COBH Pennsylvania Commerce Bancorp (MM)

Pennsylvania Commerce Bancorp, Inc. (NASDAQ Global Select Market Symbol: COBH), parent company of Commerce Bank/Harrisburg, N.A., reported record loans, revenues, net income and earnings per share for the first quarter of 2008, announced Gary L. Nalbandian, Chairman. � First Quarter 2008 Financial Highlights � � � � % � 03/31/08 03/31/07 Change Total assets $ 1.96 Billion $ 1.90 Billion 3 % � Total deposits $ 1.58 Billion $ 1.56 Billion 1 % � Total loans (net) $ 1.20 Billion $ 1.05 Billion 15 % � � � � � � � � � � � Total revenues $ 24.6 Million $ 18.4 Million 34 % � Net income $ 3.2 Million $ 1.1 Million 188 % � Diluted net income per share $ 0.49 $ 0.17 188 % Chairman�s Statement In commenting on the Company�s financial results, Chairman Nalbandian noted the following highlights: Net income was $3.2 million, up $2.1 million, or 188%, over the first quarter one year ago. This represents an all-time high for quarterly net income. Diluted net income per share was $0.49 for the quarter, up $0.32, or 188%, over the first quarter of 2007. This also represents an all-time high for the Company. Total revenues grew 34% for the first quarter of 2008 over the first quarter one year ago. Net interest income for the quarter increased 40% over the same period in 2007. The Company�s net interest margin for the first quarter improved 47 basis points over the previous quarter and 103 basis points over the same quarter one year ago to 4.07%. Deposit charges and service fees grew 26% for the first quarter over the same period one year ago. Stockholders� equity increased $5.4 million, or 5%, to $110.3 million. Return on average stockholders� equity improved to 11.39% for the quarter vs. 4.39% for the first quarter of 2007. Total assets reached $1.96 billion. Net loans grew $156.8 million, or 15%, over the first quarter one year ago. Asset quality remains strong with net charge-offs for the quarter of only 0.01% and a non-performing loan coverage ratio of 309%. Income Statement � Three months ended March 31, (dollars in thousands, except per share data) � 2008 � 2007 � %Change Total revenues $ 24,576 � $ 18,398 � 34 % Total expenses 18,901 16,490 15 % Net income 3,206 1,112 188 % Diluted net income per share � $ 0.49 � $ 0.17 � 188 % Total revenues (net interest income plus non-interest income) for the first quarter increased $6.2 million to $24.6 million, up 34% over the first quarter of 2007. Net income totaled $3.2 million for the first quarter of 2008, a $2.3 million increase over net income of $1.1 million for the first quarter of 2007. Net income per fully diluted share for the first quarter of 2008 was $0.49, a 188% increase over the $0.17 recorded for the same period a year ago. Net Interest Income and Net Interest Margin Net interest income for the first quarter of 2008 totaled $18.6 million, an increase of $5.4 million, or 40%, over the $13.2 million recorded a year ago. This increase was a result of continued strong loan growth combined with significant improvement in the Company�s net interest margin. The net interest margin for the first quarter of 2008 was 4.07%, up 47 basis points on a linked-quarter basis and 103 basis points over the 3.04% figure recorded in the first quarter of 2007. The improvement in net interest margin is the result of a marked reduction in the Company�s deposit and total cost of funds. Net interest income, on a tax equivalent basis, totaled $18.9 million in the first quarter of 2008, an increase of $5.5 million, or 41%, over the first quarter one year ago. Net interest margin on a fully-taxable