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): June 2, 2004
--------------
Commerce Bancorp, Inc.
----------------------
(Exact name of registrant as specified in its charter)
New Jersey 0-12609 22-2433468
--------------------------------------------------------------------------------
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification Number)
Commerce Atrium, 1701 Route 70 East, Cherry Hill, NJ 08034-5400
--------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 856-751-9000
------------
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. Q. What do you expect net income to be for the second quarter?
A. First Call consensus net income is approximately $66.0
million, up 46% over the second quarter of 2003. We expect to
meet or exceed the First Call consensus projection for the
second quarter.
2. Q. The First Call E.P.S. consensus projection for the second
quarter of 2004 is $.78 and the E.P.S. consensus projection
for 2004 is $3.19. Do you expect to meet these consensus
projections?
A. Yes, we expect to meet or exceed the consensus projections for
both the second quarter and for 2004.
3. Q. What will the net interest margin be for the second quarter of
this year?
A. In April and May we experienced a spike in bond prepayments
caused by the 10-year Treasury falling to 3.67% in March.
Consequently, the margin may decline to approximately 4.30%
for the second quarter.
Based on the current level of rates, we expect the net
interest margin to expand during the third and fourth quarters
of this year.
We expect that volume will offset any net interest margin rate
effects for the second quarter.
4. Q. How does the shape of the yield curve affect your
profitability?
A. The Company has demonstrated its ability over the years to
maintain a stable, high net interest margin and consistent
profitability in various yield curve scenarios.
The Company's profitability benefits from a normal to an up-
shaped yield curve.
Over the past six years the Company has consistently
maintained a spread of approximately 400 basis points between
the yield on investment securities and its cost of funds.
5. Q. Amidst concerns for a slowing in deposit growth for the
industry, how is Commerce faring?
A. For the period May 31, 2003 to May 31, 2004, deposits are up
41%.
6. Q. How does a higher level of interest rates affect your
profitability?
A. Historically, we have proven that we make more money in a
rising rate environment. Also, since we are core deposit
funded rather than funded by various types of borrowings, our
cost of funds would only rise approximately 30 basis points on
the first 100 basis point increase in short-term rates.
7. Q. How does your balance sheet react to a rising rate
environment?
A. The market value of our core deposits increase and the market
value of our fixed rate loans and investments decrease. Thus,
there is a minimal effect on our market value of equity.
8. Q. What is the present mark-to-market on your available for sale
investment portfolio?
A. At the close of business, May 28, 2004, with the 10-year
Treasury Note yield at 4.65%, our available for sale
investment portfolio had an after-tax unrealized loss of
approximately $130 - $140 million.
9. Q. What is the effect of unrealized losses in your available for
sale investment portfolio on book capital and regulatory
capital?
A. Unrealized gains or losses have no effect on regulatory
capital. We continue to meet the regulatory definition of
"well-capitalized". Unrealized losses would temporarily reduce
tangible equity, but not regulatory capital. Since we do not
envision a scenario where we would realize such losses, we
view this as a perception issue and not an economic issue.
10. Q. How much capital did you generate during the past 12 months
and how much do you expect to generate over the next 12
months?
A. For the period of April 1, 2003 to March 31, 2004, we
generated capital of $520 million.
For the period April 1, 2004 to March 31, 2005, we expect to
generate approximately $585 - $600 million in capital from the
following sources:
>> $225 - $240 million from retained earnings after
payment of dividends.
>> $150 million from our Dividend Reinvestment and
Optional Cash Purchase Plan and the exercise of stock
options.
>> $200 million from the forced conversion of our $200
million Convertible Trust Preferred issue in March
2005, assuming certain conditions are met.
11. Q. What is the status of your convertible trust preferred
securities issue?
A. Because the terms have been met for the holders to convert,
the shares are included in our share count for calculating
diluted earnings per share.
Beginning March 11, 2005, we will be able to force conversion
provided that our common stock trades at or above $63.30 for
20 consecutive days in a 30-day trading period.
12. Q. Once the convertible trust preferred is converted, what will
be your capacity to issue straight trust preferred?
A. We would have no trust preferred outstanding and we would be
able to issue approximately $650 million of straight trust
preferred which would qualify as regulatory capital.
13. Q. Your operating leverage has improved for each of the last two
quarters. Do you expect positive operating leverage for the
second quarter of this year?
A. Yes. We expect expenses to grow slower than revenues during
the second quarter of 2004 and for the balance of 2004.
14. Q. Why are you planning to seek shareholder approval to increase
your authorized shares from 150 million shares to 500 million
shares?
A. The Company has no present plans to issue additional shares.
Among the possible uses for the new shares are stock splits,
stock dividends, employee benefit plans, future financings and
acquisitions.
15. Q. How many branches do you have open now and how many do you
expect to have at year-end?
A. We presently have 285 branches and we expect to have 320 by
the end of this year. This would result in an increase of 50
new branches this year of which approximately 40 will be in
Metropolitan New York and 10 in Metropolitan Philadelphia.
16. Q. What do you expect your asset quality to be at the end of the
second quarter?
A. We expect asset quality to be the same or better than the
first quarter of 2004.
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: June 2, 2004 COMMERCE BANCORP, INC.
By: /s/ DOUGLAS J. PAULS
-------------------------
Douglas J. Pauls
Senior Vice President and Chief
Financial Officer