8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 OR 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported) January 19, 2006

Pennsylvania Commerce Bancorp, Inc.

(Exact name of registrant as specified in its charter)

Pennsylvania	000-50961	25-1834776
(State or other jurisdiction	(Commission	(IRS Employer
of incorporation)	File Number)	Identification No.)

100 Senate Avenue, Camp Hill, Pennsylvania	17011
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code (717) 975-5630

N/A

(Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02. Results of Operations and Financial Condition

On January 19, 2006, Pennsylvania Commerce Bancorp, Inc. issued a press release reporting financial results for its fourth quarter of 2005. A copy of the press release is attached as Exhibit 99.1 to this report.

On January 19, 2006, the Registrant also made certain supplemental information available. A copy of the supplemental information is attached as Exhibit 99.2 to this report.

Item 9.01. Financial Statements and Exhibits

Exhibit No.

99.1Press Release, dated January 19, 2006

99.2Supplemental Information

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 by the undersigned hereunto duly authorized.

	Pennsylvania Commerce Bancorp, Inc.
	(Registrant)
Date: January 19, 2006	/s/ Mark A. Zody
	Mark A. Zody
	Chief Financial Officer

EXHIBIT INDEX

Exhibit No.	DESCRIPTION
99.1	Press Release of Pennsylvania Commerce Bancorp, Inc. dated January 19, 2006
99.2	Supplemental Information

EX-99.1

 

CONTACTS

Gary L. Nalbandian	Mark A. Zody
Chairman/President	Chief Financial Officer

(717) 975-5630

PENNSYLVANIA COMMERCE BANCORP

DEPOSITS INCREASE 18%, LOANS UP 28%

January 19, 2006 - Camp Hill, PA - Pennsylvania Commerce Bancorp, Inc. (NASDAQ National Market Symbol: COBH), parent company of Commerce Bank/Harrisburg, N.A., reported increased deposits, assets and loans for the fourth quarter of 2005, announced Gary L. Nalbandian, Chairman of the bank holding company.

2005 FINANCIAL HIGHLIGHTS
	Year Ended
	12/31/05		12/31/04		% Change
	(Dollars in thousands, except per share data)
* Total Assets:	$	1,641,121	$	1,277,367		28	%
* Total Deposits:		1,371,062		1,160,547		18	%
* Total Loans (net):		815,439		638,496		28	%
* Total Revenues:	$	65,061	$	57,881		12	%
* Net Income:		8,817		8,591		3	%
*Diluted Net Income
Per share - As Reported:	$	1.38	$	1.63		(15	)%
*Diluted Net Income
Per Share - As Adjusted:(1)	$	1.48	$	1.63		(9	)%
(1) Excluding non-recurring charges of $612,000, net of tax, in the fourth quarter of 2005.

Chairman’s Statement

In commenting on the Company’s financial results, Chairman Nalbandian noted the following financial highlights:

Ø   In October, we opened our fourth store in Berks County market, and 28^th overall; on Lancaster Avenue in Shillington.

Ø   Core deposits grew $202 million, or 18%, for the year.

Ø   Net loans grew $177 million, or 28%, for the prior 12 months to $815 million.

Ø   Asset quality remains very strong with non-performing assets of 0.16% and net charge-offs to average loans outstanding of only 0.02% for the entire year of 2005. The allowance for loan losses to total loans ratio of 1.12% provides reserve coverage of over 360% of non-performing loans.

Ø   The accelerated vesting of all prior stock options in the fourth quarter of 2005 allows that Commerce will not incur any compensation expense on these options for 2006 and beyond.

Ø   Like most all banking institutions, Commerce was impacted by the flat yield curve interest rate environment throughout 2005 which reduced our net interest margin and the level of growth in our net interest income.

Ø   Total revenues grew 12% for the year to $65 million.

Ø   Deposit charges and service fees grew 25% for the fourth quarter and by 26% for the year.

Ø   In the fourth quarter we repositioned $48 million of our available for sale investment securities portfolio from fixed to floating rates to partially offset further net interest margin compression. In doing so, the Company incurred an after-tax charge of $567,000, or $0.09 per share in the fourth quarter.

Ø   Excluding the impact of the investment portfolio repositioning and stock option acceleration expense, which together totaled $612,000, net of tax, our net income grew by 10% despite a challenging interest rate environment and the incremental expenses associated with opening four new stores. On the same basis, our net income per share was down 9%, which includes the impact of a 21% increase in the number of shares outstanding year over year as a result of our public stock offering in the fourth quarter of 2004.

