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 September 30, 1996
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 11,462,958
(Title of Class) (No. of Shares Outstanding
as of 11/08/96)
Series C ESOP Cumulative Con-
vertible Preferred Stock 417,000
(Title of Class) (No. of Shares Outstanding
as of 11/08/96)
<PAGE>
COMMERCE BANCORP, INC. AND SUBSIDIARIES
INDEX
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets (unaudited)
September 30, 1996 and December 31, 1995
Consolidated Statements of Income (unaudited) Three months
ended September 30, 1996 and September 30, 1995 and
nine months ended September 30, 1996 and September
30, 1995
Consolidated Statements of Cash Flows (unaudited) Nine months
ended September 30, 1996 and September 30, 1995
Notes to Consolidated Financial Statements (unaudited)
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operation
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
<PAGE>
Commerce Bancorp, Inc. and Subsidiaries
Consolidated Balance Sheets
(unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
(dollars in thousands) 1996 1995
<S> <C> <C>
Assets
Cash and due from banks $ 123,972 $ 147,465
Federal funds sold 12,850 29,550
---------- ----------
Cash and cash equivalents 136,822 177,015
Mortgages held for sale 1,254 5,442
Trading securities 3,203 8,843
Securities available for sale 765,893 520,314
Securities held to maturity:
U.S. Government agency mortgage-backed obligations 596,154 653,412
Obligations of state and political subdivisions 13,084 12,289
Other securities 17,135 17,001
---------- ----------
Total securities held to maturity
(market value 1996-$597,736; 1995-$671,539) 626,373 682,702
Loans 1,059,380 907,515
Less allowance for loan losses 14,190 13,320
---------- ----------
1,045,190 894,195
Bank premises and equipment, net 83,796 74,289
Other assets 50,191 53,094
---------- ----------
$2,712,722 $2,415,894
========== ==========
Liabilities
Deposits:
Demand:
Interest-bearing $ 729,686 $ 657,568
Noninterest-bearing 493,294 439,609
Savings 528,563 485,522
Time 733,550 642,399
---------- ----------
Total deposits 2,485,093 2,225,098
Other borrowed money 25,000
Other liabilities 5,985 1,417
Obligation to Employee Stock Ownership Plan (ESOP) 3,590 4,359
Long-term debt 23,000 23,000
---------- ----------
2,542,668 2,253,874
Stockholders' 18,007 16,880
Equity
Common stock, 11,524,964 shares issued (11,337,719 shares in 1995)
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 126,251 112,894
Retained earnings 23,504 30,723
---------- ----------
175,268 168,003
Less commitment to ESOP 3,590 4,359
Less treasury stock, at cost, 100,159 common shares
in 1996 (100,159 in 1995) 1,624 1,624
---------- ----------
Total stockholders' equity 170,054 162,020
---------- ----------
$2,712,722 $2,415,894
========== ==========
</TABLE>
1
<PAGE>
Commerce Bancorp, Inc. and Subsidiaries
Consolidated Statements of Income
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
(dollars in thousands, except per share amounts) 1996 1995 1996 1995
<S> <C> <C> <C> <C>
Interest income
Interest and fees on loans $ 23,580 $ 20,552 $ 67,063 $ 58,901
Interest on investments 21,583 19,986 61,786 61,851
Other interest 620 1,036 2,215 2,833
-------- -------- -------- --------
Total interest income 45,783 41,574 131,064 123,585
-------- -------- -------- --------
Interest expense
Interest on deposits:
Demand 4,632 4,438 13,031 11,724
Savings 3,098 2,874 8,617 8,355
Time 9,343 9,564 27,415 25,101
-------- -------- -------- --------
Total interest on deposits 17,073 16,876 49,063 45,180
Interest on other borrowed money 479 220 1,122 6,379
Interest on long-term debt 507 507 1,519 1,519
-------- -------- -------- --------
Total interest expense 18,059 17,603 51,704 53,078
-------- -------- -------- --------
Net interest income 27,724 23,971 79,360 70,507
Provision for loan losses 825 388 2,173 1,633
-------- -------- -------- --------
Net interest income after provision for loan losses 26,899 23,583 77,187 68,874
Noninterest income
Deposit charges and service fees 5,193 4,249 14,869 11,711
