COBH Pennsylvania Commerce Bancorp (MM)

Pennsylvania Commerce Bancorp, Inc. (NASDAQ National Market Symbol:COBH), parent company of Commerce Bank/Harrisburg, N.A., reported increased earnings, deposits, assets and loans for the third quarter of 2005, announced Gary L. Nalbandian, Chairman of the bank holding company. -0- *T THIRD QUARTER FINANCIAL HIGHLIGHTS ---------------------------------- SEPTEMBER 30, 2005 % Increase(1) ----------- Total Assets: $ 1.59 Billion 32% Total Deposits: $ 1.41 Billion 25% ----------- Total Loans (net): $ 753 Million 23% ----------- ---------------------------------------------------------------------- Total Revenues: $ 17.0 Million 15% ----------- Net Income: $ 2.3 Million 6% Diluted Net Income Per Share: $ 0.36 (16)% (1) Compared to Third Quarter Ended September 30, 2004 *T In commenting on the Company's financial results, Chairman Nalbandian noted the following financial highlights: -- Total revenues grew by 15% for the third quarter of 2005 to $17.0 million. -- Net interest income increased by 7% for the third quarter, despite margin compression to 3.74% caused by the flattening yield curve. -- Net income increased by 6% for the third quarter and by 16% for the first nine months of 2005. -- Earnings per share were $0.36 for the third quarter, down from $0.43 for 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 $265 million, or 24%, over the previous 12-month period. -- Non-interest bearing demand deposits increased 27% over the past 12 months. -- Comparable Store Core Deposit Growth was 17% for all stores open 2 years or more. -- Net loans grew $142 million, or 23%, for the prior 12 months to $753 million. -- Book value per share increased 21% over the past year to $15.06. -- Stockholder's Equity increased $28.9 million, or 47%, to $90.8 million. -0- *T Income Statement ---------------- Three Months Ended Nine Months Ended September 30 September 30 -------------------------- -------------------------- % % 2005 2004 Increase 2005 2004 Increase -------------------------- -------------------------- (dollars in thousands, except per share data) Total Revenues: $17,029 $14,832 15% $48,954 $42,743 15% Total Expenses: 13,337 10,890 22 36,613 31,456 16 Net Income: 2,325 2,198 6 7,341 6,307 16 ------ Diluted Net Income Per Share: $0.36 $0.43 (16) $1.15 $1.24 (7) Balance Sheet ------------- 9/30/2005 9/30/2004 % Increase ------------------------------------- (dollars in thousands) Total Assets: $1,587,394 $1,205,181 32% Total Loans (net): 753,306 611,088 23 Core Deposits: 1,353,800 1,088,586 24 Total Deposits: 1,405,601 1,124,906 25 Shareholder Returns ------------------- As of September 30, 2005 ------------------------ Commerce S & P Index -------- ----------- 1 Year 56% 12% 5 Years 26% -1% 10 Years 25% 9% Deposits -------- The Company's deposit growth continues with total deposits at September 30, 2005 reaching $1.4 billion, a $281 million, or 25%, increase over total deposits of $1.1 billion one year ago. Core deposits grew by $265 million, or 24%, over the previous 12 months. 9/30/2005 9/30/2004 $ Increase % Increase ----------- ----------- ----------- ----------- (dollars in thousands) Core Deposits: $1,353,800 $1,088,586 $265,214 24% ----------- Total Deposits: $1,405,601 $1,124,906 $280,695 25% ----------- Core Deposits ------------- Core deposit growth by type of account is as follows: 3rd Qtr 2005 Annual Cost of Growth 9/30/2005 9/30/2004 $ Increase Funds % ----------- ----------- ---------- ------- ------ (dollars in thousands) Demand Non-Interest $240,234 $189,636 $50,598 0.00% 27% Demand Interest 569,656 425,470 144,186 2.53 34 Savings 362,360 302,380 59,980 1.65 20 ----------- ----------- ---------- ------- ------ Subtotal 1,172,250 917,486 254,764 1.68% 28% ------ Time 181,550 171,100 10,450 3.00 6 ----------- ----------- ---------- ------- ------ Total Core Deposits $1,353,800 $1,088,586 265,214 1.88% 24% ----------- ----------- ---------- ------- ------ Core deposits, excluding time deposits, grew 28% for the prior 12 months. Net Income and Net Income Per Share ----------------------------------- Net income totaled $2.3 million for the third quarter of 2005, up $127,000, or 6%, over net income of $2.2 million as reported for the third quarter of 2004. Net income per share on a fully diluted basis for the third quarter was $0.36, vs. $0.43 recorded for the same period a year ago. Net income per share for the third quarter of 2005 reflects the impact of a 26% increase in the number of total shares outstanding in the third quarter of 2005 versus the same period one year ago as a result of our public stock offering in the fourth quarter of 2004. Three