equivalent basis was 4.15%. Net Interest Income and Rate/Volume Analysis As shown below, the increase in net interest income on a tax equivalent basis was due to volume increases in the Company�s earning assets, as well as noticeable improvement in the net interest margin. � (dollars in thousands) � Net Interest Income March 31 Volume � Rate � Total � % 2008 vs. 2007 � Increase � Change � Increase � Increase Quarter $ 1,550 $ 3,943 $ 5,493 41 % Non-interest Income Non-interest income for the first quarter of 2008 totaled $6.0 million, up $823,000, or 16%, over $5.2 million a year ago. The growth in non-interest income for the quarter was reflected in increased deposit charges and service fees as depicted below: � Three months ended March 31, (dollars in thousands) � 2008 � 2007 � %Change Deposit charges and service fees $ 5,676 � $ 4,502 � 26 � % Other income � � 317 � � 497 � (36 ) � Subtotal 5,993 4,999 20 Net investment securities gains � � - � � 171 � (100 ) � Total noninterest income � $ 5,993 � $ 5,170 � 16 � % Non-interest Expenses Non-interest expenses for the first quarter of 2008 were $18.9 million, up 15%, over $16.5 million one year ago. The increases in non-interest expenses for the quarter were widespread across several categories, as shown in the following table: � Three months ended March 31, (dollars in thousands) � 2008 � 2007 � %Change Salaries and employee benefits $ 8,881 � $ 8,398 � 6 % Occupancy 2,074 1,835 13 Furniture and equipment 1,052 955 10 Advertising and marketing 837 786 6 Data Processing 1,705 1,475 16 Postage and supplies 532 539 (1 ) Regulatory assessments 1,138 187 509 Telephone 596 564 6 Other expenses � � 2,086 � � 1,751 � 19 � � Total noninterest expenses � $ 18,901 � $ 16,490 � 15 � % The increase in regulatory assessment expenses was due primarily to FDIC insurance expense incurred in the first quarter of 2008 which was offset during the same period one year ago by one-time credits. Also adding to this increase were consulting and legal costs associated with regulatory matters which were significantly higher during the first quarter of 2008 as opposed to the same period last year. Balance Sheet � � March 31, � (dollars in thousands) � 2008 � 2007 � % Change Total assets $ 1,957,843 � $ 1,898,572 3 % � Total loans (net) 1,203,231 1,046,445 15 % � Total deposits � � 1,580,099 � � 1,560,361 � 1 % Lending Total gross loans increased $158.4 million, or 15%, to $1.21 billion from $1.06 billion one year ago, with the growth represented across all loan categories. The composition of the Company�s loan portfolio is as follows: � � � � � � (dollars in thousands) � � 03/31/08 � % ofTotal � � 03/31/07 � % ofTotal � $ Increase � %Increase Commercial $ 377,149 31 % $ 322,957 31 % $ 54,192 17 % Owner occupied � � 174,477 � 14 � � � 124,120 � 12 � � � 50,357 � 41 � Total commercial 551,626 45 447,077 43 104,549 23 Consumer/ residential 309,873 26 286,746 27 23,127 8 Commercial real estate � � 353,359 � 29 � � � 322,614 � 30 � � � 30,745 � 10 � Gross loans � $ 1,214,858 � 100 % � $ 1,056,437 � 100 % � $ 158,421 � 15 % Asset Quality The Company�s asset quality ratios are highlighted below: � Quarter Ended March 31, � December 31, � March 31, � � 2008 � 2007 � 2007 Non-performing assets/total assets 0.22 % 0.17 % 0.20 % Net loan charge-offs/average total loans 0.01 % 0.02 % 0.02 % Loan loss reserve/gross loans 0.96 % 0.93 % 0.95 % Non-performing loan coverage 309 % 366 % 280 % Non-performing assets/capital and reserves � 4 % � 3 % � 3 % Non-performing assets and loans past due 90 days at March 31, 2008 totaled $4.3 million, or 0.22%, of