47% 1.40% 1.31%
Total non-performing assets as a
percentage of total period-end assets 0.79% 0.92% 0.97% 1.06% 1.12%
Total non-performing assets and loans
past due 90 days or more as a
percentage of total period-end assets 0.80% 0.92% 0.98% 1.07% 1.13%
Allowance for loan losses as a
percentage of total non-performing
loans 129% 117% 102% 106% 113%
Allowance for loan losses as a percentage
of total period-end loans 1.54% 1.57% 1.50% 1.48% 1.48%
Total non-performing assets and loans
past due 90 days or more as a
percentage of stockholders' equity and
allowance for loan losses 12% 13% 18% 20% 22%
</TABLE>
-15-
<PAGE>
The following table presents, for the periods indicated, an analysis of the
allowance for loan losses and othe related data: (dollar amounts in thousands)
<TABLE>
<CAPTION>
Year
Six Months Ended Ended
06/30/95 06/30/94 12/31/94
<S> <C> <C> <C>
Balance at beginning of period $12,036 $10,023 $10,023
Provisions charged to operating expenses 1,245 2,110 4,210
------- ------- -------
13,281 12,133 14,233
Recoveries on loans charged-off:
Commercial 71 33 100
Consumer 112 68 123
Real estate 266 0 22
------- ------- -------
Total recoveries 449 101 245
Loans charged-off:
Commercial (366) (792) (1,519)
Consumer (207) (268) (530)
Real estate (73) (168) (393)
------- ------- -------
Total charged-off (646) (1,228) (2,442)
------- ------- -------
Net charge-offs (197) (1,127) (2,197)
------- ------- -------
Balance at end of period $13,084 $11,006 $12,036
======= ======= =======
Net charge-offs as a percentage of
average loans outstanding 0.05% 0.31% 0.29%
</TABLE>
-16-
<PAGE>
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Securities Holders
The Annual Meeting of the Registrant's Shareholders was
held on June 20, 1995. The only item of business acted upon at
the Annual Meeting was the election of nine directors for one
year terms. The number of votes cast for and against as to
each nominee for director was as follows:
Name of
Nominee For Against
Vernon W. Hill, II 9,010,656 73,411
C. Edward Jordan, Jr. 9,076,561 67,506
David Baird, IV 9,076,808 67,259
Robert C. Beck 8,975,982 168,085
Jack R Bershad 8,973,687 170,380
Morton N. Kerr 9,075,323 68,744
Steven M. Lewis 9,076,222 67,845
Daniel J. Ragone 9.068,794 75,273
Joseph T. Tarquini, Jr. 9,075,228 68,839
-17-
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 11 - Computation of Net Income Per Share
No reports on Form 8-K were filed during the second
quarter ended June 30, 1995.
-18-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
COMMERCE BANCORP, INC.
(Registrant)
August 14, 1995
(Date) C. EDWARD JORDAN, JR.
EXECUTIVE VICE PRESIDENT
(PRINCIPAL FINANCIAL OFFICER)
-19-
Exhibit No. 11
Commerce Bancorp, Inc. and Subsidiaries
Computation of Net Income Per Share
(dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
Primary Net Income Per Share 1995 1994 1995 1994
<S> <C> <C> <C> <C>
Adjustment of income:
Net income $ 5,816 $ 5,289 $11,059 $ 9,926
Preferred stock dividends 140 393 281 786
------- ------- ------- -------
Adjusted net income applicable to
common stock $ 5,676 $ 4,896 $10,778 $ 9,140
======= ======= ======= =======
Average shares of common stock and
equivalents outstanding:
Average common shares outstanding 10,595 7,789 10,148 7,769
Common stock equivalents - dilutive options 253 274 248 255
------- ------- ------- -------
Average shares of common stock and
equivalents outstanding 10,848 8,063 10,396 8,024
====== ===== ====== =====
Net income per share of common stock $ 0.52 $ 0.61 $ 1.03 $ 1.14
======= ======= ======= =======
Fully Diluted Net Income Per Share
Net income applicable to common stock
on a fully diluted basis $ 5,816 $ 5,289 $11,059 $ 9,926
Less: additional ESOP contribution
under the if-converted method 33 40 66 79
------- ------- ------- -------
Adjusted net income applicable to
common stock on a fully diluted basis $ 5,783 $ 5,249 $10,993 $ 9,847
======= ======= ======= =======
Average number of shares outstanding on
a fully diluted basis:
Average common shares outstanding 10,595 7,789 10,148 7,769
Additional shares considered in fully
diluted computation assuming:
Exercise of stock options 307 321 311 328
Conversion of preferred stock 559 1,506 559 1,506
------- ------- ------- -------
Average number of shares outstanding
on a fully diluted basis 11,461 9,616 11,018 9,603
====== ===== ====== =====
Fully diluted net income per share of
common stock $ 0.50 $ 0.54 $ 1.00 $ 1.02
======= ======= ======= =======
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<CIK> 0000715096
<NAME> COMMERCE BANCORP, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 126,169
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 50,500
<TRADING-ASSETS> 13,813
<INVESTMENTS-HELD-FOR-SALE> 116,498
<INVESTMENTS-CARRYING> 1,112,054
<INVESTMENTS-MARKET> 1,080,206
<LOANS> 850,597
<ALLOWANCE> 13,084
<TOTAL-ASSETS> 2,370,240
<DEPOSITS> 2,157,306
<SHORT-TERM> 34,106
<LIABILITIES-OTHER> 454
<LONG-TERM> 27,872
<COMMON> 16,723
0
7,506
<OTHER-SE> 126,273
<TOTAL-LIABILITIES-AND-EQUITY> 2,370,240
<INTEREST-LOAN> 38,349
<INTEREST-INVEST> 41,865
<INTEREST-OTHER> 1,797
<INTEREST-TOTAL> 82,011
<INTEREST-DEPOSIT> 28,304
<INTEREST-EXPENSE> 35,475
<INTEREST-INCOME-NET> 46,536
<LOAN-LOSSES> 1,245
<SECURITIES-GAINS> 18
<EXPENSE-OTHER> 37,290
<INCOME-PRETAX> 17,409
<INCOME-PRE-EXTRAORDINARY> 17,409
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,059
<EPS-PRIMARY> 1.03
<EPS-DILUTED> 1.00
<YIELD-ACTUAL> 4.45
<LOANS-NON> 9,874
<LOANS-PAST> 86
<LOANS-TROUBLED> 295
<LOANS-PROBLEM> 7,800
<ALLOWANCE-OPEN> 12,036
<CHARGE-OFFS> 646
<RECOVERIES> 449
<ALLOWANCE-CLOSE> 13,084
<ALLOWANCE-DOMESTIC> 13,084
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
