Aug. 23, 2007
Vernon W. Hill II (above), CEO and founder of Commerce Bancorp, heads a profitable company that benefits from more than 1,000 government accounts in four states. Government deposits increased ninefold after South Jersey power broker George E. Norcross III (below) joined the bank in 1996. / STAFF FILE PHOTOS
“George helped to grow the government deposits and the insurance — and that’s important,” said Claire Percarpio, a financial analyst with the Philadelphia investment bank Janney Montgomery Scott, who has covered Commerce for eight years. “It’s also helpful to be politically connected in opening new branches because it really speeds the approval process.”
Last year, Norcross was paid $1.23 million at Commerce, second only to CEO and founder Vernon W. Hill II.
Norcross owns, or has an interest in, Commerce stock that is valued at more than $60 million, according to Securities and Exchange Commission filings.
The Cherry Hill-based company consistently generates record earnings, reporting a net profit of $194 million in 2003.
On Wall Street, Commerce stock has outperformed Microsoft over the past decade. If you invested $10,000 in both Commerce and Microsoft on Dec. 31, 1993, and cashed it out on Dec. 31, 2003, the bank investment would have been worth $115,820 vs. $108,631 for the software giant.
Norcross declined requests for an interview and did not respond to written questions.
Commerce National Insurance, headed by Norcross, generated $66.5 million in revenue in 2003, making it one of the top sources of non-interest income for the bank.
The company said that approximately 15 percent to 20 percent of that business is from negotiated, or no-bid, contracts with municipalities.
“We have a lot of business in New Jersey because we’re the biggest broker in the region,” Commerce spokesman David Flaherty said.
He attributed the growth to acquisitions rather than political influence.
“Most of our insurance business was gained by acquiring firms that already had municipal business,” Flaherty said.
Commerce brokers insurance for 31 of 37 municipalities in its home base of Camden County. Commerce also administers the Municipal Excess Liability Joint Insurance Fund, which includes more than 300 of New Jersey’s 566 municipalities. The fund is a protection pool for the member towns in case one is hit with a huge liability case or judgment.
Throughout the first half of the 1980s, when Commerce had fewer than 10 locations, it held less than $5 million in government deposits, constituting less than 5 percent of overall deposits. Those figures began to climb as the company grew and as it became more closely aligned with Norcross.
Today, the bank’s government deposits alone would more than double the total deposits of its biggest South Jersey-based competitor, Sun National Bancorp Inc. of Vineland.
Banker Gerard M. Banmiller said that before 1990, when Commerce began to take a dominant role in government banking, his former Community National Bank had some government deposits, along with the forerunners of Wachovia and PNC.
“Commerce was simply not a player in government deposits,” said Banmiller, now president of 1st Colonial National Bank, based in Collingswood. “It was spread among many banks. Simply stated, that is not the case now.”
By 1991, the ties between Commerce and Norcross had solidified. That year, as chairman of the Camden County Democrats, Norcross faced the task of Democrats retaking control of the Board of Freeholders from the Republicans.
To finance that critical election, Commerce lent the county Democrats $450,000, or nearly half the money spent in the successful campaign. The practice was legal at the time, but new laws have since restricted the amount a supporter may lend to a candidate or party, ranging from $2,200 to $37,000.
The money helped to fund a successful media blitz, which included television commercials for the local Democrats aired during the World Series in October. The Democrats won, taking control of the board.
In 1992, Norcross moved his firm, Keystone National Insurance Cos., to space inside the Commerce Bank Atrium building on Route 70. Although he was not formally associated with the bank, he was a business partner with Hill in the development of Galloway National Golf Club near Atlantic City.
Banking deregulation provided Norcross with an opportunity to officially join Commerce. The repeal of the federal Glass-Steagall Act of 1933, phased out between 1989 and 1999, permitted banks to market insurance and other products.
“The idea is to cross-sell,” said Kasturi Rangan, a banking professor at Case Western Reserve University in Cleveland. “The whole name of the game is you make a loan to a firm, and then you try and sell it insurance, you try and sell it risk-management services, you try and underwrite its securities, you do (mergers and acquisitions) .’.’. for it.”
In 1996, Commerce purchased Keystone, and Norcross became the chief executive of Commerce National Insurance.
The bank also acquired Buckelew & Associates of Toms River, owned by former Ocean County Republican Chairman Joseph Buckelew. The deal paid the owners of the two firms a total of about $25 million in Commerce stock, according to SEC filings.
Commerce also has helped Norcross to prosper in other business pursuits.
In 2002, the bank approved a $32.5 million line of credit for Norcross; his brother, Philip; Commerce board member William Schwartz Jr.; and Assembly Majority Leader Joseph J. Roberts Jr., D-Camden, to buy a majority share in Glendora-based U.S. Vision Inc. Schwartz is CEO of the provider of eyeglasses and contact lenses.
Roberts and Philip Norcross have since sold their interests.
In 1998, Commerce added to its Central Jersey board then-state Sen. John A. Lynch Jr., the Middlesex County Democratic superboss, and Dale Florio, the Somerset County Republican boss whose lobbying firm works for Commerce.
But Commerce’s political involvement has been a double-edged sword. Its political action committee, Compac, was closed in 2003 following criticism from the financial community.
Earlier this year in Philadelphia, federal prosecutors indicted a former Commerce regional board member and two bank executives, among a dozen people accused in an alleged kickback scheme to win business from City Hall.
The former and current Commerce officials pleaded innocent. The bank has not been charged with wrongdoing.
After the indictment, Commerce said it would no longer participate in no-bid bond deals but did not mention any change in its no-bid insurance work.
In a conference call with analysts earlier this year, CEO Hill promised to establish a “gold standard” for ethical behavior at the company.