EX-99 2 ex99-1.txt EXHIBIT 99.1 COMMERCE BANCORP [GRAPHIC OMITTED] CONTACTS -------- Vernon W. Hill, II C. Edward Jordan, Jr. Chairman and President Executive Vice President (856) 751-9000 COMMERCE BANCORP 2004 NET INCOME UP 41% January 13, 2005 - Cherry Hill, New Jersey - Commerce Bancorp, Inc. (NYSE Symbol: CBH) reported record earnings and increased deposits, assets and loans for the fourth quarter of 2004, announced Vernon W. Hill, II, Chairman of the multi-bank holding company.
FOURTH QUARTER FINANCIAL HIGHLIGHTS ----------------------------------- December 31, 2004 Three Months Ended Year Ended ------------------ ---------- 12/31/04 12/31/03 % Increase 12/31/04 12/31/03 % Increase -------- -------- ---------- -------- -------- ---------- (dollars in millions, except per share data) Total Assets: $30,501 $22,712 34% Total Deposits: 27,659 20,701 34% Total (Net) Loans: 9,319 7,329 27% ------------------------------------------------------------------------------------------------------------------- Total Revenues: $374.9 $303.0 24% $1,392.9 $1,088.3 28% Net Income: 75.1 56.6 33% 273.4 194.3 41% Net Income Per Share: $.88 $.70 26% $3.26 $2.58 26%
Chairman's Statement -------------------- Vernon W. Hill, II, Chairman, commenting on the Company's financial results said, "strong deposit growth and positive operating leverage produced another record quarter of performance." Financial highlights were: o Net income increased 33% for the fourth quarter of 2004 to $75.1 million. o Earnings per share rose 26% for the fourth quarter to $.88. o Revenue growth of 24% exceeded expense growth of 23% for the fourth quarter. o Net interest income grew 29% during the fourth quarter. The net interest margin for the fourth quarter was 4.16%. o Core deposits grew 35% for the prior 12 months. Core deposits grew by $1.5 billion during the fourth quarter of 2004 and $6.9 billion for 2004. o Annualized deposit growth per store was $ 26 million. o Comparable store deposits for stores open two years or more grew 24% (29% excluding time deposits). Comparable store deposits for stores open one year or more grew 32%. o Stockholder's equity increased 30% to $1.7 billion. o The Company opened 49 new stores in 2004, an increase of 18%, bringing the total number of stores to 319. 22 stores were opened in the fourth quarter in the following areas: Metropolitan New York 16 Metropolitan Philadelphia 6 o For 2005, the Company plans to open 55-60 stores including our first stores in Metro Washington, D.C. o The Company expects to meet or exceed the current First Call E.P.S. consensus projections of $.90 for the first quarter of 2005 and $3.81 for the year. o Prior year E.P.S. amounts reflect the mandatory restatement required by recent FASB guidance related to the Company's 5.95% Convertible Trust Preferred Securities. The restatement impacts 2003 results by $.01 for the fourth quarter and $.03 for the year.
