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 March 31, 2000
--------------
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
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(State or other jurisdiction of (IRS Employer Identification
incorporation or organization) Number)
Commerce Atrium, 1701 Route 70 East, Cherry Hill, New Jersey 08034-5400
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(Address of Principal Executive Offices) (Zip Code)
(609) 751-9000
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(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 __
---
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 30,624,092
(Title of Class) (No. of Shares Outstanding
as of 5/01/00)
<PAGE>
COMMERCE BANCORP, INC. AND SUBSIDIARIES
INDEX
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets (unaudited)
March 31, 2000 and December 31, 1999............................1
Consolidated Statements of Income (unaudited)
Three months ended March 31, 2000 and
March 31, 1999..................................................2
Consolidated Statements of Cash Flows (unaudited)
Three months ended March 31, 2000 and
March 31, 1999..................................................3
Notes to Consolidated Financial Statements (unaudited)..........4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operation..............................7
Item 3. Quantitative and Qualitative Disclosures About Market Risk.....13
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K....................................14
<PAGE>
COMMERCE BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (unaudited)
<TABLE>
<CAPTION>
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March 31, December 31,
--------------------------------
(dollars in thousands) 2000 1999
------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets Cash and due from banks $ 331,600 $ 317,624
Federal funds sold 18,200 5,300
------------ --------------
Cash and cash equivalents 349,800 322,924
Loans held for sale 5,704
Trading securities 67,913 117,837
Securities available for sale 1,681,469 1,664,257
Securities held to maturity 1,257,369 1,201,892
(market value 03/00-$1,205,518; 12/99-$1,155,447)
Loans 3,196,193 2,961,088
Less allowance for loan losses 40,705 38,382
------------ --------------
3,155,488 2,922,706
Bank premises and equipment, net 214,461 198,515
Other assets 200,321 201,958
------------ --------------
$6,926,821 $6,635,793
============ ==============
Liabilities Deposits:
Demand:
Interest-bearing $2,126,511 $2,063,899
Noninterest-bearing 1,496,921 1,420,865
Savings 1,184,069 1,054,791
Time 1,299,726 1,069,365
------------ --------------
Total deposits 6,107,227 5,608,920
Other borrowed money 318,953 558,092
Other liabilities 54,248 31,525
Trust Capital Securities - Commerce Capital Trust I 57,500 57,500
Long-term debt 23,000 23,000
------------ --------------
6,560,928 6,279,037
Stockholders' Common stock, 30,572,346 shares
Equity issued (29,844,314 shares in 1999) 47,761 44,418
Capital in excess of par or stated value 380,961 321,443
Retained earnings (11,941) 32,263
Accumulated other comprehensive income (49,264) (39,744)
------------ --------------
367,517 358,380
Less treasury stock, at cost 1,624 1,624
------------ --------------
Total stockholders' equity 365,893 356,756
------------ --------------
$6,926,821 $6,635,793
============ ==============
</TABLE>
1
<PAGE>
<TABLE>
<CAPTION>
COMMERCE BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (unaudited)
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Three Months Ended
March 31,
---------------------------------
(dollars in thousands, except per share amounts) 2000 1999
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<S> <C> <C>
Interest Interest and fees on loans $63,178 $48,003
income Interest on investments 48,830 39,007
Other interest 218 156
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Total interest income 112,226 87,166
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Interest Interest on deposits:
expense Demand 15,351 9,625
Savings 6,168 4,795
Time 15,863 15,007
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Total interest on deposits 37,382 29,427
Interest on other borrowed money 5,087 775
Interest on long-term debt 1,558 1,782
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Total interest expense 44,027 31,984
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Net interest income 68,199 55,182
Provision for loan losses 3,493 2,184
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Net interest income after provision for loan losses 64,706 52,998
Noninterest Deposit charges and service fees 12,336 9,740
income Other operating income 22,508 17,128
Net investment securities gains 820 865
