[PENNSYLVANIA COMMERCE BANCORP LOGO]
CONTACTS
Gary L. Nalbandian Mark A. Zody
Chairman/President Chief Financial Officer
(717) 975-5630
PENNSYLVANIA COMMERCE BANCORP EARNINGS UP 44%
DEPOSITS INCREASE 26%
October 20, 2004- Camp Hill, PA - Pennsylvania Commerce Bancorp, Inc.
(NASDAQ Symbol: COBH) parent company of Commerce Bank/Harrisburg, N.A. reported
record earnings and increased deposits, assets and loans for the third quarter
of 2004, as announced today by Gary L. Nalbandian, Chairman of the bank holding
company.
===============================================================================
SEPTEMBER 30, 2004
THIRD QUARTER FINANCIAL HIGHLIGHTS
%
Increase(1)
---------------
* Total Assets: $ 1.21 Billion 26%
* Total Deposits: $ 1.12 Billion 26%
* Total Loans (net): $ 611 Million 42%
* Total Revenues: $ 14.8 Million 37%
* Net Income: $ 2.2 Million 44%
* Diluted Net Income Per Share: $ 0.86 39%
(1) Compared to Third Quarter Ended September 30, 2003
===============================================================================
In commenting on the Company's financial results, Company Chairman
Nalbandian said, "Our core deposit growth of 29% and loan growth of 42% produced
strong top line revenues of $14.8 million for the third quarter, up 37% over the
third quarter of 2003."
Some of our third quarter 2004 financial highlights were:
>> Net income increased 44% over the third quarter of 2003 to $2.2
million.
>> Earnings per share rose 39% for the third quarter to $0.86 when
compared to third quarter 2003.
>> Total revenues increased $4.0 million, or 37%, for the third quarter
of 2004 over the same period in 2003.
>> Core deposits grew $247.2 million, or 29%, over the prior 12-month
period.
>> Comparable store core deposits grew 25% over third quarter 2003.
>> Total loans grew $182.1 million, or 42%, for the prior 12 months.
>> Net interest margin was 4.23% for the third quarter of 2004, up 16
basis points over the third quarter of 2003.
>> The Company's total deposit cost of funds including
non-interest-bearing demand deposits was 1.08% for the third quarter
of 2004 compared to 1.17% for the third quarter of 2003.
>> On September 29, 2004, Commerce Bancorp, Inc. of Cherry Hill, New
Jersey purchased 100,000 shares of unregistered common stock of the
Company for a per share price of $45.666 and an aggregate price of
$4,566,600. In addition, the Company has filed a registration
statement with the Securities and Exchange Commission for a proposed
underwritten offering of 400,000 shares of its common stock, subject
to market and other conditions.
Income Statement
- ----------------
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------------------------------- --------------------------------------------------
% %
2004 2003 Increase 2004 2003 Increase
--------------------------------------------------- --------------------------------------------------
(dollars in thousands, except per share data) (dollars in thousands, except per share data)
Total Revenues: $ 14,832 $ 10,799 37% $ 42,743 $ 31,005 38%
Total Expenses: 10,890 8,213 33% 31,456 22,668 39%
Net Income: 2,198 1,526 44% 6,307 4,832 31%
Diluted Net
Income Per Share: $0.86 $0.62 39% $2.49 $1.97 26%
2
Balance Sheet
- -------------
09/30/04 09/30/03 % Increase
----------------------------------------------------------
(dollars in thousands)
Total Assets: $1,205,181 $ 957,970 26%
Total Loans (net): 611,088 428,940 42%
Core Deposits: 1,089,626 842,437 29%
Total Deposits: 1,124,906 894,608 26%
Shareholder Returns (Annualized)
- --------------------------------
As of September 30, 2004
---------------------------------------
Commerce S & P Index
-------- -----------
1 year +16% 14%
5 years +21% -1%
10 years +21% 11%
Total Deposits
- --------------
The Company's strong growth continues with total deposits at September
30, 2004 reaching $1.12 billion, a $230.3 million, or 26%, increase over total
deposits of $894.6 million at September 30, 2003. 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.