Income Statement ---------------- Three Months Ended Year Ended December 31 December 31 ------------------------------------------------------------------------------------------------------------------------------------ 2004 2003 % Increase 2004 2003 % Increase ------------------------------------------------------------------------------------------------------------------------------------ (dollar in thousands, except per share data) Total Revenues: $374,893 $303,008 24% $1,392,856 $1,088,344 28% Total Expenses: 253,111 206,281 23 938,778 763,392 23 Net Income: 75,118 56,606 33 273,418 194,287 41 -------- -------- -------- -------- -------- -------- Net Income Per Share: $.88 $.70 26% $3.26 $2.58 26% -------- -------- -------- -------- -------- -------- Balance Sheet Linked Quarter -------------- 12/31/04 12/31/03 % Increase 9/30/04 $ Increase % Increase -------------------------------------------------------------------------------------- (dollars in millions) Total Assets: $30,501 $22,712 34% $28,431 $2,070 7% Total Loans (Net): 9,319 7,329 27 8,779 540 6 Core Deposits: 26,657 19,779 35 25,109 1,548 6 Total Deposits: 27,659 20,701 34 26,242 1,417 5 Shareholder Returns December 31, 2004 --------------------------- Commerce S & P Index -------- ----------- 1 Year 24% 11% 5 Years 29% -2% 10 Years 29% 12%
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Growth Targets -------------- Last 5 Year Actual % Growth Targets Growth % Fourth Quarter 2004 -------------- ------------ ------------------- Total Deposits: 25% 39% 34% Comp Store Deposits: 18 23 24 Total Revenue: 25 31 24 Net Income 25 36 33 Earnings Per Share 20 27 26 Total Deposits -------------- The Company's deposit growth continues with total deposits at December 31, 2004 of $27.7 billion, a $7.0 billion increase or 34% over total deposits of $20.7 billion a year ago, including growth of $1.4 billion in the fourth quarter. 12/31/04 12/31/03 $ Increase % Increase -------- -------- ---------- ---------- (dollars in millions) Core Deposits $26,657 $19,779 $6,878 35% ----- Total Deposits $27,659 $20,701 $6,958 34% ----- Regional Deposit Growth ----------------------- Deposit growth by region is as follows: # of $ % Annualized Stores 12/31/04 12/31/03 Increase Increase Growth/Store ------ -------- -------- -------- -------- ----------- (dollars in millions) Northern New Jersey 116 $9,060 $7,251 $1,809 25% $19 New York City 37 3,195 1,480 1,715 116 54 Long Island/NY State 25 2,326 1,203 1,123 93 68 ------ -------- -------- -------- -------- -------- Metro New York 178 $14,581 $9,934 $4,647 47% $33 Metro Philadelphia 141 $13,078 10,767 2,311 21 17 ------ -------- -------- -------- -------- -------- Total 319 $27,659 $20,701 $6,958 34% $26
Based on FDIC deposit information as of June 30, 2004, the average bank branch in America grew $2.4 million compared to the Company's growth of $26 million. 4 Comparable Store Deposit Growth ------------------------------- Comparable store deposit growth is measured as the year-over-year percentage increase in core deposits for stores open two years or more at the balance sheet date. Additional information is provided below for stores opened one year or more at the balance sheet date. At December 31, 2004 the Company had 62 stores in New York State. Of these stores, 19 are included in the comparable store growth for stores open 2 years or more and 41 are included in the comparable store growth for stores open one year or more at the balance sheet date.
Stores Open 2 Stores Open 1 Years or More Year or More ----------------------------- ----------------------------- # of Comp Store # of Comp Store Stores Increase Stores Increase ------- ---------- ------- ---------- Metro Philadelphia 119 21% 131 24% Northern New Jersey 86 22 98 26 New York City 11 45 25 82 Long Island/NY State 8 43 16 81 ------- ---------- ------- ---------- Total 224 24% 270 32% Excluding time deposits, which include the Company's highest deposit cost of funds, comparable store deposit growth for stores open two years or more was 29%. Core Deposits ------------- Core deposit growth by type of account is as follows: 4th Quarter Cost of Annual 12/31/04 12/31/03 Funds Growth % -------- -------- ----- -------- (dollars in millions) Demand $6,407 $ 4,575 .00% 40% Interest Bearing Demand 11,604 8,574 1.26 35 Savings 6,166 4,222 1.00 46 -------- -------- ----- -------- Subtotal 24,177 17,371 .87% 39% Time 2,480 2,408 2.00 3 Total Core Deposits: $26,657 $19,779 .98% 35%
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Core deposit growth by type of customer is as follows: Annual Comp Store 12/31/04 % Total 12/31/03 % Total Growth % Growth % -------- ------- -------- ------- -------- -------- (dollars in millions) Consumer $12,227 46% $ 9,760 49% 25% 13% Commercial 9,138 34 6,599 34 38 28 Government 5,292 20 3,420 17 55 45 -------- ------- -------- ------- -------- -------- Total $26,657 100% $ 19,779 100% 35% 24% -------- ------- -------- ------- -------- --------
Core deposits, excluding government deposits, grew $5.0 billion or 31% over the year ago period.
