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Commerce Bancorp

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squeaked past first-quarter earnings estimates Wednesday, but the difficult rate environment put a damper on the bank's profit.



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, another regional bank with branches primarily in the Northeast, blew past earnings forecasts on the heels of its acquisition of Mercantile Bankshares.

At Commerce, earnings rose to $77.9 million, or 40 cents a share, from $77.3 million, or 41 cents a share, a year earlier. Revenue rose 12% from a year earlier but remained flat from the fourth quarter at $492 million.

Analysts were predicting that the Cherry Hill, N.J.-based bank would earn 39 cents a share on $501 million in revenue.

The $47.4 billion-asset bank's deposits -- its bread and butter business -- rose 18% to $43.9 billion. Loans also were up 18% from a year earlier but rose just 2% from the fourth quarter to $15.8 billion.

Commerce's net interest margin -- a way of measuring a bank's ability to generate income from its deposit and investment businesses -- fell 26 basis points from a year earlier to 3.27%. Still, it was up 2 points from the fourth quarter.

Nonperforming assets and loans that were 90 days past due jumped 54% from a year earlier but fell 2.6% from the fourth quarter to $52.4 million. Net loan charge-offs inched higher to 0.16% from 0.12%.

Commerce disclosed last quarter that it was involved in yet another federal probe. The company is under investigation by the Office of the Comptroller of the Currency and the board of governors of the

Federal Reserve

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system for "transactions with its officers, directors and related parties, including transactions involving bank premises," the bank revealed in its fourth-quarter earnings report.

Commerce didn't provide an update on the investigation in the first-quarter report.

In 2004, the bank was being looked at by the U.S. District Court for the Eastern District of Pennsylvania in Philadelphia over its municipal bond underwriting business -- a business it has subsequently gotten out of -- and whether it violated pay-to-play rules by making contributions to political campaigns in the area. Two former Commerce employees were convicted. Commerce said in November that regulators had concluded that investigation.

For PNC, earnings rose 30% to $459 million, or $1.46 a share, from $354 million, or $1.19 a share, a year earlier. Revenue fell 2% to $1.71 billion.

The Pittsburgh bank's adjusted income for the quarter was $434 million, or $1.38 a share. The adjusted income excludes a $33 million aftertax gain on shares related to a long-term incentive plan with


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and $8 million in integration costs.

Analysts' estimate, which excludes one-time items, predicted that PNC would earn $1.32 a share.

The $123 billion-asset bank's revenue improved from trading and asset management and the impact of its $6 billion purchase of Baltimore-based Mercantile last month. But that growth was partly offset by a decline in corporate services revenue and lower gains on asset sales, it said.

"PNC delivered an outstanding quarter to start 2007," said Jim Rohr, PNC's chairman and CEO. "We grew net interest income and total revenue and we created positive operating leverage compared with both the first and fourth quarters of 2006. Our asset quality is exceptional and the integration of Mercantile Bankshares is well under way."

Last year, PNC completed an asset swap with

Merrill Lynch

( MER) to merge their asset-management operations. The swap reduced PNC's once-majority stake in BlackRock to 34%. The subsidiary has been a big contributor to PNC's bottom line.

Shares of Commerce recently rose 55 cents, or 1.6%, to $34.33. PNC's stock was up 94 cents, or 1.3%, to $74.81.