-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, H4B5IbHzxBh8KvIhd62WKcxjrBnat6JQcPKxQJJyRGyPRurjJLP11Zhu4XnmLGDi BGSzcYSguvHDx0UdGzluqw== 0000950159-02-000506.txt : 20020814 0000950159-02-000506.hdr.sgml : 20020814 20020814145135 ACCESSION NUMBER: 0000950159-02-000506 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20020630 FILED AS OF DATE: 20020814 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PENNSYLVANIA COMMERCE BANCORP INC CENTRAL INDEX KEY: 0001085706 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 251834776 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 333-78445 FILM NUMBER: 02735116 BUSINESS ADDRESS: STREET 1: 100 SENATE AVE CITY: CAMP HILL STATE: PA ZIP: 17001-8599 BUSINESS PHONE: 7179755630 MAIL ADDRESS: STREET 1: 100 SENATE AVE CITY: CAMP HILL STATE: PA ZIP: 17001-8599 10-Q 1 pacommerce6-02q.txt SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarter ended June 30, 2002 ------------- OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to ------------ ------------ Commission File 333-78445 --------- PENNSYLVANIA COMMERCE BANCORP, INC. --------------------------------------------------------- (Exact name of small business issuer as specified in its charter) Pennsylvania 25-1834776 ------------------------------- ---------------------------- (State or other jurisdiction of (IRS Employer Identification incorporation or organization) Number) 100 Senate Avenue, P.O. Box 8599, Camp Hill, PA 17001-8599 -------------------------------------------------------------- (Address of principal executive offices) (717) 975-5630 ------------------------------ (Issuer's telephone number) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No -------- --------- State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: 1,992,037 Common shares outstanding at 07/31/02 -------------------------------------------------- Transitional Small Business Disclosure Format (check one): Yes No X --- ----- PENNSYLVANIA COMMERCE BANCORP, INC. INDEX Page PART I. FINANCIAL INFORMATION Item 1. Consolidated Financial Statements Consolidated Balance Sheets (Unaudited)..............................3 June 30, 2002, and December 31, 2001 Consolidated Statements of Income (Unaudited)........................4 Three months ended June 30, 2002 and June 30, 2001 Six months ended June 30, 2002 and June 30, 2001 Consolidated Statements of Stockholders' Equity (Unaudited)........5 Six months ended June 30, 2002 and June 30, 2001 Consolidated Statements of Cash Flows (Unaudited)....................6 Six months ended June 30, 2002, and June 30, 2001 Notes to Consolidated Financial Statements (Unaudited)...............7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations...........................................10 Item 3. Quantitative and Qualitative Disclosures about Market Risk..........20 PART II. OTHER INFORMATION Item 1. Legal Proceedings...................................................21 Item 2. Changes in Securities and Use of Proceeds...........................21 Item 3. Defaults Upon Senior Securities.....................................21 Item 4. Submission of Matters to a Vote of Securities Holders...............21 Item 5. Other Information...................................................21 Item 6a. Exhibits Exhibit 11 & 99.....................................................21 Item 6b. Reports on Form 8-K.................................................21 Signatures..........................................................24 2 Pennsylvania Commerce Bancorp, Inc. and Subsidiaries Consolidated Balance Sheets (Unaudited)
- ----------------------------------------------------------------------------------------------------------------------------- June 30, December 31, ( in thousands, except share amounts) 2002 2001 - ----------------------------------------------------------------------------------------------------------------------------- Assets Cash and due from banks $ 21,078 $ 21,555 Federal funds sold 12,875 4,300 ---------------------------------------------------------------------------------------------------------- Cash and cash equivalents 33,953 25,855 Securities, available for sale at fair value 132,065 107,315 Securities, held to maturity at cost (fair value 2002: $121,609; 2001: $102,427 ) 120,358 103,349 Loans, held for sale (fair value 2002: $2,986; 2001: $7,733 ) 2,968 7,661 Loans receivable : Real estate: Commercial mortgage 148,551 142,969 Construction and land development 31,644 32,863 Residential mortgage 60,836 48,415 Tax-exempt 3,372 2,676 Commercial business 48,435 42,399 Consumer 32,335 36,551 Lines of credit 34,900 36,801 ---------------------------------------------------------------------------------------------------------- 360,073 342,674 Less: Allowance for loan losses 4,965 4,544 ---------------------------------------------------------------------------------------------------------- Net loans receivable 355,108 338,130 Premises and equipment, net 23,559 21,587 Accrued interest receivable 3,869 3,542 Other assets 2,202 2,451 ---------------------------------------------------------------------------------------------------------- Total assets $ 674,082 $ 609,890 - ----------------------------------------------------------------------------------------------------------------------------- Liabilities Deposits : Noninterest-bearing $ 121,595 $ 105,171 Interest-bearing 496,883 456,567 ---------------------------------------------------------------------------------------------------------- Total deposits 618,478 561,738 Accrued interest payable 716 837 Other liabilities 2,971 1,722 Long term debt 13,000 13,000 ---------------------------------------------------------------------------------------------------------- Total liabilities 635,165 577,297 - ----------------------------------------------------------------------------------------------------------------------------- Stockholders' Preferred stock - Series A noncumulative; $10.00 par value Equity 1,000,000 shares authorized; 40,000 shares issued and outstanding 400 400 Common stock - $1.00 par value; 10,000,000 shares authorized; issued and outstanding - 2002: 1,992,037; 2001: 1,881,960 1,992 1,882 Surplus 27,585 25,263 Retained earnings 7,739 5,159 Accumulated other comprehensive income (loss) 1,201 (111) ---------------------------------------------------------------------------------------------------------- Total stockholders' equity 38,917 32,593 ---------------------------------------------------------------------------------------------------------- Total liabilities and stockholders' equity $ 674,082 $ 609,890 - -----------------------------------------------------------------------------------------------------------------------------
See accompanying notes. 3 Pennsylvania Commerce Bancorp, Inc. and Subsidiaries Consolidated Statements of Income (Unadutied)
