Commerce Bancorp 8-K Receives Branch Approval from Occ

CONTACTS

Douglas J. Pauls	C. Edward Jordan, Jr.
Chief Financial Officer	Executive Vice President

(856) 751-9000

COMMERCE BANCORP CORE DEPOSITS UP 17%,

RECEIVES BRANCH APPROVAL FROM OCC

July 24, 2007 – Cherry Hill, New Jersey – Commerce Bancorp, Inc. (NYSE Symbol: CBH) reported increased assets, deposits and loans for the second quarter of 2007.

SECOND QUARTER FINANCIAL HIGHLIGHTS

June 30, 2007

			% Change
Total Assets:	$48.2	Billion	11%
Core Deposits:	$43.0	Billion	17%
Total (Net) Loans:	$16.2	Billion	15%
Total Revenues:	$519.4	Million	12%
Net Income:	$76.9	Million	(3)%
Net Income Per Share:	$.39		(5)%

Company Statement

Financial highlights for the second quarter were:

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

·   Core deposits increased $6.2 billion, up 17%, for the prior 12 months, while total deposits increased  $6.3 billion, or 17%, for the prior 12 months.

·   Annualized core deposit growth per store was $15 million.

·   Comparable store core deposit growth was 15%

·   Commercial core deposits grew 18% to $17.3 billion.

·   New York City core deposits increased to $7.2 billion, up 29%.

·   Net loans grew $2.1 billion, or 15%, to $16.2 billion.

·   Revenue grew 12% despite the continuing difficult interest rate environment.

·   Net income was $76.9 million and net income per share was $.39 for the second quarter of 2007.

·   During the second quarter of 2007, the Company recorded non-recurring, pre-tax charges of approximately $5.1 million (approximately $.02 per share, after tax), primarily related to legal costs associated with the investigation being conducted by the Office of the Comptroller of the Currency (OCC) and net losses related to the Company’s equity method investments.

·   Shareholder equity increased $366.4 million, or 15%, to $2.9 billion.

·   Book value per share grew 12% to $14.55.

Expansion Plans

The Commerce growth model includes the opening of new stores in both existing and new markets, with a goal of increasing the store base by approximately 15% a year.  During the first six months of 2007, the Company opened 14 new stores, including its first in Miami-Dade County, Florida.

·   In 2007, the Company expects to open a total of +/- 50 stores, which will increase total stores to approximately 480.  Openings are planned in the following markets:

Metro New York 25 +/-

Metro Philadelphia10 +/-

Metro Washington5 +/-

Southeast Florida10 +/-

·   The Company has finalized its revised branch application process with the OCC and has received approval for one branch under the revised process.  Accordingly, the Company will submit additional branch applications.

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The Commercial Bank

	6/30/07		6/30/06		$ Increase		% Increase
	(dollars in millions)
Commercial Core Deposits:	$	17,319	$	14,637	$	2,682		18	%
Commercial Loans:		10,332		8,995		1,337		15

Lending

Loans increased 15% to $16.4 billion from the second quarter of 2006, and the growth was widespread throughout all loan categories.  

Regional Loan Growth:

	6/30/07		6/30/06		$ Increase		% Increase			% of Total Growth
	(dollars in millions)
Metro New York	$	8,413	$	7,104	$	1,309		18	%		63	%
Metro Philadelphia		7,164		6,693		471		7			22
Metro Washington		286		119		167		140			8
Southeast Florida		505		358		147		41			7
Total:	$	16,368	$	14,274	$	2,094		15	%		100	%

Loan Composition:

	6/30/07		% of Total			6/30/06		% of Total			$ Increase		% Increase
	(dollars in millions)
Commercial	$	4,458		27	%	$	3,731		26	%	$	727		19	%
Owner-Occupied RE		3,000		18			2,614		18			386		15
Total Commercial		7,458		45			6,345		44			1,113		18
Consumer		6,036		37			5,279		37			757		14
Commercial Real Estate		2,874		18			2,650		19			224		8
Total Loans	$	16,368		100	%	$	14,274		100	%	$	2,094		15	%

The loan-to-deposit ratio was 37% at June 30, 2007.

