COMMERCE BANCORP [LOGO]
CONTACTS
--------
Vernon W. Hill, II C. Edward Jordan, Jr.
Chairman and President Executive Vice President
(856) 751-9000
COMMERCE BANCORP NET INCOME UP 24%
April 13, 2005 - Cherry Hill, New Jersey - Commerce Bancorp, Inc. (NYSE
Symbol: CBH) reported record earnings and increased deposits, assets and loans
for the first quarter of 2005, announced Vernon W. Hill, II, Chairman of the
multi-bank holding company.
FIRST QUARTER FINANCIAL HIGHLIGHTS
----------------------------------
March 31, 2005
%
Increase
--------
* Total Assets: $31.9 Billion 28%
* Total Deposits: $29.5 Billion 29%
* Total (Net) Loans: $9.8 Billion 28%
* Total Revenues: $382.6 Million 21%
* Net Income: $77.1 Million 24%
* Net Income Per Share: $ .45 22%
Chairman's Statement
- --------------------
Vernon W. Hill, II, Chairman, noted the following financial highlights:
o Net income increased 24% for the first quarter of 2005 to $77.1
million.
o Earnings per share rose 22% for the first quarter to $.45.
o Net interest income grew 21% during the first quarter despite margin
compression to 4.04% caused by the flattening yield curve.
o Core deposits, excluding time deposits, grew 33% for the prior 12
months.
o Annualized deposit growth per store was $23 million.
o Comparable Store Core Deposit Growth:
Two Year One Year
-------- --------
Total 22% 29%
Excluding Time Deposits 26% 33%
o Total loans reached $10.0 billion, reflecting growth of 28% over the
past twelve months.
o The Company expects to meet or exceed the current First Call E.P.S.
consensus projections of $.46 for the second quarter of 2005 and $1.90
for the year.
Expansion
- ---------
The Company's long range plans call for increasing its number of stores by
approximately 18% per year. In keeping with these plans, the Company's 2005
strategy is as follows:
o 55-60 new stores.
o 35+ new stores in Metro New York, including its first 2-4 stores in
Connecticut.
o The first 5-10 stores of its planned 200 new stores in the Metro
Washington D.C. market.
o Expected openings in Manassas, Virginia and Connecticut Avenue in
Washington, D.C. in June 2005.
Metro New York is now the Company's largest market with 178 stores and $16.0
billion in deposits.
2
Income Statement
- ----------------
Three Months Ended
--------------------------------------------
3/31/05 3/31/04 % Increase
--------------------------------------------
(dollar in thousands, except per share data)
Total Revenues: $382,590 $316,444 21%
Total Expenses: 258,406 212,250 22
Net Income: 77,137 61,975 24
Net Income Per Share: $.45 $.37 22%
Balance Sheet
- -------------
Linked Quarter
--------------
3/31/05 3/31/04 % Increase 12/31/04 $ Increase % Increase
----------------------------------------------------------------------------------
(dollars in millions)
Total Assets: $31,870 $24,955 28% $30,501 $1,369 4%
Total Loans (Net): 9,837 7,671 28 9,319 518 6
Core Deposits: 28,058 21,706 29 26,657 1,401 5
Total Deposits: 29,488 22,883 29 27,659 1,829 7
Shareholder Returns
- -------------------
March 31, 2005
--------------
Commerce S & P Index
-------- -----------
1 Year - % 7%
5 Years 31% -3%
10 Years 31% 11%
3
Growth Targets
- --------------
Last 5 Year Actual %
Growth Targets Growth % First Quarter 2005
-------------- -------- ------------------
Total Deposits: 25% 38% 29%
Two-Year Comp Store Deposits: 18 24 22
Total Revenue: 25 33 21
Net Income: 25 36 24
Earnings Per Share: 20 27 22
Total Deposits
- --------------
The Company's deposit growth continues with total deposits at March 31,
2005 of $29.5 billion, a $6.6 billion increase or 29% over total deposits of
$22.9 billion a year ago, including growth of $1.8 billion in the first quarter.