- ---------------------------------------------------------------------------------------------------------------------------------- Three Months Six Months Ended June 30, Ended June 30, ------------------------------------------------------------- (in thousands, except per share amounts) 2002 2001 2002 2001 - ---------------------------------------------------------------------------------------------------------------------------------- Interest Loans receivable, including fees: Income Taxable $ 6,599 $ 6,627 $ 13,199 $ 13,110 Tax - exempt 19 33 41 70 Securities : Taxable 3,614 2,702 6,759 5,009 Tax - exempt 27 26 54 40 Federal funds sold 83 101 162 403 -------------------------------------------------------------------------------------------------------------------- Total interest income 10,342 9,489 20,215 18,632 - ---------------------------------------------------------------------------------------------------------------------------------- Interest Deposits 3,262 3,899 6,498 8,068 Expense Other borrowed money 0 11 0 11 Long-term debt 337 139 676 277 -------------------------------------------------------------------------------------------------------------------- Total interest expense 3,599 4,049 7,174 8,356 -------------------------------------------------------------------------------------------------------------------- Net interest income 6,743 5,440 13,041 10,276 Provision for loan losses 280 315 715 600 -------------------------------------------------------------------------------------------------------------------- Net interest income after provision for loan losses 6,463 5,125 12,326 9,676 - ---------------------------------------------------------------------------------------------------------------------------------- Noninterest Service charges and other fees 1,564 1,417 3,128 2,762 Income Other operating income 127 119 254 245 Gain on sale of securities available for sale 0 0 0 52 Gain on sale of loans 57 58 189 262 -------------------------------------------------------------------------------------------------------------------- Total noninterest income 1,748 1,594 3,571 3,321 - ---------------------------------------------------------------------------------------------------------------------------------- Noninterest Salaries and employee benefits 2,916 2,434 5,582 4,732 Expenses Occupancy 559 551 1,086 1,066 Furniture and equipment 359 369 706 708 Advertising and marketing 586 390 1,173 780 Data processing 523 311 949 622 Postage and supplies 203 198 412 410 Audits , regulatory fees and assessments 109 98 218 197 Other 927 767 1,803 1,497 -------------------------------------------------------------------------------------------------------------------- Total noninterest expenses 6,182 5,118 11,929 10,012 -------------------------------------------------------------------------------------------------------------------- Income before income taxes 2,029 1,601 3,968 2,985 Provision for federal income taxes 682 533 1,331 994 -------------------------------------------------------------------------------------------------------------------- Net income $ 1,347 $ 1,068 $ 2,637 $ 1,991 - ---------------------------------------------------------------------------------------------------------------------------------- Net income per common share : Basic $ 0.68 $ 0.56 $ 1.35 $ 1.05 Diluted 0.61 0.51 1.21 0.96 - ----------------------------------------------------------------------------------------------------------------------------------
See accompanying notes. 4 Pennsylvania Commerce Bancorp, Inc. and Subsidiaries Consolidated Statement of Stockholders' Equity (Unaudited)
- ----------------------------------------------------------------------------------------------------------------------------------- Accumulated Other Preferred Common Retained Comprehensive ( in thousands ) Stock Stock Surplus Earnings Income (Loss) Total - ----------------------------------------------------------------------------------------------------------------------------------- Balance : December 31, 2000 $ 400 $ 1,749 $ 20,861 $ 4,334 $ (676) $ 26,668 Comprehensive income: Net income - - - 1,991 - 1,991 Change in unrealized gains (losses) on securities, net of reclassification adjustment - - - - 528 528 ------------ Total comprehensive income 2,519 Dividends declared on preferred stock - - - (40) - (40) Common stock issued under stock option plans - 12 93 - - 105 Income tax benefit of stock options exercised - - 69 - - 69 Common stock issued under employee stock purchase plan - - 6 - - 6 Proceeds from issuance of common stock in connection with dividend reinvestment and stock purchase plan - 5 166 - - 171 Other - - 12 (12) - - - ----------------------------------------------------------------------------------------------------------------------------------- June 30, 2001 $ 400 $ 1,766 $ 21,207 $ 6,273 $ (148) $ 29,498 - ----------------------------------------------------------------------------------------------------------------------------------- Accumulated Other Preferred Common Retained Comprehensive ( in thousands ) Stock Stock Surplus Earnings Income (Loss) Total - ----------------------------------------------------------------------------------------------------------------------------------- Balance : December 31, 2001 $ 400 $ 1,882 $ 25,263 $ 5,159 $ (111) $ 32,593 Comprehensive income: Net income - - - 2,637 - 2,637 Change in unrealized gains (losses) on securities, net of reclassification adjustment - - - - 1,312 1,312 ------------ Total comprehensive income 3,949 Dividends declared on preferred stock - - - (40) - (40) Common stock issued under stock option plans - 96 1,409 - - 1,505 Income tax benefit of stock options exercised - - 292 - - 292 Common stock issued under employee stock purchase plan - - 15 - - 15 Proceeds from issuance of common stock in connection with dividend reinvestment and stock purchase plan - 14 589 - - 603 Other - - 17 (17) - - - ----------------------------------------------------------------------------------------------------------------------------------- June 30, 2002 $ 400 $ 1,992 $ 27,585 $ 7,739 $ 1,201 $ 38,917 - -----------------------------------------------------------------------------------------------------------------------------------
See accompanying notes. 5 Pennsylvania Commerce Bancorp, Inc. and Subsidiaries Consolidated Statements of Cash Flows (Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------- Six Months Ended June 30, ( in thousands ) 2002 2001 - ------------------------------------------------------------------------------------------------------------------------------- Operating Activities Net income $ 2,637 $ 1,991 Adjustments to reconcile net income to net cash provided by operating activities: Provision for loan losses 715 600 Provision for depreciation and amortization 709 707 Deferred income taxes (110) (181) Amortization of securities premiums and accretion of discounts, net 300 107 Net gain on sale of securities available for sale 0 (52) Proceeds from sale of loans 22,746 29,772 Loans originated for sale (17,861) (32,124) Gain on sales of loans (189) (262) Stock granted under stock purchase plan 15 6 (Increase) decrease in accrued interest receivable and other assets (344) (380) Increase in accrued interest payable and other liabilities 1,128 328 ------------------------------------------------------------------------------------------------------------ Net cash provided by operating activities 9,746 512 - ------------------------------------------------------------------------------------------------------------------------------- Investing Activities Securities held to maturity : Proceeds from principal repayments and maturities 12,039 5,823 Purchases (29,124) (49,138) Securities available for sale : Proceeds from principal repayments and maturities 21,119 15,859 Proceeds from sales 0 7,497 Purchases (44,106) (21,326) Proceeds from sale of loans receivable 0 3,255 Net increase in loans receivable (17,693) (21,828) Purchases of premises and equipment (2,681) (2,236) ------------------------------------------------------------------------------------------------------------ Net cash (used) by investing activities (60,446) (62,094) - ------------------------------------------------------------------------------------------------------------------------------- Financing Activities Net increase in demand deposits, interest checking, money market and savings deposits 57,666 42,084 Net increase (decrease) in time deposits (926) 2,701 Proceeds from common stock options exercised 1,505 105 Proceeds from common stock purchase and dividend reinvestment plans 603 171 Cash dividends on preferred stock and cash in lieu of fractional shares (50) (40) ------------------------------------------------------------------------------------------------------------ Net cash provided by financing activities 58,798 45,021 ------------------------------------------------------------------------------------------------------------ Increase (decrease) in cash and cash equivalents 8,098 (16,561) Cash and cash equivalents at beginning of year 25,855 39,649 ------------------------------------------------------------------------------------------------------------ Cash and cash equivalents at end of period $ 33,953 $23,088 ------------------------------------------------------------------------------------------------------------