Other operating income 1,813 1,126 4,746 3,054
Net investment securities gains 0 88 517 106
-------- -------- -------- --------
Total noninterest income 7,006 5,463 20,132 14,871
-------- -------- -------- --------
Noninterest expense
Salaries 8,349 6,870 23,339 19,469
Benefits 2,155 1,517 5,888 5,165
Occupancy 2,636 2,285 7,815 6,222
Furniture and equipment 3,300 2,441 9,241 6,996
Office 2,326 1,916 6,812 5,259
Audit and regulatory fees and assessments 1,753 275 2,563 2,756
Marketing 967 715 2,985 2,041
Other real estate (net) 400 516 1,300 1,807
Other 2,682 2,657 8,004 6,767
-------- -------- -------- --------
Total noninterest expenses 24,568 19,192 67,947 56,482
-------- -------- -------- --------
Income before income taxes 9,337 9,854 29,372 27,263
Provision for federal and state income taxes 3,329 3,577 10,507 9,927
-------- -------- -------- --------
Net income 6,008 6,277 18,865 17,336
Dividends on preferred stocks 141 141 422 422
======== ======== ======== ========
Net income applicable to common stock $ 5,867 $ 6,136 $ 18,443 $ 16,914
======== ======== ======== ========
Net income per common and common equivalent share:
Primary $ 0.49 $ 0.52 $ 1.56 $ 1.51
-------- -------- -------- --------
Fully diluted $ 0.47 $ 0.51 $ 1.51 $ 1.46
-------- -------- -------- --------
Average common and common equivalent shares
outstanding:
Primary 11,877 11,566 11,777 11,147
-------- -------- -------- --------
Fully diluted 12,521 12,210 12,476 11,897
-------- -------- -------- --------
Cash dividends declared, common stock $ 0.18 $ 0.15 $ 0.52 $ 0.46
======== ======== ======== ========
</TABLE>
2
<PAGE>
Commerce Bancorp, Inc. And Subsidiaries
Consolidated Statements of Cash Flows
(unaudited)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
(dollars in thousands) 1996 1995
<S> <C> <C>
Operating
activities
Net income $ 18,865 $ 17,336
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses 2,173 1,633
Provision for depreciation, amortization and accretion 11,838 9,779
Gains on sales of securities available for sale (517) (88)
Proceeds from sales of mortgages held for sale 19,200 9,887
Originations of mortgages held for sale (15,012) (15,257)
Net loan (chargeoffs) (1,303) (664)
Net decrease (increase) in trading securities 5,640 (1,735)
Decrease (increase) in other assets 7,178 (1,707)
Increase (decrease) in other liabilities 4,568 (961)
--------- ---------
Net cash provided by operating activities 52,630 18,223
Investing
activities
Proceeds from the sales of securities available for sale 40,561 128
Proceeds from the maturity of securities available for sale 19,609 12,943
Proceeds from the maturity of securities held to maturity 67,569 63,624
Purchase of securities available for sale (320,195) (48,126)
Purchase of securities held to maturity (13,364) (11,452)
Net increase in loans (159,218) (73,257)
Proceeds from sales of loans 7,353 5,326
Purchases of premises and equipment (17,107) (15,119)
--------- ---------
Net cash (used) by investing activities (374,792) (65,933)
Financing
activities
Net increase in demand and savings deposits 168,844 137,442
Net increase in time deposits 91,151 244,215
Net increase (decrease) in other borrowed money 25,000 (312,895)
Issuance of common stock 25,774
Dividends paid (6,290) (5,240)
Proceeds from issuance of common stock under
dividend reinvestment and other stock plans 3,116 2,112
Purchase of treasury stock (352)
Other 148 147
--------- ---------
Net cash provided by financing activities 281,969 91,203
(Decrease) increase in cash and cash equivalents (40,193) 43,493
Cash and cash equivalents at beginning of year 177,015 129,447
--------- ---------
Cash and cash equivalents at end of period $ 136,822 $ 172,940
--------- ---------
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 52,042 $ 53,398
Income taxes 9,551 9,608
--------- ---------
</TABLE>
3
<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, 1995. The
results for the three months ended September 30, 1996 and for the nine
months ended September 30, 1996 are not necessarily indicative of the
results that may be expected for the year ended December 31, 1996.
