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 September 30, 1999
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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.
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(Exact name of small business issuer as specified in its charter)
Pennsylvania 25-1834776
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(State or other jurisdiction of (IRS Employer Identification
incorporation or organization) Number)
100 Senate Avenue, P.O. Box 8599, Camp Hill, PA 17001-8599
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(Address of principal executive offices)
(717) 975-5630
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(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: 1,560,235 Common shares
outstanding at 10/31/99
Transitional Small Business Disclosure Format (check one): Yes __ No X
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PENNSYLVANIA COMMERCE BANCORP, INC.
INDEX
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Page
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PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets (Unaudited).........................................................3
September 30, 1999, and December 31, 1998
Consolidated Statements of Income (Unaudited)...................................................4
Three months ended September 30, 1999 and September 30, 1998
Nine months ended September 30, 1999 and September 30, 1998
Consolidated Statement of Stockholders' Equity (Unaudited).....................................5
Nine months ended September 30, 1999 and September 30, 1998
Consolidated Statements of Cash Flows (Unaudited)...............................................6
Nine months ended September 30, 1999, and September 30, 1998
Notes to Consolidated Financial Statements (Unaudited)..........................................7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.......................................................................9
Item 3. Quantitative and Qualitative Disclosures about Market Risk.....................................20
PART II. OTHER INFORMATION
Item 1. Legal Proceedings..............................................................................20
Item 6a. Exhibits
Exhibit 11.....................................................................................20
Exhibit 27.....................................................................................20
Item 6b. Reports on Form 8-K............................................................................21
Signatures.....................................................................................22
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PENNSYLVANIA COMMERCE BANCORP, INC.
Consolidated Balance Sheets (Unaudited)
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September 30, December 31,
( in thousands, except share amounts) 1999 1998
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Assets
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Cash and due from banks $ 12,271 $ 11,975
Federal funds sold 2,400 11,900
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Cash and cash equivalents 14,671 23,875
Securities, available for sale at fair value 87,965 96,993
Securities, held to maturity at cost
(fair value 1999: $28,777; 1998: $11,524 ) 29,597 11,493
Loans, held for sale
(fair value 1999: $4,167; 1998: $5,726 ) 4,109 5,641
Loans receivable :
Real estate:
Commercial mortgage 100,140 68,663
Construction and land development 17,454 13,286
Residential mortgage 32,927 31,694
Tax-exempt 351 395
Commercial business 18,970 19,614
Consumer 20,745 20,868
Lines of credit 15,425 12,601
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206,012 167,121
Less: Allowance for loan losses 2,690 2,232
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Net loans receivable 203,322 164,889
Premises and equipment, net 13,322 13,420
Accrued interest receivable 1,925 1,824
Other assets 2,197 1,188
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Total assets $357,108 $ 319,323
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Liabilities
Deposits :
Noninterest-bearing $ 65,435 $ 60,699
Interest-bearing 268,932 237,038
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Total deposits 334,367 297,737
Accrued interest payable 895 518
Other liabilities 1,447 623
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Total liabilities 336,709 298,878
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Stockholders'
Equity Preferred stock - Series A noncumulative;
$10.00 par value; 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 - 1999: 1,560,235; 1998: 1,557,375 1,560 1,557
Surplus 16,777 16,728
Retained earnings 3,654 1,546
Accumulated other comprehensive income (loss) (1,992) 214
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Total stockholders' equity 20,399 20,445
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Total liabilities and stockholders' equity $357,108 $ 319,323
==========================================================================================================
</TABLE>
See accompanying notes.
3
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PENNSYLVANIA COMMERCE BANCORP, INC.
Consolidated Statements of Income (Unaudited)
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Three Months Nine Months
Ended Sept 30, Ended Sept 30,
(in thousands, except per share amounts) 1999 1998 1999 1998
- ------------------------------------------------------------------------------------------------------------------------
Interest
Income Loans receivable, including fees :
Taxable $ 4,431 $ 3,509 $ 12,135 $ 9,979
Tax - exempt 5 5 15 17
Securities :
Taxable 1,917 1,539 5,442 4,027
Tax - exempt 0 0 0 7
Federal funds sold 71 209 336 479
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Total interest income 6,424 5,262 17,928 14,509
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Interest
Expense Deposits 2,519 2,397 7,158 6,359
Other 9 0 14 0
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Total interest expense 2,528 2,397 7,172 6,359
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Net interest income 3,896 2,865 10,756 8,150
Provision for loan losses 232 150 602 377
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Net interest income after provision for loan losses 3,664 2,715 10,154 7,773
- ------------------------------------------------------------------------------------------------------------------------
Noninterest
Income Service charges and other fees 908 726 2,555 1,982
Other 97 70 264 202
Gain on sale of securities available for sale 0 128 1 386
Other real estate (net) (2) (15) (5) (5)
Gain on sale of loans 332 82 619 389
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Total noninterest income 1,335 991 3,434 2,954
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Noninterest
Expenses Salaries and employee benefits 1,583 1,311 4,528 3,671
Occupancy 425 374 1,246 1,069
Furniture and equipment 244 220 698 631
Advertising and marketing 345 255 1,035 765
Data processing 244 208 697 574
Postage and supplies 120 126 378 343
Audits , regulatory fees and assessments 33 49 138 144
Other 602 423 1,574 1,185
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Total noninterest expenses 3,596 2,966 10,294 8,382
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Income before income taxes 1,403 740 3,294 2,345
Provision for federal income taxes 480 248 1,126 780
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Net income $ 923 $ 492 $2,168 $ 1,565
=======================================================================================================
Net income per common share : Basic $ 0.58 $ 0.30 $ 1.35 $ 0.97
Diluted 0.54 0.28 1.26 0.90
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</TABLE>
See accompanying notes.
4
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PENNSYLVANIA COMMERCE BANCORP, INC.