See accompanying notes. 6 PENNSYLVANIA COMMERCE BANCORP, INC. NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS June 30, 2002 (Unaudited) Note 1. BASIS OF PRESENTATION The consolidated financial statements include the accounts of Pennsylvania Commerce Bancorp, Inc. ("the Company") and its wholly owned subsidiaries Commerce Bank/Harrisburg, N.A. ("the Bank"), Commerce Capital Harrisburg Trust I, and Commerce Capital Harrisburg Trust II. All material intercompany accounts and transactions have been eliminated. The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included and are of a normal, recurring nature. Operating results for the six-month period ended June 30, 2002, are not necessarily indicative of the results that may be expected for the year ended December 31, 2002. The Company may, from time to time, make written or oral "forward-looking statements", including statements contained in the Company's filings with the Securities and Exchange Commission (including the annual report and Form 10-K and the exhibits thereto), in its reports to stockholders and in other communications by the Company, which are made in good faith by the Company pursuant to the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include statements with respect to the Company's beliefs, plans, objectives, goals, expectations, anticipations, estimates, and intentions, that are subject to significant risks and uncertainties and are subject to change based on various factors (some of which are beyond the Company's control). The words may, could, should, would, believe, anticipate, estimate, expect, intend, plan, and similar expressions are intended to identify forward-looking statements. The following factors, among others could cause the Company's financial performance to differ materially from that expressed in such forward-looking statements: the strength of the United States economy in general and the strength of the local economies in which the Company conducts operations; the effects of, and changes in, trade, monetary and fiscal policy, including interest rate policies of the Board of the Federal Reserve System; inflation; interest rate, market and monetary fluctuations; the timely development of competitive new products and services by the Company and the acceptance of such products and services by customers; the willingness of customers to substitute competitors' products and services and vice versa; the impact of changes in financial services laws and regulations (including laws concerning taxes, banking, securities, and insurance); technological changes; future acquisitions; the expense savings and revenue enhancements from acquisitions being less than expected; the growth and profitability of the Company's noninterest or fee income being less than expected; unanticipated regulatory or judicial proceedings; changes in consumer spending and saving habits; and the success of the Company at managing the risks involved in the foregoing. 7 The Company cautions that the foregoing list of important factors is not exclusive. The Company does not undertake to update any forward-looking statements, whether written or oral, that may be made from time to time by or on behalf of the Company. For further information, refer to the financial statements and footnotes thereto included in the Pennsylvania Commerce Bancorp, Inc., Annual Report for the year ended December 31, 2001. Note 2. SIGNIFICANT ACCOUNTING POLICIES Stock Dividends and Per Share Data On January 30, 2002, the Board of Directors declared a 5% stock dividend on common stock outstanding, paid on February 25, 2002, to stockholders of record on February 11, 2002. Payment of the stock dividend resulted in the issuance of 89,805 additional common shares and cash of $9,870 in lieu of fractional shares. The effect of the 5% common stock dividend has been recorded as of December 31, 2001. Recently Issued FASB Statements In July of 2001, the Financial Accounting Standards Board issued Statement No. 143, "Accounting for Asset Retirement Obligations", which addresses the financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. This Statement requires that the fair value of a liability for an asset retirement obligation be recognized in the period in which it is incurred if a reasonable estimate of fair value can be made. The associated asset retirement costs are capitalized as part of the carrying amount of the long-lived asset. This Statement will become effective for the Company on January 1, 2003. Adoption of this statement will not have a material impact on the Company's financial condition or results of operations. Note 3. COMMITMENTS AND CONTINGENCIES The Company is subject to certain routine legal proceedings and claims arising in the ordinary course of business. It is management's opinion that the ultimate resolution of these claims will not have a material adverse effect on the Company's financial position and results of operations. Future Branch Facilities The Company entered into a land lease for the premises located in front of the Camp Hill Mall at 32nd Street and Trindle Road in the Borough of Camp Hill, Cumberland County, Pennsylvania. The land lease commenced in April 2002 with a term of 20 years and annual rent payments began in August 2002. Rent is subject to change on terms set forth in the lease agreement. Commerce subsequently opened this branch for business on August 3, 2002. 8 The Bank leases office space at 4 Lemoyne Drive, Suite 100, Lemoyne, Pennsylvania. The lease for 1,885 square feet commenced October 1, 1998, with an initial term of 2 years and year-to year renewal options. In June 2002, the Bank exercised its option to renew for a third 1-year renewal period beginning October 1, 2002 and ending on September 30, 2003. Note 4. COMPREHENSIVE INCOME Comprehensive income for the Company consists of net income and unrealized gains or losses on available for sale and securities and is presented in the consolidated statement of stockholders' equity. Unrealized securities gains or losses and the related tax impact included in comprehensive income are as follows:
Three Months Ended June30, Six Months Ended June 30, -------------------------- ------------------------- 2002 2001 2002 2001 -------------- --------------- ------------- -------------- Unrealized holding gains (losses) on available for sale securities occurring during the period $2,495 ($33) $1,988 $852 Reclassification adjustment for gains included in net income 0 0 0 (52) -------------- --------------- ------------- -------------- Net Unrealized Gains (Losses) 2,495 (33) 1,988 800 Tax effect (848) 11 (676) (272) ------------------------------ ------------- -------------- Net of Tax Other Comprehensive Income (Loss) $1,647 ($22) $1,312 $528 ============== =============== ============= ==============
