Insider dealing still under scrutiny at Commerce Bancorp

Commerce Bancorp Inc. said today that the Securities and Exchange Commission was investigating insider dealings at the company in a reprise of a probe by federal bank regulators that led to the ouster in June of founder Vernon W. Hill II.

The Cherry Hill bank - which agreed this month to a buyout by TD Bank Financial Group of Toronto in an $8.5 billion deal - said the investigation was examining the bank's dealings with former officers, directors, and other parties related to bank branches.

Commerce, which disclosed the investigation in today's third-quarter news release, said it was cooperating with the SEC, but declined to say any more about it during a conference call with analysts.

TD Bank said in a statement that it knew of the pending SEC investigation before announcing the proposed acquisition of Commerce on Oct. 2.

Gerard Cassidy, a banking analyst at RBC Capital Markets, indicated he was puzzled as to why the SEC would jump in now, saying: "This is almost as if it's an afterthought."

The investigation into similar matters by the federal Office of the Comptroller of Currency led to an agreement giving Commerce until the end of the year to unwind business relationships with a design firm owned by Hill's wife and a real estate firm that employs Hill's brother and Hill's son.

Details on those transactions had been disclosed for years in the company's annual proxy statements.

During the comptroller's investigation, Commerce received no regulatory approvals for branch openings. That stance by regulators threatened to strangle fast-growing Commerce.

Since the end of June, when Commerce signed the consent decree, it has received comptroller approvals for six branches, the bank said.

The bank, which had a backlog of approvals, opened 29 branches in the first nine months of the year, and projected 50 openings for the full year.

The bank's third quarter was marred by a $175.3 million pre-tax charge related to a previously announced restructuring of its fixed-income portfolio.

Mostly because of that charge, Commerce recorded a loss of $49.91 million, or 24 cents a share, compared with a profit of $76.67 million, or 41 cents a share, in the same period a year ago. The company's deposit growth, its hallmark, was 16 percent overall.

Like most banks, Commerce experienced an increase in bad loans. At Commerce, such nonperforming loans climbed to $101.9 million, or 0.20 percent of total assets, at the end of last month. A year ago, those figures were $47.8 million, or 0.11 percent of total assets.

Most of the increase involved loans for residential developments in northern New Jersey and Northern Virginia.

Commerce shares closed up 34 cents, at $38.92, on the New York Stock Exchange. The deal with TD Bank valued Commerce at $42 a share.