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.
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 $3,590,000 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 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.
4
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operation
Capital Resources
At September 30, 1996, stockholders' equity totaled $170.1
million or 6.27% of total assets, compared to $162.0 million or 6.71%
of total assets at December 31, 1995.
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
September 30, September 30, Regulatory September 30,
1996 1995 Requirements 1996
(in thousands)
<S> <C> <C> <C> <C>
Company
Risk based capital ratios:
Tier 1 12.73% 12.84% 4.00% $118,290
Total capital 15.47 15.92 8.00 101,260
Leverage ratio 6.50 6.37 3.00-5.00 92,860 (1)
Commerce NJ
Risk based capital ratios:
Tier 1 13.82% 14.78% 4.00% $102,070
Total capital 14.93 15.92 8.00 72,030
Leverage ratio 7.08 7.21 3.00-5.00 82,820 (1)
Commerce PA
Risk based capital ratios:
Tier 1 13.50% 11.77% 4.00% $ 15,150
Total capital 14.32 12.69 8.00 10,080
Leverage ratio 6.63 6.10 3.00-5.00 11,790 (1)
Commerce Shore
Risk based capital ratios:
Tier 1 14.12% 13.56% 4.00% $15,480
Total capital 14.99 14.60 8.00 10,700
Leverage ratio 6.55 6.18 3.00-5.00 11,710 (1)
<FN>
(1) Based on a minimum regulatory requirement of 3.00%
</FN>
</TABLE>
At September 30, 1996, 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%.
5
<PAGE>
Deposits
Total deposits at September 30, 1996 were $2.49 billion, up
$268.9 million, or 12% over total deposits of $2.22 billion at
September 30, 1995, and up by $260.0 million, or 12% from year-end
1995. Deposit growth during the first nine months of 1996 was largely
from core deposits, primarily demand and savings accounts. In addition,
the Company experienced "same-store core deposit growth" of 10.9% at
September 30, 1996 as compared to deposits a year ago for those
branches open for more than one year.
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. The objective
of interest rate risk management is to monitor and manage the
sensitivity of net interest income to changing interest rates and other
factors in order to meet the Company's overall financial goals.
Management considers the simulation of net interest income in
different interest rate environments to be the best indicator of the
Company's 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.
The Company's income simulation model analyzes interest rate
sensitivity by projecting net income over the next 24 months in a flat
rate scenario versus net income in alternative interest rate scenarios.
Management continually reviews and refines its interest rate risk
management process in response to the changing economic climate.
Currently, the Company's model projects a proportionate 200 basis point
change during the next year, with rates remaining constant in the
second year. The Company's Asset/Liability Committee (ALCO) policy has
established that interest income sensitivity will be considered
acceptable if net income in the above interest rate scenario is within
15% of net income in the flat rate scenario in the first year and
within 30% over the two year time frame. At September 30, 1996, the
Company's income simulation model indicates an acceptable level of
interest rate risk.
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, or the use of risk management
strategies such as interest rate swaps and caps. 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.
Management also monitors interest rate risk by utilizing a
market value of equity model. The model assesses the impact of a change
in interest rates on the market value of all the Company's assets and
liabilities, as well as any off balance sheet items. The model
6
<PAGE>
calculates the market value of the Company's assets and liabilities in
excess of book value in the current rate scenario, and then compares
the excess of market value over book value given an immediate 200 basis
point increase in rates. The Company's ALCO policy indicates that the
level of interest rate risk is unacceptable if the immediate 200 basis
point increase would result in the loss of 70% or more of the excess of
market value over book value in the current rate scenario. At September
30, 1996, the market value of equity model indicates an acceptable
level of interest rate risk.
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, as
required.
