UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): September 5, 2003
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Commerce Bancorp, Inc.
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(Exact name of registrant as specified in its charter)
New Jersey 0-12874 22-2433468
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(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification Number)
Commerce Atrium, 1701 Route 70 East, Cherry Hill, NJ 08034-5400
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 856-751-9000
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ITEM 5. OTHER EVENTS AND REGULATION FD DISCLOSURE
The following information is included in this document as a result of the
Company's desire to comply with its policy regarding public disclosure of
corporate information. The Company may or may not continue to provide similar
information in the future using this format.
Forward-looking Statements and Associated Risk Factors
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.
(1) Question: Do you expect to meet the current First Call estimates of $2.53
for 2003 and $2.89 for 2004?
Answer:
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We expect to meet or exceed estimates for the third quarter, fourth quarter and
the entire year. The First Call estimate of $2.53 for all of 2003 reflects a 24%
annual increase in earnings per share over the actual 2002 earnings per share of
$2.04.
We expect to meet or exceed the current First Call EPS 2004 estimate of $2.89.
(2) Question: What is the effect on your projected income from the recent
dramatic increase in long-term rates?
Answer:
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To the extent that the shape of the yield curve steepens, our earnings power
increases. The recent 100+ basis points increase in long-term rates should
increase our net interest margin percentage and net income in the months ahead.
(3) Question: Are you planning to issue more common stock?
Answer:
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Because deposits for the last two years have been growing in excess of 40% a
year, we require additional capital beyond our internal rate of capital growth.
In September 2003, we plan to issue approximately $225 million in common stock.
The issuance of these new shares will increase our book value by approximately
$1.75 per share.
The issuance of these new shares would have raised our regulatory capital
leverage ratio at June 30, 2003 from 6.04% to approximately 7.21%.
The issuance of these new shares will not affect our ability to meet or exceed
the First Call earning estimates for 2003 and 2004.
(4) Question: How many branches will you open in all of 2003 and in what
markets?
Answer:
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During 2003 Commerce will open 46 new offices in the Metro Philadelphia and
Metro New York markets. In the last two years we will have added 20+ offices in
New York City and 10+ offices in Long Island.
(5) Question: Is your rapid expansion and investment in fixed assets in any way
capital constrained?
Answer:
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Capital investments are constrained by regulatory limitations. As of June 30,
2003, we have invested only approximately 30% of our maximum capital
expenditures limit. We do not envision a scenario where the regulatory capital
expenditures limit will be an expansion constraint.
(6) Question: How is your expansion going in New York City and Long Island?
Answer:
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Our offices in New York City and Long Island have been tremendously successful
and are growing at the rate of approximately $100 million in deposits per branch
per year. Long Island, despite expansion from scratch, is already operating on a
profitable basis. We plan to have 400 offices in the Metropolitan New York
market over the next five years.
(7) Question: How has the recent increase in long-term rates affected your
securities portfolio and balance sheet?
Answer:
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Banking is the business of interest rate risk management. We monitor rate risk
by utilizing a market value of equity at risk model (MVE) which prices and
reprices all the company's assets and liabilities at current, up 200 basis
points, and down 100 basis points environments. Shown below is the June 30, 2003
MVE model, on a per share basis.
Market Value
Of Equity
(in millions) Per Share
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Plus 200 basis points $4,183 $60.07
Current Rates $3,804 $54.63
Minus 100 basis points $2,885 $41.43
In general, in a rising rate environment, the value of our core deposits
increases more than the decline in the value of our investment portfolio.
(8) Question: How do mark-to-market gains/losses in the securities portfolio
affect regulatory capital?
Answer:
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Appreciation or depreciation resulting from the marking to market of the
available for sale securities portfolio has no effect on regulatory capital.
(9) Question: How do you measure your internal growth rate?
Answer:
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We believe the value of Commerce is in our rapidly growing, long-life, low-cost
core deposits.
Like any retailer, we report existing store growth as year-to-year comparable
store deposit growth for stores opened two+ years (comps).
For the last six (6) quarters, our year-over-year comp store deposit growth has
been over 28%.
(10) Question: Do you intend to expand outside of Philadelphia and New York?
Answer:
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We have stated that in the next 10 years we expect to build approximately 1,000
offices from Washington through Boston, which could generate $100 billion in
deposits.
During the fourth quarter of 2003, we expect to announce expansion into either
the Washington-Baltimore market or the Metropolitan Boston market beginning in
2005.
SIGNATURE
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 hereunto duly authorized.
Date: September 5, 2003 COMMERCE BANCORP, INC.
By: /s/ DOUGLAS J. PAULS
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Douglas J. Pauls
Senior Vice President and Chief
Financial Officer