Months Ended Nine Months Ended September 30 September 30 --------------------------- -------------------------- % % 2005 2004 Increase 2005 2004 Increase --------------------------- -------------------------- (dollars in thousands, except per share data) Net Income: $2,325 $2,198 6% $7,341 $6,307 16% -------- -------- Diluted Net Income Per Share: $0.36 $0.43 (16)% $1.15 $1.24 (7)% For the first nine months of 2005, net income totaled $7.3 million, up $1.0 million, or 16%, over net income of $6.3 million for the first nine months of 2004. On a diluted per share basis, net income for the first nine months of 2005 was $1.15 compared to $1.24 for the first nine months of 2004. Net income per share for the first nine months was also impacted by the additional shares outstanding as described above. Total Revenues -------------- Three Months Ended Nine Months Ended September 30 September 30 ---------------------------- ---------------------------- % % 2005 2004 Increase 2005 2004 Increase ---------------------------- ---------------------------- (dollars in thousands) (dollars in thousands) Total Revenues: $17,029 $14,832 15% $48,954 $42,743 15% --------- --------- Total revenues (net interest income plus non-interest income) for the third quarter increased $2.2 million to $17.0 million, a 15% increase over the third quarter of 2004. Total revenues for the first nine months of 2005 increased by $6.2 million, also a 15% increase, over the same period in 2004. Net Interest Income and Net Interest Margin ------------------------------------------- Net interest income for the third quarter 2005 of $12.7 million represented a 7% increase over the $11.9 million recorded a year ago. For the first nine months of 2005, net interest income totaled $37.8 million, up $3.3 million, or 9%, over the $34.5 million recorded in the first nine months of 2004. The Company's strong 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 third quarter of 2005 was 3.74% compared to 4.23% for the third quarter 2004. The net interest margin for the first nine months of 2005 was 3.89%, compared to 4.33% for the first nine months of 2004. The decrease is primarily the result of the flattening yield curve, which has occurred over the past 12 months. 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 strong growth of core deposits. Net Interest Income ---------------------------------------- September Volume Rate Total % 2005 vs. 2004 Increase Change Increase Increase ---------------- --------- --------- --------- ---------- (dollars in thousands) Quarter $2,190 $(1,328) $862 7% First Nine Months $7,150 $(3,884) $3,266 9% Non-Interest Income ------------------- Non-interest income for the third quarter of 2005 increased to $4.3 million from $2.9 million a year ago, a 45% increase. Non-interest income for the first nine months of 2005 was $11.2 million, a 36% increase over the $8.3 million earned in the first nine months of 2004. The growth in non-interest income for the third quarter was reflected in increased deposit charges and service fees, other operating income and net investment securities gains as more fully depicted below: Three Months Ended Nine Months Ended September 30 September 30 -------------------------- -------------------------- % % 2005 2004 Increase 2005 2004 Increase -------------------------- -------------------------- (dollars in thousands) Deposit Charges & Service Fees $3,246 $2,707 20% $8,959 $7,465 20% Other Income 425 242 76 1,438 786 83 -------------------------- -------------------------- Subtotal $3,671 $2,949 24 $10,397 $8,251 26 Net Investment Securities Gains 613 0 799 0 -------------------------- -------------------------- Total Non- Interest Income $4,284 $2,949 45% $11,196 $8,251 36% Non-Interest Expenses --------------------- Non-interest expenses for the third quarter of 2005 were $13.3 million, up 22% from $10.9 million a year ago. Non-interest expenses for the first nine months of 2005 were $36.6 million, up 16% from $31.5 million a year ago. The increases in non-interest expenses for both the quarter and the first nine months 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 and third quarters of 2005. Lending ------- Loans increased $142 million, or 23%, to $753 million from $611 million a year ago, and the growth was represented across all loan categories. The composition of the Company's loan portfolio is as follows: Loan Composition ---------------- % of % of $ % 9/30/2005 Total 9/30/2004 Total Increase Increase ---------- ------ ---------- ------ --------- -------- (dollars in thousands) Commercial $212,553 28% $158,941 26% $53,612 34% Consumer 138,646 18 99,576 16 39,070 39 