9 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Management's Discussion and Analysis of Financial Condition and Results of Operations analyzes the major elements of the Company's balance sheets and statements of income. This section should be read in conjunction with the Company's financial statements and accompanying notes. OVERVIEW Net income for the quarter increased 26% to $1.3 million as compared to $1.1 million for the second quarter of 2001 and total revenues (net interest income plus noninterest income) increased by 21% to $8.5 million for the quarter. Diluted net income per common share increased 20% to $0.61 from $0.51 per share in the second quarter a year ago (after adjusting for a 5% common stock dividend paid in February 2002). At June 30, 2002, the Company had total assets of $674.1 million, total loans (including loans held for sale) of $363.0 million, and total deposits of $618.5 million. RESULTS OF OPERATIONS Average Balances and Average Interest Rates Interest earning assets averaged $617.2 million for the second quarter of 2002 as compared to $484.8 million for the same period in 2001. Approximately $48.8 million, or 37%, of this increase was in average loans outstanding and $83.6 million, or 63%, was in average investment securities and federal funds sold. The yield on earning assets for the second quarter of 2002 was 6.72%, a decrease of 113 basis points (bps) from the comparable period in 2001. This decrease was mainly the result of eleven decreases in short-term interest rates totaling 475 bps by the Federal Reserve Board during 2001. The growth in interest earning assets was funded primarily by an increase in the average balance of deposits of $104.6 million. Interest-bearing liabilities increased from $399.6 million during the second quarter of 2001 to $511.1 million during the second quarter of 2002. Average savings deposits increased $56.5 million over second quarter a year ago, average public funds deposits increased $48.2 million and average non-interest bearing demand deposits increased by $20.3 million. Average time deposits decreased $13.6 million during the quarter as compared to the second quarter one year ago. The average rate paid on these liabilities for the second quarter of 2002 was 2.82%, a decrease of 124 basis points from the comparable period in 2001. The Company's aggregate cost of funding sources was 2.34% for the second quarter of 2002, a decrease of 101 basis points from the prior year. This is the result of 10 a decrease in the average rates paid on all interest bearing deposits partially offset by the issuance of $8.0 million of long-term debt in September 2001, which bears interest at a higher rate than the Company's deposits. Interest earning assets for the first six months averaged $598.4 versus $472.4 million for the comparable period in 2001. The yield on earning assets decreased to 6.79% during the first half of 2002, from 7.95% for the first half of 2001. The level of average interest-bearing liabilities increased from $393.3 million for the first half of 2001 to $496.9 million for the first six months of 2002. The Company's cost of funds for the first half of 2002 was 2.42%, down 115 basis points from 3.57% for the comparable period in the prior year. Net Interest Income and Net Interest Margin Net interest income is the difference between interest income earned on assets and interest expense incurred on liabilities used to fund those assets. Interest earning assets primarily include loans and securities. Liabilities used to fund such assets include deposits, borrowed funds, and long-term debt. Changes in net interest income and margin result from the interaction between the volume and composition of earning assets, related yields and associated funding costs. Interest income increased by $853,000, or 9%, over the second quarter of 2001. Interest expense for the second quarter of 2002 decreased by $450,000, or 11%, compared to the second quarter of 2001. Net interest income for the second quarter of 2002 increased by $1.3 million, or 24%, over the same period in 2001. Changes in net interest income are frequently measured by two statistics: net interest rate spread and net interest margin. Net interest rate spread is the difference between the average rate earned on earning assets and the average rate incurred on interest-bearing liabilities. Net interest margin represents the difference between interest income, including net loan fees earned, and interest expense, reflected as a percentage of average earning assets. The Company's net interest rate spread was 3.90% during the second quarter of 2002 compared to 3.79% during the same period of the previous year. The net interest margin decreased by 12 basis points from 4.50% for the second quarter 2001 to 4.38% during the second quarter of 2002. For the first six months ended June 30, 2002, interest income increased by $1.6 million, or 9%, over the same period in 2001. Interest expense for the first six months of 2002 totaled $7.2 million, a decrease of $1.2 million, or 14%, from the first six months of 2001. Net interest income for the first six months of 2002 increased by $2.8 million, or 27%, over the same period in 2001. The Company's net interest margin increased from 4.36% for the first six months of 2001 to 4.37% for the first half of 2002. Noninterest Income Noninterest income for the second quarter of 2002 increased by $154,000, or 10%, over the same period in 2001. The increase is attributable to service charges 11 and fees associated with servicing a higher volume of deposit accounts and transactions. Included in noninterest income for the first six months of 2002 is nonrecurring income of $95,000, as a result of a gain on the sale of student loans. Included in noninterest income for the first six months of 2001 is nonrecurring income of $233,000, comprised of a $102,000 gain on the sale of student loans, a $79,000 gain from the sale of Small Business Administration loans, and a $52,000 gain on sale of securities available for sale. Excluding these transactions, recurring core noninterest income for the first six months of 2002 totaled $3.5 million as compared to $3.1 million for the first half of 2001, an increase of 13%. The increase is mainly attributable to additional service charges and fees associated with servicing a higher volume of deposit accounts and transactions. Noninterest Expenses For the second quarter of 2002, noninterest expenses increased by $1.1 million, or 21%, over the same period in 2001. Staffing levels and related expenses increased as a result of servicing more deposit and loan customers and processing a higher volume of transactions. Staffing and occupancy expenses also increased as a result of opening two additional branch offices, one each in October 2001 and June 2002, respectively. In addition, staffing and occupancy expenses increased in preparation for the August opening of the Trindle Road branch in Camp Hill, Pennsylvania. A comparison of noninterest expense for certain categories for the three months ended June 30, 2002, and June 30, 2001, is presented in the following paragraphs. Salary expenses and employee benefits, which represent the largest component of noninterest expenses, increased by $482,000, or 20%, for the second quarter of 2002 over the second quarter of 2001. This increase is consistent with increases in staff levels necessary to handle Company growth from second quarter 2001 to second quarter 2002, including the additional staff