Consolidated Statement of Stockholders' Equity (Unaudited)
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Accumulated
Other
Preferred Common Retained Comprehensive
( in thousands ) Stock Stock Surplus Earnings Income (Loss) Total
- -------------------------------------------------------------------------------------------------------------------------
Balance : December 31, 1997 $ 400 $1,475 $14,407 $1,708 $ 328 $18,318
Comprehensive income:
Net income - - - 1,565 - 1,565
Change in unrealized gains
(losses) on securities, net of
reclassification adjustment 28 28
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Total comprehensive income (loss) 1,593
Dividends declared on preferred stock - - - (60) - (60)
Common stock issued under stock option plans - 7 40 - - 47
- -------------------------------------------------------------------------------------------------------------------------
Balance : September 30, 1998 $ 400 $1,482 $14,447 $3,213 $ 356 $19,898
=========================================================================================================================
Accumulated
Other
Preferred Common Retained Comprehensive
( in thousands ) Stock Stock Surplus Earnings Income (Loss) Total
- -------------------------------------------------------------------------------------------------------------------------
Balance : December 31, 1998 $ 400 $1,557 $16,728 $1,546 $ 214 $20,445
Comprehensive income:
Net income - - - 2,168 - 2,168
Change in unrealized gains
(losses) on securities, net of
reclassification adjustment - - - - (2,206) (2,206)
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Total comprehensive income (loss) - - - - (38)
Dividends declared on preferred stock - - - (60) - (60)
Common stock issued under stock option plans - 3 49 - - 52
- -------------------------------------------------------------------------------------------------------------------------
Balance : September 30, 1999 $ 400 $1,560 $16,777 $3,654 $ (1,992) $20,399
=========================================================================================================================
</TABLE>
See accompanying notes.
5
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PENNSYLVANIA COMMERCE BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
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Nine Months
Ended September 30,
( in thousands ) 1999 1998
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Operating
Activities Net income $ 2,168 $ 1,565
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses 602 377
Provision for depreciation and amortization 853 768
Deferred income taxes (151) (133)
Amortization of securities premiums and accretion of discounts, net 253 139
Net gain on sale of securities available for sale (1) (386)
Net proceeds from sale of loans 36,137 43,530
Loans originated for sale (33,986) (40,055)
Gain on sales of loans and other real estate owned (619) (412)
(Decrease) in accrued interest receivable and other assets (60) (148)
Increase in accrued interest payable and other liabilities 1,201 602
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Net cash provided by operating activities 6,397 5,847
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Investing
Activities Securities held to maturity :
Proceeds from principal repayments and maturities 1,990 4,041
Purchases (20,107) 0
Securities available for sale :
Proceeds from principal repayments and maturities 11,564 9,813
Proceeds from sales 5,357 22,141
Purchases (11,637) (64,581)
Proceeds from sale of loans receivable 5,418 0
Net increase in loans receivable (44,053) (32,504)
Purchases of premises and equipment (755) (2,937)
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Net cash (used) by investing activities (52,223) (64,027)
- ---------------------------------------------------------------------------------------------------------------------------
Financing
Activities Net increase in demand deposits, interest checking,
money market and savings deposits 23,191 21,689
Net increase in time deposits 13,439 40,573
Proceeds from common stock options exercised 52 47
Cash dividends on preferred stock (60) (60)
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Net cash provided by financing activities 36,622 62,249
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(Decrease) increase in cash and cash equivalents (9,204) 4,069
Cash and cash equivalents at beginning of year 23,875 25,784
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Cash and cash equivalents at end of period $ 14,671 $ 29,853
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</TABLE>
See accompanying notes.
6
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PENNSYLVANIA COMMERCE BANCORP, INC.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1999
(Unaudited)
Note 1. BASIS OF PRESENTATION
The consolidated financial statements include Pennsylvania Commerce Bancorp,
Inc. ("the Company") and the wholly-owned subsidiary Commerce Bank/Harrisburg,
N.A. ("the Bank"). All significant intercompany accounts and transactions have
been eliminated. Currently, the only asset of the Company is its investment in
the Bank.
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 nine month period ended September
30, 1999, are not necessarily indicative of the results that may be expected for
the year ended December 31, 1999.
In addition to historical information, this Form 10-Q Report contains
forward-looking statements. The forward-looking statements contained herein are
subject to certain risks and uncertainties that could cause actual results to
differ materially from those projected in the forward-looking statements.
Important factors that might cause such differences include, but are not limited
to, those discussed in the section entitled "Management's Discussion and
Analysis of Financial Condition and Results of Operations". Readers are
cautioned not to place undue reliance on these forward-looking statements, which
reflect management's analysis only as of the date hereof. The Company undertakes
no obligation to publicly revise or update these forward-looking statements to
reflect events or circumstances that arise after the date hereof. Readers should
carefully review the risk factors described in other documents the Company files
from time to time with the Securities and Exchange Commission.
For further information, refer to the financial statements and footnotes thereto
included in the Commerce Bank/Harrisburg, N.A., Annual Report for the year ended
December 31, 1998.
Note 2. SIGNIFICANT ACCOUNTING POLICIES
Stock Dividends and Per Share Data
On January 15, 1999, the Board of Directors declared a 5% stock dividend on
common stock outstanding, paid on February 19, 1999, to stockholders of record
on January 29, 1999. Payment of the stock dividend resulted in the issuance of
73,952 additional common shares and cash of $6,974 in lieu of fractional shares.
The effect of the 5% common stock dividend has been recorded as of December 31,
1998.
Recently Issued FASB Statement
In July 1999, the Financial Accounting Standards Board issued Statement No. 137,
"Accounting
7
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for Derivative Instruments and Hedging Activities - Deferral of the Effective
Date of FASB Statement No. 133 - an amendment of FASB Statement No. 133."