Commercial Real Estate 318,729 42 270,422 44 48,307 18 Residential 92,230 12 89,324 14 2,906 3 ---------- ------ ---------- ------ --------- -------- Gross Loans 762,158 100% 618,263 100% 143,895 23% Less: Reserves (8,852) (7,175) (1,677) ---------- ---------- --------- Net Loans $753,306 $611,088 $142,218 23% -------- Asset Quality ------------- Asset quality continues to be strong as non-performing assets at September 30, 2005 totaled $2.1 million, or 0.13%, of total assets, versus $2.4 million, or 0.20%, of total assets one year ago. The Company's asset quality results are highlighted below: Nine Months Ended ------------------------- 9/30/2005 9/30/2004 ---------- ---------- Non-Performing Assets/Assets 0.13% 0.20% Net Loan Charge-Offs 0.06% 0.13% Loan Loss Reserve/Gross Loans 1.16% 1.16% Non-Performing Loan Coverage 458% 436% Non-Performing Assets/Capital and Reserves 2% 4% Investments ----------- The Company's investment portfolio increased by 41%, to $687 million from $487 million one year ago, with 57% of this total in the available for sale portfolio and 43% 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 5.04% and a current duration of 4.5 years as of September 30, 2005. Capital ------- Stockholders' equity at September 30, 2005 totaled $90.8 million, an increase of $28.9 million, or 47%, over stockholders' equity of $61.9 million at September 30, 2004. Return on average stockholders' equity (ROE) for the third quarter and nine months ending September 30, 2005 and 2004 is shown in the table below: Return on Equity ---------------- Three Months Ended Nine Months Ended September 30 September 30 --------------------- --------------------- 2005 2004 2005 2004 --------- --------- --------- --------- 10.15% 15.75% 11.08% 15.91% ROE for the third quarter and first nine 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 September 30, 2005 were as follows: Regulatory Guidelines Commerce "Well Capitalized" --------------------- --------------------- Leverage Ratio 7.32% 5.00% Tier 1 10.31 6.00 Total Capital 11.16 10.00 *T New Stores and Expansion Plans -- On July 30, 2005, the Company opened its 26th store, located on West Cumberland Street in Lebanon County. -- On August 13, 2005, the Company opened its 27th store, located on State Hill Road in Wyomissing, Berks County. -- The Central Penn Business Journal has named Commerce one of Central Pennsylvania's Top Fifty Fastest Growing Companies for the 9th year in a row. -- 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 September 30, ------------------------------ (in thousands, except per share % amounts) 2005 2004 Change ----------- ----------- ------ Income Statement Data: Net interest income $12,745 $11,883 7% Provision for loan losses 250 675 (63)% Noninterest income 4,284 2,949 45% Noninterest operating expenses 13,337 10,890 22% Net income 2,325 2,198 +6% ----------- ----------- ------ Per Common Share Data: Net income: Basic $0.39 $0.47 (17)% Net income: Diluted 0.36 0.43 (16)% ----------- ----------- Book Value Weighted average shares outstanding: Basic 5,956 4,671 Diluted 6,393 5,049 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 2.17% 1.33% Deposit Cost of Funds 1.82 1.08 Net interest margin 3.74 4.23 Return on average assets 0.63 0.73 Return on average total stockholders' equity 10.15 15.75 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 Nine Months Ended September 30, ------------------------------ (in thousands, except per share % amounts) 2005 2004 Change ----------- ----------- ------ Income Statement Data: Net interest income $37,758 $34,492 9% Provision for loan losses 1,420 1,925 (26)% Noninterest income 11,196 8,251 36% Noninterest operating expenses 36,613 31,456 16% Net income 7,341 6,307 +16% ----------- ----------- ------ Per Common Share Data: Net income: Basic $1.23 $1.35 (9)% Net income: Diluted 1.15 1.24 (7)% ----------- ----------- Book Value $15.06 $12.44 +21% ------ Weighted average shares outstanding: Basic 5,933 4,634 Diluted 6,347 5,025 Balance Sheet Data: Total assets $1,587,394 $1,205,181 32% Loans (net) 753,306 611,088 +23% ------ Allowance for loan losses 8,852 7,175 23% Investment Securities 686,558 487,049 41% Total deposits 1,405,601 1,124,906 25% ----------- ----------- Core deposits 1,353,800 1,088,586 +24% ----------- ----------- ------ Stockholders' equity 90,823 61,861 +47% ------ Capital: Stockholders' equity to total assets 5.72% 5.13% Leverage Ratio 7.32 6.21 Risk based capital ratios: Tier 1 10.31 9.36 Total Capita 11.16 10.26 Performance Ratios: Cost of funds 1.95% 1.24% Deposit Cost of Funds 1.62 0.97 Net interest margin 3.89 4.33 Return on average assets 0.71 0.74 