total assets, as compared to $3.4 million, or 0.17% of total assets, at December 31, 2007 and $3.9 million, or 0.20%, of total assets one year ago. Core Deposits Core deposit growth by type of account is as follows: � � � March 31, � 1st Qtr 2008 % Cost of (dollars in thousands) � 2008 � 2007 � Change � Funds Demand noninterest-bearing $ 295,340 $ 287,129 3 % 0.00 % Demand interest-bearing 693,514 676,253 3 1.91 Savings � � 368,557 � � 384,546 � (4 ) � � 1.38 � Subtotal 1,357,411 1,347,928 1 1.38 Time � � 188,164 � � 194,504 � (3 ) � � 3.99 � Total core deposits � $ 1,545,575 � $ 1,542,432 � 0 � % � 1.67 % Core deposit growth by type of customer is as follows: � � � � � March 31, % of March 31, % of % (dollars in thousands) � 2008 � Total � 2007 � Total � Change Consumer $ 642,235 42 % $ 641,350 42 % 0 % Commercial 560,568 36 511,202 33 10 Government � � 342,772 � 22 � � � 389,880 � 25 � � (12 ) � Total � $ 1,545,575 � 100 % � $ 1,542,432 � 100 % � 0 � % Investments At March 31, 2008, the Company�s investment portfolio totaled $555.6 million. Detailed below is information regarding the composition and characteristics of the Company�s investment portfolio at March 31, 2008. � Available � Held to � Product Description � for Sale � Maturity � Total (in thousands) Mortgage-backed securities: Federal government agencies pass through certificates $ 70,168 $ 79,139 $ 149,307 Collateralized mortgage obligations (AAA rated) 290,823 33,606 324,429 U.S. Government agencies/other � � 4,958 � � � 76,910 � � � 81,868 � Total � $ 365,949 � � $ 189,655 � � $ 555,604 � Duration (in years) 3.9 3.4 3.7 Average life (in years) 5.0 4.3 4.7 Quarterly average yield � � 5.05 % � � 5.33 % � � 5.15 % At March 31, 2008, the after tax depreciation of the Company�s available for sale portfolio was $9.6 million. Capital Stockholders� equity at March 31, 2008 totaled $110 million, an increase of $5.4 million, or 5%, over stockholders� equity of $105 million at March 31, 2007. Return on average stockholders� equity (ROE) for the three months ended March 31, 2008 and 2007 are shown below: � Return on Equity Three Months Ended March 31, 2008 � 2007 11.39% � 4.39% The Company�s capital ratios at March 31, 2008 were as follows: � � Regulatory Guidelines Commerce � "Well Capitalized" Leverage Ratio 7.59 % 5.00 % Tier 1 9.99 6.00 Total Capital � 10.77 � � 10.00 � Stockholder Returns � � � As of March 31, 2008 � � Commerce � NASDAQ Bank Index � S & P Index 1 Year (6 ) % � (20 ) % � (5 ) % 5 Years 9 � % 6 � % 11 � % 10 Years � 10 � % � 4 � % � 4 � % 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 (including the annual report on Form 10-K and the exhibits thereto), 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 discussed in the Company�s Form 10-K, could cause the Company�s financial performance to differ materially from that expressed or implied 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; 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. Because such forward-looking statements are subject to risks and uncertainties, actual results may differ materially from those expressed or implied by such statements. 