Statement No. 137 delays the effective date required for adoption of Statement
No. 133 by one year. Therefore, the Company is required to adopt the statement
on January 1, 2001. The adoption of the statement is not expected to have a
significant impact on the financial condition or results of operations of the
Company.
Reclassifications
Certain amounts in the 1998 financial statements have been reclassified to
conform with the 1999 presentation. These reclassifications had no impact on the
net income reported for the nine months ended September 30, 1999 or 1998.
Note 3. COMMITMENTS AND CONTINGENCIES
In July 1995, a Company borrower filed a multi-count lender liability complaint
against the Company seeking unspecified damages. The Company filed preliminary
objections to the complaint. The Court sustained the preliminary objections in
part and denied them in part. An amended complaint was filed and the Court
denied the Company's preliminary objections to the amended complaint. The
Company filed its answer with new matter and a counterclaim. The Company
believed that the complaint was without merit. The complaint was resolved with
the Company borrower, in the second quarter of 1999 with nominal cost to the
Company. In July 1999, the borrower withdrew the complaint.
The Company is also subject to certain 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 has entered into an agreement to purchase the parcel of land at 1120
Carlisle Road, Camp Hill, Pennsylvania, and intends to construct a full-service
branch office on this land in the year 2000.
The Company has entered into a land lease for the premises located on lot #2, in
Palmyra Shopping Center, on Route #422 in Palmyra, Pennsylvania. The Company
intends to construct a full-service branch office on this land in the year 2000.
The land lease commenced September 13, 1999 and has an initial term of 20 years.
In addition, the Company has an option to renew the land lease for four
additional 5-year terms. Initial annual rent payments equal $60,000. Rent is
subject to change on terms set forth in the lease agreement.
8
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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 88% to $923,000 as compared to $492,000 for
the third quarter of 1998. At September 30, 1999, the Company had total assets
of $357.1 million, total loans (including loans held for sale) of $210.1
million, and total deposits of $334.4 million.
RESULTS OF OPERATIONS
Net Interest Income and Net Interest Margin
The largest source of the Company's income is net interest income. 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. The principal source of funding
for such assets is deposits.
Interest income increased by $1.2 million, or 22%, over the third quarter of
1998. Interest earning assets averaged $326.1 million for the third quarter of
1999 as compared to $264.6 million for the same period in 1998. The yield on
earning assets for the third quarter of 1999 was 7.82%, a decrease of 9 basis
points from the comparable period in 1998.
Interest expense for the third quarter of 1999 increased by $131,000, or 5%,
compared to the third quarter of 1998. This increase was primarily attributable
to an increase in the level of average interest-bearing liabilities from $221.6
million during the third quarter of 1998 to $267.0 million during the third
quarter of 1999. The average rate paid on these liabilities for the third
quarter of 1999 was 3.76%, a decrease of 53 basis points from the comparable
period in 1998. The level of average time deposit account balances (excluding
public funds) increased from $94.8 million for the third quarter of 1998 to
$108.2 million for the quarter ended September 30, 1999 resulting in a 5%
increase in interest expense on these accounts from $1.3 million for the quarter
ended September 30, 1998, to $1.4 million for the third quarter of 1999. This
large increase in time deposits was due to the promotional products offered at
the opening of two branches, one in the spring and one in the fall of 1998. The
Company's aggregate cost of funds was 3.04% for the third quarter of 1999, a
decrease of 55 basis points from the prior year.
Net interest income for the third quarter of 1999 increased by $1.0 million, or
36%, over the same period in 1998. 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 increased to 4.06% during
the third quarter of 1999 from 3.60% during the same period of the previous
year. The net interest margin increased by 44 basis points from
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4.30% for the third quarter 1998 to 4.74% during the third quarter of 1999.
For the nine months ended September 30, 1999, interest income increased by $3.4
million, or 24%, over the same period in 1998. As with the third quarter, the
increase for the first nine months was related to volume increases in the level
of interest earning assets partially offset by a decrease in the level of yields
earned on those assets. Interest earning assets for the first nine months of
1999 averaged $311.0 million versus $240.2 million for the comparable period in
1998. The yield on those assets decreased from 8.08% during the first nine
months of 1998, to 7.71% for the first nine months of 1999.
Interest expense for the first nine months of 1999 totaled $7.2 million, an
increase of $813,000, or 13%, over the first nine months of 1998. The level of
average interest-bearing liabilities increased from $197.7 million for the first
nine months of 1998 to $316.7 million for the first nine months of 1999. The
Company's cost of funds for the first nine months of 1999 was 3.07%, down 47
basis points from 3.54% for the comparable period in the prior year.
Net interest income for the first nine months of 1999 increased by $2.6 million,
or 32%, over the same period in 1998. The Company's net interest margin
increased from 4.55% for the first nine months of 1998 to 4.60% for the first
nine months of 1999.
Noninterest Income
Noninterest income for the third quarter of 1999 increased by $344,000, or 35%,
from the same period in 1998. Recurring core noninterest income increased from
$878,000 in the third quarter of 1998 to $1.0 million for the same period in
1999. The increase is attributable to service charges and fees associated with
servicing a higher volume of deposit accounts.
Total noninterest income for the first nine months of 1999 totaled $3.4 million,
an increase of $480,000, or 16%, over the first nine months of the prior year.
Included in noninterest income for the first nine months of 1999 is nonrecurring
income of $502,000 as a result of a $106,000 gain on the sale of student loans,
net securities gain of $1,000, a $5,000 loss from Other Real Estate Owned
(OREO), and $400,000 income from the sale of Small Business Administration
loans. Included in noninterest income for the first nine months of 1998 is
nonrecurring income of $543,000 as a result of a $162,000 gain on the sale of
student loans, a $386,000 gain on the sale of investments from the Securities
Available for Sale portfolio, and $5,000 loss from the sale of OREO. Excluding
these transactions, recurring core noninterest income for the first nine months
of 1999 totaled $2.9 million as compared to $2.4 million for the first nine
months of 1998, an increase of 22%. The increase is mainly attributable to
additional service charges and fees associated with servicing a higher volume of
deposit and loan accounts.
