Pennsylvania Commerce Bancorp
[GRAPHIC OMITTED]
CONTACTS
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Gary L. Nalbandian Mark A. Zody
Chairman/President Chief Financial Officer
(717) 975-5630
PENNSYLVANIA COMMERCE BANCORP
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REPORTS DEPOSIT GROWTH OF 22%
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October 21, 2003- Camp Hill, PA - Pennsylvania Commerce Bancorp, Inc.
(NASDAQ Small Cap Market Symbol: COBH) parent company of Commerce
Bank/Harrisburg reported increased deposits, assets and loans for the third
quarter of 2003, it was announced today by Gary L. Nalbandian, Chairman of the
bank holding company.
September 30, 2003
THIRD QUARTER FINANCIAL HIGHLIGHTS
%
Increase(1)
-----------
*Total Assets: $ 958 Million 21%
*Total Deposits: $ 895 Million 22%
*Total Loans (net): $ 429 Million 19%
*Total Revenues: $ 10.8 Million 18%
*Net Income: $ 1.5 Million 4%
*Diluted Net Income Per Share: $ .65 3%
(1) Compared to September 30, 2002 Third Quarter Financial Highlights
1
Three Months Ended Nine Months Ended
September 30 September 30
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2003 2002 % Increase 2003 2002 % Increase
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(dollars in thousands, except per share data)
Total Revenues: $10,799 $ 9,167 18% $31,005 $ 25,779 20%
Total Expenses: 8,213 6,584 25 22,668 18,513 22
Net Income: 1,526 1,467 4 4,832 4,104 18
Diluted Net Income
Per Share: $.65 $.63 3% $2.07 $1.80 15%
Balance Sheet Comparison
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9/30/03 9/30/02 % Change
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(dollars in thousands)
Total Assets: $957,970 $ 789,811 + 21%
Total Loans (net): 428,940 361,478 19
Total Deposits: 894,608 731,503 22
Core Deposits: 842,437 681,383 24
In commenting on the Company's financial results, Chairman Nalbandian
said, "Commerce continued its strong growth during the third quarter of 2003,
fueled by a 22% increase in total deposits. Our combination of strong deposit
growth and a low cost of funds provide us with increased profitability while
continuing to make substantial investments in new locations, technology and
personnel."
Some of our financial highlights were:
>> The Company opened two new stores in Berks County during the third
quarter. Commerce also has two new offices under construction for
openings in the fourth quarter. The Company will open a total of
five new offices in 2003 and by year-end will have a total of 23
branch offices.
>> Total revenues increased 20% for the first nine months of 2003 over
the first nine months in 2002.
>> Net income increased 18% for the first nine months of 2003 over the
same period in 2002.
>> Earnings per share rose 15% for the first nine months of 2003 over
2002.
2
>> Core deposits grew 24%, or $161 million, over the previous 12-month
period.
>> Comparable store core deposits grew 21%.
>> Total loans grew $67.5 million, or 19%, over the previous 12-month
period.
Shareholder Returns
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Commerce S & P Index
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1 year 8.49% 24.38%
5 years 10.51% 1.00%
10 years 22.86% 10.04%
Total Deposits
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The Company's strong growth continues with total deposits at September
30, 2003 reaching $895 million, a $163 million, or 22%, increase over total
deposits of $732 million one year ago.
09/30/03 09/30/02 $ Increase % Increase
-------- -------- ---------- ----------
Core Deposits $ 842,437 $ 681,383 $ 161,054 24%
Total Deposits 894,608 731,503 163,105 22%
The Company considers core deposits as all deposits other than public
certificates of deposit and measures comparable store deposit growth as the
annual percentage increase in core deposits for branch offices open two years or
more. As of September 30, 2003, 14 of Commerce's 21 branches have been open for
two years or more.
The Company's total deposit cost of funds including non-interest-bearing
demand deposits was 1.17% for the third quarter of 2003 compared to 1.95% for
the third quarter of 2002. Total cost of all funding sources was 1.34% for the
third quarter of 2003 compared to 2.15% for the same period in 2002.
Net Income and Earnings Per Share
- ---------------------------------
Net income totaled $1.53 million for the third quarter of 2003, up
$59,000, a 4% increase over net income of $1.47 million as reported for the
third quarter of 2002.
