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, 2001
--------------
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
[GRAPHIC OMITTED - LOGO]
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)
(856) 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 32,198,979
--------------------------------------------------------------------------------
(Title of Class) (No. of Shares Outstanding
as of 5/01/01)
COMMERCE BANCORP, INC. AND SUBSIDIARIES
INDEX
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets (unaudited)
March 31, 2001 and December 31, 2000.................................1
Consolidated Statements of Income (unaudited)
Three months ended March 31, 2001 and
March 31, 2000.......................................................2
Consolidated Statements of Cash Flows (unaudited)
Three months ended March 31, 2001 and
March 31, 2000.......................................................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..........12
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K....................................13
COMMERCE BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS(unaudited)
------------------------------------------------------------------------------------------------
March 31, December 31,
--------------------------------
(dollars in thousands) 2001 2000
------------------------------------------------------------------------------------------------
Assets Cash and due from banks $401,392 $443,918
Federal funds sold 200,600 52,000
----------- -----------
Cash and cash equivalents 601,992 495,918
Loans held for sale 28,123 41,791
Trading securities 174,988 109,306
Securities available for sale 2,460,058 2,021,326
Securities held to maturity 1,385,852 1,513,456
(market value 03/01-$1,388,562; 12/00-$1,503,202)
Loans 3,847,040 3,687,260
Less allowance for loan losses 52,157 48,680
----------- -----------
3,794,883 3,638,580
Bank premises and equipment, net 285,722 276,097
Other assets 217,127 200,042
----------- -----------
$8,948,745 $8,296,516
=========== ===========
Liabilities Deposits:
Demand:
Interest-bearing $2,645,950 $2,628,358
Noninterest-bearing 1,935,101 1,789,371
Savings 1,561,953 1,436,800
Time 1,967,446 1,533,065
----------- -----------
Total deposits 8,110,450 7,387,594
Other borrowed money 66,410 283,714
Other liabilities 151,293 52,484
Trust Capital Securities - Commerce Capital Trust I 57,500 57,500
Long-term debt 23,000 23,000
----------- -----------
8,408,653 7,804,292
Stockholders' Common stock, 32,142,144 shares
Equity issued (31,761,453 shares in 2000) 50,222 49,627
Capital in excess of par or stated value 435,514 422,375
Retained earnings 41,730 27,083
Accumulated other comprehensive income 14,248 (5,239)
----------- -----------
541,714 493,846
Less treasury stock, at cost 1,622 1,622
----------- -----------
Total stockholders' equity 540,092 492,224
----------- -----------
$8,948,745 $8,296,516
=========== ===========
See accompanying notes.
1
COMMERCE BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME(unaudited)
-----------------------------------------------------------------------------------------------
Three Months Ended
March 31,
-------------------------------
(dollars in thousands, except per share amounts) 2001 2000
-----------------------------------------------------------------------------------------------
Interest Interest and fees on loans $79,739 $63,178
income Interest on investments 61,450 48,830
Other interest 1,890 218
----------- -----------
Total interest income 143,079 112,226
----------- -----------
Interest Interest on deposits:
expense Demand 18,034 15,351
Savings 8,895 6,168
Time 27,242 15,863
----------- -----------
Total interest on deposits 54,171 37,382
Interest on other borrowed money 1,573 5,087
Interest on long-term debt 1,595 1,558
----------- -----------
Total interest expense 57,339 44,027
----------- -----------
Net interest income 85,740 68,199
Provision for loan losses 4,609 3,493
----------- -----------
Net interest income after provision for loan losses 81,131 64,706
Noninterest Deposit charges and service fees 17,164 12,336
income Other operating income 25,964 22,508
Net investment securities gains 980 820
----------- -----------
Total noninterest income 44,108 35,664
----------- -----------
Noninterest Salaries 35,656 29,043
expense Benefits 8,271 6,192
Occupancy 8,798 7,078
Furniture and equipment 11,606 9,159
Office 6,066 5,798
Audit and regulatory fees and assessments 960 681
Marketing 2,264 2,264
Other real estate (net) 350 273
Other 16,383 12,371
----------- -----------
Total noninterest expenses 90,354 72,859
----------- -----------
Income before income taxes 34,885 27,511
Provision for federal and state income taxes 11,484 9,216
----------- -----------
Net income $23,401 $18,295
=========== ===========
Net income per common and common equivalent share:
Basic $ 0.73 $ 0.60
----------- -----------
Diluted $ 0.70 $ 0.59
----------- -----------
Average common and common equivalent shares outstanding:
Basic 31,907 30,263
----------- -----------
Diluted 33,438 31,160
----------- -----------
Cash dividends declared, common stock $ 0.28 $ 0.24
=========== ===========
See accompanying notes.
