Commerce Bancorp 8K Results of Operations and Financial Condition | SEC 18 Apr 07

CONTACTS

*Vernon W. Hill, II*	*C. Edward Jordan, Jr.*
*Chairman and President*	*Executive Vice President*

(856) 751-9000

COMMERCE BANCORP CORE DEPOSITS UP 19%

April 18, 2007 - Cherry Hill, New Jersey - Commerce Bancorp, Inc. (NYSE Symbol: CBH) reported increased assets, deposits and loans for the first quarter of 2007, announced Vernon W. Hill, II, Chairman.


*FIRST QUARTER FINANCIAL HIGHLIGHTS*
*March 31, 2007*

			% Change

*Total Assets:*	$47.4	Billion	16%
*Core Deposits:*	$42.7	Billion	19%
*Total (Net) Loans:*	$15.8	Billion	18%
*Total Revenues:*	$492.4	Million	12%
*Net Income:*	$77.9	Million	1%
*Net Income Per Share:*	$.40		(2)%

Chairman’s Statement

Commented Chairman Hill, “America’s #1 Bank Retailer again posted outstanding growth with core deposits up 19% and loan growth of 18%.”

Financial highlights for the first quarter were:

·	Deposit growth continues to drive the Company’s overall growth.

·	Core deposits grew $2.6 billion during the first quarter.

·	Core deposits increased $6.8 billion, up 19% , for the prior 12 months, while total deposits increased $6.9 billion, or 18%, for the prior 12 months.

·	Annualized core deposit growth per store was $17 million.

·	Comparable store core deposit growth per store was 17% for stores open one year or more.

·	Commercial core deposits grew 24% to $16.9 billion.

·	New York City core deposits increased to $6.9 billion, up 37%.

·	Net loans grew $2.4 billion, or 18%, to $15.8 billion.

·	Revenue grew 12% despite the difficult rate environment.

·	Net income was $77.9 million and net income per share was $.40 for the first quarter of 2007.

·	Shareholder equity increased $462.9 million, or 19%, to $2.9 billion.

·	Book value per share grew 15% to $14.54

Expansion Plans

The Commerce growth model includes the opening of new stores in both existing and new markets, with a goal of increasing our store base by 15-20% a year.

·	During the first quarter of 2007, the Company opened 9 new stores, including its first in Miami-Dade County, Florida.

·	In 2007, the Company expects to open a total of +/- 65 stores, which will increase total stores to approximately 500. Openings are planned in the following markets:

	Metro New York	30 +/-
	Metro Philadelphia	5 +/-
	Metro Washington	10 +/-
	Southeast Florida	20 +/-

·	The Company presently has +/- 175 locations in various stages of land use approvals.

Despite the difficult interest rate environment, the Company has not altered its plans for continued store expansion.

The Commercial Bank

										Linked Quarter
	3/31/07		3/31/06		% Increase			12/31/06		$ Increase		% Increase
	(dollars in millions)
Commercial Core Deposits:	$	16,895	$	13,642		24	%	$	15,768	$	1,127		7	%
Commercial Loans:		10,138		8,556		18			9,988		150		2

Lending

Loans increased 18% to $15.9 billion from the first quarter of 2006, and the growth was widespread throughout all loan categories. On a linked quarter basis loans grew $327.0 million, or 2%.

Regional Loan Growth:

	3/31/07		3/31/06		$ Increase		% Increase			% of Total Growth
	(dollars in millions)
Metro New York	$	8,200	$	6,657	$	1,543		23	%		63	%
Metro Philadelphia		7,029		6,404		625		10			25
Metro Washington		231		92		139		152			6
Southeast Florida		474		328		146		44			6

Total:	$	15,934	$	13,481	$	2,453		18	%		100	%

Loan Composition:

	3/31/07		% of Total			3/31/06		% of Total			$ Increase		% Increase
	(dollars in millions)
Commercial	$	4,223		27	%	$	3,584		26	%	$	639		18	%
Owner-Occupied RE		3,007		19			2,527		19			480		19
Total Commercial		7,230		46			6,111		45			1,119		18
Consumer		5,797		36			4,925		37			872		18
Commercial Real Estate		2,907		18			2,445		18			462		19
Total Loans	$	15,934		100	%	$	13,481		100	%	$	2,453		18	%

The loan-to-deposit ratio was 36% at March 31, 2007.