Government Core Deposits ------------------------ Government core deposits by state are as follows: Annual # of Growth Relationships 12/31/04 Rate % Total --------------- -------- -------- ------- (dollars in millions) New Jersey 648 $3,147 38% 60% Pennsylvania 193 1,082 80 20 New York 104 1,063 98 20 --------------- -------- -------- ------- Total 945 $5,292 55% 100%
Net Income and Earnings Per Share --------------------------------- Net income totaled $75.1 million for the fourth quarter of 2004, up $18.5 million or 33% over net income of $56.6 million for the fourth quarter of 2003. On a diluted per share basis, net income for the fourth quarter was $.88 compared to $.70 for the fourth quarter of 2003, a 26% increase. 6
Three Months Ended Year Ended ------------------ ---------- 12/31/04 12/31/03 % Increase 12/31/04 12/31/03 % Increase -------- -------- ---------- -------- -------- ---------- (dollars in thousands, except per share data) Net Income $75,118 $56,606 33% $273,418 $194,287 41% Earnings Per Share $.88 $.70 26% $3.26 $2.58 26% For the year ended December 31, 2004, net income totaled $273.4 million, up $79.1 million or 41% over net income of $194.3 million for the year ended December 31, 2003. On a diluted per share basis, net income for the year ended December 31, 2004 was $3.26 compared to $2.58 for the year ended December 31, 2003, a 26% increase. Total Revenues Three Months Ended Year Ended ------------------ ---------- 12/31/04 12/31/03 % Increase 12/31/04 12/31/03 % Increase -------- -------- ---------- -------- -------- ---------- (dollars in thousands, except per share data) Total Revenues $374,893 $303,008 24% $1,392,856 $1,088,344 28% Revenue Per Share $17.15 $14.47 19% $16.14 $13.91 16%
Net Interest Income and Net Interest Margin ------------------------------------------- Net interest income for the fourth quarter totaled $278.4 million, a 29% increase over the $215.1 million recorded a year ago. For the year ended December 31, 2004, the Company recorded net interest income of $1.0 billion, a 35% increase over the $755.9 million earned in the year ended December 31, 2003. The increase in net interest income in both the quarter and year was due to the volume increases in interest earning assets resulting from the Company's strong, low-cost core deposit growth. The net interest margin for the fourth quarter of 2004 was 4.16%, down 13 basis points from the third quarter of 2004, and down 11 basis points from the 4.27% margin for the fourth quarter of 2003. On a tax equivalent basis, the Company recorded $283.7 million in net interest income in the fourth quarter of 2004, an increase of $64.6 million or 29% over the fourth quarter of 2003. Net interest income on a tax equivalent basis of $1.0 billion was earned in the year ended December 31, 2004, an increase of $264.7 million or 34% over the year ended December 31, 2003. 7
Net Interest Income and Rate/Volume Analysis -------------------------------------------- As shown below, the increase in net interest income on a tax equivalent basis was due to volume increases in the Company's earning assets, which were fueled by the Company's continued growth of low-cost core deposits. Net Interest Income ---------------------------------------------------------- December Volume Rate Total % 2004 vs. 2003 Increase Change Increase Increase ------------- -------- ------ -------- -------- (dollars in thousands) Quarter $ 72,240 ($7,624) $ 64,616 29% Year $284,946 ($20,278) $264,668 34%
Non-Interest Income ------------------- Non-interest income for the fourth quarter of 2004 increased to $96.5 million from $87.9 million a year ago, a 10% increase, which is primarily attributable to the increase in deposit charges and service fees of 38%. The growth in non-interest income for the fourth quarter and the year ended December 31, 2004 is more fully depicted below:
Three Months Ended Year Ended ------------------ ---------- 12/31/04 12/31/03 % Increase 12/31/04 12/31/03 % Increase -------- -------- ---------- -------- -------- ---------- (dollars in thousands) Deposit Charges & Service Fees $62,847 $45,556 38% $218,126 $160,678 36% Other Operating Income: Commerce Insurance 16,395 15,614 5 72,479 66,482 9 Commerce Capital Markets 3,435 13,683 (75) 28,053 42,518 (34) Loan Brokerage Fees 3,384 4,628 (27) 13,189 27,169 (51) Other 9,753 7,315 33 40,585 31,780 28 -------------------------------------------------------------------------------- Total Other Operating Income 32,967 41,240 (20) 154,306 167,949 (8) Net Investment Securities Gains 637 1,088 (41) 2,639 3,851 (31) -------------------------------------------------------------------------------- Total Non-Interest Income $96,451 $87,884 10% $375,071 $332,478 13%
Non-interest income for Commerce Capital Markets was impacted by the exit from the government public finance business during the third quarter as well as lower municipal trading results during the fourth quarter of 2004. 8 Non-Interest Expenses --------------------- Non-interest expenses for the fourth quarter of 2004 were $253.1 million, up 23% from $206.3 million a year ago. Non-interest expenses for the year ended December 31, 2004 were $938.8 million, up 23% from $763.4 million for the year ended December 31, 2003. The increase in non-interest expenses for the fourth quarter and the year ended December 31, 2004 was widespread throughout non-interest expense categories, reflecting the Company's store expansion program. The Company continued to experience positive operating leverage in the fourth quarter, as revenue growth of 24% exceeded non-interest expense growth of 23%. Lending ------- Loans increased 27% to $9.5 billion from the fourth quarter of 2003, and the growth was widespread throughout all loan categories. The Company's primary strength is in building customer relationships and growing market share in deposits, loans, and related services. Consumer and small business loan growth is directly related to the Company's significant increase in store locations, market expansion and added lending personnel. Geographically, loan growth has occurred in the following markets:
Portfolio Geographical Growth ----------------------------- 12/31/04 12/31/03 Growth Rate % of Total Growth -------- -------- ----------- ----------------- (dollars in millions) Metro Philadelphia $5,617 $4,659 21% 48% Northern New Jersey 2,731 2,219 23 25 New York/Long Island 1,107 563 97 27 -------- -------- -------- -------- Total: $9,455 $7,441 27% 100% Loan Composition ---------------- 12/31/04 % of Total 12/31/03 % of Total $ Increase % Increase -------- ---------- -------- ---------- ---------- ---------- (dollars in millions) Commercial $2,452 26% $1,988 27% $464 23% Owner-Occupied 1,998 21% 1,619 22% 379 23% -------- -------- -------- -------- -------- -------- Total Commercial 4,450 47% 3,607 49% 843 23% Consumer 3,342 35% 2,524 34% 818 32% Commercial Real Estate 1,663 18% 1,310 17% 353 27% -------- -------- -------- -------- -------- Gross Loans $9,455 100% $7,441 100% $2,014 Less: Reserves (136) (112) (24) -------- -------- -------- Net Loans $9,319 $7,329 $1,990 27% 9 Asset Quality ------------- Quarter Ended ------------- 12/31/04 9/30/04 12/31/03 -------- ------- -------- Non-Performing Assets/Assets .11% .14% .11% Net Loan Charge-Offs .18% .18% .13% Loan Loss Reserve/Gross Loans 1.43% 1.48% 1.51% Non-Performing Loan Coverage 413% 353% 515% Non-Performing Assets/Capital 2% 2% 2% and Reserves
Non-performing assets and loans past due 90 days at December 31, 2004 totaled $34.1 million or .11% of total assets, versus $24.1 million, or .11% of total assets a year ago. Investments ----------- At December 31, 2004, total investments increased to $18.5 billion. The available for sale and held to maturity portfolios totaled $8.0 and $10.5 billion, respectively. During the quarter, the Company transferred approximately $6 billion of securities classified as available for sale to the held to maturity classification based upon the Company's liquidity and annual cash flow from deposit growth and bond and loan prepayments. The aggregate market value of the securities transferred equaled their book value, with no effect on stockholders' equity, regulatory capital or results of operations.