Return on average total stockholders' equity 11.08 15.91 Asset Quality: Net charge-offs to average loans outstanding 0.06% 0.13% Nonperforming loans to total period-end loans 0.25 0.27 Nonperforming assets to total period-end assets 0.13 0.20 Allowance for loan losses to total period-end loans 1.16 1.16 Allowance for loan losses to nonperforming loans 458% 436% Pennsylvania Commerce Bancorp, Inc. and Subsidiaries Average Balances and Net Interest Income (unaudited) Quarter ended, ---------------------------- September 2005 ---------------------------- Average Average Balance Interest Rate ---------------------------- (dollars in thousands) Earning Assets ------------------------------------------ Investment securities Taxable $604,417 $7,548 5.00 % Tax-exempt 7,403 111 6.00 ---------------------------------------------------------------------- Total securities 611,820 7,659 5.01 Federal funds sold 325 3 3.61 Loans receivable Mortgage and construction 394,589 6,705 6.74 Commercial loans and lines of credit 198,775 3,521 7.03 Consumer 138,815 2,159 6.17 Tax-exempt 9,308 108 4.64 ---------------------------------------------------------------------- Total loans receivable 741,487 12,493 6.76 ---------------------------------------------------------------------- Total earning assets $1,353,632 $20,155 5.91 % ---------------------------------------------------------------------- Sources of Funds ------------------------------------------ Interest-bearing deposits Regular savings $330,563 $1,378 1.65 % Interest checking and money market 490,208 3,193 2.58 Time deposits 179,493 1,359 3.00 Public funds time 31,429 265 3.35 ---------------------------------------------------------------------- Total interest-bearing deposits 1,031,693 6,195 2.38 Short-term borrowings 93,472 861 3.65 Junior subordinated debt 13,600 354 10.41 ---------------------------------------------------------------------- Total interest-bearing liabilities 1,138,765 7,410 2.58 Noninterest-bearing funds (net) 214,867 ---------------------------------------------------------------------- Total sources to fund earning assets $1,353,632 7,410 2.17 ---------------------------------------------------------------------- Net interest income and margin $12,745 3.74 % ---------------------------------------------------------------------- Other Balances ------------------------------------------ Cash and due from banks $48,936 Other assets 61,593 Total assets 1,464,161 Demand deposits (noninterest-bearing) 230,992 Other liabilities 3,487 Stockholders' equity 90,917 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, ---------------------------- September 2004 ---------------------------- Average Average Balance Interest Rate ---------------------------- (dollars in thousands) Earning Assets ------------------------------------------ Investment securities Taxable $497,218 $6,096 4.90 % Tax-exempt 6,835 100 5.85 ---------------------------------------------------------------------- Total securities 504,053 6,196 4.92 Federal funds sold 180 1 Loans receivable Mortgage and construction 351,969 5,682 6.42 Commercial loans and lines of credit 158,333 2,332 5.86 Consumer 98,101 1,353 5.49 Tax-exempt 6,179 74 4.79 ---------------------------------------------------------------------- Total loans receivable 614,582 9,441 6.11 ---------------------------------------------------------------------- Total earning assets $1,118,815 $15,638 5.56 % ---------------------------------------------------------------------- Sources of Funds ------------------------------------------ Interest-bearing deposits Regular savings $283,841 $736 1.03 % Interest checking and money market 346,437 1,062 1.22 Time deposits 169,794 1,025 2.40 Public funds time 48,850 224 1.82 ---------------------------------------------------------------------- Total interest-bearing deposits 848,922 3,047 1.43 Short-term borrowings 91,101 354 1.55 Junior subordinated debt 13,600 354 10.41 ---------------------------------------------------------------------- Total interest-bearing liabilities 953,623 3,755 1.57 Noninterest-bearing funds (net) 165,192 ---------------------------------------------------------------------- Total sources to fund earning assets $1,118,815 3,755 1.33 ---------------------------------------------------------------------- Net interest income and margin $11,883 4.23 % ---------------------------------------------------------------------- Other Balances ------------------------------------------ Cash and due from banks $37,600 Other assets 44,162 Total assets 1,200,576 Demand deposits (noninterest-bearing) 187,799 Other liabilities 3,619 Stockholders' equity 55,535 *T