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Asset Quality

	Quarter Ended
	6/30/07			3/31/07			6/30/06
Non-Performing Assets/Assets		.12	%		.11	%		.12	%
Net Loan Charge-Offs		.18	%		.16	%		.06	%
Reserve for Credit Losses/Gross Loans		1.04	%		1.03	%		1.04	%
Non-Performing Loan Coverage		334	%		351	%		291	%
Non-Performing Assets/Capital		2	%		2	%		2	%
and Reserves

Non-performing assets and loans past due 90 days at June 30, 2007 totaled $56.9 million or .12% of total assets, versus $52.4 million, or .11% of total assets, at March 31, 2007 and $53.0 million, or .12% of total assets, at June 30, 2006.

Income Statement

	Three Months Ended							Six Months Ended
	6/30/07		6/30/06		% Change			6/30/07		6/30/06		% Change
	(dollars in thousands, except per share data)
Total Revenues:	$	519,397	$	461,893		12	%	$	1,011,804	$	900,825		12	%
Total Expenses:		387,895		333,784		16			750,680		649,118		16
Net Income:		76,903		79,520		(3	)		154,839		156,817		(1	)
Net Income Per Share:	$	.39	$	.41		(5	)	$	.79	$	.82		(4	)

Balance Sheet

	6/30/07		6/30/06		$ Increase		% Increase
	(dollars in millions)
Total Assets:	$	48,176	$	43,436	$	4,740		11	%
Total Loans (Net):		16,207		14,133		2,074		15
Core Deposits:		43,014		36,784		6,230		17
Total Deposits:		44,388		38,050		6,338		17

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Deposit Growth

	6/30/07		6/30/06		$ Increase		% Increase
	(dollars in millions)
Core Deposits	$	43,014	$	36,784	$	6,230		17	%
Total Deposits	$	44,388	$	38,050	$	6,338		17	%

Regional Deposit Growth

 Core deposit growth by region is as follows:

	# of Stores		6/30/07		6/30/06		$ Increase		% Increase			Average Store Size		Annualized Growth/ Store
	(dollars in millions)
Northern New Jersey		144	$	13,030	$	11,388	$	1,642		14	%	$	90	$	12
New York City		59		7,217		5,596		1,621		29			122		30
Long Island/Westchester/CT		52		4,391		3,498		893		26			84		19
Metro New York		255	$	24,638	$	20,482	$	4,156		20	%	$	97	$	17
Metro Philadelphia		156		17,445		15,763		1,682		11			112		11
Metro Washington		19		542		280		262		94			29		19
Southeast Florida		12		389		259		130		50			32		14
Total Core Deposits		442	$	43,014	$	36,784	$	6,230		17	%	$	97	$	15
Total Deposits			$	44,388	$	38,050	$	6,338		17	%	$	100	$	15

Metro New York remains the Company’s largest and fastest growing market with core deposits of $24.6 billion, an increase of 20% over the second quarter of 2006, and an annualized core deposit growth per store of $17 million.  This market is expected to continue to lead the deposit growth of the Company.

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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		149		11	%
Northern New Jersey		132		13
New York City		48		29
Long Island/Westchester/CT		44		21
Metro Washington		8		66
Southeast Florida		8		29
Total		389		15	%

Core Deposits

Core deposit growth by type of account is as follows:

	6/30/07		6/30/06		$ Change			% Change			2nd Quarter Cost of Funds
	(dollars in millions)
Demand	$	9,377	$	8,654	$	723			8	%		0.00	%
Interest Bearing Demand		18,860		14,269		4,591			32			3.71
Savings		10,524		10,729		(205	)		(2	)		2.80
Subtotal		38,761		33,652		5,109			15	%		2.60	%
Time		4,253		3,132		1,121			36			4.49
Total Core Deposits:	$	43,014	$	36,784	$	6,230			17	%		2.78	%

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Core deposit growth by type of customer is as follows:

	6/30/07		% Total			6/30/06		% Total			$ Increase		% Increase
	(dollars in millions)
Consumer	$	18,156		42	%	$	15,766		43	%	$	2,390		15	%
Commercial		17,319		40			14,637		40			2,682		18
Government		7,539		18			6,381		17			1,158		18
Total	$	43,014		100	%	$	36,784		100	%	$	6,230		17	%

Net Income and Net Income Per Share

Net income totaled $76.9 million for the second quarter of 2007, compared to net income of $79.5 million for the second quarter of 2006.  On a diluted per share basis, net income for the second quarter of 2007 was $.39 compared to $.41 for the second quarter of 2006.