Asset Quality

	Quarter Ended
	3/31/07	12/31/06	3/31/06

Non-Performing Assets/Assets	.11%	.12%	.08%
Net Loan Charge-Offs	.16%	.12%	.16%
Reserve for Credit Losses/Gross Loans	1.03%	1.03%	1.06%
Non-Performing Loan Coverage	351%	317%	432%
Non-Performing Assets/Capital	2%	2%	1%
and Reserves

Non-performing assets and loans past due 90 days at March 31, 2007 totaled $52.4 million or .11% of total assets, versus $53.8 million, or .12% of total assets, at December 31, 2006 and $33.9 million, or .08% of total assets, at March 31, 2006.

Income Statement

	Three Months Ended							Linked Quarter
	3/31/07		3/31/06		% Change			12/31/06			$ Change			% Change
	(dollars in thousands, except per share data)
Total Revenues:	$	492,407	$	438,932		12	%	$	492,309		$	98			-	%
Total Expenses:		362,785		315,334		15			363,174			(389	)		-
Net Income:		77,936		77,297		1			62,827⁽¹	⁾		15,109			24
Net Income Per Share:	$	.40	$	.41		(2	)	$	.32⁽¹	⁾	$	.08			25

⁽¹⁾ During the fourth quarter of 2006, the Company recorded a non-recurring charge of $15.8 million, net of tax, or $.08 per share, in anticipation of potential settlements with various taxing authorities.

Balance Sheet

										Linked Quarter
	3/31/07		3/31/06		% Increase			12/31/06		$ Increase		% Increase
	(dollars in millions)
Total Assets:	$	47,372	$	40,692		16	%	$	45,272	$	2,100		5	%
Total Loans (Net):		15,778		13,345		18			15,455		323		2
Core Deposits:		42,699		35,912		19			40,077		2,622		7
Total Deposits:		43,976		37,112		18			41,288		2,688		7

Shareholder Returns

		March 31, 2007
		Commerce	S & P Index
1	Year	(8)%	12%
5	Years	10%	6%
10	Years	24%	8%

5-Year Growth Targets

	Average Annual Growth Targets	Last 5-Year Average Annual Growth	Actual First Quarter 2007

Core Deposit Growth per Store (in millions):	$20	$22	$17
Core Deposits:	24 - 26%	30%	19%
Comp Store Deposits:	18 - 20	30	17
Total Revenue:	23 - 25	21	12
Net Income:	23 - 25	19	1
Net Income Per Share:	18 - 20	10	(2)

Deposit Growth

	3/31/07		3/31/06		$ Increase		% Increase
	(dollars in millions)
Core Deposits	$	42,699	$	35,912	$	6,786		19	%

Total Deposits	$	43,976	$	37,112	$	6,864		18	%

Regional Deposit Growth

Core deposit growth by region is as follows:

	# of Stores		3/31/07		3/31/06		$ Increase		% Increase			Average Store Size		Annualized Growth/ Store
	(dollars in millions)
Northern New Jersey		143	$	13,153	$	11,168	$	1,985		18	%	$	92	$	15
New York City		59		6,937		5,074		1,863		37			118		37
Long Island/Westchester/CT		50		4,150		3,199		951		30			83		21
Metro New York		252	$	24,240	$	19,441	$	4,799		25	%	$	96	$	21
Metro Philadelphia		156		17,716		16,031		1,685		11			114		10
Metro Washington		18		376		149		227		152			21		20
Southeast Florida		11		367		291		76		26			33		9
Total Core Deposits		437	$	42,699	$	35,912	$	6,787		19	%	$	98	$	17
Total Deposits			$	43,976	$	37,112	$	6,864		18	%	$	101	$	17

Metro New York remains the Company’s largest and fastest growing market with core deposits of $24.2 billion, an increase of 25% over the first quarter of 2006, and an annualized core deposit growth per store of $21 million. This market is expected to continue to lead the deposit growth of the Company.

Comparable Store Core Deposit Growth

Comparable store deposit growth is measured as the year-over-year percentage increase in core deposits for stores open one year or more at the balance sheet date.