09/30/04 09/30/03 $ Increase % Increase
-------- -------- ---------- ----------
(dollars in thousands)
Core Deposits: $ 1,089,626 $ 842,437 $247,189 29%
Total Deposits: 1,124,906 894,608 230,298 26%
3
Core Deposits
- -------------
Core deposit growth by type of account is as follows:
3rd Quarter 2004 Annual
09/30/04 09/30/03 Cost of Funds Growth %
-------- -------- ------------- --------
(dollars in thousands)
Demand $ 189,636 $ 169,996 0.00% 12%
Interest Bearing Demand 426,511 298,949 1.22 43%
Savings 302,379 242,786 1.03 25%
--------------- --------------- -------------------- -------------
Subtotal 918,526 711,731 0.87 29%
Time 171,100 130,706 2.41 31%
--------------- --------------- -------------------- -------------
Total Core Deposits $1,089,626 $842,437 1.00% 29%
The Company's total deposit cost of funds including
non-interest-bearing demand deposits was 1.08% for the third quarter of 2004
compared to 1.17% for the third quarter of 2003. Total cost of all funding
sources was 1.33% for the third quarter of 2004 compared to 1.34% for the third
quarter of 2003.
Net Income and Earnings Per Share
- ---------------------------------
Net income totaled $2.2 million for the third quarter of 2004, up
$672,000, a 44% increase over net income of $1.5 million as reported for the
third quarter of 2003.
Net income per share on a fully diluted basis for the third quarter was
$0.86, a 39% increase over the $0.62 recorded for the same period a year ago.
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------------------------------------- ------------------------------------------------
% %
2004 2003 Increase 2004 2003 Increase
-------------------------------------------------- ------------------------------------------------
(dollars in thousands, except per share data) (dollars in thousands, except per share data)
Net Income: $ 2,198 $1,526 44% $ 6,307 $4,832 31%
Diluted Net Income
Per Share: $ 0.86 $ 0.62 39% $ 2.49 $ 1.97 26%
For the first nine months of 2004, net income totaled $6.3 million, up
$1.5 million, or 31%, over net income of $4.8 million for the first nine months
of 2003.
Net income per share, on a fully diluted basis, was $2.49 for the first
nine months of 2004, a 26% increase over $1.97 for the same period in 2003.
Total Revenues
- --------------
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------------------------------------- -----------------------------------------------------
09/30/04 09/30/03 % Increase 09/30/04 09/30/03 % Increase
----------------------------------------------------- -----------------------------------------------------
(dollars in thousands) (dollars in thousands)
Total Revenues: $ 14,832 $ 10,799 37% $ 42,743 $ 31,005 38%
Total revenues (net interest income plus non-interest income) increased
$4.0 million to $14.8 million, a 37% increase over the third quarter of 2003.
Total revenues for the third quarter of 2004 resulted from a 46%
increase in net interest income and an 11% increase in non-interest income over
the third quarter of 2003.
Net Interest Income and Net Interest Margin
- -------------------------------------------
Net interest income for the third quarter of $11.9 million represented
a 46% increase over the $8.2 million recorded in the third quarter of 2003. For
the first nine months of 2004, net interest income totaled $34.5 million, up 44%
over the $23.9 million recorded in the first nine months of 2003. 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 net interest income
for the quarter and the first nine months.
The net interest margin for the third quarter of 2004 was 4.23%
compared to 4.07% for the third quarter of 2003. The net interest margin for the
first nine months of 2004 was 4.33%, up 15 basis points over the first nine
months of 2003. The increase in net interest margin was primarily due to a
decrease in the Company's cost of deposit funds to 0.97% during the first nine
months of 2004 versus 1.36% for the same period in 2003.
Non-Interest Income
- -------------------
Non-interest income for the third quarter of 2004 was $2.9 million,up
from $2.6 million for the third quarter of 2003, an 11% increase. Non-interest
income for the first nine months of 2004 was $8.3 million, a 17% increase over
the $7.1 million earned in the first nine months of 2003.
