China considers same tax rate for domestic, overseas firms (AFP)
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Commerce Bancorp probed by U.S. regulators (Reuters)
By Jonathan Stempel 11 minutes ago
NEW YORK (Reuters) - Commerce Bancorp Inc. (NYSE:CBH - news), a fast-growing Northeast U.S. bank, said on Tuesday that federal regulators are investigating transactions involving the company, its officers and directors, and "related" parties.
The Cherry Hill, New Jersey-based company also said fourth-quarter profit rose 68 percent, but said earnings in early 2007 may fall below analysts' estimates as a tough interest-rate environment crimps lending margins.
Shares of Commerce, which operates mainly in New Jersey, New York and Pennsylvania, closed down $2.89, or 8.3 percent, at $31.83, the biggest drop since September 12, 2005. Analysts said the probe and expected profit shortfall caused the decline.
"A cloud will remain over the stock for some time, at least until the results of the investigation are revealed," wrote Sandler O'Neill & Partners LP analyst Mark Fitzgibbon.
Commerce said the probe by the Federal Reserve and the Office of the Comptroller of the Currency (OCC) "will include but not be limited to transactions with its officers, directors and related parties, including transactions involving bank premises."
On a conference call, Commerce officials said the bank is cooperating and has formed a committee of independent directors to address the matter.
No other details were immediately available about the probe. Commerce spokesman David Flaherty declined further comment. Fed spokeswoman Deborah Lagomarsino and OCC spokesman Kevin Mukri declined comment.
Separately, Commerce said fourth-quarter profit rose to $78.7 million, or 40 cents per share, from $46.9 million, or 26 cents. Profit matched the average analyst forecast, according to Reuters Estimates.
2004 CORRUPTION SCANDAL
Commerce tightened internal controls and increased disclosures after a 2004 corruption scandal involving the trading of cash and gifts for Philadelphia city contracts.
Two former Commerce executives were convicted, though the bank said in November it was no longer under investigation.
In an April 2006 proxy filing, Commerce disclosed leases for "land and bank premises" with entities in which Chairman and Chief Executive Vernon Hill is a business partner.
It has also bought services from an architectural design firm run by Hill's wife, Shirley, for more than 25 years.
Commerce said that in 2005, the lease rentals totaled $1.9 million, while services from the design firm cost $7.5 million. It said the amounts were comparable to what it would have paid to unaffiliated entities.
"If regulators are now probing these relationships, they may simply be late to the party," said Gerard Cassidy, an analyst at RBC Capital Markets in Portland, Maine. "The stock is down amid concern they may have found something else."
Separately, Commerce said net interest margin, the difference between what it earns on loans and pays on deposits, fell to 3.25 percent in the fourth quarter from 3.27 percent in the third quarter, and should average between 3.20 percent and 3.30 percent through June.
Chief Financial Officer Douglas Pauls said on the call that it is "reasonable" that quarterly earnings will stay around 40 cents per share until the Fed begins cutting short-term rates.
Analysts, on average, expected profit per share of 41 cents for the first quarter and $1.84 for 2007. Cassidy said hitting that full-year target now appears "next to impossible."
Commerce opened 26 branches in the quarter and ended the year with 428 in and around New York, Philadelphia, Washington, D.C. and Southeastern Florida. It expects to open about 65 branches in 2007.
"We see nothing on the horizon now that will impact our ability to meet our expansion plans in (2007)," Hill said on the conference call.
(Additional reporting by John Poirier)
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