Noninterest Expenses
For the third quarter of 1999, noninterest expenses increased by $630,000, or
21%, over the same period in 1998. Staffing levels, occupancy, furniture and
equipment, and related expenses increased as a result of opening two branch
offices in 1998 (one each in April and August) as well as two Loan Production
Offices opening in December 1998. A comparison of noninterest expense for
certain categories for the three months ended September 30, 1999, and September
30, 1998, is presented in the following paragraphs.
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Salary expenses and employee benefits, which represent the largest component of
noninterest expenses, increased by $272,000, or 21%, for the third quarter of
1999 over the third quarter of 1998. This increase is consistent with increases
in staff levels to handle Company growth from third quarter 1998 to third
quarter 1999, including the additional staff of the two branch offices opened in
1998 and the two Loan Production Offices opened in December 1998.
Occupancy expenses totaled $425,000 for the three months ended September 30,
1999, an increase of $51,000, or 14%, over the comparable period of 1998.
Increased occupancy expenses relate to the two branch offices and two Loan
Production Offices opened in 1998.
Furniture and equipment expenses of $244,000 were $24,000, or 11%, higher for
the third quarter of 1999 than for the three months ended September 30, 1998.
This increase was the result of higher levels of depreciation costs for
furniture and equipment incurred with the addition of the two branch offices and
two Loan Production Offices opened in 1998.
Advertising and marketing expenses totaled $345,000 for the three months ended
September 30, 1999, an increase of $90,000, or 35%, over the third quarter of
1998. This increase was primarily the result of increased advertising efforts in
each of the Company's markets. These markets will continue to expand as the
branch network grows.
Data processing expenses of $244,000 for the third quarter of 1999 were $36,000,
or 17%, more than the third quarter of 1998. The increase was due to a
combination of increased costs associated with processing additional
transactions, both over-the-counter and ATM (due to growth in the number of
accounts), and the costs associated with the increased volume of users of our
Home Banking product which is offered to our customers at no charge. Also
contributing to the increased expenses is the cost associated with higher
volumes of customer transactions on the Visa Check Card product.
Postage and supplies expense of $120,000 represented a $6,000, or 5%, decrease
from the third quarter of the prior year. This was due to increased usage of
stationery and supplies, and other office expenses related to growth in volume
of customers and customer transactions offset by a decrease in postage expense
resulting from the efforts to obtain additional postage discounts by presorting
increased volumes of outgoing mail.
Other noninterest expenses increased by $179,000, or 42%, for the three-month
period ended September 30, 1999, as compared to the same period in 1998. The
increase is mainly attributable to increased provisions for non-credit related
losses as well as $64,000 in costs associated with the formation of the holding
company, Pennsylvania Commerce Bancorp, Inc. In late December 1998, the Company
opened two Loan Production Offices, one in Camp Hill and one in York. Costs
associated with these two offices not already detailed above are included in
this category.
For the first nine months of 1999, total noninterest expenses increased by $1.9
million, or 23%, over the comparable period in 1998. A comparison of noninterest
expense for certain categories for these two periods is discussed below.
Salary expense and employee benefits increased by $857,000, or 23%, over the
first nine months of 1998. The increase was due to normal salary adjustments and
additional salary and benefits costs due to an increase in the level of
full-time equivalent employees from 205 at September 30, 1998 to 227 at
September 30, 1999.
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Occupancy expenses for the first nine months of 1999 increased by $177,000, or
17%, from the first nine months of 1998 while furniture and equipment increased
by $67,000, or 11%, from $631,000 to $698,000. These increases are the result of
the increased furniture and equipment depreciation and the related occupancy
costs associated with the opening of two new branches and two Loan Processing
Centers since the spring of 1998.
Advertising and marketing expenses totaled $1.0 million for the nine months
ended September 30, 1999, an increase of $270,000, or 35%, over the first nine
months of 1998. This increase was primarily the result of advertising in
multiple markets. These markets will continue to expand as the branch network
grows.
Data processing expenses increased $123,000, or 21%, for the first nine months
of 1999 as compared to the first nine months of 1998. The increase in data
processing expenses is a combination of increased costs associated with
processing higher volumes of automatic teller machine (ATM) transactions as well
as the installation of two additional ATM's at the new branches as previously
mentioned. Also contributing to the increased expenses is the cost associated
with higher volumes of customer transactions on the Visa Check Card and Home
Banking products.
Postage and office supplies increased $35,000, or 10%, over the first nine
months of 1998. The increase in supplies expense is a result of increased usage
of such items related to additional staff levels as well as an increase in the
number of accounts serviced.
Other noninterest expenses for the first nine months of 1999 were $1.6 million
compared to $1.2 million for the similar period in 1998. Provisions for
non-credit related losses increased by $65,000 in 1999 over the first nine
months in 1998. Nonrecurring formation expenses for the holding company,
Pennsylvania Commerce Bancorp, Inc, were $64,000. Correspondent bank charges
increased from $51,000 in the first none months of 1998 to $109,000 in the same
period in 1999. The increase was due to an increase in processing volume related
to an increase in deposits. The remaining increase was associated with other
general branch-related 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 other real estate expenses) less
noninterest income (exclusive of nonrecurring gains), divided by average assets.