3/31/05 3/31/04 $ Increase % Increase
------- ------- ---------- ----------
(dollars in millions)
Core Deposits $28,058 $21,706 $6,352 29%
Total Deposits $29,488 $22,883 $6,605 29%
Regional Deposit Growth
- -----------------------
Deposit growth by region is as follows:
# of $ % Annualized
Stores 3/31/05 3/31/04 Increase Increase Growth/Store
------ ------- ------- -------- -------- ------------
(dollars in millions)
Northern New Jersey 116 $9,404 $7,763 $1,641 21% $17
New York City 37 3,980 2,283 1,697 74 50
Long Island/NY State 25 2,609 1,570 1,039 66 51
---- ------- ------- ------ ---- ----
Metro New York 178 $15,993 $11,616 $4,377 38% $28
Metro Philadelphia 141 $13,495 11,267 2,228 20 16
---- ------- ------- ------ ---- ----
Total 319 $29,488 $22,883 $6,605 29% $23
4
Comparable Store Core Deposit Growth
- ------------------------------------
Comparable store deposit growth is measured as the year-over-year
percentage increase in core deposits for stores open two years or more at the
balance sheet date. Additional information is provided below for stores opened
one year or more at the balance sheet date.
At March 31, 2005 the Company had 62 stores in New York State. Of these
stores, 19 are included in the comparable store growth for stores open 2 years
or more and 44 are included in the comparable store growth for stores open one
year or more at the balance sheet date.
Core Deposit Growth
------------------------------------------------------
Stores Open Stores Open
2 Years or More 1 Year or More
------------------------- -------------------------
# of Comp Store # of Comp Store
Stores Increase Stores Increase
------ -------- ------ --------
Metro Philadelphia 120 21% 133 22%
Northern New Jersey 87 21 101 25
New York City 11 39 27 62
Long Island/NY State 8 26 17 53
----- ----- ----- -----
Total 226 22% 278 29%
Excluding Time Deposits 26% 33%
Core Deposits
- -------------
Core deposit growth by type of account is as follows:
1st Quarter
Cost of Annual
3/31/05 3/31/04 Funds Growth %
------- ------- ----- --------
(dollars in millions)
Demand $6,878 $5,093 .00% 35%
Interest Bearing Demand 11,970 9,314 1.59 29
Savings 6,597 4,769 1.13 38
------ ------ ---- ----
Subtotal 25,445 19,176 1.06% 33%
Time 2,613 2,530 2.17 3
------ ------ ---- ----
Total Core Deposits: $28,058 $21,706 1.16% 29%
5
Core deposit growth by type of customer is as follows:
Annual
3/31/05 % Total 3/31/04 % Total Growth %
------- ------- ------- ------- --------
(dollars in millions)
Consumer $12,681 45% $10,511 48% 21%
Commercial 10,150 36 7,575 35 34
Government 5,227 19 3,620 17 44
------- --- ------- ---- ----
Total $28,058 100% $21,706 100% 29%
Core deposits, excluding government deposits, grew $4.7 billion or 26% over the
year ago period.
Two year comp store growth by type of customer is as follows:
Comp Store Excluding
Growth % Time %
-------- ------
Consumer 11% 15%
Commercial 27 29
Government 44 45
----- -----
22% 26%
Government Core Deposits
- ------------------------
Government core deposits by state are as follows:
Annual
# of Growth
Relationships 3/31/05 Rate % Total
------------- ------- ---- -------
(dollars in millions)
New Jersey 650 $3,142 35% 60%
Pennsylvania 189 1,053 65 20
New York 113 1,032 56 20
--- ------ ---- ----
Total 952 $5,227 44% 100%
6
Net Income and Earnings Per Share
- ---------------------------------
Net income totaled $77.1 million for the first quarter of 2005, up
$15.1 million or 24% over net income of $62.0 million for the first quarter of
2004.
On a diluted per share basis, net income for the first quarter was $.45
compared to $.37 for the first quarter of 2004, a 22% increase.
Three Months Ended
------------------
3/31/05 3/31/04 % Increase
------- ------- ----------
(dollars in thousands, except per share data)
Net Income $77,137 $61,975 24%
Earnings Per Share $.45 $.37 22%
Total Revenues
- --------------
Three Months Ended
------------------
3/31/05 3/31/04 % Increase
------- ------- ----------
(dollars in thousands, except per share data)
Total Revenues $382,590 $316,444 21%
Revenue Per Share $8.68 $7.40 17%
Net Interest Income and Net Interest Margin
- -------------------------------------------
Net interest income for the first quarter totaled $278.9 million, a 21%
increase over the $230.2 million recorded a year ago. The increase in net
interest income in the quarter was due to volume increases in interest earning
assets resulting from the Company's strong, low-cost core deposit growth.
The net interest margin for the first quarter of 2005 was 4.04%, down
12 basis points from the fourth quarter of 2004, and down 35 basis points from
the 4.39% margin for the first quarter of 2004.
On a tax equivalent basis, the Company recorded $283.0 million in net
interest income in the first quarter of 2005, an increase of $48.6 million or
21% over the first quarter of 2004.