Available Held to Product Description For Sale Maturity Total ------------------- -------- -------- ----- (in millions) Mortgage-backed Securities: Federal Agencies Pass Through $1,740 $2,445 $4,185 Certificates (AAA Rated) Collateralized Mortgage 5,770 7,040 12,810 Obligations (AAA Rated) Obligations of State and 534 979 1,513 Political Subdivisions/Other ------------------------ -------------------- ------------- Total $8,044 $10,464 $18,508 ======================== ==================== ============= Duration (in years) 2.69 3.62 3.22 Average Life (in years) 3.11 4.33 3.80 Quarterly Average Yield 4.82% 4.91% 4.86%
At December 31, the after tax appreciation of the Company's available for sale portfolio was $20.9 million. 10 Linked Quarter Comparison ------------------------- A comparison of financial results for the quarter ended December 31, 2004 to the previous quarter ended September 30, 2004 is as follows: (dollars in thousands, except per share data)
Three Months Ended Linked Quarter ------------------ -------------- 12/31/04 9/30/04 $ Change % Change -------- ------- -------- -------- Total Assets $30,501,645 $28,431,481 $ 2,070,164 7% Total Loans (Net) 9,318,991 8,779,438 539,553 6 Core Deposits 26,656,530 25,108,705 1,547,825 6 Total Deposits 27,658,885 26,241,632 1,417,253 5 Total Revenues 374,893 364,495 10,398 3 Net Interest Income 278,442 264,382 14,060 5 Non-Interest Income 96,451 100,113 (3,662) (4) Non-Interest Expense 253,111 247,162 5,949 2 Net Income 75,118 70,090 5,028 7 Net Income Per Share $ .88 $ .84 $ .04 5
11 Capital Resources ----------------- Stockholders' equity at December 31, 2004 increased to $1.7 billion, a $388.4 million increase, or 30% over stockholders' equity of $1.3 billion at December 31, 2003. As of April 1, 2004 each of the outstanding Convertible Trust Capital Securities became convertible into 0.9478 shares of the Company's common stock. The Company may call its $200 million, 5.95% Convertible Trust Preferred Securities on or after March 11, 2005, provided various terms and conditions are met, primarily related to the market price of the Company's common stock. The Company's common stock must trade at a price of $63.30 or higher for 20 trading days in a period of 30 consecutive trading days in order for the Company to force conversion. Return on average stockholders equity (ROE) for the fourth quarter and year ended December 31, 2004 is shown in the table below: Return on Equity Three Months Ended Year Ended ------------------ ---------- 12/31/04 12/31/03 12/31/04 12/31/03 -------- -------- -------- -------- 18.48% 18.46% 18.78% 18.81% The Company's capital ratios at December 31, 2004 were as follows: Regulatory Guidelines Commerce "Well Capitalized" -------- --------------------- Leverage Ratio 6.19% 5.00% Tier I 12.31 6.00% Total Capital 13.26 10.00% Retail Activities ----------------- "America's Most Convenient Bank" continued its unique retail focus by offering the best in community branch banking and on-line banking. The Company's continued deposit growth consists of growth in "same-store" (existing store) sales and increased deposits from newly opened stores. o "Same Store Sales" ---------------- Comparable store deposits for stores open two years or more grew 24% (29% excluding time deposits). Comparable store deposits for stores open one year or more grew 32%. 12 o New Stores ---------- During the fourth quarter of 2004, the Company opened 22 new stores, increasing the total stores opened to 319. During the last three years, the Company has opened 135 of its 319 stores. Stores opened during the fourth quarter were as follows: Metropolitan New York --------------------- Location County -------- ------- Queens/Ridgewood Queens (NY) Huntington Station Suffolk (NY) 43rd & 6th New York (NY) Hackensack/Courthouse Bergen (NJ) Roselle Union (NJ) Old Bridge/Route 9 Middlesex (NJ) Union/Chestnut Union (NJ) Westfield Union (NJ) Mamaroneck/Rye Westchester (NY) Port Chester Westchester (NY) Mount Kisco Westchester (NY) Stony Point Rockland (NY) Roxbury Morris (NJ) Jackson Heights Queens (NY) Hazlet Monmouth (NJ) Fairlawn/River Road Bergen (NJ) Metropolitan Philadelphia ------------------------- Location County -------- ------ 15th & JFK Philadelphia (PA) Pennsauken Camden (NJ) Bensalem/Neshaminy Bucks (PA) Plymouth Meeting Montgomery (PA) Dover Kent (DE) East Goshen Chester (PA) For 2005, the Company plans to open 55 - 60 stores in Metro New York, Philadelphia and Washington, D.C. 13 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, 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 (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 non-interest 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. 14