Net income per share on a fully diluted basis for the third quarter was
$0.65, a 3% increase over the $0.63 recorded for the same period a year ago.
3
Three Months Ended Nine Months Ended
September 30 September 30
---------------------------------------------------------------------------------
2003 2002 % Increase 2003 2002 % Increase
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(dollars in thousands, except per share data)
Net Income: $1,526 $ 1,467 4% $4,832 $ 4,104 18%
Diluted Earnings
Per Share: $ 0.65 $ 0.63 3% $2.07 $1.80 15%
For the first nine months of 2003, net income totaled $4.8 million, up 18%
over net income of $4.1 million for the first nine months of 2002.
Net income per fully diluted share was $2.07 for the first nine months of
2003 compared to $1.80 for the same period of 2002, an increase of 15%.
Total Revenues
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Three Months Ended Nine Months Ended
September 30 September 30
---------------------------------------------------------------------------------
2003 2002 % Increase 2003 2002 % Increase
---------------------------------------------------------------------------------
(dollars in thousands, except per share data)
Total Revenues: $10,799 $ 9,167 18% $31,005 $ 25,779 20%
Total revenues (net interest income plus non-interest income) increased
$1.6 million to $10.8 million, an 18% increase over the third quarter of 2002.
The growth in total revenue for the third quarter of 2003 resulted from a 14%
increase in net interest income and increased non-interest income of 33%.
Total revenues for the first nine months of 2003 increased by $5.2
million, or 20%, over the same period in 2002. This increase was the result of
an 18% increase in net interest income and a 27% increase in non-interest
income.
Net Interest Income and Net Interest Margin
- -------------------------------------------
Net interest income for the third quarter of $8.2 million represented a
14% increase over the $7.2 million recorded a year ago. For the first nine
months of 2003, net interest income totaled $23.9 million, up $3.7 million, or
18%, over $20.2 million for the first nine months of 2002. The Company's strong,
low-cost core deposit growth fueled volume increases in the level of interest
earning assets, which resulted in the increase in interest income.
The net interest margin for the third quarter of 2003 was 4.07% compared
to 4.28% for the third quarter 2002. The decrease is primarily due to a decrease
in the yield on the investment portfolio, mainly a result of the lowest rate
environment in 45 years.
4
Strong mortgage refinancing activity during the third quarter of 2003 was
the result of continued volatility in the long-term interest rate environment.
As a result, the Company received significant prepayments in the mortgage-backed
securities portfolio. This level of prepayments required the Company to
accelerate its premium amortization on these securities, which contributed to
the lower net interest margin for the quarter. Given the shape of the current
yield curve and recent investment portfolio strategies undertaken by management,
the Company feels the net interest margin should be more stable going forward.
Non-Interest Income
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Non-interest income for the third quarter of 2003 increased to $2.6
million from $2.0 million a year ago, a 33% increase.
Non-interest income for the first nine months of 2003 increased to $7.1
million from $5.6 million in the first nine months of 2002, a 27% increase.
The growth in non-interest income for the third quarter and the first nine
months of 2003 was reflected in increased deposit charges and service fees and
other operating income which are more fully depicted below:
Three Months Ended Nine Months Ended
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9/30/03 9/30/02 % Increase 9/30/03 9/30/02 % Increase
-------- -------- ------------ ---------- -------- ----------
(Dollars in thousands)
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Deposit Charges $2,077 $1,747 19% $5,809 $4,875 19%
& Service Fees
Other Operating Income 284 247 15% 959 690 39%
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Subtotal 2,361 1,994 18% 6,768 5,565 22%
Net Investment Securities
Gains 288 288
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Total Non-Interest Income $2,649 $1,994 33% $7,056 $5,565 27%
Non- Interest Expenses
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Non-interest expenses for the third quarter of 2003 were $8.2 million, up
25% from $ 6.6 million a year ago. Non-interest expenses for the first nine
months of 2003 were $22.7 million, up 22% from $18.5 million for the first nine
months of 2002. The increase in non-interest expenses for the third quarter and
the first nine months of 2003 are primarily a result of the Company's rapid
growth during the last 2 years and also reflect substantial infrastructure
expenditures made by the Company to support future growth. The Company opened 3
new branch offices between mid-June and mid-September, two of these representing
the Company's initial entry into the Berks County market. Also, as of September
30, 2003, seven of the Company's 21 branch offices were constructed within the
past 2 years and four of these have been within the past 12 months. As a result
of this rapid expansion and planned future growth, the Company has incurred
increased expenses to construct the new branch offices and hire the appropriate
personnel at all levels which allows us to continue to provide our high level of
customer service and convenience.