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Net Interest Income and Rate/Volume Analysis
- --------------------------------------------
As shown below, the increase in net interest income on a tax equivalent
basis was due to volume increases in the Company's earning assets, which were
fueled by the Company's continued growth of low-cost core deposits.
Net Interest Income
-----------------------------------------------------------------
Quarter Ended Volume Rate Total %
March 31 Increase Change Increase Increase
-------- -------- ------ -------- --------
(dollars in thousands)
2005 vs. 2004 $70,578 ($21,987) $48,591 21%
Non-Interest Income
- -------------------
Non-interest income for the first quarter of 2005 increased to $103.7
million from $86.2 million a year ago, a 20% increase, which was primarily
attributable to the increase in deposit charges and service fees of 32%.
The growth in non-interest income for the first quarter is more fully
depicted below:
Three Months Ended
------------------
3/31/05 3/31/04 % Increase
------- ------- ----------
(dollars in thousands)
Deposit Charges & Service Fees $59,964 $45,481 32%
Other Operating Income:
Commerce Insurance 19,789 18,336 8
Commerce Capital Markets 6,441 9,727 (34)
Loan Brokerage Fees 2,759 3,053 (10)
Other 13,628 9,211 48
--------------------------------------------
Total Other Operating Income 42,617 40,327 6
Net Investment Securities Gains 1,108 424 161
--------------------------------------------
Total Non-Interest Income $103,689 $86,232 20%
============================================
8
Non-Interest Expenses
- ---------------------
Non-interest expenses for the first quarter of 2005 were $258.4
million, up 22% from $212.3 million a year ago. The increase in non-interest
expenses for the first quarter was widespread throughout non-interest expense
categories, reflecting the Company's store expansion program.
Lending
- -------
Loans increased 28% to $10.0 billion from the first quarter of 2004,
and the growth was widespread throughout all loan categories.
The Company's primary strength is in building customer relationships
and growing market share in deposits, loans, and related services. Consumer and
small business loan growth is directly related to the Company's significant
increase in store locations, market expansion and added lending personnel.
Geographically, loan growth has occurred in the following markets:
Portfolio Geographical Growth
-----------------------------
3/31/05 3/31/04 Growth Rate % of Total Growth
------- ------- ----------- -----------------
(dollars in millions)
Metro Philadelphia $5,902 $4,709 25% 55%
Northern New Jersey 2,840 2,331 22 23
New York/Long Island 1,234 748 65 22
------ ------ ---- ----
Total: $9,976 $7,788 28% 100%
Loan Composition
----------------
3/31/05 % of Total 3/31/04 % of Total $ Increase % Increase
------- ---------- ------- ---------- ---------- ----------
(dollars in millions)
Commercial $2,598 26% $2,033 26% $565 28%
Owner-Occupied 2,100 21% 1,710 22% 390 23%
------ --- ------ --- ------ ----
Total Commercial 4,698 47% 3,743 48% 955 26%
Consumer 3,499 35% 2,664 34% 835 31%
Commercial Real Estate 1,779 18% 1,381 18% 398 29%
------ --- ------ --- ------
Gross Loans $9,976 100% $7,788 100% $2,188
Less: Reserves (139) (117) (22)
------ ------ ------
Net Loans $9,837 $7,671 $2,166 28%
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Asset Quality
- -------------
Quarter Ended
-------------
3/31/05 12/31/04 3/31/04
------- -------- -------
Non-Performing Assets/Assets .10% .11% .13%
Net Loan Charge-Offs .11% .18% .22%
Loan Loss Reserve/Gross Loans 1.40% 1.43% 1.51%
Non-Performing Loan Coverage 435% 413% 385%
Non-Performing Assets/Capital 2% 2% 2%
and Reserves
Non-performing assets and loans past due 90 days at March 31, 2005
totaled $33.0 million or .10% of total assets, versus $33.1 million, or .13% of
total assets a year ago.
Investments
- -----------
At March 31, 2005, total investments increased to $19.2 billion. The
available for sale and held to maturity portfolios totaled $7.9 billion and
$11.3 billion, respectively.
Detailed below is information regarding the composition and
characteristics of the Company's investment portfolio, excluding trading
securities, as of March 31, 2005.
Available Held to
Product Description For Sale Maturity Total
- ------------------- -------- -------- -----
(in millions)
Mortgage-backed Securities:
Federal Agencies Pass Through $1,666 $2,491 $4,157
Certificates (AAA Rated)
Collateralized Mortgage 5,887 7,811 13,698
Obligations (AAA Rated)
Obligations of State and 398 991 1,389
Political Subdivisions/Other
--------------------------------------------
Total $7,951 $11,293 $19,244
============================================
Duration (in years) 3.02 4.17 3.69
Average Life (in years) 3.62 5.16 4.52
Quarterly Average Yield 4.90% 4.92% 4.91%
At March 31, the after tax depreciation of the Company's available for
sale portfolio was $35.9 million.