This ratio equaled 2.84% for the three months ended September 30, 1999, the same
as the three months ended September 30, 1998, and 2.89% for the first nine
months of 1999 compared to 3.00% for the comparable period in 1998. Another
productivity measure is the operating efficiency ratio. This ratio expresses the
relationship of noninterest expenses (excluding other real estate expenses) to
net interest income plus noninterest income (excluding nonrecurring gains). For
the quarter ended September 30, 1999, the operating efficiency ratio was 68.72%
compared to 79.24% for the similar period in 1998. For the nine months ended
September 30, 1999, this ratio was 73.07% compared to 79.37% for the nine months
ended September 30, 1998.
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Provision for Federal Income Taxes
The provision for federal income taxes was $480,000 for the third quarter of
1999 as compared to $248,000 for the same period in 1998. For the nine months
ended September 30, the provision was $1.1 million and $780,000 for 1999 and
1998 respectively. The effective tax rate, which is the ratio of income tax
expense to income before income taxes, was 34% for the first nine months of 1999
and 33.3% for the same period in 1998. The effective tax rate for 1998 was less
than the federal statutory rate of 34% primarily because of a higher level of
tax-exempt security and loan income.
Net Income
Net income for the third quarter of 1999 was $923,000, an increase of $431,000,
or 88%, over the $492,000 recorded in the third quarter of 1998. The increase
was due to an increase in net interest income of $1.0 million, an increase in
noninterest income of $344,000, offset partially by an increase in noninterest
expenses of $630,000, an increase of $82,000 in the provision for loan losses,
and an increase of $232,000 in the provision for income taxes.
Net income for the first nine months of 1999 was $2.2 million as compared to
$1.6 million recorded in the first nine months of 1998. The increase was due to
an increase in net interest income of $2.6 million, an increase in noninterest
income of $480,000, offset partially by an increase of $1.9 million in
noninterest expenses, an increase of $225,000 in the provision for loan losses,
and an increase of $346,000 in the provision for income taxes.
Basic earnings per common share, after adjusting for a 5% common stock dividend
paid in February 1999, increased to $0.58 per common share for the third quarter
of 1999 compared to $0.30 for the same period in 1998. Diluted earnings per
common share were $0.54 for the third quarter of 1999 and $0.28 for the same
period in 1998.
Basic earnings per common share, for the first nine months of the year, after
adjusting for a 5% common stock dividend paid in February 1999, increased to
$1.35 per share as compared to $0.97 per common share for the first nine months
of 1998. Diluted earnings per common share were $1.26 for the first nine months
of 1999 and $0.90 for the same period in 1998.
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 third quarter of
1999 was 1.03% as compared to 0.67% for the third quarter of 1998. The ROA for
the first nine months of 1999 and 1998 was 0.85% and 0.78%, 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 third quarter of 1999 was 18.32%,
as compared to 10.03% for the third quarter of 1998. The annualized ROE for the
first nine months of 1999 was 14.27%, as compared to 11.01% for the first nine
months of 1998.
13
<PAGE>
FINANCIAL CONDITION
Securities
During the first nine months of 1999, securities available for sale decreased by
$9.0 million (net of unrealized depreciation) from $97.0 million at December 31,
1998 to $88.0 million at September 30, 1999 primarily as a result of the
purchase of $11.6 million in U.S. Government agency and mortgage-backed
securities, offset by the sale of $5.4 million in mortgage-backed securities and
$11.6 million of principal repayments and calls on mortgage-backed securities
and U.S. Government agency securities and unrealized loss of $3.3 million in the
portfolio.
The securities available for sale portfolio is comprised of U.S. Treasury Notes,
U.S. Government agency securities, mortgage-backed securities, trust preferred
debt securities, and equity securities. The weighted average life of the
securities available for sale portfolio was 4.7 years at September 30, 1999 with
a weighted average yield of 6.62%.
During the first nine months of 1999, securities held to maturity increased from
$11.5 million to $29.6 million primarily as a result of the purchase of $20.1
million in U.S. Government agency and mortgage-backed securities, offset by
principal repayments of $2.0 million. The securities held in this portfolio
include U.S. Government agency securities and mortgage-backed securities. The
weighted average life of the securities held to maturity portfolio was 5.5 years
at September 30, 1999 with a weighted average yield of 6.53%.
Federal funds sold decreased by $9.5 million during the first nine months of
1999 from $11.9 million at December 31, 1998 to $2.4 million at September 30,
1999. Total securities and federal funds sold aggregated $120.0 million at
September 30, 1999, and represented 34% of total assets.
The average yield on the combined securities portfolio for the first nine months
of 1999 was 6.40%, as compared to 6.69% for the similar period of 1998. The
average yield earned on federal funds sold during the first nine months of 1999
was 4.70%, down 71 basis points from 5.41% earned during the first nine months
of 1998.
Loans Held for Sale
Loans held for sale are comprised of student loans and residential mortgage
loans that the Company originates with the intention of selling in the future.
During the first nine months of 1999, total loans held for sale decreased by
$1.5 million from $5.6 million at December 31, 1998, to $4.1 million at
September 30, 1999. The decrease in loans held for sale in the first nine months
of 1999 was the result of the sale of $7.1 million of student loans offset by
originations of $5.6 million in new loans held for sale. Loans held for sale
represented 1% of total assets at September 30, 1999, as compared to 2% at
December 31, 1998.
Loans Receivable
During the first nine months of 1999, total loans receivable increased by $38.9
million from $167.1 million at December 31, 1998, to $206.0 million at September
30, 1999. The increase in loans receivable in the first nine months of 1999 was
primarily in commercial mortgage loans. Loans receivable represented 62% of
total deposits and 58% of total assets at September 30, 1999, as compared to 56%
and 52%, respectively, at December 31, 1998.
14
<PAGE>
Loan and Asset Quality and Allowance for Loan Losses
Total nonperforming assets (nonperforming loans and other real estate, excluding
loans past due 90 days or more and still accruing interest) at September 30,
1999, were $686,000, or 0.19%, of total assets as compared to $286,000 or 0.09%
of total assets at December 31, 1998. Other real estate owned totaled $92,000 at
September 30, 1999, and $11,000 as of December 31, 1998.