	Three Months Ended							Six Months Ended
	6/30/07		6/30/06		% Change			6/30/07		6/30/06		% Change
	(dollars in thousands, except per share data)
Net Income:	$	76,903	$	79,520		(3	)%	$	154,839	$	156,817		(1	)%
Net Income Per Share:	$	.39	$	.41		(5	)	$	.79	$	.82		(4	)

For the first six months of 2007, net income totaled $154.8 million, compared to $156.8 million for the first six months of 2006.

On a diluted per share basis, net income for the first six months of 2007 was $ .79 compared to $.82 for the first six months of 2006.

Net income and net income per share for the second quarter and first six months of 2007 were reflective of the continuing difficult interest rate environment and its impact on the Company’s net interest income, as well as increased FDIC assessments and certain non-recurring items.

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Net Interest Income and Net Interest Margin

Net interest income for the second quarter totaled $342.8 million, a 7% increase over the $318.9 million recorded a year ago, despite the continuing difficult interest rate environment.  For the first six months of 2007, the Company recorded net interest income of $675.8 million, an 8% increase over the $626.9 million earned in the first six months of 2006.  The increase in net interest income during the quarter and first six months was due to volume increases in interest earning assets resulting from the Company’s continued deposit growth.

The net interest margin for the second quarter of 2007 decreased slightly to 3.22%, compared to 3.27% for the first quarter of 2007, and was down 17 basis points from the 3.39% margin for the second quarter of 2006.  The year over year compression in net interest margin was primarily caused by the continuing difficult interest rate environment.

On a tax equivalent basis, the Company recorded $350.1 million in net interest income in the second quarter of 2007, an increase of $25.1 million or 8% over the second quarter of 2006.  Net interest income on a tax equivalent basis of $690.6 million was earned in the first six months of 2007, an increase of $51.8 million or 8% over the first six months 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 continuing difficult interest rate environment.

	Net Interest Income
June 2007 vs. 2006	Volume Increase		Rate Change			Total Increase		% Increase
	(dollars in thousands)
Quarter	$	44,950	$	(19,826	)	$	25,124		8	%
First Six Months	$	95,718	$	(43,897	)	$	51,821		8	%

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Non-Interest Income

Non-interest income for the second quarter of 2007 increased to $176.6 million from $143.0 million a year ago, a 24% increase.  Excluding net investment securities gains, non-interest income for the first six months of 2007 increased to $333.1 million from $274.0 million a year ago, a 22% increase.  The increases in non-interest income are primarily attributable to the increase in deposit charges and service fees of 28% for both the second quarter and first six months of 2007.

The growth in non-interest income for the second quarter and the first six months of 2007 is more fully depicted below:

	Three Months Ended							Six Months Ended
	6/30/07		6/30/06		% Change			6/30/07		6/30/06		% Change
	(dollars in thousands)
Deposit Charges & Service Fees	$	116,913	$	91,653		28	%	$	222,119	$	173,934		28	%
Other Operating Income:
Commerce Banc Insurance		23,084		20,573		12			45,734		42,517		8
Commerce Capital Markets		8,037		7,263		11			15,305		13,498		13
Operating Lease Revenue		4,797		3,475		38			10,051		6,977		44
Loan Brokerage Fees		2,641		2,183		21			5,603		4,119		36
Other		21,100		17,809		18			34,332		32,913		4
Total Other Operating Income		59,659		51,303		16			111,025		100,024		11
Subtotal		176,572		142,956		24			333,144		273,958		22
Net Investment Securities Gains		-		-		-			2,879		-		100
Total Non-Interest Income	$	176,572	$	142,956		24	%	$	336,023	$	273,958		23	%

Included in other operating income for the second quarter and first six months of 2007 are $2.5 million and $7.5 million, respectively, of net losses related to the Company’s equity method investments.