5
Lending
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Loans increased $67.5 million, or 19%, to $429 million from $361 million a
year ago, reflecting a continuing commitment to the credit needs of Commerce's
market areas. This growth was represented across all loan categories as shown in
the table below. Consumer loan growth of 79% has been extremely strong over the
past 12 months and is directly related to the Company's increase in branch
locations and added consumer lending personnel. The Company continues to
maintain a conservative approach to lending and has avoided the problems
experienced by other banks by avoiding participation in sub-prime loans and
loans to sectors considered higher risk in the current economy.
The composition of the Company's loan portfolio is as follows:
Loan Composition
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9/30/03 % of Total 9/30/02 % of Total $Increase %Increase
------- ---------- ------- ---------- --------- ---------
(dollars in thousands)
Commercial $98,358 23% $85,794 24% $12,564 15%
Consumer 61,264 14 34,292 9 26,972 79
Commercial Real Estate 200,681 46 179,459 49 21,222 12
Residential 74,414 17 67,203 18 7,211 11
------- ---------- ------- ---------- --------- ---------
Gross Loans $434,717 100% $366,748 100% $67,969
Less: Reserves ( 5,777 ) ( 5,270) ( 507)
------- ------- -------
Net Loans $428,940 $361,478 $67,462 19%
Asset Quality
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Asset quality continues to be strong as non-performing assets at
September 30, 2003 totaled $1.4 million, or 0.15% of total assets, versus $2.2
million, or 0.27% of total assets one year ago. Net charge-offs as a percentage
of average loans outstanding for the first nine months of 2003 were 0.14% as
compared to 0.10% for the same period last year.
The Company's asset quality results are highlighted below:
Nine Months Ended
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09/30/2003 09/30/2002
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Non-Performing Assets/Assets 0.15% 0.27%
Net Loan Charge-Offs 0.14% 0.10%
Loan Loss Reserve/Gross Loans 1.33% 1.44%
Non-Performing Loan Coverage 472% 258%
Non-Performing Assets/Capital 3% 5%
and Reserves
6
Investments
- -----------
The Company's investment portfolio increased by 39%, to $391 million from
$281 million one year ago.
The portfolio, consisting mainly of high quality U.S. Government agency
and mortgage-backed obligations, has a weighted average yield of 4.44% and a
current duration of 4.5 years as of September 30, 2003.
The appreciation in the available for sale portfolio totaled approximately
$900,000 at September 30, 2003.
Capital
- -------
Stockholders' equity at September 30, 2003 totaled $48 million, an
increase of 16%, over stockholders' equity of $41 million at September 30, 2002.
Return on average stockholders' equity ("ROE") for the third quarter of 2003 was
13.28% as compared to 14.49% for the third quarter of 2002.
The Company's capital ratios at September 30, 2003 were as follows:
Regulatory Guidelines
Commerce "Well Capitalized"
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Leverage Ratio 6.86% 5.00%
Tier 1 10.20 6.00
Total Capital 11.18 10.00
Retail Activities
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In July, the Company opened its 20th branch office, located in Exeter
Township in Berks County.
In September, the Company opened its 21st branch, located in Muhlenberg
Township, also in Berks County. During the past two years, the Company has
opened 7 of its 21 branch offices.
Commerce Bank continues its leading role in on-line banking with its
penetration rate of 33%, which is one of the highest in America.
Commerce serves customers in Cumberland, Dauphin, Lebanon, York, and Berks
counties.
Commerce Bank/Harrisburg is also a member of "the Commerce Bank Network"
led by Commerce Bancorp (NYSE: CBH) in Cherry Hill, N.J.
7
FORWARD-LOOKING STATEMENTS
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); technological
changes; future acquisitions; the expense savings and revenue enhancements from
acquisitions being less than expected; the growth and profitability of the
Company's noninterest or fee income being less than expected; unanticipated
regulatory or judicial proceedings; changes in consumer spending and saving
habits; and the success of the Company at managing the risks involved in the
foregoing.
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.
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