The following summary presents information regarding nonperforming loans and
assets as of September 30, 1999 and 1998 and the year ended December 31, 1998.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Nonperforming Loans and Assets
=====================================================================================
(dollars in thousands) September 30, December 31, September 30,
1999 1998 1998
- -------------------------------------------------------------------------------------
Nonaccrual loans:
Commercial $150 $227 $162
Consumer 134 23 26
Real estate
Construction 0 0 0
Mortgage 310 25 139
- -------------------------------------------------------------------------------------
Total nonaccrual loans 594 275 327
Restructured loans 0 0 0
- -------------------------------------------------------------------------------------
Total nonperforming loans 594 275 327
Other real estate 92 11 10
- -------------------------------------------------------------------------------------
Total nonperforming assets 686 286 337
- -------------------------------------------------------------------------------------
Loans past due 90 days or more 0 1 0
- -------------------------------------------------------------------------------------
Total nonperforming assets and
loans past due 90 days or more $686 $287 $337
- -------------------------------------------------------------------------------------
Nonperforming loans to total loans 0.29% 0.16% 0.20%
Nonperforming assets to total assets 0.19% 0.09% 0.11%
=====================================================================================
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
=====================================================================================
Allowance for Loan Losses
=====================================================================================
(dollars in thousands) September 30, December 31,
1999 1998
- -------------------------------------------------------------------------------------
Balance at beginning of period $2,232 $1,699
Provisions charged to operating expenses 602 542
- -------------------------------------------------------------------------------------
2,834 2,241
Recoveries of loans previously charged-off:
Commercial 6 4
Consumer 5 3
Real estate 0 0
- -------------------------------------------------------------------------------------
Total recoveries 11 7
Loans charged-off:
Commercial 151 2
Consumer 3 14
Real estate 1 0
- -------------------------------------------------------------------------------------
Total charged-off 155 16
- -------------------------------------------------------------------------------------
Net charge-offs (recoveries) 144 9
- -------------------------------------------------------------------------------------
Balance at end of period $2,690 $2,232
- -------------------------------------------------------------------------------------
Net charge-offs (recoveries) as a percentage of
Average loans outstanding 0.08% 0.01%
Allowance for loan losses as a percentage of
Period-end loans 1.33% 1.34%
=====================================================================================
</TABLE>
15
<PAGE>
Deposits
Total deposits at September 30, 1999, were $334.4 million, up $36.7 million, or
12%, over total deposits of $297.7 million at December 31, 1998. The average
balances and weighted average rates paid on deposits for the first nine months
of 1999 and 1998 are presented in the following table.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
==========================================================================================
Nine months Ended September 30,
1999 1998
- ------------------------------------------------------------------------------------------
Average Average Average Average
(dollars in thousands) Balance Rate Balance Rate
- ------------------------------------------------------------------------------------------
Demand deposits:
Noninterest-bearing $ 63,245 $ 48,128
Interest-bearing (money market
and checking) 57,128 2.37% 32,521 2.45%
Savings 76,064 2.80 68,788 3.52
Time deposits 120,386 5.06 96,421 5.48
- ------------------------------------------------------------------------------------------
Total deposits $316,823 $245,858
==========================================================================================
</TABLE>
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 market 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 these
policies. The guidelines established by ALCO are reviewed by the Company's Board
of Directors.
Management considers the simulation of net interest income in different interest
rate environments to be the best indicator of the Company's 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
proportionate 200 basis point change during the next year, with rates remaining
constant in the third year. The Company's ALCO policy has established that
interest income sensitivity will be considered acceptable if net income in the
above interest rate scenario is within 15% of net income in the flat rate
scenario in the first year and within 30% over the two year time frame. At
September 30, 1999, the Company's income simulation model indicates net income
would increase by 14% and 19% in
16
<PAGE>
the first year and over a two year time frame, respectively, if rates decreased
as described above. The model projects that net income would increase by 5% and
9% in the first year and over a two year time frame, respectively, if rates
increased as described above. All of these net income projections are within an
acceptable level of interest rate risk pursuant to the policy established by
ALCO.
In the event the Company's interest rate risk models indicate an unacceptable
level of risk, the Company could undertake a number of actions that would reduce
this risk, including the sale of a portion of its available for sale portfolio,
or the use of risk management strategies such as interest rate swaps and caps.
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 change in rates. The Company's ALCO policy indicates that the level
of interest rate risk is unacceptable if the immediate 200 basis point change
would result in the loss of 60% or more of the excess of market value over book
value in the current rate scenario. At September 30, 1999, the market value of
equity model 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 September 30, 1999, the total potential liquidity for the Company
through these secondary sources was $133 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 September 30, 1999, stockholders' equity totaled $20.4 million, the same as
at December 31, 1998. Stockholders' equity at September 30, 1999 included $2.0
million in unrealized depreciation, net of income taxes, on securities available
for sale. Excluding this unrealized depreciation, gross stockholders' equity
increased by $2.2 million from $20.2 million at December 31, 1998, to $22.4
million at September 30, 1999 due principally to retained net income.
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
17
<PAGE>
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.
The table below provides a comparison of the Bank's risk-based capital ratios
and leverage ratios to the minimum regulatory requirements for the periods
indicated:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
=====================================================================================================
September 30, December 31, For Capital To Be Well Capitalized
1999 1998 Adequacy Under Prompt
Purposes Corrective Action
Provisions
- -----------------------------------------------------------------------------------------------------
Risk-Based Capital Ratios:
Tier 1 9.96% 10.83% 4.00% 6.00%
Total 11.15 12.02 8.00 10.00
Leverage Total 6.25 6.50 4.00 5.00
=====================================================================================================
</TABLE>
At September 30, 1999, risk-based capital and leverage ratios for the Company
did not differ from those of the Bank. The Bank exceeds the minimum regulatory
requirements to be considered a "well capitalized" financial institution.