Ø   Commerce produced the following shareholder returns:

	As of December 31, 2005
	Commerce	S & P Index
1 Year	1%	5%
5 Years	23%	1%
10 Years	23%	9%

2

Income Statement

	Three Months Ended							Year Ended
	December 31							December 31
					%							%
	2005		2004		Change			2005		2004		Change
	(dollars in thousands, except per share data)
Total Revenues:	$	16,107	$	15,138		6	%	$	65,061	$	57,881		12	%
Total Expenses:		13,790		11,010		25			50,403		42,466		19
As Reported
Net Income:	$	1,476	$	2,284		(35	)	$	8,817	$	8,591		3
Diluted Net Income Per Share:	$	0.23	$	0.38		(39	)	$	1.38	$	1.63		(15	)
As Adjusted
Net Income:(1)	$	2,088	$	2,284		(9	)	$	9,429	$	8,591		10
Diluted Net Income Per Share:(1)	$	0.32	$	0.38		(16	)	$	1.48	$	1.63		(9	)
(1) - Excluding non-recurring charges of $612,000, net of tax, in the fourth quarter of 2005

Balance Sheet

	12/31/05		12/31/04		% Increase
	(dollars in thousands)
Total Assets:	$	1,641,121	$	1,277,367		28	%
Total Loans (net):		815,439		638,496		28	%
Core Deposits:		1,309,926		1,108,095		18	%
Total Deposits:		1,371,062		1,160,547		18	%

Deposits

The Company’s deposit growth continues with total deposits at December 31, 2005 reaching $1.37 billion, a $211 million, or 18%, increase over total deposits of $1.16 billion one year ago. Core deposits grew by $202 million, or 18%, over the previous 12 months.

	12/31/05		12/31/04		$ Increase		% Increase
	(dollars in thousands)
Core Deposits:	$	1,309,926	$	1,108,095	$	201,831		18	%
Total Deposits:	$	1,371,062	$	1,160,547	$	210,515		18	%

3

Core Deposits

Core deposit growth by type of account is as follows:

							4th Qtr 2005			Annual
	12/31/05		12/31/04		$ Increase		Cost of Funds			Growth %
	(dollars in thousands)
Demand Non-Interest	$	248,101	$	206,393	$	41,708		0.00	%		20	%
Demand Interest		525,320		421,430		103,890		2.95			25
Savings		346,208		307,377		38,831		1.89			13
Subtotal		1,119,629		935,200		184,429		2.00			20
Time		190,297		172,895		17,402		3.29			10
Total Core Deposits	$	1,309,926	$	1,108,095	$	201,831		2.19	%		18	%

Core deposits, excluding time deposits, grew 20% for the year ended December 31, 2005.

Net Income and Net Income Per Share

Net income totaled $1.5 million for the fourth quarter of 2005, down $808,000, or 35%, from net income of $2.3 million as reported for the fourth quarter of 2004. For the year ended December 31, 2005, net income totaled $8.8 million, up $226,000, or 3%, over net income of $8.6 million for the year ended December 31, 2004.

     Net income per fully diluted share for the fourth quarter was $0.23, vs. $0.38 recorded for the same period a year ago. On a fully diluted per share basis, net income for the year ended December 31, 2005 was $1.38 compared to $1.63 for the year ended December 31, 2004. Net income per share for the year ended December 31, 2005, reflects the impact of a 21% increase in the number of total shares outstanding in 2005 versus 2004 as a result of our public stock offering in the fourth quarter of 2004.

	Three Months Ended							Year Ended
	December 31							December 31
					%							%
	2005		2004		Change			2005		2004		Change
	(dollars in thousands, except per share data)
As Reported
Net Income:	$	1,476	$	2,284		(35	)%	$	8,817	$	8,591		3	%
Diluted Net Income
Per Share:	$	0.23	$	0.38		(39	)	$	1.38	$	1.63		(15	)
As Adjusted
Net Income:(1)	$	2,088	$	2,284		(9	)	$	9,429	$	8,591		10
Diluted Net Income
Per Share:(1)	$	0.32	$	0.38		(16	)	$	1.48	$	1.63		(9	)
(1) - Excluding non-recurring charges of $612,000, net of tax, in the fourth quarter of 2005.