	Core Deposit Growth
	Stores Open 1
	Year or More
	# of Stores	Comp Store Increase

Metro Philadelphia	148	11%
Northern New Jersey	132	14
New York City	47	37
Long Island/Westchester/CT	37	24
Metro Washington	7	124
Southeast Florida	7	7
Total	378	17%

Core Deposits

Core deposit growth by type of account is as follows:

	3/31/07		3/31/06		$ Increase		% Increase			1st Quarter Cost of Funds
	(dollars in millions)
Demand	$	9,322	$	8,391	$	931		11	%		0.00	%
Interest Bearing Demand		18,682		14,146		4,536		32			3.71
Savings		10,580		10,292		288		3			2.80
Subtotal		38,584		32,829		5,755		18	%		2.58	%

Time		4,115		3,083		1,032		33			4.39
Total Core Deposits:	$	42,699	$	35,912	$	6,787		19	%		2.76	%

Core deposit growth by type of customer is as follows:

	3/31/07		% Total			3/31/06		% Total			Annual Growth %
	(dollars in millions)
Consumer	$	17,907		42	%	$	15,643		44	%		14	%
Commercial		16,895		40			13,642		38			24
Government		7,897		18			6,627		18			19

Total	$	42,699		100	%	$	35,912		100	%		19	%

Net Income and Net Income Per Share

Net income totaled $77.9 million for the first quarter of 2007, compared to net income of $77.3 million for the first quarter of 2006. On a diluted per share basis, net income for the first quarter of 2007 was $.40 compared to $.41 for the first quarter of 2006.

	Three Months Ended							Linked Quarter
	3/31/07		3/31/06		% Change			12/31/06			$ Increase		% Change
	(dollars in thousands, except per share data)
Net Income:	$	77,936	$	77,297		1	%	$	62,827⁽¹	⁾	$	15,109		24	%
Net Income Per Share:	$	.40	$	.41		(2	)	$	.32⁽¹	⁾	$	.08		25

Total Revenues

	Three Months Ended
	3/31/07		3/31/06		% Increase
	(dollars in thousands, except per share data)
Total Revenues	$	492,407	$	438,932		12	%
Revenue Per Share	$	10.02	$	9.25		8	%

Net Interest Income and Net Interest Margin

Net interest income for the first quarter totaled $333.0 million, an 8% increase over the $307.9 million recorded a year ago, despite the impact of the inverted yield curve. The increase in net interest income during the first quarter was due to volume increases in interest earning assets resulting from the Company’s continued deposit growth.

The net interest margin for the first quarter of 2007 increased slightly to 3.27%, compared to 3.25% for the fourth quarter of 2006, and was down 26 basis points from the 3.53% margin for the first quarter of 2006. The year over year compression in net interest margin was primarily caused by the current interest rate environment.

On a tax equivalent basis, the Company recorded $340.5 million in net interest income in the first quarter of 2007, an increase of $26.7 million or 9% over the first quarter of 2006.

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 deposit growth. The Company’s continuing ability to grow deposits produces net interest income growth, despite rate compression primarily caused by the current rate environment.

	Net Interest Income
Quarter Ended March 31,	Volume Increase	Rate Change	Total Increase	% Increase
	(dollars in thousands)

2007 vs. 2006	$ 51,019	($24,322)	$26,697	9%

Non-Interest Income

Excluding net investment securities gains, non-interest income for the first quarter of 2007 increased to $156.6 million from $131.0 million a year ago, a 20% increase. The increases in non-interest income are primarily attributable to the increase in deposit charges and service fees of 28% for the first quarter of 2007.

The growth in non-interest income for the first quarter is more fully depicted below:

	Three Months Ended
	3/31/07		3/31/06		% Change
	(dollars in thousands)
Deposit Charges & Service Fees	$	105,206	$	82,281		28	%
Other Operating Income:
Commerce Banc Insurance		22,650		21,944		3
Commerce Capital Markets		7,267		6,235		17
Loan Brokerage Fees		2,963		1,937		53
Other		18,486		18,605		(1	)
Total Other Operating Income		51,366		48,721		5
Subtotal		156,572		131,002		20	%
Net Investment Securities Gains		2,879		-		100
Total Non-Interest Income	$	159,451	$	131,002		22	%

Included in other operating income for the first quarter of 2007 are $5.0 million of net losses related to the Company’s equity method investments.