Year 2000
The Company formed a committee in mid-1997 consisting of members from all areas
of the Company to develop a plan and oversee the progress of Y2K efforts. The
Company has named the Chief Financial Officer as the Y2K officer to direct the
project. The Y2K officer reports to the Board on a quarterly basis.
The Company has utilized both internal and external resources to identify,
correct, and test the systems for the Year 2000 compliance. The Company's
software systems are provided by outside vendors and are not developed in-house.
The Company has contacted and continues to work closely with these vendors to
ensure readiness. The Company utilizes systems that are driven by software
created by the nation's prominent technology companies. As a result, most of the
Company's mission critical systems were Year 2000 compliant at the time of their
installation. For those systems not compliant, the Company was able to obtain
upgrades to enable processing of transactions in the Year 2000. The Company's
primary data processing vendor has certified compliance of their software for
Year 2000 processing. Backup vendors have been identified for products supplied
by vendors that have not certified their products as Y2K ready. The Company has
identified noncomputer systems that may include embedded technology that may be
affected by Y2K issues and implemented corrective actions. As part of the
planning process, the Company has developed contingency plans that will provide
alternative methods of doing business, should it be necessary.
The IBM AS400 computer processes the daily transactions and interfaces with an
IBM VSE 9260 processor at our data processing vendor. The IBM VSE is the record
keeping system for our customer's loan and deposit accounts and the Company's
general ledger system. The Company has tested the hardware, software and
interfaces of these mission-critical systems and completed the
18
<PAGE>
necessary renovations to enable processing in the Year 2000 and beyond.
Throughout the past year, the Company has been upgrading or replacing personal
computers that are not Y2K compliant. The Company has experienced considerable
growth in recent years, which independent of the Y2K issue has created the need
to upgrade some hardware and software. Therefore, it is difficult to isolate
expenditures that have been made for Y2K from normal business replacement. Costs
to date which include capital expenditures are estimated at $150,000, and are
not considered material to any one fiscal period. The Company estimates that
future costs of upgrades and asset replacements will be immaterial, most of
which will be capitalized and amortized over the useful life of the asset. In
the unlikely event that the Company would have to resort to alternative
operating procedures due to major systems or communication failures at the
beginning of the Year 2000, the extra costs could be material.
Through the use of questionnaires and officer calls, customers with significant
relationships with the Company are being evaluated for Y2K risk. No individual
customer is significant enough to materially impact the financial position of
the Company; however, one concern is that the credit risk associated with
lending may increase to the extent that our borrowers or their suppliers may not
adequately address Y2K issues. We continue to be in contact with any customers
that we have identified as high risk to monitor their Y2K efforts. Due to the
uncertainties involved, it is not possible to quantify the potential credit
losses, if any, due to Y2K.
The Year 2000 plan developed by the committee consists of five phases:
awareness, assessment, renovation, testing and implementation. Systems were
assessed a level of importance from 1 to 4, 1 being mission-critical and 4 being
irrelevant in relation to Y2K compliance. Awareness, assessment, renovation and
testing are complete for all systems. Implementation is complete for all systems
with the exception of one, which is currently in the final steps of
implementation.
Three federal agencies share responsibility for supervising efforts by banks in
relation to Y2K compliance. The Company is subject to review and examination by
the Office of the Comptroller of the Currency (OCC). Our banking software vendor
was also examined by the Federal Financial Institutions Examination Council
(FFIEC) to evaluate their systems for processing in the Year 2000 and beyond.
The results of this evaluation have been released to the Company for our review.
The vendor was also independently evaluated and certified as Year 2000 compliant
by the Information Technology Association of America (ITAA). The ITAA, an
organization well respected by Company examiners, performed a thorough and
complete review of the design methods and controls used to provide Year 2000
compliant software.
Senior management has developed an outline for a contingency plan to provide
operating alternatives for continuation of services to the Company's customers
in the event of systems or communications failures at the beginning of the Year
2000. Management believes that the Company will be able to continue to operate
in the Year 2000 even if some systems fail. In a worst case scenario, we believe
that we would be able to process all transactions manually until normal
operations were restored. Management feels that adequate resources are available
to fund and address the Y2K issues and that the costs associated with these
issues will not have a material impact on the Company's financial statements or
results of operations. However, there is no guarantee that the efforts of the
Company will fully prevent all failures and problems. In addition, the Company
relies on third party providers, such as telecommunications and utility
companies, where alternative sources or arrangements are
19
<PAGE>
limited or unavailable. While the Company continues to address Y2K issues and
work with our vendors and corporate customers to identify, assess, and control
potential Y2K risks, the Company does not manage these businesses and therefore,
potential uncertainties remain.
Forward-Looking Statements
The discussion regarding the Company's interest rate risk position in the
section entitled "Interest Rate Sensitivity and Liquidity" and the section
entitled "Year 2000" contain statements that may be forward-looking (as defined
in the Private Securities Litigation Reform Act of 1995). These forward looking
statements involve risks and uncertainties, including changes in general
economic conditions and the Company's ability (as well as third party ability)
to effectively address the Year 2000 issue. Although the Company believes such
forward-looking statements are reasonable, actual results may differ materially
from the results discussed in these forward-looking statements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The Company's exposure to market risk has not changed significantly since
December 31, 1998. The market risk principally includes interest rate risk which
is discussed in the Management's Discussion and Analysis above.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
In July 1995, a Company borrower filed a multi-count lender liability complaint
against the Company seeking unspecified damages. The Company filed preliminary
objections to the complaint. The Court sustained the preliminary objections in
part and denied them in part. An amended complaint was filed and the Court
denied the Company's preliminary objections to the amended complaint. The
Company filed its answer with new matter and a counterclaim. The Company
believed that the complaint was without merit. The complaint was resolved with
the Company borrower, in the second quarter of 1999 with nominal cost to the
Company. In July 1999, the borrower withdrew the complaint.