4

Total Revenues

	Three Months Ended							Year Ended
	December 31							December 31
	2005		2004		% Increase			2005		2004		% Increase
	(dollars in thousands)							(dollars in thousands)
Total Revenues:	$	16,107	$	15,138		6	%	$	65,061	$	57,881		12	%

Total revenues (net interest income plus non-interest income) for the fourth quarter increased $969,000 to $16.1 million, a 6% increase over the fourth quarter of 2004. Total revenues for the year ended December 31, 2005 increased by $7.2 million, or 12% increase, over the year ended December 31, 2004.

Net Interest Income and Net Interest Margin

 Net interest income for the fourth quarter 2005 of $13.1 million represented a 9% increase over the $12.1 million recorded a year ago. For the year ended December 31, 2005, net interest income totaled $50.9 million, up $4.3 million, or 9%, over the $46.6 million recorded in the year ended December 31, 2004. The Company’s core deposit growth fueled volume increases in the level of interest earning assets, which resulted in the increase in net interest income.

 The net interest margin for the fourth quarter of 2005 was 3.45% compared to 4.12% for the fourth quarter of 2004. The net interest margin for the year ended December 31, 2005 was 3.77%, compared to 4.28% for the year ended December 31, 2004. The decrease in net interest margin is the result of the continued increase in short-term rates as initiated by the Federal Reserve Board and the flattening of the yield curve, which has occurred over the past 12 months.

Net Interest Income and Rate/Volume Analysis

 As shown below, the increase in net interest income was due to volume increases in the Company’s earning assets, which were fueled by the Company’s continued growth of core deposits. The Company continues to grow core deposits, which has produced growth in net interest income, despite net interest margin compression brought on by the flat yield curve.

	Net Interest Income
December	Volume		Rate			Total		%
2005 vs. 2004	Increase		Change			Increase		Increase
	(dollars in thousands)
Quarter	$	2,469	$	(1,415	)	$	1,054		9	%
Year End	$	9,776	$	(5,456	)	$	4,320		9	%

The per share impact on the negative rate change was $0.15 for the fourth quarter and $0.57 for all of 2005.

5

Non-Interest Income

 Excluding net investment securities (losses), non-interest income for the fourth quarter of 2005 increased to $3.8 million from $3.0 million a year ago, a 25% increase. On the same basis, non-interest income for the year 2005 increased to $14.2 million from $11.3 million in 2004, a 26% increase. The growth in non-interest income for the fourth quarter and for the year ended December 31, 2005 was reflected in increased deposit charges and service fees, and other operating income as more fully depicted below:

	Three Months Ended								Year Ended
	December 31								December 31
						%								%
	2005			2004		Change			2005			2004		Change
	(dollars in thousands)
Deposit Charges
& Service Fees	$	3,471		$	2,787		25	%	$	12,430		$	10,252		21	%
Other Income		348			258		35			1,786			1,044		71
Subtotal	$	3,819		$	3,045		25	%	$	14,216		$	11,296		26	%
Net Investment Securities (Losses)		(859	)		-		-			(60	)		-		-
Total Non-Interest Income	$	2,960		$	3,045		(3	)%	$	14,156		$	11,296		25	%

Non-Interest Expenses

 Non-interest expenses for the fourth quarter of 2005 were $13.8 million, up 25% from $11.0 million a year ago. Non-interest expenses for the year 2005 were $50.4 million, up 19% from $42.5 million a year ago. The increases in non-interest expenses for both the quarter and the year 2005 were widespread across all categories and include the impact of four new stores opened during 2005.

Lending

 Loans increased $177 million, or 28%, to $815 million from $638 million a year ago, and the growth was represented across all loan categories. The composition of the Company’s loan portfolio is as follows:

	Loan Composition
	12/31/2005			% of Total			12/31/2004			% of Total			$ Increase			% Increase
	(dollars in thousands)
Commercial	$	233,604			29	%	$	172,733			27	%	$	60,871			35	%
Consumer		148,906			18			109,569			17			39,337			36
Commercial Real Estate		348,620			42			277,672			43			70,948			26
Residential		93,540			11			86,369			13			7,171			8
Gross Loans		824,670			100	%		646,343			100	%		178,327			28	%
Less: Reserves		(9,231	)					(7,847	)					(1,384	)
Net Loans	$	815,439					$	638,496					$	176,943			28	%

6

Asset Quality

 Asset quality continues to be strong as non-performing assets and loans past due 90 days at December 31, 2005 totaled $2.7 million, or 0.16%, of total assets, versus $1.4 million, or 0.11%, of total assets one year ago.