-------------- --------------
Total noninterest income 35,664 27,733
-------------- --------------
Noninterest Salaries 29,043 23,787
expense Benefits 6,192 5,056
Occupancy 7,078 5,093
Furniture and equipment 9,159 6,943
Office 5,798 5,298
Audit and regulatory fees and assessments 681 572
Marketing 2,264 1,663
Other real estate (net) 273 474
Other 12,371 8,866
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Total noninterest expenses 72,859 57,752
-------------- --------------
Income before income taxes 27,511 22,979
Provision for federal and state income taxes 9,216 7,498
-------------- --------------
Net income $18,295 $15,481
============== ==============
Net income per common and common equivalent share:
Basic $0.60 $0.54
-------------- --------------
Diluted $0.59 $0.51
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Average common and common equivalent shares outstanding:
Basic 30,263 28,818
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Diluted 31,160 30,141
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Cash dividends declared, common stock $0.24 $0.20
============== ==============
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
COMMERCE BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
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Three Months Ended
March 31,
---------------------------------
(dollars in thousands) 2000 1999
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<S> <C> <C>
Operating Net income $ 18,295 $ 15,481
activities Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses 3,493 2,184
Provision for depreciation, amortization and accretion 6,975 7,607
Gains on sales of securities available for sale (820) (865)
Proceeds from sales of mortgages held for sale 6,241 39,794
Originations of mortgages held for sale (537) (27,935)
Net loan chargeoffs (1,170) (300)
Net decrease in trading securities 49,924 31,123
Decrease (increase) in other assets 6,793 (21,119)
Increase (decrease) in other liabilities 22,722 (19,559)
------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 111,916 26,411
Investing Proceeds from the sales of securities available for sale 167,134 185,808
activities Proceeds from the maturity of securities available for sale 61,324 96,870
Proceeds from the maturity of securities held to maturity 35,705 77,100
Purchase of securities available for sale (259,551) (415,463)
Purchase of securities held to maturity (91,272) (35,522)
Net increase in loans (237,991) (197,854)
Proceeds from sales of loans 2,886 2,684
Purchases of premises and equipment (22,804) (13,217)
------------------------------------------------------------------------------------------------------
Net cash used by financing activities (344,569) (299,594)
Financing Net increase (decrease) in demand and savings deposits 267,946 (13,263)
activities Net increase in time deposits 230,361 126,392
Net (decrease) increase in other borrowed money (239,139) 106,945
Dividends paid (7,040) (5,074)
Proceeds from issuance of common stock under
dividend reinvestment and other stock plans 12,921 4,564
Other (5,520) 4
------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 259,529 219,568
Increase (decrease) in cash and cash equivalents 26,876 (53,615)
Cash and cash equivalents at beginning of year 322,924 277,615
------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $349,800 $224,000
======================================================================================================
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $43,111 $29,024
Income taxes 1,343 18
Other noncash activities:
Transfer of securities to securities available for sale 91,010
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</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 on Form 10-K for the period ended December 31, 1999.
The results for the three months ended March 31, 2000 are not necessarily
indicative of the results that may be expected for the year ended December 31,
2000.
The consolidated financial statements include the accounts of Commerce Bancorp,
Inc. and all of its subsidiaries, including Commerce Bank, N.A. (Commerce NJ),
Commerce Bank/Pennsylvania, N.A., Commerce Bank/Shore, N.A., Commerce
Bank/North, Commerce Bank/Central, N.A., Commerce Bank/Delaware, N.A., Commerce
National Insurance Services, Inc. (Commerce National Insurance), Commerce
Capital Trust I, and Commerce Capital Markets, Inc. (CCMI). 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. Comprehensive Income
Total comprehensive income, which for the Company included net income and
unrealized gains and losses on the Company's available for sale securities,
amounted to $8.8 million and $9.6 million, respectively, for the three months
ended March 31, 2000 and 1999.
