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Commerce Climbing

Investors await a possible regulatory settlement.

Commerce Bancorp's

(CBH) - Get AllianzGI Convertible & Income 2024 Target Term Fund Report

stock chugged higher Wednesday on speculation that the regional bank could be close to settling a regulatory investigation.

Market participants have been wondering over the past two days if the Cherry Hill, N.J.-based bank was preparing to announce the resolution of an investigation by the

Federal Reserve

and the Office of the Comptroller of the Currency.

Commerce had canceled a presentation it was to give today at a Sanford Bernstein conference in New York, along with a client dinner to be held this evening, according to a Tuesday note by Sanford analyst Kevin St. Pierre.

"While the company offered no further comment on the cancellation, we believe one possible explanation could be that Commerce is in a quiet period preceding news related to the current regulatory investigation," St. Pierre writes. "The outcome of the regulatory investigation will prove a strong positive for shareholders, as we expect Commerce will take the final steps in cleaning up corporate governance."

A Commerce spokesman did not immediately return a request for comment. Shares rose $1.21, or 3.6%, to $35.01.

Regulators are probing the company for certain "transactions with its officers, directors and related parties, including transactions involving bank premises," according to Commerce's fourth-quarter earnings report.

The investigation also covers possible conflicts of interest involving rents at some Commerce bank locations as well as CEO Vernon Hill's personal investment properties.

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Other observers say the bank could be getting ready to announce the sale of the company.

"Usually when people cancel from conferences, it usually means they're making an acquisition or being acquired," says Matt Shields, a bank stock trader at FIG Partners, a broker-dealer in Atlanta.

Commerce's earnings have stalled over the past few quarters from a persistent flat yield curve, which makes it difficult for the bank to profit on interest income from loans and investments.

A sale seems unlikely while Hill remains CEO, but analysts have said a foreign bank could be interested should he decide to sell.

"In the end Commerce Bank is Mr. Hill's legacy," says Robert Patten, a managing director and senior bank analyst at Morgan Keegan, a subsidiary of

Regions Financial

(RF) - Get Regions Financial Corporation Report

.

Like St. Pierre, Patten expects a regulatory settlement rather than a sale. But the analyst, who rates the stock market perform, says a pairing of Commerce and a large non-U.S. bank such as

HSBC

(HBC)

would give Hill an "endless supply of capital to continue his nationwide expansion of Commerce."