 Net charge-offs to average loans outstanding were only 0.02% for the entire year of 2005. The Company’s asset quality results are highlighted below:

	Year Ended
	12/31/2005			12/31/2004
Non-Performing Assets/Assets		0.16	%		0.11	%
Net Loan Charge-Offs		0.02	%		0.14	%
Loan Loss Reserve/Gross Loans		1.12	%		1.21	%
Non-Performing Loan Coverage		364	%		916	%
Non-Performing Assets/Capital
and Reserves		3	%		2	%

Investments

 The Company’s investment portfolio increased by 31%, to $687 million from $524 million one year ago, with 55% of total securities in the available for sale portfolio and 45% in the held to maturity portfolio. The investment portfolio, consisting mainly of high quality U.S. Government agency and mortgage-backed obligations, has a weighted average yield of 5.05% and a current duration of 3.9 years as of December 31, 2005.

 During the fourth quarter, the Company sold approximately $48 million of fixed rate securities with an approximate yield of 4.50% for an after tax loss of $567,000, or $0.09 per share. In turn, the Company purchased approximately $48 million of floating rate securities with a current yield of 5.20%.

Capital

 Stockholders’ equity at December 31, 2005 totaled $91.6 million, an increase of $6.6 million, or 8%, over stockholders’ equity of $85 million at December 31, 2004. Return on average stockholders’ equity (ROE) for the fourth quarter and year ended December 31, 2005 is shown in the table below:

Return on Equity
Three Months Ended		Year Ended
December 31		December 31
2005	2004	2005	2004
6.50%	12.36%	9.91%	14.78%

ROE for the fourth quarter and year 2005 reflects the impact of the additional capital raised by the Company during the fourth quarter of 2004.

7

The Company’s capital ratios at December 31, 2005 were as follows:

	Commerce			Regulatory Guidelines “Well Capitalized”
Leverage Ratio		6.69	%		5.00	%
Tier 1		9.78	%		6.00
Total Capital		10.61	%		10.00

New Stores and Expansion Plans

Ø   On October 22, 2005, the Company opened its 28^th store, located on Lancaster Avenue in Shillington, Berks County.

Ø   The Company plans to open 4 new stores in 2006 including our initial entry into the Lancaster County market.

Ø   The Company plans to open Commerce Center on Paxton Street in Dauphin County during the first quarter of 2006, which will serve as our new Headquarters, Operations and Training Facility.

Ø   The Central Penn Business Journal has named Commerce one of Central Pennsylvania’s Top Fifty Fastest Growing Companies for the 9th year in a row.

Ø   Commerce serves customers in Cumberland, Dauphin, Lebanon, York, and Berks counties.

Ø   Pennsylvania Commerce Bancorp is an independent member of the “Commerce Bank Network,” a network of banks established by Commerce Bancorp, Inc. (NYSE: CBH) based in Cherry Hill, N.J.

8

FORWARD-LOOKING STATEMENTS AND OTHER INFORMATION

 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, 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 policies, including interest rate policies of the Board of Governors of the Federal Reserve System (the “FRB”); 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 for the Company’s products and services and vice versa; the impact of changes in financial services’ laws and regulations (including laws concerning taxes, banking, securities and insurance); the impact of the rapid growth of the Company; the Company’s dependence on Commerce Bancorp, Inc. to provide various services to the Company; changes in the Company’s allowance for loan losses; effect of terrorists attacks and threats of actual war; 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.

 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.

