Commerce Bancorp
| Company type | Public |
|---|---|
| Industry | Banking |
| Founded | 1973 |
| Founder | Vernon Hill |
| Defunct | 2009 |
| Fate | Acquired by Toronto-Dominion Bank and integrated into TD Banknorth (later TD Bank) |
| Successor | TD Banknorth (later TD Bank) |
| Headquarters | Cherry Hill, New Jersey , United States |
Area served | United States (primarily New Jersey, Pennsylvania, New York, Florida) |
Key people | Vernon Hill (founder, former chairman, president and CEO) |
| Products | Banking services including retail banking, checking accounts, ATM cards |
| Parent | Toronto-Dominion Bank (from 2007) |
Commerce Bancorp was a banking institution headquartered in Cherry Hill, New Jersey, established in 1973. In 2007, it was purchased by Toronto-Dominion Bank and integrated into TD Banknorth, which subsequently adopted the TD Bank name.
History
Vernon Hill, a Wharton School alumnus and fast-food franchise entrepreneur, founded Commerce Bancorp with the vision of applying quick-service principles to banking. Over a span of 33 years, the company grew from a single branch to more than 435 locations, targeting a network of at least 800 branches by 2010. Early in the 2000s, its advertising campaigns featured personalities such as Kelly Ripa and Regis Philbin. In 2006, Commerce Bancorp expanded its services by acquiring eMoney Advisor through a $32 million stock transaction.
In 2004, two senior executives received prison sentences after authorizing loans to Philadelphia officials to secure municipal banking contracts.
A federal inquiry into insider trading resulted in a settlement that restricted Commerce's growth initiatives. Following this, Hill stepped down from his roles as chairman, president, and CEO. In 2008, Hill filed a lawsuit against Commerce Bancorp alleging wrongful termination and sought more than $57 million in severance and damages. However, in 2013, a federal court determined that Commerce was not obligated to compensate Hill because he had not been cleared of fraud or breaches of fiduciary duty.
Business model
Commerce distinguished itself by operating more like a retailer than a conventional bank, labeling its locations as stores rather than traditional branches.
Prominent aspects of its approach included:
- Branding as "America's most convenient bank"
- Offering seven-day lobby or drive-thru access in Center City Philadelphia and Manhattan, with the exception of Paramus, New Jersey due to local blue laws
- Instant issuance of ATM cards upon account opening
- Eliminating overdraft fees on debit card transactions
- Providing free access to "penny arcade" coin counting machines for both customers and non-customers
- No-cost Visa gift cards available to customers
- Complimentary lollipops and dog treats offered in lobbies and drive-thru lanes
- Reimbursement of foreign ATM fees for customers maintaining a daily balance of $2,500 or more
- The slogan: "No Stupid Fees, No Stupid Hours"
This business model fostered strong customer loyalty in its operating regions. Promotional giveaways—such as coffee mugs, pens, and pencils—were widely distributed, with 28 million free pens handed out in 2006 alone. Founder Vernon Hill applied principles from fast-food retailing to banking operations, which earned Commerce the nickname "Mc-Bank."
Harvard Business School featured this innovative strategy in a 2002 case study.
Despite high customer satisfaction, Commerce faced challenges with elevated operating costs that constrained profitability. In 2004, capital investments resulted in net income per employee of $25,000, compared to $135,000 at a peer regional bank. The operating profit margin fell from 26% in 2004 to 16% by 2006. For instance, the bank’s entry into New York City’s Chinatown market involved expensive promotions, including spending over $300,000 on rice cooker giveaways tied to account openings with minimum deposits of $250.
Commerce consistently offered the lowest deposit interest rates within its markets. This trade-off allowed it to fund extended service hours and superior customer experiences while providing free checking accounts with little or no interest earnings.
The Penny Arcade coin-counting machines were distinctive for their free availability and support of charitable initiatives such as medical research and disaster relief efforts. However, TD Bank discontinued these machines in 2016 after facing lawsuits alleging inaccurate coin counts.
Mascots
The official mascot of Commerce Bank was Mr. C, characterized by a red letter "C" logo featuring black arms and legs, a wide smile, and bushy eyebrows. Following the acquisition by TD Bank, Mr. C was retired.
Expansion
Commerce Bank’s growth strategy was primarily organic but included five significant acquisitions:
- Early 1990s – Acquired four branches from Long Island-based Anchor Savings Bank located at Cherry Hill Mall, Bellmawr, Woodcrest, and West Deptford.
- January 21, 1997 – Independence Bancorp, Inc. integrated as Commerce Bank/North.
- August 13, 1998 – Community First Banking Company and Tinton Falls State Bank merged into Commerce Bank/Shore.
- September 17, 1998 – Prestige Financial Corp. and Prestige State Bank became Commerce Bank/Central.
- July 25, 2005 – Palm Beach County Bank established Commerce Bank’s presence in Southeast Florida.
Controversies
In 2003, loans extended to executives and directors amounted to $145.7 million; Commerce asserted these loans were issued under standard terms during regular business operations. Furthermore, the bank engaged with companies owned by founder Vernon Hill and his family for interior design and real estate services. These arrangements included rental properties generating income and brokerage commissions related to new branch developments. Additionally, the bank covered employee access to a golf club owned by Hill.
Commerce Bank Harrisburg
In Central Pennsylvania, Commerce Bank operated a separate franchise known as Pennsylvania Commerce Bancorp, Inc, commonly referred to as Commerce Bank Harrisburg. This franchise shared a call center with Commerce and held an ownership stake of about 11%. Notably, the Harrisburg branch was not part of the 2007 acquisition by TD Bank.
By November 2008, Commerce Bank Harrisburg intended to merge tax-free through an all-stock transaction with Philadelphia-based Republic First Bank, aiming to create Metro Bank. Although regulatory hurdles delayed the merger deadline in August 2009, both companies' boards ultimately called off the deal in March 2010 due to ongoing regulatory uncertainties.
After its rights to the Commerce Bank name and the red “C” logo expired in June 2009, Commerce Bank Harrisburg adopted the name Metro Bancorp Inc. Subsequently, on February 12, 2016, Metro Bank finalized a $474 million merger with First National Bank (F.N.B. Corporation), resulting in the dissolution of its independent status.
Metro Bank maintained 33 branches throughout Berks, Cumberland, Dauphin, Lancaster, Lebanon, and York counties, with its headquarters situated in Swatara Township near Harrisburg.
“Commerce Bank” brand
The "Commerce Bank" designation has been used by various U.S.-based banks, leading to brand identity challenges. For example, Commerce Bank and Trust Company in Worcester, Massachusetts successfully blocked TD Bank from adopting the name "TD Commerce Bank" after acquiring Commerce Bancorp. Meanwhile, Commerce Bancshares located in Kansas City, Missouri and Commerce National Bank based in Columbus, Ohio continue to operate independently under their original names.
TD Bank acquisition
On October 2, 2007, TD Bank Financial Group (TDBFG) announced its agreement to purchase Commerce Bancorp for $8.5 billion through a combination of 75% stock and 25% cash. Shareholders of Commerce received 0.4142 shares of TD common stock plus $10.50 in cash per share of Commerce. This arrangement corresponded to a negotiated value of $42.00 per share and an effective price of $42.37 based on TD’s closing price on October 1.
Following this acquisition, Vernon Hill, founder of Commerce Bancorp, resigned and took leadership at Republic Bank where he continued to implement his retail-centric banking approach.