Short-Term Borrowings
Short-term borrowings, or other borrowed money, consist of
securities sold under agreement to repurchase. During the first nine
months of 1996, these borrowings were used as an additional source of
funding for the investment portfolio and to fund loan growth. At
September 30, 1996, short-term borrowings aggregated $25.0 million and
had an average rate of 5.38%.
Interest Earning Assets
For the nine month period ended September 30, 1996, interest
earning assets increased $314.6 million from $2.15 billion to $2.47
billion. This increase was primarily in investment securities and the
loan portfolio as described below.
Loans
During the first nine months of 1996, loans increased $151.9
million from $907.5 million to $1.06 billion. At September 30, 1996,
loans represented 43% of total deposits and 39% of total assets.
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
In total, for the first nine months of 1996, securities
increased $183.6 million from $1.21 billion to $1.40 billion. Deposit
growth and other funding sources were used to increase the Company's
available for sale portfolio, which rose $245.6 million to $765.9
million from $520.3 million at year-end 1995. Securities held to
maturity decreased from $682.7 million to $626.4 million reflecting
payments on the existing portfolio. At September 30, 1996, the average
life of the investment portfolio was approximately 6.2 years, and the
duration was approximately 4.4 years.
7
<PAGE>
Short-term investments (Federal funds sold) decreased $16.7
million from $29.6 million at year-end 1995 to $12.9 million at
September 30, 1996. At September 30, 1996, total securities and Federal
funds sold aggregated $1.41 billion and represented 52% of total
assets.
Net Income
After the imposition of an historic one-time special assessment
of approximately $1.3 million in connection with recently enacted
legislation to recapitalize the Savings Association Insurance Fund
(SAIF), net income for the third quarter of 1996 was $6.0 million as
compared to $6.3 million recorded for the third quarter of 1995. Net
income for the first nine months of 1996 was $18.9 million, an increase
of $1.5 million over the $17.3 million recorded in the first nine
months of 1995. The decrease in net income in the third quarter of 1996
as compared to the third quarter of 1995 was due to increased overhead
expenses ( including the SAIF assessment) and higher loan loss
provisions, which offset increases in net interest income and
noninterest income. The increase in net income for the first nine
months of 1996 as compared to the first nine months of 1995 was due to
increases in net interest income and noninterest income, which offset
slightly higher loan loss provisions and increased overhead expenses (
including the SAIF assessment). On a per share basis, fully diluted net
income for the third quarter of 1996 and for the first nine months of
1996 was $.47 and $1.51 per common share compared to $.51 and $1.46 per
common share for the respective 1995 periods.
Excluding the SAIF assessment, net income for the third quarter
and the first nine months of 1996 was $6.8 million and $19.7 million as
compared to $6.3 and $17.3 million for the respective 1995 periods. On
a per share basis, fully diluted net income excluding the SAIF
assessment for the third quarter of 1996 and the first nine months of
1996 was $.55 and $1.58 per common share compared to $.51 and $1.46 per
common share for the respective 1995 periods.
After the SAIF assessment, return on average assets (ROA) and
return on average equity (ROE) for the third quarter of 1996 were .91%
and 14.70%, respectively, compared to 1.06% and 16.60%, respectively,
for the same 1995 period. ROA and ROE for the first nine months of 1996
were .99% and 15.55%, respectively, compared to .99% and 16.40% a year
ago.
Net Interest Income
Net interest income totaled $27.7 million for the third
quarter of 1996, an increase of $3.8 million or 16% from $24.0 million
in the third quarter of 1995. Net interest income for the first nine
months of 1996 totaled $79.4 million, up $8.9 million or 13% from the
first nine months of 1995. The improvement in net interest income for
both reporting periods was due primarily to volume increases in the
loan portfolio.
Noninterest Income
Noninterest income totaled $7.0 million for the third quarter of
1996, an increase of $1.5 million or 28% from $5.5 million in the third
quarter of 1995. The increase was due primarily to increased deposit
charges and service fees, which rose $944 thousand over the prior year.