9

EX-99.2

Pennsylvania Commerce Bancorp, Inc.
Selected Consolidated Financial Data
(Unaudited)
	At or for the						At or for the
	Three Months Ended						Twelve Months Ended
	December 31,						December 31,
					%							%
(in thousands, except per share amounts)	2005		2004		Change		2005		2004			Change
Income Statement Data:
Net interest income	$ 13,147		$ 12,093		9	%	$ 50,905		$ 46,585			9	%
Provision for loan losses	140		721		(81)	%	1,560		2,646			(41)	%
Noninterest income	2,960		3,045		(3)	%	14,156		11,296			25	%
Noninterest operating expenses	13,790		11,010		25	%	50,403		42,466			19	%
Net income	1,476		2,284		(35)	%	8,817		8,591		+	3	%
Per Common Share Data:
Net income: Basic	$ 0.24		$ 0.41		(41)	%	$ 1.47		$ 1.75			(16)	%
Net income: Diluted	0.23		0.38		(39)	%	1.38		1.63			(15)	%
Book Value							$ 15.07		$ 14.31		+	5	%
Weighted average shares outstanding:
Basic	5,994		5,516				5,948		4,856
Diluted	6,366		5,912				6,318		5,218
Balance Sheet Data:
Total assets							$ 1,641,121		$ 1,277,367			28	%
Loans (net)							815,439		638,496		+	28	%
Allowance for loan losses							9,231		7,847			18	%
Investment Securities							687,102		523,982			31	%
Total deposits							1,371,062		1,160,547			18	%
Core deposits							1,309,926		1,108,095		+	18	%
Stockholders' equity							91,643		85,039		+	8	%
Capital:
Stockholders' equity to total assets							5.58	%	6.66	%
Leverage Ratio							6.69		7.79
Risk based capital ratios:
Tier 1							9.78		11.57
Total Capital							10.61		12.49
Performance Ratios:
Cost of funds	2.55	%	1.55	%			2.12	%	1.32	%
Deposit Cost of Funds	2.01		1.41				1.73		1.09
Net interest margin	3.45		4.12				3.77		4.28
Return on average assets	0.36		0.72				0.61		0.73
Return on average total stockholders' equity	6.50		12.36				9.91		14.78
Asset Quality:
Net charge-offs to average loans outstanding							0.02	%	0.14	%
Nonperforming assets to total period-end assets							0.16		0.11
Allowance for loan losses to total period-end loans							1.12		1.21
Allowance for loan losses to nonperforming loans							364		916
Nonperforming assets to capital and reserves							3	%	2	%

Pennsylvania Commerce Bancorp, Inc. and Subsidiaries Average Balances and Net Interest Income
(unaudited)
	Quarter ended,
	December 2005							September 2005							December 2004
	Average				Average			Average				Average			Average				Average
	Balance		Interest		Rate			Balance		Interest		Rate			Balance		Interest		Rate
(dollars in thousands)
Earning Assets
Investment securities
Taxable	$	720,099	$	9,096		5.05	%	$	604,417	$	7,548		5.00	%	$	502,689	$	6,356		5.06	%
Tax-exempt		2,616		32		4.89			7,403		111		6.00			6,830		100		5.86
Total securities		722,715		9,128		5.05			611,820		7,659		5.01			509,519		6,456		5.07
Federal funds sold		0		0					325		3		3.61			14,293		66		1.85
Loans receivable
Mortgage and construction		419,512		7,225		6.83			394,589		6,705		6.74			362,786		5,945		6.52
Commercial loans and lines of credit		213,487		4,016		7.46			198,775		3,521		7.03			162,555		2,523		6.17
Consumer		150,459		2,399		6.33			138,815		2,159		6.17			111,558		1,567		5.59
Tax-exempt		13,691		155		4.53			9,308		108		4.64			6,292		75		4.77
Total loans receivable		797,149		13,795		6.87			741,487		12,493		6.76			643,191		10,110		6.25
Total earning assets	$	1,519,864	$	22,923		6.00	%	$	1,353,632	$	20,155		5.91	%	$	1,167,003	$	16,632		5.67	%
Sources of Funds
Interest-bearing deposits
Regular savings	$	349,729	$	1,669		1.89	%	$	330,563	$	1,378		1.65	%	$	309,258	$	926		1.19	%
Interest checking and money market		548,212		4,132		2.99			490,208		3,193		2.58			444,801		1,904		1.70
Time deposits		186,364		1,539		3.28			179,493		1,359		3.00			172,561		1,118		2.58
Public funds time		38,623		358		3.68			31,429		265		3.35			38,669		201		2.07
Total interest-bearing deposits		1,122,928		7,698		2.72			1,031,693		6,195		2.38			965,289		4,149		1.71
Short-term borrowings		163,410		1,723		4.13			93,472		861		3.65			5,979		35		2.33
Junior subordinated debt		13,600		355		10.44			13,600		354		10.41			13,600		355		10.44
Total interest-bearing liabilities		1,299,938		9,776		2.98			1,138,765		7,410		2.58			984,868		4,539		1.83
Noninterest-bearing funds (net)		219,926							214,867							182,135
Total sources to fund earning assets	$	1,519,864		9,776		2.55		$	1,353,632	$	7,410		2.17		$	1,167,003		4,539		1.55
Net interest income and margin			$	13,147		3.45	%			$	12,745		3.74	%			$	12,093		4.12	%
Other Balances
Cash and due from banks	$	40,389						$	48,936						$	38,787
Other assets		68,539							61,593							53,152
Total assets		1,628,792							1,464,161							1,258,942
Demand deposits (noninterest-bearing)		232,279							230,992							191,311
Other liabilities		6,435							3,487							9,220
Stockholders' equity		90,140							90,917							73,543