10
Linked Quarter Comparison
- -------------------------
A comparison of financial results for the quarter ended March 31, 2005
to the previous quarter ended December 31, 2004 is as follows: (dollars in
thousands, except per share data)
Three Months Ended Linked Quarter
------------------ --------------
3/31/05 12/31/04 $ Change % Change
------- -------- -------- --------
Total Assets $31,869,976 $30,501,645 $1,368,331 4%
Total Loans (Net) 9,836,604 9,318,991 517,613 6
Core Deposits 28,058,156 26,656,530 1,401,626 5
Total Deposits 29,487,958 27,658,885 1,829,073 7
Total Revenues 382,590 374,893 7,697 2
Net Interest Income 278,901 278,442 459 --
Non-Interest Income 103,689 96,451 7,238 8
Non-Interest Expense 258,406 253,111 5,295 2
Net Income 77,137 75,118 2,019 3
Net Income Per Share $.45 $.44 $.01 2
Capital Resources
- -----------------
Stockholders' equity at March 31, 2005 increased to $1.7 billion, a
$253.4 million increase, or 17% over stockholders' equity of $1.5 billion at
March 31, 2004.
Each outstanding share of the Company's $200 million, 5.95% Convertible
Trust Preferred Securities is convertible into 1.8956 shares of the Company's
common stock at the option of the holder.
The Company may call its $200 million, 5.95% Convertible Trust
Preferred Securities, provided various terms and conditions are met, primarily
related to the market price of the Company's common stock. The Company's common
stock must trade at a price of $31.65 or higher for 20 trading days in a period
of 30 consecutive trading days in order for the Company to force conversion.
Return on average stockholders equity (ROE) for the first quarter is
shown in the table below:
Return on Equity
----------------
Three Months Ended
------------------
3/31/05 3/31/04
------- -------
17.98% 17.91%
11
The Company's capital ratios at March 31, 2005 were as follows:
Regulatory Guidelines
Commerce "Well Capitalized"
-------- ------------------
Leverage Ratio 6.22% 5.00%
Tier I 12.46% 6.00%
Total Capital 13.39% 10.00%
Retail Activities
"America's Most Convenient Bank" continued its unique retail focus by
offering the best in community branch banking and on-line banking. The Company's
continued deposit growth consists of growth in "same-store" (existing store)
sales and increased deposits from newly opened stores.
o "Same Store Sales"
----------------
Comparable store deposits for stores open two years or more
grew 22% (26% excluding time deposits). Comparable store
deposits for stores open one year or more grew 29%.
o "New Stores"
------------
For 2005, the Company plans to open 55-60 stores including:
35+ in Metro New York
10+ in Metro Washington, D.C.
10 in Metro Philadelphia
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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 stockholders and in other
communications by the Company, which are made in good faith by the Company
pursuant to the "safe harbor" provisions of the Private Securities Litigation
Reform Act of 1995.
These forward-looking statements include statements with respect to the
Company's beliefs, plans, objectives, goals, expectations, anticipations,
estimates and intentions, that are subject to significant risks and
uncertainties and are subject to change based on various factors (some of which
are beyond the Company's control). The words "may", "could", "should", "would",
"believe", "anticipate", "estimate", "expect", "intend", "plan", and similar
expressions are intended to identify forward-looking statements. The following
factors, among others, could cause the Company's financial performance to differ
materially from that expressed in such forward-looking statements: the strength
of the United States economy in general and the strength of the local economies
in which the Company conducts operations; the effects of, and changes in, trade,
monetary and fiscal policies, including interest rate policies of the Board of
Governors of the Federal Reserve System (the "FRB"); inflation; interest rates,
market and monetary fluctuations; the timely development of competitive new
products and services by the Company and the acceptance of such products and
services by customers; the willingness of customers to substitute competitors'
products and services for the Company's products and services and vice versa;
the impact of changes in financial services' laws and regulations (including
laws concerning taxes, banking, securities and insurance); technological
changes; future acquisitions; the expense savings and revenue enhancements from
acquisitions being less than expected; the growth and profitability of the
Company's non-interest or fee income being less than expected; unanticipated
regulatory or judicial proceedings; changes in consumer spending and saving
habits; and the success of the Company at managing the risks involved in the
foregoing.
The Company cautions that the foregoing list of important factors is
not exclusive. The Company does not undertake to update any forward-looking
statement, whether written or oral, that may be made from time to time by or on
behalf of the Company.
13