5
The growth in non-interest income for the third quarter and the first
nine months was reflected in increased deposit charges and service fees as more
fully depicted below:
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------------------------------ -----------------------------------------------
% %
2004 2003 Increase 2004 2003 Increase
------------------------------------------------ -----------------------------------------------
(dollars in thousands) (dollars in thousands)
Deposit Charges
& Service Fees $ 2,707 $2,077 30% $ 7,465 $ 5,809 29%
Other Operating Income 242 572 (58)% 786 1,247 (37)%
------------------------------------------------ -----------------------------------------------
$ 2,949 $2,649 11% $ 8,251 $ 7,056 17%
Non-Interest Expenses
- ---------------------
Non-interest expenses for the third quarter of 2004 were $10.9 million,
up 33% from $8.2 million recorded in the third quarter of 2003. The increase in
non-interest expenses for the third quarter is primarily a result of the
Company's rapid growth during the last 12 months and also reflects
infrastructure expenditures made by the Company to support future growth.
The Company opened five new branch offices between mid-June 2003 and
the end of December 2003, two of these representing the Company's initial entry
into the Berks County market. Also, as of September 30, 2004, six of the
Company's 23 branch offices were constructed within the past two years. As a
result of this 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 it to continue to provide its high level of
customer service and convenience.
Lending
- -------
Loans increased $182.1 million, or 42%, to $611.1 million from $428.9
million at September 30, 2003. This growth was represented across all loan
categories as shown in the following table:
The composition of the Company's loan portfolio is as follows:
Loan Composition
----------------
09/30/04 % of Total 09/30/03 % of Total $ Increase % Increase
--------------------------------- -------------- ------------- ----------------- --------------
(dollars in thousands)
Commercial $ 158,941 26 % $ 98,358 23 % $ 60,583 62 %
Consumer 99,576 16 61,264 14 38,312 63
Commercial Real Estate 270,422 44 200,681 46 69,741 35
Residential 89,324 14 74,414 17 14,910 20
----------------- -------------- -------------- ------------- ----------------- --------------
Gross Loans $ 618,263 100 % $ 434,717 100 % $ 183,546
Less: Reserves (7,175) (5,777) (1,398)
----------------- -------------- -----------------
Net Loans $ 611,088 $428,940 $ 182,148 42%
6
Asset Quality
- -------------
Asset quality continues to be strong as non-performing assets and loans
90 days past due at September 30, 2004 totaled $2.4 million, or 0.20%, of total
assets, versus $1.5 million, or 0.15%, of total assets one year ago. Net
charge-offs as a percentage of average loans outstanding for the first nine
months of 2004 were 0.13%, as compared to 0.14% for the same period last year.
The Company's asset quality results are highlighted below:
Nine Months Ended
-----------------
09/30/04 9/30/03
-------- -------
Non-Performing Assets/Assets 0.20% 0.15%
Net Loan Charge-Offs 0.13% 0.14%
Loan Loss Reserve/Gross Loans 1.16% 1.33%
Non-Performing Loan Coverage 436% 472%
Non-Performing Assets/Capital
and Reserves 4% 3%
Investments
- -----------
The Company's investment portfolio increased by 25%, to $487.0 million
from $391.1 million one year ago. The portfolio, consisting mainly of U.S.
Government agency and mortgage-backed obligations, has a weighted average yield
of 5.14% and a duration of 4.4 years as of September 30, 2004. The appreciation
in the available for sale portfolio totaled approximately $390,000 at September
30, 2004.
Capital
- -------
On September 29, 2004, Commerce Bancorp, Inc. of Cherry Hill, New
Jersey purchased 100,000 shares of unregistered common stock of the Company for
a per share price of $45.666 and an aggregate price of $4,566,600.
The Company's capital ratios at September 30, 2004 were as follows:
Regulatory Guidelines
Commerce "Well Capitalized"
-------- ------------------
Leverage Ratio 6.21% 5.00%
Tier 1 9.36 6.00
Total Capital 10.26 10.00
The Company has filed a registration statement with the Securities and
Exchange Commission for a proposed underwritten offering of 400,000 shares of
its common stock, subject to market and other conditions.