2
COMMERCE BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
------------------------------------------------------------------------------------------------------
Three Months Ended
March 31,
---------------------------------
(dollars in thousands) 2001 2000
------------------------------------------------------------------------------------------------------
Operating Net income $23,401 $18,295
activities Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses 4,609 3,493
Provision for depreciation, amortization and accretion 9,915 6,975
Gains on sales of securities available for sale (980) (820)
Proceeds from sales of mortgages held for sale 112,515 6,241
Originations of mortgages held for sale (98,847) (537)
Net loan chargeoffs (1,132) (1,170)
Net (increase) decrease in trading securities (65,682) 49,924
(Increase) decrease in other assets (27,927) 6,793
Increase in other liabilities 98,808 22,723
-----------------------------------------------------------------------------------------------------
Net cash provided by operating activities 54,680 111,917
Investing Proceeds from the sales of securities available for sale 185,229 167,134
activities Proceeds from the maturity of securities available for sale 158,954 61,324
Proceeds from the maturity of securities held to maturity 82,281 35,705
Purchase of securities available for sale (687,657) (259,551)
Purchase of securities held to maturity (18,843) (91,272)
Net increase in loans (162,873) (237,991)
Proceeds from sales of loans 3,093 2,886
Purchases of premises and equipment (19,322) (22,804)
-----------------------------------------------------------------------------------------------------
Net cash used by investing activities (459,138) (344,569)
Financing Net increase in demand and savings deposits 288,476 267,946
activities Net increase in time deposits 434,381 230,361
Net decrease in other borrowed money (217,304) (239,139)
Dividends paid (8,747) (7,040)
Proceeds from issuance of common stock under
dividend reinvestment and other stock plans 14,069 12,921
Other (343) (5,521)
-----------------------------------------------------------------------------------------------------
Net cash provided by financing activities 510,532 259,528
Increase in cash and cash equivalents 106,074 26,876
Cash and cash equivalents at beginning of year 495,918 322,924
-----------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $601,992 $349,800
=====================================================================================================
Supplemental disclosures of cash flow information: Cash paid
during the period for:
Interest $52,597 $43,111
Income taxes 1,343
-----------------------------------------------------------------------------------------------------
See accompanying notes.
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 on Form 10-K for the period ended December 31, 2000.
The results for the three months ended March 31, 2001 are not necessarily
indicative of the results that may be expected for the year ended December 31,
2001.
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. Effective April 1, 2001,
Commerce Bank/Central, N.A. was merged into Commerce NJ.
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 $42.9 million and $8.8 million, respectively, for the three months
ended March 31, 2001 and 2000.