of the branch offices opened in October 2001 and June 2002. Occupancy expenses of $559,000 were $8,000 higher for the second quarter of 2002 than for the three months ended June 30, 2001. Increased occupancy expenses primarily are a result of the two branch offices opened in October 2001 and June 2002 offset by rental income earned at the downtown Harrisburg location. Advertising and marketing expenses totaled $586,000 for the three months ended June 30, 2002, an increase of $196,000, or 50% from the second quarter of 2001. This increase was primarily the result of increased advertising efforts in each of the Company's markets along with grand opening celebrations at the newly opened branches in Red Lion, PA and downtown Harrisburg. The Company's markets will continue to expand as the branch network grows. Data processing expenses of $523,000 were $212,000, or 68%, higher in the second quarter of 2002 than the three months ended June 30, 2001. The increase was due to a combination of increased costs associated with processing additional transactions (due to growth in number of accounts) and an increase in data processing support costs. Also, during the second quarter 2002, Commerce converted its check statement processing function to an image system as an added convenience for customers. The increased data processing costs to implement this system are expected to result in lower supplies expense and postage expense in the future that would have been incurred with continued paper checking statement processing. Audits and regulatory fees increased by $11,000, or 11%, from $98,000 for the second quarter of 2001 to $109,000 for the second quarter of 2002. This increase is a result of higher Federal Deposit Insurance Corporation (FDIC) and Office of the Comptroller of the Currency (OCC) assessments. Both assessment calculations, which are based upon deposit size, continue to increase as the Company's deposit balances grow. 12 Other noninterest expenses increased by $160,000, or 21%, for the three-month period ended June 30, 2002, as compared to the same period in 2001. Components of the increase include telephone services for new branch locations, increase in volume and service costs of coin and currency delivery, higher loan expenses due to an increase in loan volume, higher provisions for non-credit related losses, an increase in Pennsylvania Shares Tax which is based on the Bank's equity, and increased insurance costs offset by a decrease in checkbook printing costs. For the first six months of 2001, total noninterest expenses increased by $1.9 million, or 19% over the comparable period in 2001. A comparison of noninterest expense for certain categories for these two periods is discussed below. Salary expense and employee benefits increased by $850,000, or 18%, over the first six months of 2001. The increase was due to normal increases and additional salary and benefits costs due to and increase in the level of full-time equivalent employees from 316 at June 30, 2001 to 350 at June 30, 2002 as well as the addition of new staff to operate the new branches opened in October 2001 and June 2002. Data processing expenses increased $327,000 or 53%, for the first six months of 2002 as compared to the first six months of 2001. The increase is the result of higher data processing support costs and processing higher volumes of customer transactions. Audit and regulatory fees increased by $21,000, or 11%, for the first six months of 2002 over the same period in 2001. This increase is a result of higher Federal Deposit Insurance Corporation (FDIC) and the Office of the Comptroller of the Currency (OCC) assessments, both of which are calculated on levels of deposits. Other noninterest expenses for the first six months of 2002 were $1.8 million compared to $1.5 million for the similar period in 2001. Components of the increase include telephone services for new branch locations, increase in volume and service costs of coin and currency delivery, higher loan expenses due to an increase in loan volume, higher provisions for non-credit related losses, an increase in Pennsylvania Shares Tax which is based on the Bank's equity, and increased insurance costs offset by a decrease in checkbook printing costs. One key measure used to monitor progress in controlling overhead expenses is the ratio of net noninterest expenses to average assets. Net noninterest expenses equal noninterest expenses (excluding foreclosed real estate expenses) less noninterest income (exclusive of nonrecurring gains), divided by average assets. This ratio equaled 2.66% for the three months ended June 30, 2002, less than the 2.70% reported for the three months ended June 30, 2001, and 2.64% for the six months of 2002 compared to 2.74% for the first half of 2001. Another productivity measure is the operating efficiency ratio. This ratio expresses the relationship of noninterest expenses (excluding foreclosed real estate expenses) to net interest income plus noninterest income (excluding nonrecurring gains). For the quarter ended June 30, 2002, the operating efficiency ratio was 72.4%, compared to 72.7% for the similar period in 2001. For the six months ended June 30, 2002, this ratio was 71.9% compared to 74.9% for the six months ended June 30, 2001. Provision for Federal Income Taxes The provision for federal income taxes was $682,000 for the second quarter of 13 2002 as compared to $533,000 for the same period in 2001. For the six months ended June 30, the provision was $1.3 million and $1.0 million for 2002 and 2001, respectively. The effective tax rate, which is the ratio of income tax expense to income before income taxes, was 33.5% for the first six months of 2002 and 33.3% for the same period in 2001. Net Income and Net Income Per Share Net income for the second quarter of 2002 was $1.3 million, an increase of $279,000, or 26%, over the $1.1 million recorded in the second quarter of 2001. The increase was due to an increase in net interest income of $1.3 million, an increase in noninterest income of $154,000, offset partially by an increase in noninterest expenses of $1.1 million, a decrease of $35,000 in the provision for loan losses, and an increase of $149,000 in the provision for income taxes. Net income for the first six months of 2002 was $2.6 million as compared to $2.0 million recorded in the first six months of 2001.The increase was due to an increase in net interest income of $2.8 million, an increase in noninterest income of $250,000, offset partially by an increase in noninterest expenses of $1.9 million, an increase of $115,000 in the provision for loan losses, and an increase of $337,000 in the provision for income taxes. Basic earnings per common share, after adjusting for a 5% common stock dividend paid in February 2002, increased 29% to $1.35 per common share for the first six months of 2002 compared to $1.05 for the same period in 2001. Diluted earnings per common share were $1.21 for the first six months of 2002 and $0.96 for the same period in 2001, an increase of 26%. Return on Average Assets and Average Equity Return on average assets (ROA) measures the Company's net income in relation to its total average assets. The Company's annualized ROA for the second quarter of 2002 and second quarter of 2001 was 0.82%. The ROA for the first six months of 2002 and 2001 was 0.83% and 0.79%, respectively. For purposes of calculating ROA, average assets have been adjusted to exclude gross unrealized appreciation or depreciation on securities available for sale. Return on average equity (ROE) indicates how effectively the Company can generate net income on the capital invested by its stockholders. ROE is calculated by dividing net income by average stockholders' equity. For purposes of calculating ROE, average stockholders' equity includes the effect of unrealized appreciation or depreciation, net of income taxes, on securities available for sale. The annualized ROE for the second quarter of 2002 was 14.57%, as compared to 14.85% for the second quarter of 2001. The annualized ROE for the first six months of 2002 was 15.01%, as compared to 14.24% for the first six months of 2001. FINANCIAL CONDITION Securities During the first six months of 2002, securities available for sale increased by $24.8 million (net of unrealized appreciation) from $107.3 million at December 31, 2001 to $132.1 million at June 30, 2002. This resulted from the purchase of $44.1 million in securities, partially offset by $21.1 million in principal repayments. 