For the first nine months of 1996, noninterest income totaled $20.1
million, an increase of $5.3 million or 35% from $14.9 million in the
first nine months of 1995. The increase was due primarily to increased
deposit charges and service fees, which rose $3.2 million over the
prior year, and net investment securities gains which increased $411
thousand over 1995.
8
<PAGE>
Noninterest Expense
For the third quarter of 1996, noninterest expense totaled
$24.6 million, an increase of $5.4 million or 28% over the same period
in 1995. The one-time special SAIF assessment of $1.3 million caused
audit and regulatory fees and assessments to increase significantly
over the prior year. Also contributing to the rise in noninterest
expenses was the increase in the number of branches from 47 at
September 30, 1995 to 56 at September 30, 1996. As a result of the
addition of these offices, staff, facilities, marketing, and related
expenses rose accordingly.
For the first nine months of 1996, noninterest expense totaled
$67.9 million, an increase of $11.5 million, or 20%, over $56.5 million
in the first nine months of 1995. Contributing to this increase was the
SAIF assessment and new branch activity as noted above.
One key measure used to monitor progress in controlling
overhead expenses is the ratio of noninterest expenses to average
assets. For the first nine months of 1996, this ratio equaled 3.56%
versus 3.22% for the comparable 1995 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 67.34% for the first nine months of 1996 as compared to
64.12% for the same 1995 period.
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 September 30, 1996 were $17.0 million, or .63% of
total assets compared to $19.1 million or .79% of total assets at
December 31, 1995 and $17.9 million or .74% of total assets at
September 30, 1995.
Total non-performing loans (non-accrual loans and restructured
loans, excluding loans past due 90 days or more and still accruing
interest) at September 30, 1996 were $9.5 million or .90% of total
loans compared to $8.5 million or .94% of total loans at December 31,
1995 and $7.7 million or .89% of total loans at September 30, 1995. At
September 30, 1996, loans past due 90 days or more and still accruing
interest amounted to $142 thousand compared to $126 thousand at
December 31, 1995 and $77 thousand at September 30, 1995. Additional
loans considered as potential problem loans by the Company's internal
loan review department ($12.1 million at September 30, 1996, $7.2
million at December 31, 1995 and $7.6 million at September 30, 1995)
have been evaluated as to risk exposure in determining the adequacy of
the allowance for loan losses.
Other real estate (ORE) at September 30, 1996 totaled $7.4
million compared to $10.6 million at December 31, 1995 and $10.1
million at September 30, 1995. These properties have been written down
to the lower of cost or fair value less disposition costs.
On pages 11 and 12 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 September 30, 1996, December 31, 1995, and September 30, 1995.
9
<PAGE>
Pending Acquisitions
On July 31, 1996, the Company reached agreements in principle
to acquire two insurance brokerage firms: Keystone National Companies,
Inc., Cherry Hill, NJ and Buckelew & Associates, Toms River, NJ. On
October 2, 1996, the Company reached an agreement in principle to
acquire a third insurance brokerage firm: Chesley & Cline, Inc., Mt.
Holly, New Jersey. The acquisitions will be completed by the issuance
of common stock of the Company totaling approximately 750,000 shares.
The acquisitions are intended to be tax-free reorganizations under
appropriate provisions of the United States Internal Revenue Code and
will be accounted for by the Company under the pooling-of-interests
method. Subject to required governmental approvals, the first two
acquisitions are expected to close on or about November 15, 1996 and
the third acquisition is expected to close on or about December 1,
1996. The effect of these acquisitions on the Company's total
consolidated assets, stockholders' equity, and net income is not
expected to be material.
On October 15, 1996, the Company entered into an agreement and
Plan of Reorganization and related Agreement and Plan of Merger
(collectively the "Merger Agreement") to acquire Independence Bancorp,
Inc. ("IBI"), the holding company for Independence Bank of New Jersey,
a $375 million, 8-branch bank headquartered in Ramsey, New Jersey. The
acquisition is structured as a tax-free merger to be accounted for as a
pooling-of-interests. Under the Merger Agreement, the shareholders of
IBI will receive .935 shares of the Company's common stock for each of
the outstanding shares of the common stock of IBI, resulting in the
issuance of approximately 2,522,000 shares of the Company's common
stock. Also, in connection with the Merger Agreement, IBI granted the
Company an option to acquire up to 19.9% of IBI's authorized but
unissued shares of common stock at a price of $21.00 per share, subject
to certain adjustments and certain circumstances. Consummation of the
acquisition is subject to certain customary conditions, including
shareholder and bank regulatory approvals, and, subject to those
approvals, is expected to close in the first quarter of 1997.