4
COMMERCE BANCORP, INC. AND SUBSIDIARIES
D. Segment Information
Selected segment information is as follows:
-----------------------------------------------------------------------------------------------------------------------
Three Months Ended Three Months Ended
March 31, 2001 March 31, 2000
Community Parent/ Community Parent/
Banks Other Total Banks Other Total
-----------------------------------------------------------------------------------------------------------------------
Net interest income $85,880 $(140) $85,740 $69,801 $(1,602) $68,199
Provision for loan losses 4,609 4,609 3,493 3,493
---------------------------------------------------------------------------------
Net interest income after provision 81,271 (140) 81,131 66,308 (1,602) 64,706
Noninterest income 26,378 17,730 44,108 20,345 15,319 35,664
Noninterest expense 76,108 14,246 90,354 59,682 13,177 72,859
---------------------------------------------------------------------------------
Income before income taxes 31,541 3,344 34,885 26,971 540 27,511
Income tax expense 10,295 1,189 11,484 8,925 291 9,216
---------------------------------------------------------------------------------
Net income $21,246 $2,155 $23,401 $18,046 $249 $18,295
=================================================================================
Average assets (in millions) $7,583,889 $901,607 $8,485,496 $6,030,116 $630,352 $6,660,468
=================================================================================
E. Recent Accounting Statement
In June 1998, the FASB issued Statement No. 133 "Accounting for Derivative
Instruments and Hedging Activities" (FAS 133). FAS 133 requires 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. The Company adopted FAS 133 on January 1, 2001. Due to the Company's
minimal use of derivatives, adoption did not have a significant effect on the
results of operations or the financial position of the Company. Future impact of
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
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,
----------------------------------
2001 2000
--------------------------------------------------------------------------------------------------
Basic:
Net income applicable to common stock $ 23,401 $18,295
==================================
Average common shares outstanding 31,907 30,263
==================================
Net income per common share - basic $ 0.73 $ 0.60
==================================
Diluted:
Net income applicable to common stock
on a diluted basis $ 23,401 $18,295
==================================
Average common shares outstanding 31,907 30,263
Additional shares considered in diluted
computation assuming:
Exercise of stock options 1,531 897
----------------------------------
Average common shares outstanding
on a diluted basis 33,438 31,160
==================================
Net income per common share - diluted $ 0.70 $ 0.59
==================================
6
COMMERCE BANCORP, INC. AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operation
----------------------------------------------------------------------
Capital Resources
-----------------
At March 31, 2001, stockholders' equity totaled $540.1 million or 6.04% of total
assets, compared to $492.2 million or 5.93% of total assets at December 31,
2000.
The table below presents the Company's and Commerce NJ's risk-based and leverage
ratios at March 31, 2001 and 2000:
Per Regulatory Guidelines
-------------------------------------------------
Actual Minimum "Well Capitalized"
Amount Ratio Amount Ratio Amount Ratio
--------------------------------------------------------------------------------------------------------------------
March 31, 2001
Company
Risk based capital ratios:
Tier 1 $579,674 10.80% $214,618 4.00% $321,927 6.00%
Total capital 641,031 11.95 429,236 8.00 536,545 10.00
Leverage ratio 579,674 6.84 339,013 4.00 423,766 5.00
Commerce NJ
Risk based capital ratios:
Tier 1 $302,796 10.00% $ 121,071 4.00% $181,607 6.00%
Total capital 333,115 11.01 242,143 8.00 302,678 10.00
Leverage ratio 302,796 6.62 182,973 4.00 228,716 5.00
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 6.98 268,302 4.00 335,378 5.00
Commerce NJ
Risk based capital ratios:
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
At March 31, 2001, 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, 2001, the Company
and its subsidiaries meet all capital adequacy requirements to which they are
subject.
Deposits
--------
Total deposits at March 31, 2001 were $8.11 billion, up $2.00 billion, or 33%
over total deposits of $6.11 billion at March 31, 2000, and up by $722.9
million, or 10% from year-end 2000. Deposit growth during the first three months
of 2001 included core deposit growth in all categories as well as growth from
the public sector. The Company experienced "same-store core deposit growth" of
17.3% at March 31, 2001 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
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, 2001, the Company's income simulation model indicates net income would
increase by 3.60% and decrease by 0.27% in the first year and over a two year
time frame, respectively, if rates decreased as described above, as compared to
an increase of 4.14% and 1.05%, respectively, at March 31, 2000. At March 31,
2001, the model projects that net income would decrease by 5.77% and 4.79% in
the first year and over a two year time frame, respectively, if rates increased
as described above, as compared to a decrease of 6.09% and 4.60%, respectively,
at March 31, 2000. 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, 2001, 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 2001, the
Company significantly reduced its short-term borrowings, primarily through
increased deposits. At March 31, 2001, short-term borrowings aggregated $66.4
million and had an average rate of 4.33%, as compared to $283.7 million at an
average rate of 6.70% at December 31, 2000.
