COBH Pennsylvania Commerce Bancorp (MM)

-Pennsylvania Commerce Bancorp, Inc. (NASDAQ National Market Symbol:COBH), parent company of Commerce Bank/Harrisburg, N.A., reported record earnings and increased deposits, assets and loans for the second quarter of 2005, announced Gary L. Nalbandian, Chairman of the bank holding company. -0- *T SECOND QUARTER FINANCIAL HIGHLIGHTS ----------------------------------- JUNE 30, 2005 % Increase(1) ----------- Total Assets: $ 1.45 Billion 22% Total Deposits: $ 1.23 Billion 26% ----------- Total Loans (net): $ 714 Million 21% ----------- ---------------------------------------------------------------------- Total Revenues: $ 16.6 Million 15% Net Income: $ 2.6 Million 17% ---------- Diluted Net Income Per Share: $ 0.40 (7)% (1) Compared to Second Quarter Ended June 30, 2004 *T In commenting on the Company's financial results, Chairman Nalbandian noted the following financial highlights: -- Net income increased 17% for the second quarter of 2005 to $2.6 million. -- Total revenues grew by 15% over the same period in 2004, despite margin compression to 3.88% caused by the flattening yield curve. -- Earnings per share were $0.40 for the second quarter, down slightly from the same period one-year ago due to a 26% increase in the number of total shares outstanding as a result of our public stock offering in the fourth quarter of 2004. -- Core deposits grew $247 million, or 27%, over the previous 12-month period. -- Demand deposits increased 29% over the past 12 months. -- Deposit service charges and fees grew 20% year over year. -- Net loans grew $126 million, or 21%, over the second quarter one year ago. -- Book value per share increased 41% over the past year to $15.12. Income Statement -0- *T Three Months Ended Six Months Ended June 30, June 30, -------------------------- -------------------------- % % 2005 2004 Increase 2005 2004 Increase -------------------------- -------------------------- (dollars in thousands, except per share data) Total Revenues: $16,561 $ 14,357 15% $31,925 $ 27,911 14% Total Expenses: 12,129 10,449 16 23,276 20,566 13 Net Income: 2,555 2,181 17% 5,016 4,109 22% -------- -------- Diluted Net Income Per Share: $ 0.40 $ 0.43 (7)% $ 0.79 $ 0.81 (2)% *T Balance Sheet -0- *T 6/30/2005 6/30/2004 Increase ---------------------------------------------- (dollars in thousands) Total Assets: $ 1,450,759 $ 1,184,870 22% Total Loans (net): 713,979 588,398 21 Core Deposits: 1,158,679 911,838 27 Total Deposits: 1,229,461 978,258 26 *T Shareholder Returns -0- *T As of June 30, 2005 ------------------- Commerce S & P Index -------- ----------- 1 Year 35% 6% 5 Years 29% -2% 10 Years 26% 10% *T Total Deposits The Company's deposit growth continues with total deposits at June 30, 2005 reaching $1.23 billion, a $251 million, or 26%, increase over total deposits of $978 million one year ago. -0- *T 6/30/2005 6/30/2004 $ Increase % Increase ----------- ----------- ---------- ---------- (dollars in thousands) Core Deposits: $1,158,679 $911,838 $246,841 27% ---------- Total Deposits: $1,229,461 $978,258 $251,203 26% ---------- *T Core Deposits Core deposit growth by type of account is as follows: -0- *T 2nd Qtr 2005 Annual 6/30/2005 6/30/2004 Cost of Funds Growth % ----------- ----------- ------------- -------- (dollars in thousands) Demand $ 234,309 $ 182,282 0.00% 29% Interest Bearing Demand 417,874 288,485 1.99 45 Savings 327,389 270,382 1.37 21 ----------- ----------- ------------- -------- Subtotal 979,572 741,149 1.35% 32% -------- Time 179,107 170,689 2.87 5 ----------- ----------- ------------- -------- Total Core Deposits $1,158,679 $ 911,838 1.40% 27% ----------- ----------- ------------- -------- *T Core deposits, excluding time deposits, grew 32% for the prior 12 months. Net Income and Net Income Per Share Net income totaled $2.6 million for the second quarter of 2005, up $374,000, or 17%, over net income of $2.2 million as reported for the second quarter of 2004. Net income per share on a fully diluted basis for the second quarter was $0.40, vs. $0.43 recorded for the same period a year ago. Net income per share for the second quarter of 2005 reflects the impact of an additional 920,000 shares (adjusted for a two-for-one stock split) issued during the fourth quarter of 2004 through a public stock offering and an additional 200,000 shares (adjusted for the two-for-one stock split) issued at the end of the third quarter 2004 through a private placement. -0- *T Three Months Ended Six Months Ended June 30, June 30, ------------------------ ------------------------ % % 2005 2004 Increase 2005 2004 Increase ------------------------ ------------------------ (dollars in thousands, except per share data) Net Income: $2,555 $2,181 17% $5,016 $4,109 22% -------- -------- Diluted Net Income Per Share: $ 0.40 $ 0.43 (7)% $ 0.79 $ 0.81 (2)% *T For the first six months of 2005, net income totaled $5.0 million, up $907,000, or 22%, over net income of $4.1 million for the first six months of 2004. On a diluted per share basis, net income for the first six months of 2005 was $0.79 compared to $0.81 for the first six months of 2004. Net income per share for the first six months was also impacted by the additional shares outstanding as described above. Total Revenues -0- *T Three Months Ended Six Months Ended June 30 June 30 ---------------------------- ---------------------------- 2005 2004 % Increase 2005 2004 % Increase ---------------------------- ---------------------------- (dollars in thousands) (dollars in thousands) Total Revenues: $16,561 $14,357 15% $31,925 $27,911 14% ---------- ---------- *T Total revenues (net interest income plus non-interest income) for the second quarter increased $2.2 million to $16.6 million, a 15% increase over the second quarter of 2004. Total revenues for the first six months of 2005 increased by $4.0 million, or 14%, over the same period in 2004. Net Interest Income and Net Interest Margin Net interest income for the second quarter 2005 of $12.9 million represented a 10% increase over the $11.6 million recorded a year ago. For the first six months of 2005, net interest income totaled $25.0 million, up $2.4 million, or 11%, over the $22.6 million recorded in the first six months of 2004. The Company's low-cost core deposit growth fueled volume increases in the level of interest earning assets, which resulted in the increase in net interest income. The net interest margin for the second quarter of 2005 was 3.88% compared to 4.35% for the second quarter 2004. The net interest margin for the first six months of 2005 was 3.97%, compared to 4.38% for the first six months of 2004. The decrease is primarily the result of the flattening yield curve, which has occurred during the fourth quarter 2004 and first half of 2005. Net Interest Income and Rate/Volume Analysis As shown below, the increase in net interest income was due to volume increases in the Company's earning assets, which were fueled by the Company's continued growth of low-cost core deposits. -0- *T Net Interest Income ----------------------------------------- June Volume Rate Total % 2005 vs. 2004 Increase Change Increase Increase ----------------------- ---------- -------- ---------- ---------- (dollars in thousands) Quarter $ 2,542 $(1,328) $ 1,214 10% First Six Months $ 4,960 $(2,556) $ 2,404 11% *T Non-Interest Income Non-interest income for the second quarter of 2005 increased to $3.7 million from $2.7 million a year ago, a 36% increase. Non-interest income for the first six months of 2005 was $6.9 million, a 30% increase over the $5.3 million earned in the first six months of 2004. The growth in non-interest income for the second quarter was reflected in increased deposit charges and service fees and other operating income as more fully depicted below: -0- *T Three Months Ended Six Months Ended June 30, June 30, ------------------------ ------------------------ % % 2005 2004 Increase 2005 2004 Increase ------------------------ ------------------------ (dollars in thousands) Deposit Charges & Service Fees $3,018 $2,517 20% $5,713 $4,758 20% Other Income 502 199 152 1,013 544 86 ------------------------ ------------------------ Subtotal $3,520 $2,716 30 $6,726 $5,302 27 Net Investment Securities Gains 186 0 186 0 ------------------------ ------------------------ Total Non-Interest Income $3,706 $2,716 36% $6,912 $5,302 30% *T Non-Interest Expenses Non-interest expenses for the second quarter of 2005 were $12.1 million, up 16% from $10.4 million a year ago. Non-interest expenses for the first six months of 2005 were $23.3 million, up 13% from $20.6 million a year ago. The increases in non-interest expenses for both the quarter and the first half of 2005 were widespread across all categories and include the impact of new store growth during the fourth quarter of 2004 as well as the second quarter of 2005. Lending Loans increased $126 million, or 21%, to $714 million from $588 million a year ago, and the growth was represented across all loan categories. The composition of the Company's loan portfolio is as follows: -0- *T Loan Composition ---------------- % of % of $ % 6/30/2005 Total 6/30/2004 Total Increase Increase ---------- ----- ---------- ----- --------- --------- (dollars in thousands) Commercial $ 204,813 28% $ 158,364 27% $ 46,449 29% Consumer 131,290 18 88,443 15 42,847 48 Commercial Real Estate 298,373 42 264,511 44 33,862 13 Residential 88,077 12 84,099 14 3,978 5 ---------- ----- ---------- ----- --------- --------- Gross Loans 722,553 100% 595,417 100% 127,136 21% Less: Reserves (8,573) (7,019) (1,554) ---------- ---------- --------- Net Loans $ 713,980 $ 588,398 $125,582 21% --------- *T Asset Quality Asset quality continues to be strong as non-performing assets at June 30, 2005 totaled $1.6 million, or 0.11%, of total assets, versus $1.3 million, or 0.11%, of total assets one year ago. The Company's asset quality results are highlighted below: -0- *T Six Months Ended --------------------- 6/30/2005 6/30/2004 ---------- ---------- Non-Performing Assets/Assets 0.11% 0.11% Net Loan Charge-Offs 0.06% 0.04% Loan Loss Reserve/Gross Loans 1.19% 1.18% Non-Performing Loan Coverage 655% 855% Non-Performing Assets/Capital and Reserves 2% 2% *T Investments The Company's investment portfolio increased by 21%, to $607 million from $504 million one year ago, with 60% of this total in the available for sale portfolio and 40% in the held to maturity portfolio. The investment portfolio, consisting mainly of high quality U.S. Government agency and mortgage-backed obligations, has a weighted average yield of 5.05% and a current duration of 3.7 years as of June 30, 2005. Capital Stockholders' equity at June 30, 2005 totaled $91 million, an increase of $40 million, or 79%, over stockholders' equity of $51 million at June 30, 2004. Return on average stockholders' equity (ROE) for the second quarter and six months ending June 30, 2005 and 2004 is shown in the table below: -0- *T Return on Equity ---------------- Three Months Ended June 30, Six Months Ended June 30, -------------------------------- -------------------------------- 2005 2004 2005 2004 ---- ---- ---- ---- 11.47% 17.14% 11.58% 15.99% *T ROE for the second quarter and first six months of 2005 reflects the impact of the additional capital raised by the Company during the fourth quarter of 2004. The Company's capital ratios at June 30, 2005 were as follows: -0- *T Regulatory Guidelines Commerce "Well Capitalized" -------- --------------------- Leverage Ratio 7.34% 5.00% Tier 1 10.86 6.00 Total Capital 11.75 10.00 *T New Stores and Expansion Plans -- On April 30, 2005, the Company opened its 25th store, located on Mt. Zion Road in York County. -- On July 30, 2005, the Company will open its 26th store, located on West Cumberland Street in Lebanon County. -- On August 13, 2005, the Company will open its 27th store, located on State Hill Road in Wyomissing, Berks County. -- Commerce serves customers in Cumberland, Dauphin, Lebanon, York, and Berks counties. -- The Company plans to expand into the Lancaster County market in 2006. -- Pennsylvania Commerce Bancorp is an independent member of the "Commerce Bank Network," a network of banks established by Commerce Bancorp, Inc. (NYSE:CBH) based in Cherry Hill, N.J. 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. -0- *T Pennsylvania Commerce Bancorp, Inc. Selected Consolidated Financial Data (Unaudited) At or for the Three Months Ended June 30, ----------------------------------- (in thousands, except per share % amounts) 2005 2004 Change ----------- ----------- ----------- Income Statement Data: Net interest income $ 12,855 $ 11,641 10% Provision for loan losses 625 675 (7)% Noninterest income 3,706 2,716 36% Noninterest operating expenses 12,129 10,449 16% Net income 2,555 2,181 + 17% ----------- ----------- ----------- Per Common Share Data: Net income: Basic $ 0.43 $ 0.47 (9)% Net income: Diluted 0.40 0.43 (7)% ----------- ----------- Book Value Weighted average shares outstanding: Basic 5,940 4,627 Diluted 6,351 5,044 Balance Sheet Data: Total assets Loans (net) Allowance for loan losses Investment Securities Total deposits Core deposits Stockholders' equity Capital: Stockholders' equity to total assets Leverage Ratio Risk based capital ratios: Tier 1 Total Capital Performance Ratios: Cost of funds 1.94% 1.19% Deposit Cost of Funds 1.57 0.91 Net interest margin 3.88 4.35 Return on average assets 0.72 0.76 Return on average total stockholders' equity 11.47 17.14 Asset Quality: Net charge-offs to average loans outstanding Nonperforming loans to total period-end loans Nonperforming assets to total period-end assets Allowance for loan losses to total period-end loans Allowance for loan losses to nonperforming loans At or for the Six Months Ended June 30, ----------------------------------- (in thousands, except per share % amounts) 2005 2004 Change ----------- ----------- ----------- Income Statement Data: Net interest income $ 25,013 $ 22,609 11% Provision for loan losses 1,170 1,250 (6)% Noninterest income 6,912 5,302 30% Noninterest operating expenses 23,276 20,566 13% Net income 5,016 4,109 + 22% ----------- ----------- ----------- Per Common Share Data: Net income: Basic $ 0.84 $ 0.88 (5)% Net income: Diluted 0.79 0.81 (2)% ----------- ----------- Book Value $ 15.12 $ 10.76 + 41% ----------- Weighted average shares outstanding: Basic 5,921 4,615 Diluted 6,330 5,034 Balance Sheet Data: Total assets $1,450,759 $1,184,870 22% Loans (net) 713,979 588,398 + 21% ----------- Allowance for loan losses 8,573 7,019 22% Investment Securities 607,032 503,742 21% Total deposits 1,229,461 978,258 26% ----------- ----------- Core deposits 1,158,679 911,838 + 27% ----------- ----------- ----------- Stockholders' equity 91,051 51,006 + 79% ----------- Capital: Stockholders' equity to total assets 6.28% 4.30% Leverage Ratio 7.34 5.80 Risk based capital ratios: Tier 1 10.86 8.72 Total Capital 11.75 9.63 Performance Ratios: Cost of funds 1.83% 1.19% Deposit Cost of Funds 1.52 0.92 Net interest margin 3.97 4.38 Return on average assets 0.75 0.74 Return on average total stockholders' equity 11.58 15.99 Asset Quality: Net charge-offs to average loans outstanding 0.06% 0.04% Nonperforming loans to total period-end loans 0.18 0.14 Nonperforming assets to total period-end assets 0.11 0.11 Allowance for loan losses to total period-end loans 1.19 1.18 Allowance for loan losses to nonperforming loans 655% 855% Pennsylvania Commerce Bancorp, Inc. and Subsidiaries Average Balances and Net Interest Income (unaudited) Quarter ended, ---------------------------------------------------------------------- June 2005 ---------------------------------------------------------------------- Average Average Balance Interest Rate ------------------------------- (dollars in thousands) Earning Assets -------------------------------------- Investment securities Taxable $609,060 $7,587 4.98% Tax-exempt 7,113 107 6.02 ---------------------------------------------------------------------- Total securities 616,173 7,694 4.99 Federal funds sold 0 0 Loans receivable Mortgage and construction 384,180 6,368 6.65 Commercial loans and lines of credit 193,509 3,241 6.72 Consumer 127,515 1,909 6.00 Tax-exempt 7,186 82 4.58 ---------------------------------------------------------------------- Total loans receivable 712,390 11,600 6.53 ---------------------------------------------------------------------- Total earning assets $1,328,563 $19,294 5.82% ---------------------------------------------------------------------- Sources of Funds -------------------------------------- Interest-bearing deposits Regular savings $317,020 $1,080 1.37% Interest checking and money market 458,575 2,587 2.26 Time deposits 177,065 1,267 2.87 Public funds time 34,732 261 3.01 ---------------------------------------------------------------------- Total interest-bearing deposits 987,392 5,195 2.11 Short-term borrowings 112,766 889 3.16 Junior subordinated debt 13,600 355 10.44 ---------------------------------------------------------------------- Total interest-bearing liabilities 1,113,758 6,439 2.32 Noninterest-bearing funds (net) 214,805 ---------------------------------------------------------------------- Total sources to fund earning assets $1,328,563 6,439 1.94 ---------------------------------------------------------------------- Net interest income and margin $12,855 3.88% ---------------------------------------------------------------------- Other Balances -------------------------------------- Cash and due from banks $41,959 Other assets 55,719 Total assets 1,426,241 Demand deposits (noninterest-bearing) 218,107 Other liabilities 5,064 Stockholders' equity 89,312 Quarter ended, ---------------------------------------------------------------------- March 2005 ---------------------------------------------------------------------- Average Average Balance Interest Rate ------------------------------- (dollars in thousands) Earning Assets -------------------------------------- Investment securities Taxable $526,341 $6,591 5.01% Tax-exempt 6,440 105 6.52 ---------------------------------------------------------------------- Total securities 532,781 6,696 5.03 Federal funds sold 270 2 2.66 Loans receivable Mortgage and construction 368,689 6,032 6.64 Commercial loans and lines of credit 172,078 2,696 6.35 Consumer 118,824 1,679 5.73 Tax-exempt 6,607 75 4.60 ---------------------------------------------------------------------- Total loans receivable 666,198 10,482 6.38 ---------------------------------------------------------------------- Total earning assets $1,199,249 $17,180 5.77% ---------------------------------------------------------------------- Sources of Funds -------------------------------------- Interest-bearing deposits Regular savings $302,987 $915 1.22% Interest checking and money market 418,702 2,029 1.97 Time deposits 174,653 1,165 2.71 Public funds time 35,189 211 2.43 ---------------------------------------------------------------------- Total interest-bearing deposits 931,531 4,320 1.88 Short-term borrowings 51,740 348 2.69 Junior subordinated debt 13,600 354 10.43 ---------------------------------------------------------------------- Total interest-bearing liabilities 996,871 5,022 2.04 Noninterest-bearing funds (net) 202,378 ---------------------------------------------------------------------- Total sources to fund earning assets $1,199,249 $5,022 1.70 ---------------------------------------------------------------------- Net interest income and margin $12,158 4.07% ---------------------------------------------------------------------- Other Balances -------------------------------------- Cash and due from banks $37,513 Other assets 50,459 Total assets 1,287,221 Demand deposits (noninterest-bearing) 200,418 Other liabilities 4,571 Stockholders' equity 85,361 Quarter ended, ---------------------------------------------------------------------- June 2004 ---------------------------------------------------------------------- Average Average Balance Interest Rate ------------------------------- (dollars in thousands) Earning Assets -------------------------------------- Investment securities Taxable $505,413 $6,248 4.94% Tax-exempt 6,840 100 5.85 ---------------------------------------------------------------------- Total securities 512,253 6,348 4.95 Federal funds sold 0 0 Loans receivable Mortgage and construction 330,853 5,251 6.38 Commercial loans and lines of credit 142,191 2,025 5.73 Consumer 84,155 1,137 5.43 Tax-exempt 6,077 73 4.83 ---------------------------------------------------------------------- Total loans receivable 563,276 8,486 6.06 ---------------------------------------------------------------------- Total earning assets $1,075,529 $14,834 5.54% ---------------------------------------------------------------------- Sources of Funds -------------------------------------- Interest-bearing deposits Regular savings $264,660 $592 0.90% Interest checking and money market 301,937 685 0.91 Time deposits 166,741 975 2.35 Public funds time 47,992 194 1.63 ---------------------------------------------------------------------- Total interest-bearing deposits 781,330 2,446 1.26 Short-term borrowings 126,184 392 1.25 Junior subordinated debt 13,600 355 10.44 ---------------------------------------------------------------------- Total interest-bearing liabilities 921,114 3,193 1.39 Noninterest-bearing funds (net) 154,415 ---------------------------------------------------------------------- Total sources to fund earning assets $1,075,529 3,193 1.19 ---------------------------------------------------------------------- Net interest income and margin $11,641 4.35% ---------------------------------------------------------------------- Other Balances -------------------------------------- Cash and due from banks $33,941 Other assets 48,322 Total assets 1,157,792 Demand deposits (noninterest-bearing) 180,734 Other liabilities 4,779 Stockholders' equity 51,165 *T