NEW YORK (Reuters) - Fourth-quarter profit fell 47 percent at Commerce Bancorp Inc CBH.N as credit losses quintupled, the large New Jersey bank being acquired by Canada’s Toronto-Dominion Bank TD.TO said on Friday.
Commerce also said it had lost deposits during the quarter, including $1.5 billion of accounts that pay higher interest, because of tough market conditions and increased competition. But it tried to soothe concerns that the drop was due to the impending TD takeover.
“We don’t attribute anything going on or not going on to the merger with TD,” Commerce Chief Financial Officer Douglas Pauls said on a conference call.
TD agreed on October 2 to acquire Commerce for $8.5 billion in stock and cash, nearly doubling the U.S. presence of Canada’s second-largest bank.
The merger value has fallen to about $7.7 billion because TD’s share price has fallen. Commerce shareholders are expected to vote on the deal on February 6.
Commerce Chief Executive Robert Falese said he knew of “no reason” why the deal won’t close.
TD previously bought TD Banknorth of Portland, Maine, and Hudson United Bancorp of Mahwah, New Jersey.
For the fourth quarter, Commerce’s net income fell to $33.4 million, or 17 cents per share, from $62.8 million, or 32 cents, a year earlier.
Excluding one-time items, profit was 15 cents per share, 11 cents below the analysts’ average forecast, according to Reuters Estimates.
Commerce set aside $55 million in the quarter for credit losses, up from $10.2 million a year earlier and $26 million in the third quarter, hurt by exposure to soured residential real estate, real estate development, and commercial loans, especially in the Florida market.
Core deposits fell to $44.6 billion on December 31 from $44.8 billion at the end of September.
One positive was the bank’s lending margin, the gap between what it earns on loans and pays on deposits. This expanded to 3.32 percent from the third quarter’s 3.13 percent, the first time since 2004 that the margin has widened. In October Commerce forecast a 3.16 percent to 3.18 percent margin. Lending income rose 14 percent to $370.7 million.
Pauls said the Cherry Hill-based bank plans to open between 30 and 35 new branches this year.
Shares of Commerce were unchanged at $37.16 in midday trading on the New York Stock Exchange.
Commerce is preparing for the TD acquisition as it wrangles with regulators and in the courts over matters involving its founder and former chief executive, Vernon Hill.
Last week, Hill sued Commerce, accusing the bank of wrongly ousting him last June under pressure from regulators examining dealings involving Commerce and his family. He sought more than $57 million of damages.
The bank has said it is cooperating with a U.S. Securities and Exchange Commission probe into transactions with insiders. Commerce executives did not comment on the suit on Friday.
Probes into Hill stalled branch openings, long a key to Commerce’s growth, but openings resumed after his departure.
Commerce opened 13 branches in the fourth quarter and ended the year with 470. The company operates in and around New York, Philadelphia, Washington, D.C., and southeast Florida, and is known for keeping branches open seven days a week.
Reporting by Jonathan Stempel and Nicole Mordant; editing by John Wallace