14 The securities available for sale portfolio is comprised of U.S. Treasury Notes, U.S. Government agency securities, mortgage-backed securities, AAA CMO securities, corporate debt, and equity securities. The weighted average life of the securities available for sale portfolio was 5.0 years at June 30, 2002 with a weighted average yield of 6.22%. During the first six months of 2002, securities held to maturity increased from $103.3 million to $120.4 million primarily as a result of the purchase of $29.1 million in securities, offset by principal repayments of $12.0 million. The securities held in this portfolio include U.S. Government agency securities, tax-exempt municipal bonds, AAA CMO securities, corporate debt securities, and mortgage-backed securities. The weighted average life of the securities held to maturity portfolio was 7.8 years at June 30, 2002 with a weighted average yield of 6.32%. Federal funds sold increased by $8.6 million during the first six months of 2002. Total securities and federal funds sold aggregated $265.3 million at June 30, 2002, and represented 39% of total assets. The average yield on the combined securities portfolio for the first six months of 2002 was 6.14%, as compared to 6.73% for the similar period of 2001. The average yield earned on federal funds sold during the first six months of 2002 was 1.66%, down 353 basis points from 5.19% earned during the first six months of 2001. The decrease in the yield in the investment securities portfolio and on federal funds sold is a result of eleven decreases in short-term interest rates by the Federal Reserve Bank for a total of 475 bps between January 1, 2001 and December 31, 2001. Loans Held for Sale Loans held for sale are comprised of student loans, Small Business Administration loans, and residential mortgage loans, which the Company originates with the intention of selling in the future. During the first six months of 2002, total loans held for sale decreased by $4.7 million, from $7.7 million at December 31, 2001 to $3.0 million at June 30, 2002. The change was the result of the sale of $6.3 million of student loans and the sale of $16.3 million of residential loans, offset by originations of $17.9 million in new loans held for sale. Loans held for sale represented 1% of total assets at December 31, 2001 and 0.4% of total assets at June 30, 2002. Loans Receivable During the first six months of 2002, total loans receivable increased by $17.4 million from $342.7 million at December 31, 2001, to $360.1 million at June 30, 2002. Loans receivable represented 58% of total deposits and 53% of total assets at June 30, 2002, as compared to 61% and 56%, respectively, at December 31, 2001. Loan and Asset Quality and Allowance for Loan Losses Total nonperforming assets (nonperforming loans and foreclosed real estate, excluding loans past due 90 days or more and still accruing interest) at June 30, 2002, were $1.3 million, or 0.20%, of total assets as compared to $888,000, or 0.15%, of total assets at December 31, 2001. Foreclosed real estate totaled $125,000 at June 30, 2002, and $12,000 as of December 31, 2001. 15 The summary table below presents information regarding nonperforming loans and assets as of June 30, 2002 and 2001 and December 31, 2001.
Nonperforming Loans and Assets - ------------------------------------------------------------------------------------------------ (dollars in thousands) June 30, December 31, June 30, 2002 2001 2001 - ------------------------------------------------------------------------------------------------ Nonaccrual loans: Commercial $ 376 $ 127 $ 508 Consumer 74 116 126 Real estate: Construction 0 0 0 Mortgage 757 633 805 - ------------------------------------------------------------------------------------------------ Total nonaccrual loans 1,207 876 1,439 Restructured loans 0 0 0 - ------------------------------------------------------------------------------------------------ Total nonperforming loans 1,207 876 1,439 Foreclosed real estate 125 12 12 - ------------------------------------------------------------------------------------------------ Total nonperforming assets 1,332 888 1,451 - ------------------------------------------------------------------------------------------------ Loans past due 90 days or more 0 0 0 - ------------------------------------------------------------------------------------------------ Total nonperforming assets and Loans past due 90 days or more $ 1,332 $ 888 $ 1,451 - ------------------------------------------------------------------------------------------------ Nonperforming loans to total loans 0.34% 0.26% 0.47% Nonperforming assets to total assets 0.20% 0.15% 0.27% - ------------------------------------------------------------------------------------------------
The following table sets forth information regarding the Company's provision and allowance for loan losses.
Allowance for Loan Losses - ---------------------------------------------------------------------------------------------- (dollars in thousands) 6 Months Year Ending Ending December 31, June 30, 2001 2002 - ---------------------------------------------------------------------------------------------- Balance at beginning of period $ 4,544 $ 3,732 Provisions charged to operating expenses 715 1,469 - ---------------------------------------------------------------------------------------------- 5,259 5,201 Recoveries of loans previously charged-off: Commercial 40 3 Consumer 1 21 Real estate 19 0 - ---------------------------------------------------------------------------------------------- Total recoveries 60 24 Loans charged-off: Commercial 129 475 Consumer 61 85 Real estate 164 121 - ---------------------------------------------------------------------------------------------- Total charged-off 354 681 - ---------------------------------------------------------------------------------------------- Net charge-offs 294 657 - ---------------------------------------------------------------------------------------------- Balance at end of period $ 4,965 $ 4,544 - ---------------------------------------------------------------------------------------------- Net charge-offs as a percentage of Average loans outstanding 0.08% 0.21% - ---------------------------------------------------------------------------------------------- Allowance for loan losses as a percentage of Period-end loans 1.38% 1.33% - ----------------------------------------------------------------------------------------------
16 Deposits Total deposits at June 30, 2002 were $618.5 million, up $56.7 million, or 10%, over total deposits of $561.7 million at December 31, 2001. The average balances and weighted average rates paid on deposits for the first six months of 2002 and 2001 are presented in the following table.
