-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, O2vuCvxxX2NetWpVMMRmuWzHkT0rY0FKHLmPuF/+Rd4bdGWRicVWWeUsAz0fVq2a mkFLo7n5FYSz4+CKhJt0Yw== 0000950159-96-000219.txt : 19961118 0000950159-96-000219.hdr.sgml : 19961118 ACCESSION NUMBER: 0000950159-96-000219 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961114 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: COMMERCE BANCORP INC /NJ/ CENTRAL INDEX KEY: 0000715096 STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021] IRS NUMBER: 222433468 STATE OF INCORPORATION: NJ FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-12069 FILM NUMBER: 96663257 BUSINESS ADDRESS: STREET 1: COMMERCE ATRIUM STREET 2: 1701 RTE 70 E CITY: CHERRY HILL STATE: NJ ZIP: 08034-5400 BUSINESS PHONE: 6097519000 MAIL ADDRESS: STREET 1: 1701 ROUTE 70 EAST CITY: CHERRY HILL STATE: NJ ZIP: 08034-5400 10-Q 1 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 [ ] 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) 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 Commerce Bancorp, Inc. and Subsidiaries Consolidated Balance Sheets (unaudited)
September 30, December 31, (dollars in thousands) 1996 1995 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 ========== ==========
1 Commerce Bancorp, Inc. and Subsidiaries Consolidated Statements of Income (unaudited)
Three Months Ended Nine Months Ended September 30, September 30, (dollars in thousands, except per share amounts) 1996 1995 1996 1995 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 ======== ======== ======== ========
2 Commerce Bancorp, Inc. And Subsidiaries Consolidated Statements of Cash Flows (unaudited)
Nine Months Ended September 30, (dollars in thousands) 1996 1995 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 --------- ---------
3 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 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.
Capital Excess Minimum as of September 30, September 30, Regulatory September 30, 1996 1995 Requirements 1996 (in thousands) 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) (1) Based on a minimum regulatory requirement of 3.00%
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 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 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 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 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 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 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)
September 30, June 30, March 31, Dec. 31, Sept. 30, 1996 1996 1996 1995 1995 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%
11 The following table presents, for the periods indicated, an analysis of the allowance for loan losses and other related data: (dollar amounts in thousands)
Year Nine Months Ended Ended 09/30/96 09/30/95 12/31/95 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%
12 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 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 EX-11 2 Exhibit No. 11.1 Commerce Bancorp, Inc. and Subsidiaries Computation of Net Income Per Share (dollars in thousands, except per share amounts)
Three Months Ended Nine Months Ended September 30, September 30, 1996 1995 1996 1995 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 ======= ======= ======= =======
EX-27 3
9 0000715096 COMMERCE BANCORP, INC. 1,000 9-MOS DEC-31-1996 JAN-01-1996 SEP-30-1996 123,972 0 12,850 3,203 765,893 626,373 597,736 1,059,380 14,190 2,712,722 2,485,093 25,000 5,985 26,590 0 7,506 18,007 144,541 2,712,722 67,063 61,786 2,215 131,064 49,063 51,704 79,360 2,173 517 67,947 29,372 29,372 0 0 18,865 1.56 1.51 4.63 8,985 142 550 12,053 13,320 1,670 367 14,190 14,190 0 0
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