Commerce Bank founder to retire

Commerce Bank founder to retire

	Published : Sat, 30 Jun 2007 05:43 By : Agencies Print this Story

MOUNT LAUREL, N.J. (AP) - The maverick founder of Commerce Bank NA, a New Jersey bank that has grown into a powerhouse on the East Coast, is retiring as the bank resolves a probe by federal banking regulators.

In a surprise announcement Friday, the company said Vernon W. Hill II had resigned from the bank and would retire from its holding company, Commerce Bancorp, on July 31.

Commerce also announced that it had entered into an agreement with the Comptroller of the Currency to stop doing business with companies owned by its executives and their relatives.

A person close to the situation said regulators had pressured the bank's board to seek Hill's resignation because the bank had business deals with Hill and his relatives. The person, who was not authorized to speak on behalf of the bank, spoke only on condition of anonymity.

Kevin Mukri, a spokesman for the Office of the Comptroller of the Currency, said the agency would not comment on personnel changes at Commerce.

Hill, a Burger King franchisee, started the bank 34 years ago and has been its president, chairman and CEO ever since. He owns, directly or indirectly, nearly 5 million shares of its stock, or about 3 percent of the 196 million outstanding. He did not respond Friday to a request for an interview.

Three longtime Commerce executives are taking over a newly created office of chairman for the bank. They said that when Hill retires from the holding company, one of them, Robert D. Falese Jr., would become president and chief executive and a yet-unnamed member of the board would become chairman.

The Cherry Hill-based bank has become a major bank in the Philadelphia and New York City areas and also has branches around Washington, D.C., and in Florida.

Hill has said he always wanted to operate the bank more like a retailer and less like a commercial bank. The bank's operations reflect that. Tellers generally are not shielded by bars, greeters often work the doors and most of the branches have free penny counting machines in the lobby. Almost all the branches have night and weekend hours.

The company's growth to 450 'stores' has come almost entirely through building its own branches, as opposed to the more typical bank expansion model of buying other banks.

Doug Pauls, who became chief financial officer of the bank, said on a conference call with investors Friday that the company would continue that strategy.

The company has long been the center of controversy for its unconventional way of doing business, its political connections, and its leasing of land owned by partnerships that include Hill.

In its agreement with regulators, the bank said it would not enter into new contracts with officials or their families. It ended its practice five years ago of building banks on land leased from a partnership including Hill.

The bank had previously said that it would bring in-house InterArch, a Mount Laurel architecture firm run by Hill's wife, Shirley Hill, that is the exclusive designer of Commerce facilities. Last year, InterArch made $9 million in contracts with Commerce.

Bank officials said they were still planning to bring InterArch in house.

Gary Townsend, an analyst who follows banking for Friedman, Billings, Ramsey & Co. said he was surprised that Hill, whom he called 'one of the great American entrepreneurs of banking' received 'a death sentence.'

Townsend said he believed Commerce's fast growth is the reason regulators would not have been satisfied with the company merely stopping doing business with partnerships involving Hill and his wife.

In six years, he said, Commerce grew from a $10 billion company to a $50 billion company.

Moody's Investors Service said Friday that it might raise Commerce's bond ratings in the future because of the management change. 'For some time, Moody's has cited Commerce's corporate governance as a negative driver in its ratings,' the company said.

Townsend and other analysts speculated that after Hill's departure, the bank may be an acquisition target for another bank.

That possibility, Townsend said, is why the bank's stock surged Friday, rising $3.18, or more than 9 percent, to $36.99.

Dennis M. DiFlorio, chairman of the bank, said on the conference call that Commerce would consider its options, but plans to 'stay the course.'