10
<PAGE>
The following summary presents information regarding non-performing
loans and assets as of September 30, 1996 and the preceding four
quarters: (dollar amounts in thousands)
<TABLE>
<CAPTION>
September 30, June 30, March 31, Dec. 31, Sept. 30,
1996 1996 1996 1995 1995
<S> <C> <C> <C> <C> <C>
Non-accrual loans:
Commercial $ 1,066 $ 1,000 $ 701 $ 629 $ 658
Consumer 979 827 794 853 1,186
Real Estate:
Construction 2,196 1,687 1,787 1,787 911
Mortgage 4,744 5,015 5,054 4,708 4,441
------- ------- ------- ------- -------
Total non-accrual loans 8,985 8,529 8,336 7,977 7,196
------- ------- ------- ------- -------
Restructured loans
Commercial 21 22 144 161 173
Consumer 29 59 60 60 69
Real Estate:
Construction
Mortgage 500 84 301 301
------- ------- ------- ------- -------
Total restructured loans 550 81 288 522 543
------- ------- ------- ------- -------
Total non-performing loans 9,535 8,610 8,624 8,499 7,739
------- ------- ------- ------- -------
Other real estate 7,422 7,721 8,241 10,561 10,120
------- ------- ------- ------- -------
Total non-performing assets 16,957 16,331 16,865 19,060 17,859
------- ------- ------- ------- -------
Loans past due 90 days or more
and still accruing 142 427 163 126 77
------- ------- ------- ------- -------
Total non-performing assets and
loans past due 90 days or more $17,099 $16,758 $17,028 $19,186 $17,936
======= ======= ======= ======= =======
Total non-performing loans as a
percentage of total period-end
loans 0.90% 0.83% 0.92% 0.94% 0.89%
Total non-performing assets as a
percentage of total period-end assets 0.63% 0.63% 0.68% 0.79% 0.74%
Total non-performing assets and loans
past due 90 days or more as a
percentage of total period-end assets 0.63% 0.64% 0.69% 0.79% 0.75%
Allowance for loan losses as a
percentage of total non-performing
loans 149% 159% 156% 157% 168%
Allowance for loan losses as a percentage
of total period-end loans 1.34% 1.33% 1.43% 1.47% 1.50%
Total non-performing assets and loans
past due 90 days or more as a
percentage of stockholders' equity and
allowance for loan losses 9% 10% 10% 11% 11%
</TABLE>
11
<PAGE>
The following table presents, for the periods indicated, an analysis of
the allowance for loan losses and other related data: (dollar amounts in
thousands)
<TABLE>
<CAPTION>
Year
Nine Months Ended Ended
09/30/96 09/30/95 12/31/95
<S> <C> <C> <C>
Balance at beginning of period $13,320 $12,036 $12,036
Provisions charged to operating expenses 2,173 1,633 2,215
------- ------- -------
15,493 13,669 14,251
Recoveries on loans charged-off:
Commercial 167 94 154
Consumer 120 120 144
Real estate 80 288 292
------- ------- -------
Total recoveries 367 502 590
Loans charged-off:
Commercial (349) (526) (595)
Consumer (488) (326) (580)
Real estate (833) (314) (346)
------- ------- -------
Total charged-off (1,670) (1,166) (1,521)
------- ------- -------
Net charge-offs (1,303) (664) (931)
------- ------- -------
Balance at end of period $14,190 $13,005 $13,320
======= ======= =======
Net charge-offs as a percentage of
average loans outstanding 0.18% 0.11% 0.11%
</TABLE>
12
<PAGE>
PART II. OTHER INFORMATION
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 third quarter ended
September 30, 1996. A report on Form 8-K related to the
acquisition of Independence Bancorp, Inc. was filed on October
22, 1996.