7
Stockholders' equity at September 30, 2004 totaled $61.9 million, an
increase of 30%, over stockholder's equity of $47.7 million at September 30,
2003. Return on average stockholders' equity ("ROE") for the third quarter of
2004 was 15.75% as compared to 13.28% for the third quarter of 2003. ROE for the
first nine months of 2004 was 15.91% compared to 14.30% for the first nine
months of 2003.
Effective as of the open of market on October 13, 2004, the Company's
common stock began trading on the NASDAQ Stock Market's National Market System.
Previously, the common stock was quoted on the NASDAQ's Small Cap Market.
Retail Activities
- -----------------
>> In the second quarter, the Company began construction on a new branch
office in Lebanon, PA. This will be the second office for Commerce
located in Lebanon County and the 24th office overall for the Company.
Grand opening celebrations will be held in the fall of 2004.
>> "Same store core deposit growth" at September 30, 2004 was 25%
compared to the same period one year ago.
>> Commerce continues its leading role in on-line banking with its
penetration rate of 38%.
>> Commerce serves customers in Cumberland, Dauphin, Lebanon, York, and
Berks counties.
>> Commerce operates under a Network Agreement with Commerce Bancorp
(NYSE: CBH) in Cherry Hill, N.J.
8
FORWARD-LOOKING STATEMENTS AND OTHER INFORMATION
The Company may from time to time make written or oral "forward-looking
statements," including statements contained in the Company's filings with the
Securities and Exchange Commission, in its reports to stockholders and in other
communications by the Company, which are made in good faith by the Company
pursuant to the "safe harbor" provisions of the Private Securities Litigation
Reform Act of 1995.
These forward-looking statements include statements with respect to the
Company's beliefs, plans, objectives, goals, expectations, anticipations,
estimates and intentions, that are subject to significant risks and
uncertainties and are subject to change based on various factors (some of which
are beyond the Company's control). The words "may", "could", "should", "would",
"believe", "anticipate", "estimate", "expect", "intend", "plan" and similar
expressions are intended to identify forward-looking statements. The following
factors, among others, could cause the Company's financial performance to differ
materially from that expressed in such forward-looking statements: the strength
of the United States economy in general and the strength of the local economies
in which the Company conducts operations; the effects of, and changes in, trade,
monetary and fiscal policies, including interest rate policies of the Board of
Governors of the Federal Reserve System (the "FRB"); inflation; interest rate,
market and monetary fluctuations; the timely development of competitive new
products and services by the Company and the acceptance of such products and
services by customers; the willingness of customers to substitute competitors'
products and services for the Company's products and services and vice versa;
the impact of changes in financial services' laws and regulations (including
laws concerning taxes, banking, securities and insurance); the impact of the
rapid growth of the Company; the Company's dependence on Commerce Bancorp, Inc.
to provide various services to the Company; changes in the Company's allowance
for loan losses; effect of terrorists attacks and threats of actual war;
unanticipated regulatory or judicial proceedings; changes in consumer spending
and saving habits; and the success of the Company at managing the risks involved
in the foregoing.
The Company cautions that the foregoing list of important factors is
not exclusive. The Company does not undertake to update any forward-looking
statements, whether written or oral, that may be made from time to time by or on
behalf of the Company.
The common stock offering referred to in this press release may be made
only by means of a prospectus. When available, copies of the preliminary
prospectus relating to the offering may be obtained from Sandler O'Neill &
Partners LLP, 919 Third Avenue, 6th Floor, New York, New York 10022. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission but has not yet become effective. These
securities may not be sold nor may offers to buy be accepted prior to the time
that the registration statement becomes effective. This press release does not
constitute an offer to sell or a solicitation of an offer to buy the securities
described herein, nor shall there be any sale of these securities in any state
or jurisdiction in which such an offer, solicitation or sale would be unlawful
prior to registration or qualification under the securities laws of any such
state or jurisdiction.
9