4
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COMMERCE BANCORP, INC. AND SUBSIDIARIES
D. Segment Information
Selected segment information is as follows:
<TABLE>
<CAPTION>
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Three Months Ended Three Months Ended
March 31, 2000 March 31, 1999
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Community Parent/ Community Parent/
Banks Other Total Banks Other Total
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net interest income $69,801 $(1,602) $68,199 $56,799 $(1,617) $55,182
Provision for loan losses 3,493 3,493 2,184 2,184
-----------------------------------------------------------------------------------
Net interest income after provision 66,308 (1,602) 64,706 54,615 (1,617) 52,998
Noninterest income 20,345 15,319 35,664 14,788 12,945 27,733
Noninterest expense 59,682 13,177 72,859 47,094 10,658 57,752
-----------------------------------------------------------------------------------
Income before income taxes 26,971 540 27,511 22,309 670 22,979
Income tax expense 8,925 291 9,216 7,329 169 7,498
-----------------------------------------------------------------------------------
Net income $18,046 $249 $18,295 $14,980 $501 $15,481
===================================================================================
Average assets (in millions) $6,030,116 $630,352 $6,660,468 $4,870,848 $567,219 $5,438,067
===================================================================================
</TABLE>
E. Recent Accounting Statement
In June 1998, the FASB issued Statement No. 133 "Accounting for Derivative
Instruments and Hedging Activities" (FAS 133). FAS 133 will require the Company
to recognize all derivatives on the balance sheet at fair value. Derivatives
that are not hedges must be adjusted to fair value through income. If the
derivative is a hedge, depending on the nature of the hedge, changes in the fair
value of the derivative will either be offset against the change in fair value
of the hedged asset or liability through earnings or recognized in other
comprehensive income until the hedged item is recognized in earnings. The
ineffective portion of a derivative's change in fair value will be immediately
recognized in earnings. FAS 133, as amended, becomes effective for the Company
beginning January 1, 2001. Although early adoption is allowed in any quarterly
period after June 1998, the Company has no plans to adopt FAS 133 prior to the
effective date. Based on the Company's minimal use of derivatives at the current
time, management does not expect the adoption of FAS 133 to have a significant
effect on results of operations or the financial position of the Company.
However, the impact from adopting FAS 133 will depend on the nature and purpose
of the derivative instruments in use by the Company at that time.
F. Trust Capital Securities
On June 9, 1997, the Company issued $57.5 million of 8.75% Trust Capital
Securities through Commerce Capital Trust I, a newly formed Delaware business
trust subsidiary of the Company. The net proceeds of the offering will be used
for general corporate purposes, which may include contributions to subsidiary
banks to fund their operations, the financing of one or more future
acquisitions, repayment of indebtedness of the Company or of its subsidiary
banks, investments in or extensions of credit to its subsidiaries, or the
repurchase of shares of the Company's outstanding common stock. All $57.5
million of the Trust Capital Securities qualify as Tier 1 capital for regulatory
capital purposes.
5
<PAGE>
COMMERCE BANCORP, INC. AND SUBSIDIARIES
G. Earnings Per Share
The calculation of earnings per share follows (in thousands, except for per
share amounts):
Three Months Ended
March 31
----------------------
2000 1999
- -----------------------------------------------------------------------------
Basic:
Net income applicable to common stock $ 18,295 $15,481
======== =======
Average common shares outstanding 30,263 28,818
======== =======
Net income per common share - basic $ 0.60 $ 0.54
======== =======
Diluted:
Net income applicable to common stock
on a diluted basis $ 18,295 $15,481
======== =======
Average common shares outstanding 30,263 28,818
======== =======
Additional shares considered in diluted
computation assuming:
Exercise of stock options 897 1,323
======== =======
Average common shares outstanding
on a diluted basis 31,160 30,141
======== =======
Net income per common share - diluted $ 0.59 $ 0.51
======== =======
6
<PAGE>
COMMERCE BANCORP, INC. AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operation
Capital Resources
At March 31, 2000, stockholders' equity totaled $365.9 million or 5.28% of total
assets, compared to $356.8 million or 5.38% of total assets at December 31,
1999.