13
<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)
/s/ C. EDWARD JORDAN, JR.
November 14, 1996 -------------------------------
(Date) C. EDWARD JORDAN, JR.
EXECUTIVE VICE PRESIDENT
(PRINCIPAL FINANCIAL OFFICER)
14
Exhibit No. 11.1
Commerce Bancorp, Inc. and Subsidiaries
Computation of Net Income Per Share
(dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Primary Net Income Per Share
Adjustment of income:
Net income $ 6,008 $ 6,277 $18,865 $17,336
Preferred stock dividends 141 141 422 422
------- ------- ------- -------
Adjusted net income applicable to
common stock $ 5,867 $ 6,136 $18,443 $16,914
======= ======= ======= =======
Average shares of common stock and equivalents outstanding:
Average common shares outstanding 11,406 11,169 11,346 10,846
Common stock equivalents - dilutive options 471 397 431 301
------- ------- ------- -------
Average shares of common stock and
equivalents outstanding 11,877 11,566 11,777 11,147
======= ======= ======= =======
Net income per share of common stock $ 0.49 $ 0.52 $ 1.56 $ 1.51
======= ======= ======= =======
Fully Diluted Net Income Per Share
Net income applicable to common stock
on a fully diluted basis $ 6,008 $ 6,277 $18,865 $17,336
Less: additional ESOP contribution
under the if-converted method 26 33 77 99
------- ------- ------- -------
Adjusted net income applicable to
common stock on a fully diluted basis $ 5,982 $ 6,244 $18,788 $17,237
======= ======= ======= =======
Average number of shares outstanding on a fully diluted basis:
Average common shares outstanding 11,406 11,169 11,346 10,846
Additional shares considered in fully
diluted computation assuming:
Exercise of stock options 528 454 543 464
Conversion of preferred stock 587 587 587 587
------- ------- ------- -------
Average number of shares outstanding
on a fully diluted basis 12,521 12,210 12,476 11,897
======= ======= ======= =======
Fully diluted net income per share of
common stock $ 0.47 $ 0.51 $ 1.51 $ 1.46
======= ======= ======= =======
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<CIK> 0000715096
<NAME> COMMERCE BANCORP, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 123,972
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 12,850
<TRADING-ASSETS> 3,203
<INVESTMENTS-HELD-FOR-SALE> 765,893
<INVESTMENTS-CARRYING> 626,373
<INVESTMENTS-MARKET> 597,736
<LOANS> 1,059,380
<ALLOWANCE> 14,190
<TOTAL-ASSETS> 2,712,722
<DEPOSITS> 2,485,093
<SHORT-TERM> 25,000
<LIABILITIES-OTHER> 5,985
<LONG-TERM> 26,590
0
7,506
<COMMON> 18,007
<OTHER-SE> 144,541
<TOTAL-LIABILITIES-AND-EQUITY> 2,712,722
<INTEREST-LOAN> 67,063
<INTEREST-INVEST> 61,786
<INTEREST-OTHER> 2,215
<INTEREST-TOTAL> 131,064
<INTEREST-DEPOSIT> 49,063
<INTEREST-EXPENSE> 51,704
<INTEREST-INCOME-NET> 79,360
<LOAN-LOSSES> 2,173
<SECURITIES-GAINS> 517
<EXPENSE-OTHER> 67,947
<INCOME-PRETAX> 29,372
<INCOME-PRE-EXTRAORDINARY> 29,372
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 18,865
<EPS-PRIMARY> 1.56
<EPS-DILUTED> 1.51
<YIELD-ACTUAL> 4.63
<LOANS-NON> 8,985
<LOANS-PAST> 142
<LOANS-TROUBLED> 550
<LOANS-PROBLEM> 12,053
<ALLOWANCE-OPEN> 13,320
<CHARGE-OFFS> 1,670
<RECOVERIES> 367
<ALLOWANCE-CLOSE> 14,190
<ALLOWANCE-DOMESTIC> 14,190
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