Non-Interest Expenses

Non-interest expenses for the first quarter of 2007 were $362.8 million, up 15% from $315.3 million a year ago. The increases in non-interest expenses for the first quarter were widespread throughout non-interest expense categories, reflecting the Company’s store expansion program. The Company remains focused on controlling costs while continuing to execute its growth model.

Investments

At March 31, 2007, total investments increased to $27.1 billion. The available for sale and held to maturity portfolios totaled $12.3 billion and $14.8 billion, respectively.

Detailed below is information regarding the composition and characteristics of the Company’s investment portfolio, excluding trading securities, at March 31, 2007.

Product Description	Available For Sale			Held to Maturity			Total
	(in millions)
Mortgage-backed Securities:
Federal Agencies Pass Through	$	1,378		$	1,982		$	3,360
Certificates (AAA Rated)
Collateralized Mortgage		9,952			10,573			20,525
Obligations (AAA Rated)
Obligations of State and		1,004			2,257			3,261
Political Subdivisions/Other
Total	$	12,334		$	14,812		$	27,146

Duration (in years)		2.86			3.47			3.19
Average Life (in years)		4.99			5.18			5.09
Quarterly Average Yield		5.77	%		5.48	%		5.61	%

At March 31, 2007, the after tax depreciation of the Company’s available for sale portfolio was $49.4 million.

Linked Quarter Comparison

A comparison of financial results for the quarter ended March 31, 2007 to the previous quarter ended December 31, 2006 is as follows: (dollars in thousands, except per share data)

	Three Months Ended					Linked Quarter
	3/31/07		12/31/06			$ Change			% Change
Total Assets	$	47,371,632	$	45,271,816		$	2,099,816			5	%
Total Loans (Net)		15,778,094		15,454,996			323,098			2
Core Deposits		42,698,696		40,076,568			2,622,128			7
Total Deposits		43,975,866		41,288,211			2,687,655			7
Total Revenues		492,407		492,309			98			-
Net Interest Income		332,956		325,671			7,285			2
Non-Interest Income		159,451		166,638			(7,187	)		(4	)
Non-Interest Expense		362,785		363,174			(389	)		-
Net Income		77,936		62,827⁽¹	⁾		15,109			24
Net Income Per Share	$	.40	$	.32⁽¹	⁾	$	.08			25

Capital Resources

Stockholders’ equity at March 31, 2007 increased to $2.9 billion, a $462.9 million increase, or 19% over stockholders’ equity of $2.4 billion at March 31, 2006.

Return on average stockholders equity (ROE) for the first quarter is shown in the table below:

	Three Months Ended
	3/31/07	3/31/06
	10.87%	13.00%

At March 31, 2007, the Company’s book value per share was $14.54, a 15% increase over the book value per share of $12.59 at March 31, 2006.

The Company’s capital ratios at March 31, 2007 were as follows:

				Regulatory Guidelines
	Commerce			“Well Capitalized”

Leverage Ratio		6.09	%		5.00	%
Tier I		11.66	%		6.00	%
Total Capital		12.36	%		10.00	%

New Stores

During the first quarter of 2007, the Company added 9 new stores, increasing the total stores to 437. During the last three years, the Company has added 159 of its 437 stores.

Stores opened during the first quarter were as follows:

Metropolitan New York

	Location	County

	Corona	Queens (NY)
	Elmhurst	Queens (NY)
	Hillcrest	Queens (NY)

	Rockaway Commons	Morris (NJ)
	Warren	Somerset (NJ)

Metropolitan Philadelphia

	Location	County

	Newark/DE	New Castle (DE)

Metropolitan Washington, D.C.

	Location	County

	Alexandria/Van Dorn	Alexandria (VA)

Southeastern Florida

	Boca Raton/Camino Real	Palm Beach (FL)
	South Beach	Miami - Dade (FL)

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 or other forward looking statements 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 (including those regulatory and other approvals necessary to open new stores); 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.

Commerce Bancorp Inactive 8-KResults of Operations and Financial Condition