The table below presents the Company's and Commerce NJ's risk-based and leverage
ratios at March 31, 2000 and 1999:
<TABLE>
<CAPTION>
Per Regulatory Guidelines
---------------------------------------------------
Actual Minimum "Well Capitalized"
Amount Ratio Amount Ratio Amount Ratio
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
March 31, 2000
Company
Risk based capital ratios:
Tier 1 $468,481 11.33% $165,390 4.00% $248,085 6.00%
Total capital 522,986 12.65 330,780 8.00 413,475 10.00
Leverage ratio 468,481 6.98 268,472 4.00 335,590 5.00
Commerce NJ
Tier 1 $233,787 10.12% $ 92,415 4.00% $138,622 6.00%
Total capital 256,562 11.10 184,830 8.00 231,037 10.00
Leverage ratio 233,787 6.47 144,469 4.00 180,586 5.00
March 31, 1999
Company
Risk based capital ratios:
Tier 1 $386,771 11.64% $132,954 4.00% $199,431 6.00%
Total capital 438,320 13.19 265,908 8.00 332,385 10.00
Leverage ratio 386,771 7.12 217,174 4.00 271,468 5.00
Commerce NJ
Tier 1 $200,137 10.92% $ 73,300 4.00% $109,950 6.00%
Total capital 218,152 11.90 146,600 8.00 183,250 10.00
Leverage ratio 200,137 6.57 121,771 4.00 152,214 5.00
</TABLE>
At March 31, 2000, 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%. Management believes that as of March 31, 2000, the Company
and its subsidiaries meet all capital adequacy requirements to which they are
subject.
Deposits
Total deposits at March 31, 2000 were $6.11 billion, up $1.07 billion, or 21%
over total deposits of $5.04 billion at March 31, 1999, and up by $498.3
million, or 9% from year-end 1999. Deposit growth during the first three months
of 2000 included core deposit growth in all categories as well as growth from
the public sector. The Company experienced "same-store core deposit growth" of
14.3% at March 31, 2000 as compared to deposits a year ago for those branches
open for more than two years.
Interest Rate Sensitivity and Liquidity
The Company's risk of loss arising from adverse changes in the fair market value
of financial instruments, or market risk, is composed primarily of interest rate
risk. The primary objective of the Company's asset/liability management
7
<PAGE>
COMMERCE BANCORP, INC. AND SUBSIDIARIES
activities is to maximize net interest income, while maintaining acceptable
levels of interest rate risk. The Company's Asset/Liability Committee (ALCO) is
responsible for establishing policies to limit exposure to interest rate risk,
and to ensure procedures are established to monitor compliance with these
policies. The guidelines established by ALCO are reviewed by the Company's Board
of Directors.
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 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 March
31, 2000, the Company's income simulation model indicates net income would
increase by 4.14% and 1.05% in the first year and over a two year time frame,
respectively, if rates decreased as described above, as compared to a decrease
of 0.32% and 6.22%, respectively, at March 31, 1999. At March 31, 2000, the
model projects that net income would decrease by 6.09% and 4.60% in the first
year and over a two year time frame, respectively, if rates increased as
described above, as compared to a decrease of 2.81% and 1.98%, respectively, at
March 31, 1999. All of these net income projections are within an acceptable
level of interest rate risk pursuant to the policy established by ALCO.
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.
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 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 change in rates. The Company's ALCO policy indicates that the level
of interest rate risk is unacceptable if the immediate 200 basis point change
would result in the loss of 60% or more of the excess of market value over book
value in the current rate scenario. At March 31, 2000, 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 primarily 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 primarily of securities
sold under agreements to repurchase and overnight lines of credit, and are used
to meet short term funding needs. During the first three months of 2000, the
Company significantly reduced its short-term borrowings, primarily through
increased deposits. At March 31, 2000, short-term borrowings aggregated $319.0
million and had an average rate of 6.14%, as compared to $558.1 million at an
average rate of 5.38% at December 31, 1999.
8
<PAGE>
COMMERCE BANCORP, INC. AND SUBSIDIARIES
Interest Earning Assets
For the three month period ended March 31, 2000, interest earning assets
increased $265.1 million from $5.96 billion to $6.22 billion. This increase was
primarily in investment securities and the loan portfolio as described below.
Loans
During the first three months of 2000, loans increased $232.8 million from $2.92
billion to $3.16 billion. At March 31, 2000, loans represented 52% of total
deposits and 46% of total assets. All segments of the loan portfolio experienced
growth in the first three months of 2000, including loans secured by commercial
real estate properties, commercial loans, and consumer loans.
Investments
In total, for the first three months of 2000, securities increased $22.8 million
from $2.98 billion to $3.01 billion. The available for sale portfolio increased
$17.2 million to $1.68 billion at March 31, 2000 from $1.66 billion at December
31, 1999, and the securities held to maturity portfolio increased $55.5 million
to $1.26 billion at March 31, 2000 from $1.20 billion at year-end 1999. The
portfolio of trading securities decreased $49.9 million from year-end 1999 to
$67.9 million at March 31, 2000. At March 31, 2000, the average life of the
investment portfolio was approximately 7.0 years, and the duration was
approximately 4.9 years. At March 31, 2000, total securities represented 43% of
total assets.
Net Income
Net income for the first quarter of 2000 was $18.3 million, an increase of $2.8
million or 18% over the $15.5 million recorded for the first quarter of 1999. On
a per share basis, diluted net income for the first quarter of 2000 was $0.59
per common share compared to $0.51 per common share for the first quarter of
1999.
Return on average assets (ROA) and return on average equity (ROE) for the first
quarter of 2000 were 1.10% and 20.60%, respectively, compared to 1.14% and
18.76%, respectively, for the same 1999 period.
Net Interest Income
Net interest income totaled $68.2 million for the first quarter of 2000, an
increase of $13.0 million or 24% from $55.2 million in the first quarter of
1999. The improvement in net interest income was due primarily to volume
increases in the loan and investment portfolios.
Noninterest Income
Noninterest income totaled $35.7 million for the first quarter of 2000, an
increase of $7.9 million or 29% from $27.7 million in the first quarter of 1999.
The increase was due primarily to increased other operating income, which rose
$5.4 million over the prior year, including increased revenues of $4.2 million
from Commerce National Insurance, the Company's insurance brokerage subsidiary.
In addition, deposit charges and service fees increased $2.6 million over the
first quarter of 1999 primarily due to higher transaction volumes. The Company
also recorded $820 thousand in net investment securities gains in the first
quarter of 2000 as compared to $865 thousand for the same 1999 period.
Noninterest Expense
For the first quarter of 2000, noninterest expense totaled $72.9 million, an
increase of $15.1 million or 26% over the same period in 1999. Contributing to
this increase was new branch activity over the past twelve months, with the
number of branches increasing from 97 at March 31, 1999 to 120 at March 31,
2000, and the expansion of Commerce National Insurance. With the addition of
these new offices, staff, facilities, marketing, and related expenses rose
accordingly. Other noninterest expenses rose $3.5 million over the first quarter
of 1999. This increase resulted primarily from higher bank card-related service
charges, increased business development expenses, and increased provisions for
non-credit-related losses.
9
<PAGE>
COMMERCE BANCORP, INC. AND SUBSIDIARIES
The Company's operating efficiency ratio (noninterest expenses, less other real
estate expense, divided by net interest income plus noninterest income excluding
non-recurring gains) was 70.44% for the first three months of 2000 as compared
to 69.81% for the same 1999 period. The Company's efficiency ratio remains above
its peer group primarily due to its aggressive growth expansion activities.
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 March
31, 2000 were $15.6 million, or 0.23% of total assets compared to $12.2 million
or 0.18% of total assets at December 31, 1999 and $14.5 million or 0.26% of
total assets at March 31, 1999.
Total non-performing loans (non-accrual loans and restructured loans, excluding
loans past due 90 days or more and still accruing interest) at March 31, 2000
were $11.9 million or 0.37% of total loans compared to $8.7 million or 0.29% of
total loans at December 31, 1999 and $8.9 million or 0.36% of total loans at
March 31, 1999. At March 31, 2000, loans past due 90 days or more and still
accruing interest amounted to $916 thousand compared to $499 thousand at
December 31, 1999 and $696 thousand at March 31, 1999. Additional loans
considered as potential problem loans by the Company's internal loan review
department ($27.8 million at March 31, 2000) have been evaluated as to risk
exposure in determining the adequacy of the allowance for loan losses.
Other real estate (ORE) at March 31, 2000 totaled $3.7 million compared to $3.5
million at December 31, 1999 and $5.6 million at March 31, 1999. These
properties have been written down to the lower of cost or fair value less
disposition costs.
On pages 12 and 13 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 March 31, 2000, December
31, 1999, and March 31, 1999.
Year 2000
In prior years, The Company discussed the nature and progress of its plans to
become Year 2000 ready. In 1999, the Company completed its remediation and
testing of systems. As a result of those planning and implementation efforts,
the Company experienced no significant disruptions in mission critical
information and technology systems, and believes those systems successfully
responded to the Year 2000 date change. The cumulative cost of the Year 2000
compliance process, including internal and external personnel and any required
hardware and software modifications, was less than $1.0 million. The Company is
not aware of any material problems resulting from Year 2000 issues, either with
its internal systems, or the products and services of third parties (including
loan customers).
Forward-Looking Statements
The Company may from time to time make written or oral "forward-looking
statements", including statements contained in the Company's filings with the
Securities and Exchange Commission (including this Form 10-Q), in its reports to
stockholders and in other communications by the Company, which are made in good
faith by the Company pursuant to the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995.
These forward-looking statements include statements with respect to the
Company's beliefs, plans, objectives, goals, expectations, anticipations,
estimates and intentions, that are subject to significant risks and
uncertainties and are subject to change based on various factors (some of which
are beyond the Company's control). The words "may", "could", "should", "would",
believe", "anticipate", "estimate", "expect", "intend", "plan" and similar
expressions are intended to identify forward-looking statements. The following
factors, among others, could cause the Company's financial performance to differ
materially from that expressed in such forward-looking statements: the strength
of the United States economy in general and the strength of the local economies
in which the Company conducts operations; the effects of, and changes in, trade,
monetary and fiscal policies, including interest rate policies of the Board of
Governors of the Federal Reserve System (the "FRB"); inflation; interest rates,
market and monetary fluctuations; the timely development of competitive new
products and services by the Company and the acceptance of such products and
services by customers; the willingness of customers to substitute competitors'
products and services for the Company's products and services and vice versa;
the impact of changes in financial services' laws and regulations
10
<PAGE>
COMMERCE BANCORP, INC. AND SUBSIDIARIES
(including laws concerning taxes, banking, securities and insurance);
technological changes; future acquisitions; the expense savings and revenue
enhancements from acquisitions being less than expected; the growth and
profitability of the Company's noninterest or fee income being less than
expected; unanticipated regulatory or judicial proceedings; changes in consumer
spending and saving habits; and the success of the Company at managing the risks
involved in the foregoing.
The Company cautions that the foregoing list of important factors is not
exclusive. The Company does not undertake to update any forward-looking
statement, whether written or oral, that may be made from time to time by or on
behalf of the Company.
11
<PAGE>
COMMERCE BANCORP, INC. AND SUBSIDIARIES
The following summary presents information regarding non-performing loans and
assets as of March 31, 2000 and the preceding four quarters: (dollar amounts in
thousands)
<TABLE>
<CAPTION>
March 31, December 31, September 30, June 30, March 31,
2000 1999 1999 1999 1999
--------------------------------------------------------------------------
Non-accrual loans:
<S> <C> <C> <C> <C> <C>
Commercial $5,272 $2,254 $2,827 $3,104 $2,821
Consumer 709 674 748 787 846
Real estate:
Construction 55 55 55 115 115
Mortgage 5,458 5,230 5,539 5,144 4,937
--------------------------------------------------------------------------
Total non-accrual loans 11,494 8,213 9,169 9,150 8,719
--------------------------------------------------------------------------
Restructured loans:
Commercial 256 277 15 16 16
Consumer
Real estate:
Construction
Mortgage 189 192 108 110 117
--------------------------------------------------------------------------
Total restructured loans 445 469 123 126 133
--------------------------------------------------------------------------
Total non-performing loans 11,939 8,682 9,292 9,276 8,852
--------------------------------------------------------------------------
Other real estate 3,681 3,523 3,799 4,118 5,645
--------------------------------------------------------------------------
Total non-performing assets 15,620 12,205 13,091 13,394 14,497
--------------------------------------------------------------------------
Loans past due 90 days or more
and still accruing 916 499 581 693 696
--------------------------------------------------------------------------
Total non-performing assets and
loans past due 90 days or more $16,536 $12,704 $13,672 $14,087 $15,193
==========================================================================
Total non-performing loans as a
percentage of total period-end loans 0.37% 0.29% 0.34% 0.34% 0.36%
Total non-performing assets as a
percentage of total period-end assets 0.23% 0.18% 0.21% 0.23% 0.26%
Total non-performing assets and loans
past due 90 days or more as a
percentage of total period-end assets 0.24% 0.19% 0.22% 0.24% 0.27%
Allowance for loan losses as a percentage
of total non-performing loans 341% 442% 387% 376% 374%
Allowance for loan losses as a percentage
of total period-end loans 1.27% 1.30% 1.31% 1.30% 1.34%
Total non-performing assets and loans
past due 90 days or more as a
percentage of stockholders' equity and
allowance for loan losses 4% 3% 4% 4% 4%
</TABLE>
12
<PAGE>
COMMERCE BANCORP, INC. AND SUBSIDIARIES
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
Three Months Ended Ended
------------------------------
03/31/00 03/31/99 12/31/99
----------- ----------- ----------
<S> <C> <C> <C>
Balance at beginning of period $38,382 $31,265 $31,265
Provisions charged to operating expenses 3,493 2,184 9,175
----------- ----------- ----------
41,875 33,449 40,440
Recoveries on loans charged-off:
Commercial 96 220 551
Consumer 44 36 286
Commercial real estate 1 2 132
----------- ----------- ----------
Total recoveries 141 258 969
Loans charged-off:
Commercial (1,036) (368) (1,599)
Consumer (275) (184) (1,078)
Commercial real estate (6) (350)
----------- ----------- ----------
Total charge-offs (1,311) (558) (3,027)
----------- ----------- ----------
Net charge-offs (1,170) (300) (2,058)
----------- ----------- ----------
Balance at end of period $40,705 $33,149 $38,382
=========== =========== ==========
Net charge-offs as a percentage of
average loans outstanding 0.15% 0.05% 0.08%
</TABLE>
Item 3: Quantitative and Qualitative Disclosures About Market Risk
See Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operation, Interest Rate Sensitivity and Liquidity.
13
<PAGE>
COMMERCE BANCORP, INC. AND SUBSIDIARIES
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
No reports on Form 8-K were filed during the first quarter ended March 31, 2000.
14
<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)
May 15, 2000 /s/ THOMAS J. SUKAY
(Date) THOMAS J. SUKAY
SENIOR VICE PRESIDENT
(PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER)
15
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 349,800
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 67,913
<INVESTMENTS-HELD-FOR-SALE> 1,681,469
<INVESTMENTS-CARRYING> 1,257,369
<INVESTMENTS-MARKET> 1,205,518
<LOANS> 3,196,193
<ALLOWANCE> 40,705
<TOTAL-ASSETS> 6,926,821
<DEPOSITS> 6,107,227
<SHORT-TERM> 318,953
<LIABILITIES-OTHER> 54,248
<LONG-TERM> 80,500
0
0
<COMMON> 47,761
<OTHER-SE> 318,132
<TOTAL-LIABILITIES-AND-EQUITY> 6,926,821
<INTEREST-LOAN> 63,178
<INTEREST-INVEST> 48,830
<INTEREST-OTHER> 218
<INTEREST-TOTAL> 112,226
<INTEREST-DEPOSIT> 37,382
<INTEREST-EXPENSE> 44,027
<INTEREST-INCOME-NET> 68,199
<LOAN-LOSSES> 3,493
<SECURITIES-GAINS> 820
<EXPENSE-OTHER> 72,859
<INCOME-PRETAX> 27,511
<INCOME-PRE-EXTRAORDINARY> 27,511
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 18,295
<EPS-BASIC> 0.60
<EPS-DILUTED> 0.59
<YIELD-ACTUAL> 4.65
<LOANS-NON> 11,494
<LOANS-PAST> 916
<LOANS-TROUBLED> 445
<LOANS-PROBLEM> 27,838
<ALLOWANCE-OPEN> 38,382
<CHARGE-OFFS> 1,311
<RECOVERIES> 141
<ALLOWANCE-CLOSE> 40,705
<ALLOWANCE-DOMESTIC> 40,705
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