8
COMMERCE BANCORP, INC. AND SUBSIDIARIES
Interest Earning Assets
-----------------------
For the three month period ended March 31, 2001, interest earning assets
increased $671.5 million from $7.43 billion to $8.10 billion. This increase was
primarily in investment securities and the loan portfolio as described below.
Loans
-----
During the first three months of 2001, loans increased $156.3 million from $3.64
billion to $3.79 billion. At March 31, 2001, loans represented 47% of total
deposits and 42% of total assets. All segments of the loan portfolio experienced
growth in the first three months of 2001, including loans secured by commercial
real estate properties, commercial loans, and consumer loans.
Investments
-----------
In total, for the first three months of 2001, securities increased $376.8
million from $3.64 billion to $4.02 billion. The available for sale portfolio
increased $438.7 million to $2.46 billion at March 31, 2001 from $2.02 billion
at December 31, 2000, and the securities held to maturity portfolio decreased
$127.6 million to $1.39 billion at March 31, 2001 from $1.51 billion at year-end
2000. The portfolio of trading securities increased $65.7 million from year-end
2000 to $175.0 million at March 31, 2001. At March 31, 2001, the average life of
the investment portfolio was approximately 7.1 years, and the duration was
approximately 5.0 years. At March 31, 2001, total securities represented 45% of
total assets.
Net Income
----------
Net income for the first quarter of 2001 was $23.4 million, an increase of $5.1
million or 28% over the $18.3 million recorded for the first quarter of 2000. On
a per share basis, diluted net income for the first quarter of 2001 was $0.70
per common share compared to $0.59 per common share for the first quarter of
2000.
Return on average assets (ROA) and return on average equity (ROE) for the first
quarter of 2001 were 1.10% and 17.92%, respectively, compared to 1.10% and
20.60%, respectively, for the same 2000 period.
Net Interest Income
-------------------
Net interest income totaled $85.7 million for the first quarter of 2001, an
increase of $17.5 million or 26% from $68.2 million in the first quarter of
2000. The improvement in net interest income was due primarily to volume
increases in the loan and investment portfolios.
Noninterest Income
------------------
Noninterest income totaled $44.1 million for the first quarter of 2001, an
increase of $8.4 million or 24% from $35.7 million in the first quarter of 2000.
The increase was due primarily to increased deposit charges and service fees,
which rose $4.8 million over the first quarter of 2000 primarily due to higher
transaction volumes. In addition, other operating income increased $3.5 million
over the prior year, including increased revenues of $1.8 million from CCMI, the
Company's municipal public finance subsidiary. The Company also recorded $980
thousand in net investment securities gains in the first quarter of 2001 as
compared to $820 thousand for the same 2000 period.
Noninterest Expense
-------------------
For the first quarter of 2001, noninterest expense totaled $90.4 million, an
increase of $17.5 million or 24% over the same period in 2000. Contributing to
this increase was new branch activity over the past twelve months, with the
number of branches increasing from 120 at March 31, 2000 to 152 at March 31,
2001. With the addition of these new offices, staff, facilities, and related
expenses rose accordingly. Other noninterest expenses rose $4.0 million over the
first quarter of 2000. This increase resulted primarily from higher bank
card-related service charges, increased business development expenses, and
increased provisions for non-credit-related losses.
9
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 69.84% for the first three months of 2001 as compared
to 70.44% for the same 2000 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, 2001 were $20.9 million, or 0.23% of total assets compared to $16.6 million
or 0.20% of total assets at December 31, 2000 and $15.6 million or 0.23% of
total assets at March 31, 2000.
