Investors seem finally have warmed to the unusual strategy of Commerce Bancorp., a New Jersey bank whose stock price surged an eye-catching 22% the last two weeks in heavy trading.

While industry futurists pooh-pooh "brick and mortar" branch networks in the emerging era of electronic banking, Commerce is quite happy to keep opening branches.

Until recently, the stock price of the Cherry Hills, N.J., bank had lagged those of its peers, on worries that it was unwilling to be acquired and concerns about interest rate sensitivity. But Commerce now seems to be winning converts, said analysts who follow the stock.

"Bank stock investors appear to be taking notice of this unique growth story," said David C. Stumpf of Wheat First Butcher Singer, Richmond, Va., who upgraded the stock to "buy" last week.

"Commerce has routinely carried a discount," he noted. "With a clearly independent management," which owns 18% of the stock, "we suspect that Commerce's valuation lacks some of the takeover premium embedded in its peers."

However, since May 13, the stock price has risen from $20.25 a share to $24.625 at Friday's market opening. By comparison, the Nasdaq bank index rose only 1.8% in that time, and 5.3% in all of 1996.

Trading volume in Commerce shares has risen well above the average of 39,970 shares on six days since May 13.

Commerce's most distinguishing characteristics are its aggressive branching strategy and determined retail-oriented philosophy.

The company plans to double its 50-branch network within two years. And it is energetically putting outlets in convenient locations like malls, extending hours, and offering free checking.

"Unlike a lot of companies that are shying away from bricks and mortar, these guys know how to do it right," said Kenneth F. Puglisi, a bank stock analyst at Sandler O'Neill & Partners LP.

"They know exactly where to put branches," he said. "They look at traffic patterns" and other factors and are astute in their decisions.

One Wall Street knock against Commerce is that, because of its large bond portfolio, it is interest rate sensitive.

But Mr. Stumpf, who owns Commerce Bancorp shares himself, said the company's surging deposit base offsets interest sensitivity in the bonds.

Anyway, the analyst added, "no matter their classification, we suspect most of those securities will likely be held to maturity ... never experiencing any loss."

The other investor complaint against Commerce is that its management is not keen on selling. The bank survived last year's massive upheaval when nearly 80% of New Jersey's deposits changed hands.

With its attractive franchise in southern New Jersey, the $2.5 billion- asset Commerce franchise would make a logical purchase for the state's new players, including PNC Bank Corp. and First Union Corp.

But while those banks may be on the prowl, they have also been a boon to the smaller company.

As banking giants moved into the state by acquiring local institutions, many of the acquired banks' customers have fled to competitors like Commerce that are locally owned and less bureaucratic, Mr. Puglisi said.

Commerce executives "love First Union; they love PNC coming in," he said.

As a result of Commerce's newfound popularity with investors, its shares are now quickly approaching the 12-month price targets set by Mr. Puglisi and Mr. Stumpf, $27 and $28, respectively.

Finally, Mr. Puglisi points out that because management owns so much company stock its interests are clearly aligned with those of shareholders. So if the right acquisition proposal did come along, he said, Commerce probably would not pass it up.

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