The Company is also subject to certain 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.
Item 6. Exhibits and Reports on Form 8-K
(a.) Exhibits
Computation of Net Income Per Share...........................Exhibit 11
Financial Data Schedule.......................................Exhibit 27
20
<PAGE>
(b.) Reports on Form 8-K
On July 1, 1999, Pennsylvania Commerce Bancorp, Inc. filed a Reort on
Form 8-K announcing the following information. On July 1, 1999, Commerce
Bank/Harrisburg, N.A. ("Commerce") consummated the Agreement and Plan of
Reorganization (the "Agreement") with Pennsylvania Commerce Bancorp, Inc., a
newly formed Pennsylvania business corporation (the "Holding Company"),
reorganizing Commerce into a one-bank holding company. Pursuant to the
Agreement, Commerce merged with and into a new nationally chartered banking
association, "Commerce Bank/Harrisburg Interim National Bank" (the "Interim
Bank"). The Interim Bank, formed solely for the purpose of the reorganization,
will operate under the name Commerce Bank/Harrisburg, N.A. and will be a
wholly-owned subsidiary of the Holding Company.
The Reorganization has received regulatory approval and received the approval of
the shareholders of Commerce at its annual meeting on June 18, 1999.
21
<PAGE>
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)
11/12/99 /s/ James T. Gibson
----------- ---------------------------
(Date) James T. Gibson
President/CEO
11/12/99 /s/ Mark A. Zody
----------- ---------------------------
(Date) Mark A. Zody
Executive Vice President
Chief Financial Officer
22
Exhibit 11.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Pennsylvania Commerce Bancorp, Inc.
Consolidated Computation of Net Income Per Share
==============================================================================================
For the Quarter Ended September 30, 1999
- ----------------------------------------------------------------------------------------------
Income Shares Per Share
(Numerator) (Denominator) Amount
- ----------------------------------------------------------------------------------------------
Basic Earnings Per Share
Net income $923,000
Preferred stock dividends (20,000)
--------
Income available to common stockholders 903,000 1,560,235 $0.58
- ----------------------------------------------------------------------------------------------
Effect of Dilutive Securities
Stock Options 102,555
----------
Diluted Earnings Per Share
Income available to common stockholders plus
assumed conversions $903,000 1,662,790 $0.54
==============================================================================================
For the Nine Months Ended September 30, 1999
- ----------------------------------------------------------------------------------------------
Income Shares Per Share
(Numerator) (Denominator) Amount
Basic Earnings Per Share
Net income $2,168,000
Preferred stock dividends (60,000)
--------
Income available to common stockholders 2,108,000 1,559,125 $1.35
- ----------------------------------------------------------------------------------------------
Effect of Dilutive Securities
Stock Options 119,107
----------
Diluted Earnings Per Share
Income available to common stockholders plus
assumed conversions $2,108,000 1,678,232 $1.26
==============================================================================================
For the Quarter Ended September 30, 1998
- ----------------------------------------------------------------------------------------------
Income Shares Per Share
(Numerator) (Denominator) Amount
Basic Earnings Per Share
Net income $492,000
Preferred stock dividends (20,000)
--------
Income available to common stockholders 472,000 1,555,698 $0.30
- ----------------------------------------------------------------------------------------------
Effect of Dilutive Securities
Stock Options 139,157
----------
Diluted Earnings Per Share
Income available to common stockholders plus
assumed conversions $472,000 1,694,855 $0.28
==============================================================================================
For the Nine Months Ended September 30, 1998
- ----------------------------------------------------------------------------------------------
Income Shares Per Share
(Numerator) (Denominator) Amount
Basic Earnings Per Share
Net income $1,565,000
Preferred stock dividends (60,000)
--------
Income available to common stockholders 1,505,000 1,553,399 $0.97
- ----------------------------------------------------------------------------------------------
Effect of Dilutive Securities
Stock Options 129,237
----------
Diluted Earnings Per Share
Income available to common stockholders plus
assumed conversions $1,505,000 1,682,636 $0.90
==============================================================================================
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<CIK> 0001085706
<NAME> PENNSYLVANIA COMMERCE BANCORP INC
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 12,271
<INT-BEARING-DEPOSITS> 268,932
<FED-FUNDS-SOLD> 2,400
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 29,597
<INVESTMENTS-CARRYING> 29,597
<INVESTMENTS-MARKET> 28,777
<LOANS> 206,012
<ALLOWANCE> 2,690
<TOTAL-ASSETS> 357,108
<DEPOSITS> 334,367
<SHORT-TERM> 0
<LIABILITIES-OTHER> 2,342
<LONG-TERM> 0
0
400
<COMMON> 1,560
<OTHER-SE> 18,439
<TOTAL-LIABILITIES-AND-EQUITY> 357,108
<INTEREST-LOAN> 12,150
<INTEREST-INVEST> 5,778
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 17,928
<INTEREST-DEPOSIT> 7,158
<INTEREST-EXPENSE> 7,172
<INTEREST-INCOME-NET> 10,756
<LOAN-LOSSES> 602
<SECURITIES-GAINS> 1
<EXPENSE-OTHER> 10,294
<INCOME-PRETAX> 3,294
<INCOME-PRE-EXTRAORDINARY> 3,294
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,168
<EPS-BASIC> 1.35
<EPS-DILUTED> 1.26
<YIELD-ACTUAL> 7.82
<LOANS-NON> 594
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 95
<ALLOWANCE-OPEN> 2,232
<CHARGE-OFFS> 155
<RECOVERIES> 11
<ALLOWANCE-CLOSE> 2,690
<ALLOWANCE-DOMESTIC> 2,690
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