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, 2001
were $19.4 million or 0.50% of total loans compared to $13.6 million or 0.37% of
total loans at December 31, 2000 and $11.9 million or 0.37% of total loans at
March 31, 2000. At March 31, 2001, loans past due 90 days or more and still
accruing interest amounted to $537 thousand compared to $489 thousand at
December 31, 2000 and $916 thousand at March 31, 2000. Additional loans
considered as potential problem loans by the Company's internal loan review
department ($36.9 million at March 31, 2001) have been evaluated as to risk
exposure in determining the adequacy of the allowance for loan losses.
Other real estate (ORE) at March 31, 2001 totaled $1.5 million compared to $3.0
million at December 31, 2000 and $3.7 million at March 31, 2000. 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 March 31, 2001, December
31, 2000, and March 31, 2000.
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 (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.
10
COMMERCE BANCORP, INC. AND SUBSIDIARIES
The following summary presents information regarding non-performing loans and
assets as of March 31, 2001 and the preceding four quarters: (dollar amounts in
thousands)
March 31, December 31, September 30, June 30, March 31,
2001 2000 2000 2000 2000
--------------------------------------------------------------------------
Non-accrual loans:
Commercial $10,681 $4,955 $5,771 $4,960 $5,272
Consumer 1,378 1,295 1,296 891 709
Real estate:
Construction 1,590 1,459 50 55 55
Mortgage 5,756 5,840 5,979 4,720 5,458
--------------------------------------------------------------------------
Total non-accrual loans 19,405 13,549 13,096 10,626 11,494
--------------------------------------------------------------------------
Restructured loans:
Commercial 11 11 12 240 256
Consumer
Real estate:
Construction
Mortgage 82 85 183 189
--------------------------------------------------------------------------
Total restructured loans 11 93 97 423 445
--------------------------------------------------------------------------
Total non-performing loans 19,416 13,642 13,193 11,049 11,939
--------------------------------------------------------------------------
Other real estate 1,452 2,959 2,941 3,448 3,681
--------------------------------------------------------------------------
Total non-performing assets 20,868 16,601 16,134 14,497 15,620
--------------------------------------------------------------------------
Loans past due 90 days or more
And still accruing 537 489 561 473 916
--------------------------------------------------------------------------
Total non-performing assets and
Loans past due 90 days or more $21,405 $17,090 $16,695 $14,970 $16,536
==========================================================================
Total non-performing loans as a
Percentage of total period-end loans 0.50% 0.37% 0.36% 0.32% 0.37%
Total non-performing assets as a
Percentage of total period-end assets 0.23% 0.20% 0.21% 0.19% 0.23%
Total non-performing assets and loans
Past due 90 days or more as a
Percentage of total period-end assets 0.24% 0.21% 0.21% 0.20% 0.24%
Allowance for loan losses as a percentage
Of total non-performing loans 269% 357% 359% 398% 341%
Allowance for loan losses as a percentage
Of total period-end loans 1.36% 1.32% 1.30% 1.28% 1.27%
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% 3% 3% 4%
11
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)
Three Months Ended Year
------------------------------ Ended
03/31/01 03/31/00 12/31/00
----------- ----------- ----------
Balance at beginning of period $48,680 $38,382 $38,382
Provisions charged to operating expenses 4,609 3,493 13,931
--------- --------- --------
53,289 41,875 52,313
Recoveries on loans charged-off:
Commercial 9 96 276
Consumer 41 44 248
Real estate 12 1 52
--------- --------- --------
Total recoveries 62 141 576
Loans charged-off:
Commercial (358) (1,036) (2,911)
Consumer (659) (275) (1,243)
Real estate (177) (55)
--------- --------- --------
Total charge-offs (1,194) (1,311) (4,209)
--------- --------- --------
Net charge-offs (1,132) (1,170) (3,633)
--------- --------- --------
Balance at end of period $52,157 $40,705 $48,680
========== ========== =========
Net charge-offs as a percentage of
Average loans outstanding 0.12% 0.15% 0.11%
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.
12
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, 2001.
13
COMMERCE BANCORP, INC. AND SUBSIDIARIES
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 14, 2001 /s/ DOUGLAS J. PAULS
------------------------- ---------------------------------------------
(Date) DOUGLAS J. PAULS
SENIOR VICE PRESIDENT
(PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER)