September 13, 2004
Mail-Stop 0408
Via Facsimile and U.S. Mail
Mr. Gary L. Nalbandian
Chief Executive Officer
Pennsylvania Commerce Bancorp, Inc.
P.O. Box 8599
Camp Hill, Pennsylvania 17001-8599
Re: Pennsylvania Commerce Bancorp, Inc. (the "Company")
Form S-1, File No. 333-118236
Filed August 13, 2004
Dear Mr. Nalbandian:
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filings reviewed by the staff to be
certain that they have provided all information investors require for
an informed decision. Since the company and its management are in
possession of all facts relating to a company`s disclosure, they are
responsible for the accuracy and adequacy of the disclosures they
have made.
Notwithstanding our comments, in the event the company requests
acceleration of the effective date of the pending registration
statement, it should furnish a letter, at the time of such request,
acknowledging that
* should the Commission or the staff, acting pursuant to delegated
authority, declare the filing effective, it does not foreclose the
Commission from taking any action with respect to the filing;
* the action of the Commission or the staff, acting pursuant to
delegated authority, in declaring the filing effective, does not
relieve the company from its full responsibility for the adequacy and
accuracy of the disclosure in the filing; and
* the company may not assert this action as defense in any proceeding
initiated by the Commission or any person under the federal
securities laws of the United States.
In addition, please be advised that the Division of Enforcement
has access to all information you provide to the staff of the
Division of Corporation Finance in connection with our review of your
filing or in response to our comments on your filing.
We will consider a written request for acceleration of the effective
date of the registration statement as a confirmation of the fact that
those requesting acceleration are aware of their respective
responsibilities under the Securities Act of 1933 and the Securities
Exchange Act of 1934 as they relate to the proposed public offering
of the securities specified in the above registration statement. We
will act on the request and, pursuant to delegated authority, grant
acceleration of the effective date.
Form S-1
Prospectus Cover Page
1. Highlight the risk factor sentences by using boldface type to
distinguish such disclosure from the rest of the narrative.
Table of Contents
2. Revise to include a line item for "Dilution" and add the section
required by Item 506 of Regulation S-K.
3. Delete the paragraph, which follows the Table of Contents, and
revise the entire document to make clear by context that you are
referring to in each instance.
Summary
Our Strategy
4. Revise the first bullet to disclose the anticipated cost of each
new branch, the anticipated 5 year capital expenditures for branches
and the number expected to be opened, and, the cost for the new
headquarters. Additionally, disclose the expected source of the funds
to pay for these programs.
5. Revise the second and third bullets to add support for the
statements that the bank has gained from consolidation or otherwise
indicate that management believes these had assisted growth, e.g.,
add disclosure of how many new customers previously banked with a
company that was consolidated.
The Offering
Use of proceeds
6. Revise herein and in the "Use of Proceeds" section on page 15 to
disclose the costs of the branch expansion and the new headquarters
and indicate what other corporate purposes, such as, salaries, etc.,
will use the remaining proceeds.
7. Revise to add a subsection entitled, "Offering Price and Valuation
Information". Such subsection should detail recent stock trading,
price, P/E and P/B trading multiples, dilution information, and
comparable company P/E and P/B multiples.
Selected Consolidated Financial Data - page 7
8. Include a footnote detailing how you determine the efficiency
ratio that you present on page 6.
Risk Factors
General
9. Revise to add additional paragraph for declining capital and
possible regulatory impact on capital related to trusts, increased
short-term borrowings and long-term debt, recent significant
securities losses and possible future losses, and, substantial
dilution may result from exercise of outstanding derivative
securities.
Significant Growth
10. Revise to disclose the costs for each branch, the five-year costs
for the branch expansion program and the cost of the new headquarters
as well as the source of the funds for these expenditures.
Dependence of Commerce of New Jersey
11. Revise to disclose if the warrants are exercisable if no change
of controls event occurs.
Our executive officers, directors and five percent shareholders
12. Revise to disclose the present intention of the officers and
directors to purchase in the offering and indicate the amount they
intend to purchase.
Management`s Discussion and Analysis of Financial Condition and
Results of Operations
Application of Critical Accounting Policies - page 18
13. We are aware of your reference made to the Notes to the
Consolidated Financial Statements for more fully described accounting
policies. Please expand the current disclosures to provide greater
insight into the impact of these policies on your financial condition
and operating performance. We remind you that such disclosure should
supplement, not reiterate the accounting policies disclosed in the
Notes to the Consolidated Financial Statements. Refer to the
Commission`s recent interpretive release regarding Management`s
Discussion and Analysis (Release No. 33-8350) for additional
guidance.
14. Revise the last paragraph to indicate the expense that would have
been reported or will be reported upon the adoption of the new
standard.
Financial Condition - June 30, 2004 Compared to December 31, 2003
Loans Held for Sale - page 25
15. Please enhance your current loans held for sale discussion by
including quantitative and qualitative analysis, which will explain
how you determine classification, carrying value, and the strategy
you employ with each of these loan products. As a related matter,
please disclose how and when you determine which loans are
participated with Commerce Bank N.A., which you refer to in Note 19.
Additionally, refer to Industry Guide 3 III.D for disclosure
requirements, if applicable.
Loan and Asset Quality and Allowance for Loan Losses - page 26
16. We note that you quantify the interest income recognized and
foregone on nonperforming loans from 1999 to 2003 on page 41. Please
disclose these amounts for the period ended June 30, 2004.
Stockholders` Equity and Capital Adequacy - page 28
17. Revise to add an explanation for the loss of $3.2 million on the
portfolio of securities available for sale by disclosing what type of
securities suffered the losses and whether the portfolio and other
Company portfolios contain similar securities.
Liquidity - June 30, 2004 - page 30
18. We note your discussions concerning liquidity as of December 31,
2003 on page 45. Please revise to include additional disclosures
regarding the following:
* Historical information on sources and uses of cash, including
material changes in operating, investing and financing cash flows and
the supporting reasons;
* Amounts and certainty of cash flows;
* Discussions of known trends and uncertainties affecting liquidity.
Refer to the Commission`s recent interpretive release regarding
Management`s Discussion and Analysis (Release No. 33-8350) for
additional guidance.
Loan Portfolio - page 39
19. We note reference made to your loan portfolio as non-homogeneous,
due to changes in collateral requirements, among other reasons.
Please provide expanded discussion of your loan origination policies
and procedures for each loan type in your loan portfolio to provide
enhanced understanding.
20. We note reference made to your 2003 Strategic Plan. Please expand
your disclosure to provide further analysis of how the plan may
impact your lending opportunities, addressing inherent risk and
rewards.
Concentrations of Credit Risk - page 40
21. Please expand your concentrations of credit risk disclosures.
This may include but not be limited to, focusing on loan types that
are not secured by real estate, significant loans to one borrower or
within one industry, or any other risks inherent in the portfolio and
how you have policies and procedures in place to monitor risk.
Allowance for Loan Losses - page 41
22. Please revise to provide additional discussion of how the
allowance was determined, how accurate estimates for the allowance
have been in the past, and whether these estimates are reasonably
likely to change in the future. Refer to the Commission`s recent
interpretive release regarding Management`s Discussion and Analysis
(Release No. 33-8350) in addition to Industry Guide 3.IV.A.2.
23. Please revise your allowance table on page 42 by including
relevant data for the latest interim period ended.
Interest Rate Sensitivity - page 44
24. Please revise future filings to discuss why you have negative
gaps as presented over the next fiscal year and how you intend to
manage them. Also, please clearly disclose all assumptions used in
the preparation of this table and include cumulative gap percentages
below the nominal gap amounts for each measurement window.
Liquidity - page 45
25. Please provide enhanced disclosures pertaining to liquidity.
Discussions should include but not be limited to, the ability of and
resources available to meet short and long term cash requirements,
and any known trends or uncertainties. Refer to the Commission`s
recent interpretive release regarding Management`s Discussion and
Analysis (Release No. 33-8350) for these required disclosures.
Management
26. Revise to indicate the employers and positions held for the last
5 years for all directors and officers.
Description of our Capital Stock
27. Revise the preferred stock disclosures to indicate the amount
that would be owed as of June 30, 2004 in the event of a dissolution,
liquidation or winding up of the Company`s affairs as well as the
current amount that would be required to redeem the securities.
28. Revise the first full sentence on page 69 to indicate whether or
not the warrants have been exercisable.
Limitations on Liability - page 72
29. Revise to include the disclosures required by Item 510 of
Regulation S-K.
Underwriting
Stabilizing Transactions
30. Revise the discussion of the naked short position events to more
clearly illustrate why the underwriters might sell more shares than
are being sold in the offering including the underwriting over-
allotment option. In this regard, if the underwriters have done this
in the past, supplementally advise the staff of the circumstances and
details of the naked shorts, including the amount sold, prices sold
at and prices paid to buy the shares in the open market.
31. Revise to disclose how existing holders will receive or can
obtain notice that stabilization efforts have been terminated.
Consolidated Statements of Income - page F-4
32. We note a significant increase in gains on sales of securities of
$880,000 for fiscal 2003 as compared to fiscal 2002, but there is no
explanation disclosed in Management`s Discussion and Analysis. Please
revise future filings to provide enhanced understanding and
disclosure for these investment sales.
Notes to Consolidated Financial Statements
Note 18 - Commitments and Contingencies - F-25
33. We note disclosure of an agreement to purchase land for the
purpose of building your headquarters, which is to be completed in
2005. Please revise future filings to comply with Article 303 of
Regulation S-K by including these commitments within the tabular
presentation of contractual obligations on page 46.
Other
34. Please note the updating requirements in Article 3-12 of
Regulation S-X.
35. Please include an updated consent of the independent accountants
in your next amendment.
Form 10-Q filed August 12, 2004
New Accounting Standards - page 8
36. Please supplementally and in future filings disclose and discuss
the estimated impact of SAB No. 105. We note that you have certain
loan commitments on mortgage loans, which you intend to sell which
will be subject to this guidance. We note the guidance in SAB 74
regarding the impact of recently issued accounting standards.
Closing Comment
As appropriate, please amend your registration statement in response
to these comments. You may wish to provide us with marked copies of
the amendment to expedite our review. Please furnish a cover letter
with your amendment that keys your responses to our comments and
provides any requested supplemental information. Detailed cover
letters greatly facilitate our review. Please understand that we may
have additional comments after reviewing your amendment and responses
to our comments.
We direct your attention to Rules 460 and 461 regarding requesting
acceleration of a registration statement. Please allow adequate time
after the filing of any amendment for further review before
submitting a request for acceleration. Please provide this request
at least two business days in advance of the requested effective
date.
Any questions regarding the accounting comments may be directed
to John Spitz at (202) 942-1924 or John Nolan at (202) 942-1783. All
other questions may be directed to Michael Clampitt at (202) 942-1772
or to me at (202) 942-1779.
Sincerely,
Barry McCarty
Senior Counsel
Mr. W. Demchak
The PNC Financial Services Group, Inc.
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