- ---------------------------------------------------------------------------------------------- Six Months Ended June 30, 2002 2001 - ---------------------------------------------------------------------------------------------- Average Average Average Average (dollars in thousands) Balance Rate Balance Rate - ---------------------------------------------------------------------------------------------- Demand deposits: Noninterest-bearing $ 107,896 $ 85,493 Interest-bearing (money market 129,986 1.36% 94,635 2.64% and checking) Savings 183,081 2.13 130,204 3.39 Time deposits 170,788 4.36 162,865 5.75 - ---------------------------------------------------------------------------------------------- Total deposits $ 591,751 $ 473,197 - ----------------------------------------------------------------------------------------------
Interest Rate Sensitivity The management of interest rate sensitivity seeks to avoid fluctuating net interest margins and to provide consistent net interest income through periods of changing interest rates. The Company's risk of loss arising from adverse changes in the fair value of financial instruments, or market risk, is composed primarily of interest rate risk. The primary objective of the Company's asset/liability management activities is to maximize net interest income while maintaining acceptable levels of interest rate risk. The Company's Asset/Liability Committee (ALCO) is responsible for establishing policies to limit exposure to interest rate risk, and to ensure procedures are established to monitor compliance with those policies. The guidelines established by ALCO are reviewed by the Company's Board of Directors. An interest rate sensitive asset or liability is one that, within a defined period, either matures or experiences an interest rate change in line with general market interest rates. Historically, the most common method of estimating interest rate risk was to measure the maturity and repricing relationships between interest-earning assets and interest-bearing liabilities at specific points in time (GAP), typically one year. Under this method, a company is considered liability sensitive when the amount of its interest-bearing liabilities exceeds the amount of its interest-earning assets within the one year horizon. However, assets and liabilities with similar repricing characteristics may not reprice at the same time or to the same 17 degree. As a result, the Company's GAP does not necessarily predict the impact of changes in general levels of interest rates on net interest income. Management believes the simulation of net interest income in different interest rate environments provides a more meaningful measure of interest rate risk. Income simulation analysis captures not only the potential of all assets and liabilities to mature or reprice, but also the probability that they will do so. Income simulation also attends to the relative interest rate sensitivities of these items, and projects their behavior over an extended period of time. Finally, income simulation permits management to assess the probable effects on the balance sheet not only of changes in interest rates, but also of proposed strategies for responding to them. The Company's income simulation model analyzes interest rate sensitivity by projecting net income over the next 24 months in a flat rate scenario versus net income in alternative interest rate scenarios. Management continually reviews and refines its interest rate risk management process in response to the changing economic climate. Currently, the Company's model projects a 200 basis point increase and a 100 basis point decrease during the next year, with rates remaining constant in the second year. Historically, the Company's Asset/Liability Committee (ALCO) policy has established that income sensitivity will be considered acceptable if overall net income volatility in a plus 200 or minus 200 basis point scenario is within 15% of net income in a flat rate scenario in the first year and 30% using a two year planning window. At June 30, 2002, the Company projected its interest rate risk using a plus 200 and minus 100 basis point scenario. During 2001, the Federal Reserve lowered short-term interest rates by 475 basis points, pushing the Federal Funds rate down to 1.75% from 6.5% at year-end 2000, the lowest level in over 40 years. The Company's ALCO believed it was more realistic to measure current risk assuming a minus 100 point scenario, as a minus 200 basis point reduction would be unlikely given that current short-term market interest rates are already below 2.00%. At June 30, 2002, the Company's income simulation model indicates net income would decrease 0.13% in the first year and decrease 3.62% over a two-year time frame, respectively, if rates decreased 100 basis points. The model projects that net income would increase by 0.25% and increase 4.67% in the first year and over a two-year time frame, respectively, if rates increased by 200 basis points. All of these forecasts are within an acceptable level of interest rate risk per the policies established by ALCO. The market value of equity model reflects certain estimates and assumptions regarding the impact on the market value of the Company's assets and liabilities given an immediate 200 basis point change in interest rates. One of the key assumptions is the market value assigned to the Company's core deposits, or the core deposit premium. The studies have consistently confirmed management's assertion that the Company's core deposits have stable balances over long periods of time, and are generally insensitive to changes in interest rates. Thus, these core deposit balances provide an internal hedge to market fluctuations in the Company's fixed rate assets. Management believes the core deposit premiums produced by its market value of equity model at June 30, 2002 provide an accurate assessment of the Company's interest rate risk. Management also monitors interest rate risk by utilizing a market value of equity model. The model assesses the impact of a change in interest rates on the market value of all the Company's assets and liabilities, as well as any off balance sheet items. The model calculates the market value of the Company's assets and liabilities in excess of book value in the current rate scenario, and then compares the excess of market value over book value given an immediate 200 basis point increase in rates and a 100 basis point decrease in rates. The Company's ALCO policy indicates that the level of interest rate risk is unacceptable if the immediate change would result in the loss of 60% or more of 18 the excess of market value over book value in the current rate scenario. At June 30, 2002, the market value of equity indicates an acceptable level of interest rate risk. Liquidity Liquidity management involves the ability to generate cash or otherwise obtain funds at reasonable rates to support asset growth and reduce assets to meet deposit withdrawals, to maintain reserve requirements, and to otherwise operate the Company on an ongoing basis. Liquidity needs are generally met by converting assets into cash or obtaining sources of additional funding, mainly deposits. Liquidity sources from asset categories are provided primarily by cash and federal funds sold, and the cash flow from the amortizing securities and loan portfolios. The primary source of liquidity from liability categories is the generation of additional core deposit balances. Additionally, the Company has established secondary sources of liquidity consisting of federal funds lines of credit, repurchase agreements, and borrowing capacity at the Federal Home Loan Bank, which can be drawn upon if needed. As of June 30, 2002, the total potential liquidity for the Company through these secondary sources was $194 million. In view of the primary and secondary sources as previously mentioned, management believes that the Company is capable of meeting its anticipated liquidity needs. Capital Adequacy At June 30, 2002, stockholders' equity totaled $38.9 million, up 19% over stockholders' equity of $32.6 million at December 31, 2001. Stockholders' equity at June 30, 2002 included $1.2 million gross unrealized gains, net of income taxes, on securities available for sale. Excluding this unrealized gains, gross stockholders' equity increased by $5.0 million from $32.7 million at December 31, 2001, to $37.7 million at June 30, 2002 due to retained net income and the proceeds from the stock option and stock purchase plans. On June 15, 2000, the Company issued $5.0 million of 11.00% Trust Capital Securities to Commerce Bancorp, Inc. through Commerce Harrisburg Capital Trust I, a newly formed Delaware business trust subsidiary of the Company. Proceeds of this offering were downstreamed to Commerce Bank/Harrisburg, N.A., the Company's wholly owned banking subsidiary, to be used for additional capitalization purposes. All $5.0 million of the Trust Capital Securities qualify as Tier 1 capital for regulatory capital purposes. On September 28, 2001, the Company issued $8.0 million of 10.00% Trust Capital Securities to Commerce Bancorp, Inc. through Commerce Harrisburg Capital Trust II, a newly formed Delaware business trust subsidiary of the Company. Proceeds of this offering were downstreamed to Commerce Bank/Harrisburg, N.A., the Company's wholly owned banking subsidiary, to be used for additional capitalization purposes. At June 30, 2002, $7.57 million of the Trust Capital Securities qualify as Tier 1 capital for regulatory capital purposes and the remaining $428,000 qualifies as Tier 2 capital. Risk-based capital provides the basis for which all banks are evaluated in terms of capital adequacy. The risk-based capital standards require all banks to have Tier 1 capital of at least 4% and total capital, including Tier 1 capital, of at least 8% of risk-adjusted assets. Tier 1 capital includes common stockholders' equity and qualifying perpetual preferred stock together with related surpluses and retained earnings. Total capital may be comprised of total Tier 1 capital plus limited life preferred stock, qualifying debt instruments, and the allowance for loan losses. 19 The following table provides a comparison of the Company's risk-based capital ratios and leverage ratios to the minimum regulatory requirements for the periods indicated:
- ----------------------------------------------------------------------------------------------------------------------------- To Be Well Capitalized Under Prompt Corrective June 30, December 31, For Capital Action Provisions 2002 2001 Adequacy Purposes - ----------------------------------------------------------------------------------------------------------------------------- Risk-Based Capital Ratios: Total 12.11% 11.78% 8.00% 10.00% Tier 1 10.94 10.22 4.00 6.00 Leverage ratio 7.59 7.33 4.00 5.00 (to average assets) - -----------------------------------------------------------------------------------------------------------------------------
At June 30, 2002, the consolidated capital levels of the Company and of the subsidiary bank (Commerce) met the definition of a "well capitalized" institution. Item 3. Quantitative and Qualitative Disclosures About Market Risk The Company's exposure to market risk principally includes interest rate risk, which is discussed in the Management's Discussion and Analysis section above. While the federal funds rate and National Prime Rate fell 475 basis points between January 1, 2001 and December 31, 2001, the Company's net interest margin has remained fairly stable. Commerce's net interest margin for the first half of 2002 was 4.37%, a difference of 1 basis point over 4.36% for the first half of 2001. Currently, Commerce has 74% of its deposits in non-interest bearing, interest checking, and saving accounts, which it considers core deposits. Because of this, these accounts have historically contributed significantly to the net interest margin. 20 PART II. OTHER INFORMATION Item 1. Legal Proceedings The Company is subject to certain routine legal proceedings and claims arising in the ordinary course of business. It is management's opinion the ultimate resolution of these claims will not have a material adverse effect on the Company's financial position and results of operations. Item 2. Changes in Securities and Use of Proceeds No items to report for the quarter ending June 30, 2002. Item 3. Defaults Upon Senior Securities No items to report for the quarter ending June 30, 2002. Item 4. Submission of Matters to a Vote of Securities Holders The Annual Meeting of the Company's Shareholders was held on May 17, 2002. The item of business approved by the shareholders at the annual meeting was the election of eight directors for a one-year term. No proposals were submitted for the election of other directors. Item 5. Other Information In the second quarter, Pennsylvania Commerce Bancorp, Inc. and Commerce Bank/Harrisburg, N.A. entered into an amendment of a 1997 Network Agreement between the Bank and Commerce Bancorp, Inc. Commerce Bancorp, Inc. is a New Jersey bank holding company that has developed valuable trademarks and banking operations systems. Through the Network Agreement, Pennsylvania Commerce Bancorp, Inc. is able to use the trademarks and systems developed by Commerce Bancorp, Inc., and its ability to do so enables it to be competitive in Pennsylvania with larger financial institutions while maintaining its independence as a community bank. Item 6. Exhibits and Reports on Form 8-K (a.) Exhibits Computation of Net Income Per Share...................................Exhibit 11 Certification of Chief Executive Officer and Chief Financial Officer..Exhibit 99 (b.) Reports on Form 8-K No reports on Form 8-K were filed during the quarter ended June 30, 2002. 21 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf be the undersigned thereunto duly authorized. PENNSYLVANIA COMMERCE BANCORP, INC. (Registrant) 08/14/02 /s/ Gary L Nalbandian - ------------------------- ----------------------------------------- (Date) Gary L. Nalbandian President/CEO 08/14/02 /s/ Mark A. Zody - ------------------------- ----------------------------------------- (Date) Mark A. Zody Executive Vice President Chief Financial Officer 22 EX-11 3 exhibit11.txt Exhibit 11.
Pennsylvania Commerce Bancorp, Inc. Computation of Net Income Per Share - --------------------------------------------------------------------------------------------------- For the Quarter Ended June 30, 2002 - --------------------------------------------------------------------------------------------------- Income Shares Per Share Amount - --------------------------------------------------------------------------------------------------- Basic Earnings Per Share: Net income $1,347,000 Preferred stock dividends (20,000) -------- Income available to common stockholders 1,327,000 1,965,053 $0.68 - --------------------------------------------------------------------------------------------------- Effect of Dilutive Securities: Stock Options 218,447 ------- Diluted Earnings Per Share: Income available to common stockholders plus assumed conversions $1,327,000 2,183,500 $0.61 - --------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------- For the Six Months Ended June 30, 2002 - --------------------------------------------------------------------------------------------------- Income Shares Per Share Amount - --------------------------------------------------------------------------------------------------- Basic Earnings Per Share: Net income $2,637,000 Preferred stock dividends (40,000) -------- Income available to common stockholders 2,597,000 1,928,211 $1.35 - --------------------------------------------------------------------------------------------------- Effect of Dilutive Securities: Stock Options 202,120 ------- Diluted Earnings Per Share: Income available to common stockholders plus assumed conversions $2,597,000 2,130,331 $1.21 - --------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------- For the Quarter Ended June 30, 2001 - --------------------------------------------------------------------------------------------------- Income Shares Per Share Amount - --------------------------------------------------------------------------------------------------- Basic Earnings Per Share: Net income $1,068,000 Preferred stock dividends (20,000) -------- Income available to common stockholders 1,048,000 1,849,605 $0.56 - --------------------------------------------------------------------------------------------------- Effect of Dilutive Securities: Stock Options 200,010 ------- Diluted Earnings Per Share: Income available to common stockholders plus assumed conversions $1,048,000 2,049,615 $0.51 - --------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------- For the Six Months Ended June 30, 2001 - --------------------------------------------------------------------------------------------------- Income Shares Per Share Amount - --------------------------------------------------------------------------------------------------- Basic Earnings Per Share: Net income $1,991,000 Preferred stock dividends (40,000) -------- Income available to common stockholders 1,951,000 1,846,909 $1.05 - --------------------------------------------------------------------------------------------------- Effect of Dilutive Securities: Stock Options 192,948 ------- Diluted Earnings Per Share: Income available to common stockholders plus assumed conversions $1,951,000 2,039,857 $0.96 - ---------------------------------------------------------------------------------------------------
EX-99 4 exhibit99.txt Exhibit 99. Certification of Chief Executive Officer and Chief Financial Officer of Pennsylvania Commerce Bancorp, Inc. pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. The undersigned hereby certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and in connection with this Quarterly Report on Form 10-Q, that: o The report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended and o The information contained in the report fairly represents, in all material respects, the company's financial condition and results of operations. /s/ Gary L. Nalbandian - ------------------------------------------------ Gary L. Nalbandian, Chief Executive Officer /s/ Mark A. Zody - ------------------------------------------------ Mark A. Zody, Chief Financial Officer Dated: August 14, 2002 -----END PRIVACY-ENHANCED MESSAGE-----