Non-Interest Expenses

Non-interest expenses for the second quarter of 2007 were $387.9 million, up 16% from $333.8 million a year ago.  Non-interest expenses for the first six months of 2007 were $750.7 million, up 16% from $649.1 million a year ago.  The increases in non-interest expenses for the second quarter and six months ended June 30, 2007 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.

Included in non-interest expenses are increased FDIC assessments of $6.5 million and $8.4 million for the second quarter and first six months of 2007, respectively, compared to the same periods a year ago.  Excluding these amounts, the Company’s non-interest expenses would have increased by 14% for both the second quarter and first six months from the prior year.

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Non-interest expenses were also impacted by non-recurring charges of approximately $2.6 million and $3.8 million during the second quarter and first six months of 2007, respectively.  These non-recurring expenses were primarily legal costs incurred by the Company associated with the ongoing investigation being conducted by the OCC.

Investments

At June 30, 2007, total investments increased to $27.8 billion.  The available for sale and held to maturity portfolios totaled $13.2 billion and $14.6 billion, respectively.

None of the securities in the Company’s investment portfolio are backed by subprime mortgages.

Detailed below is information regarding the composition and characteristics of the Company’s investment portfolio, excluding trading securities, at June 30, 2007.

Product Description	Available For Sale			Held to Maturity			Total
	(in millions)
Mortgage-backed Securities:
Federal Agencies Pass Through	$	1,545		$	1,950		$	3,495
Certificates (AAA Rated)
Collateralized Mortgage		10,519			10,514			21,033
Obligations (AAA Rated)
Obligations of State and		1,157			2,122			3,279
Political Subdivisions/Other
Total	$	13,221		$	14,586		$	27,807
Duration (in years)		3.73			4.36			4.06
Average Life (in years)		6.42			6.44			6.43
Quarterly Average Yield		5.74	%		5.42	%		5.57	%

At June 30, 2007, the after tax depreciation of the Company’s available for sale portfolio was $123.8 million.

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Capital Resources

Stockholders’ equity at June 30, 2007 increased to $2.9 billion, a $366.4 million increase, or 15% over stockholders’ equity of $2.5 billion at June 30, 2006.

Return on average stockholders equity (ROE) for the second quarter and six months ending June 30, 2007 and 2006 is shown in the table below:

Three Months Ended                                       Six Months Ended

6/30/07                         6/30/06                      6/30/07                      6/30/06

10.57%                         12.83%                      10.72%                      12.92%

At June 30, 2007, the Company’s book value per share was $14.55, a 12% increase over the book value per share of $12.96 at June 30, 2006.

The Company’s capital ratios at June 30, 2007 were as follows:

				Regulatory Guidelines
	Commerce			“Well Capitalized”
Leverage Ratio		6.06	%		5.00	%
Tier I		11.72	%		6.00	%
Total Capital		12.43	%		10.00	%

Shareholder Returns

		June 30, 2007
		Commerce			S & P Index
1	Year		5	%		21	%
5	Years		12	%		11	%
10	Years		21	%		7	%

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New Stores

During the second quarter of 2007, the Company added 5 new stores, increasing the total stores to 442.  During the last three years, the Company has added 153 of its 442 stores.  At June 30, 2007 deposits for the Company’s 153 stores opened during the last three years totaled $6.6 billion.

Stores opened during the second quarter were as follows:

Metropolitan New York
	Location	County
	Franklin Square	Nassau (NY)
	Garnerville	Rockland (NY)
	Lakewood	Ocean (NJ)

Metropolitan Washington, D.C.
	Location	County
	Silver Spring	Montgomery (MD)

Southeastern Florida
	Location	County
	Palm Beach/South County	Palm Beach (FL)

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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 shareholders 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; 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; the ability to maintain the growth and further development of the Company’s community-based retail branching network; 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.

The Company cautions that any such forward-looking statements are not guarantees of future performance and involve known and unknown risks, uncertainties and other factors which may cause the Company’s actual results, performance or achievements to differ materially from the future results, performance or achievements the Company has anticipated in such forward-looking statements.  You should note that many factors could affect the Company’s future financial results and could cause those results to differ materially from those expressed or implied in the Company’s forward-looking statements contained in this document.

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