Driving through a busy intersection in southern New Jersey, Vernon Hill pointed out the contrast between his own white-brick and glass branch building and the weathered tan-brick building that houses a competitor's branch nearby.

"Are you going to choose that branch or mine?"asked the founder and president of Commerce Bancorp, Cherry Hill, N.J.

Such comparisons are an obsession at Commerce, a $7 billion-asset bank that is siphoning off customers from rivals in New Jersey, Pennsylvania, and Delaware. Its plan is to add 30 branches a year over the next decade to the 120 it has now.

At a time when most banks are shuttering branches and trimming hours to save money, Commerce is doing the opposite: building more branches - and building them from scratch to give them all the same look and feel. As most banks automate basic services and try to funnel customers to the Internet, Commerce staffs branches with as many tellers as needed to keep lines moving, and is open Saturdays and Sundays. On Thursday and Friday the branches are open until 8 p.m.

The bank recently installed another extra in every branch - coin counters, free for customers and noncustomers alike to use.

Mr. Hill, 54, fashions his bank as a retailer like Wal-Mart or Home Depot, which also eschew acquisition and build near-identical stores to foster name recognition.

"Every successful retailer builds the same building," Mr. Hill said. "It's all part of the brand. There are almost no banks in the country that do that. Very few build, and most of them have a conglomeration of garbage."

Mr. Hill, who owns a chain of Burger Kings, has instilled the fast-food industry's service mentality at Commerce. Quick and efficient service has allowed it to capture droves of customers and boost deposits at a 20%-a-year clip, resulting in a 15% annual earnings-per-share growth and a relatively resilient stock in a bear market for banks. Commerce stock, which was trading at $32.375 on Tuesday, has a 2000 earnings multiple of 13, versus eight to 10 for the average bank.

"Customers make a pact with us: 'You give me a better retail experience, I'll take lower rates from you.' So we have got to deliver convenience every way."

In three southern New Jersey counties - Commerce's backyard - branch deposits were $2.5 billion in 1999, versus $719 million in 1991, according to Federal Deposit Insurance Corp. data compiled by Commerce. In the same period in those counties, deposits at PNC Bank Corp. fell to $1.9 billion, from $2.3 billion, and First Union Corp.'s dropped to $1.8 billion, from $2.9 billion.

Now Commerce is invading Philadelphia and beyond, hoping to exploit the Achilles' heel of bigger competitors there by offering better service.

Joan Bradley, an account executive in Pennsylvania who had been paying $6.20 a month in bank fees at Mellon Financial Corp., switched to Commerce last year after hearing about its free-checking offer. What also enticed her were the longer hours and short lines. "They just seemed to be really working to get your business," she said.

Commerce is "still winning market share, and they are taking it particularly from the larger banks," said Claire M. Percarpio, an analyst with Janney Montgomery Scott in Philadelphia. "They have a lot of room to grow."

Robust growth has also allowed Commerce to fund its near 30% loan growth entirely with deposits, giving it the cheapest source of funding possible. That has protected it in a rising interest rate environment, when other banks' margins shrink as their funding costs rise. Commerce's margin held steady, dropping 1 basis point in the fourth quarter, to 4.69%.

"In the banking world, the retail branch system is a second-class citizen," Mr. Hill said. "It has been viewed as a cost center - not an income center."

Big banks, hard pressed to meet analysts' earnings expectations, are shutting down branches with the lowest average deposit growth, Mr. Hill added. Then they raise fees, which alienates more customers and bleeds deposits.

"We call it 'the death spiral,' " Mr. Hill said. "The ultimate result of that is that the branch shuts down because it keeps driving deposits down."

But can Commerce, with expense ratios in the 70% range, maintain the robust returns well into the future? That is the risk of a branch-building strategy, said David Trone, an analyst at Credit Suisse First Boston.

"They are going against the grain," Mr. Trone said. "They are building a brick-and-mortar system when bricks and mortar may not be needed in another five to 10 years. And it is an expensive expansion."

But Mr. Hill says his high expense ratios translate to bottom-line growth - just as they do at Wal-Mart and Home Depot. Meanwhile, he argues, the branches have organic deposit growth each year.

Banks cutting costs in branch divisions "are reinvesting nothing back into the business," Mr. Hill said.

Commerce has been reinvesting ever since Mr. Hill founded the bank in 1973 at age 26, five years after graduating from University of Pennsylvania's Wharton School. He had already owned a real estate firm, Site Development Inc., which still scouts and secures new locations for branches. With $1.5 million, Mr. Hill opened the first-ever branch in Marlton, N.J.

Since then, Commerce has been honing its retail strategy and shunning acquisitions. Its branches are made from the same mold and take eight weeks to build. Pine-colored desks are rounded at the edges, and paper clutter is nonexistent. Black, gray, and white marble lines the floors and counters, and the lobbies have high ceilings and ample skylights.

"This is a Disneyesque approach to the business. It's all about building the brand," said Denis M. DeFlorio, executive vice president of the bank.

The energetic Mr. Hill has been known to e-mail employees in the middle of the night with ideas. At a recent stop at one branch Friday, he found the lobby too warm and asked to have the air conditioning turned on. He then inspected and applauded the way Commerce's slogan - "America's Most Convenient Bank" - had been affixed to the door that week.

That detail carries over to motivating employees, all of whom receive stock options. They are encouraged to go out of their way to "Wow the customer," and a "Wow team" randomly shows up at branches in a royal blue van to reward rank-and-file personnel with cash, balloons, and company paraphernalia.

To recognize small deeds, managers hand out red "C" stickers that can be redeemed for Commerce-branded gifts. At a training class, an instructor reminded new tellers to restock lollypop holders as soon as they empty.

Employees are also encouraged to make suggestions - they get $50 for each stupid rule they find that gets eliminated. One such change at Commerce involved the uncollected-funds policy, which at most banks prevents customers from drawing on deposited checks for a few days. "That's bull," Mr. Hill said. "If you make a deposit, it's good that day."

He added: "This is mundane retailing. This isn't rocket science."


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