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. For information on subsequent events refer to the Company�s filings with the Securities and Exchange Commission (�SEC�). � Pennsylvania Commerce Bancorp, Inc. Selected Consolidated Financial Data (Unaudited) � At or for the Three Months Ended March 31, � % (in thousands, except per share amounts) 2008 2007 Change � Income Statement Data: Net interest income $ 18,583 $ 13,228 40 % Provision for loan losses 975 480 103 Noninterest income 5,993 5,170 16 Total revenues 24,576 18,398 34 Noninterest operating expenses 18,901 16,490 15 Net income 3,206 1,112 188 � Per Common Share Data: Net income: Basic $ 0.50 $ 0.18 178 % Net income: Diluted 0.49 0.17 188 � Book Value $ 17.26 $ 16.76 3 % � Weighted average shares outstanding: Basic 6,327 6,167 Diluted 6,495 6,408 � Balance Sheet Data: Total assets $ 1,957,843 $ 1,898,572 3 % Loans (net) 1,203,231 1,046,445 15 Allowance for loan losses 11,627 9,992 16 Investment securities 555,604 681,719 (18 ) Total deposits 1,580,099 1,560,361 1 Core deposits 1,545,575 1,542,432 0 Stockholders' equity 110,336 104,940 5 � Capital: Stockholders' equity to total assets 5.64 % 5.53 % Leverage ratio 7.59 7.28 Risk based capital ratios: Tier 1 9.99 9.98 Total Capital 10.77 10.72 � Performance Ratios: Cost of funds 2.11 % 3.41 % Deposit cost of funds 1.43 2.74 Net interest margin 4.07 3.04 Return on average assets 0.66 0.24 Return on average total stockholders' equity 11.39 4.39 � Asset Quality: Net charge-offs to average loans outstanding 0.01 % 0.02 % Nonperforming assets to total period-end assets 0.22 0.20 Allowance for loan losses to total period-end loans 0.96 0.95 Allowance for loan losses to nonperforming loans 309 280 Nonperforming assets to capital and reserves 4 % 3 % � � � � � � � � Pennsylvania Commerce Bancorp, Inc. and Subsidiaries Average Balances and Net Interest Income (unaudited) � � � Quarter ending, � � � March 2008 � December 2007 � March 2007 Average Average Average Average Average Average Balance � Interest � Rate Balance � Interest � Rate Balance � Interest � Rate (dollars in thousands) Earning Assets � Investment securities Taxable $ 616,294 $ 7,927 5.14 % $ 704,586 $ 9,419 5.35 % $ 704,722 $ 9,379 5.32 % Tax-exempt � � 1,621 � � 25 � 6.17 � � � 1,621 � � 25 � 6.17 � � � 1,619 � � 25 � 6.18 � Total securities 617,915 7,952 5.15 706,207 9,444 5.35 706,341 9,404 5.32 Federal funds sold 0 0 0.00 0 0 0.00 0 0 0.00 Loans receivable Mortgage and construction 579,577 9,992 6.83 551,255 10,088 7.19 477,667 8,475 7.10 Commercial loans and lines of credit 332,486 5,865 6.98 314,229 6,006 7.48 312,797 6,267 8.01 Consumer 226,889 3,717 6.59 219,970 3,764 6.79 194,354 3,247 6.78 Tax-exempt � � 56,742 � � 985 � 6.94 � � � 52,612 � � 897 � 6.82 � � � 36,686 � � 610 � 6.65 � Total loans receivable � � 1,195,694 � � 20,559 � 6.83 � � � 1,138,066 � � 20,755 � 7.17 � � � 1,021,504 � � 18,599 � 7.30 � Total earning assets � $ 1,813,609 � $ 28,511 � 6.26 % � $ 1,844,273 � $ 30,199 � 6.47 % � $ 1,727,845 � $ 28,003 � 6.49 % � Sources of Funds � Interest-bearing deposits Regular savings $ 349,976 $ 1,200 1.38 % $ 366,190 $ 1,876 2.03 % $ 377,735 $ 2,491 2.67 % Interest checking and money market 706,625 3,360 1.91 769,826 5,657 2.92 700,697 6,851 3.97 Time deposits 166,221 1,650 3.99 160,271 1,662 4.11 200,642 2,101 4.25 Public funds time � � 22,920 � � 237 � 4.16 � � � 14,167 � � 173 � 4.84 � � � 19,611 � � 236 � 4.88 � Total interest-bearing deposits 1,245,742 6,447 2.08 1,310,454 9,368 2.84 1,298,685 11,679 3.65 Short-term borrowings 230,749 1,911 3.28 210,947 2,475 4.59 165,250 2,219 5.37 Other borrowed money 50,000 555 4.39 50,000 561 4.39 0 0 0.00 Junior subordinated debt � � 29,400 � � 661 � 8.99 � � � 29,400 � � 661 � 8.99 � � � 29,400 � � 661 � 9.00 � Total interest-bearing liabilities 1,555,891 9,574 2.46 1,600,801 13,065 3.23 1,493,335 14,559 3.94 Noninterest-bearing funds (net) � � 257,718 � � � � � � � � 243,472 � � � � � � � � 234,510 � � � � � � Total sources to fund earning assets � $ 1,813,609 � $ 9,574 � 2.11 � � $ 1,844,273 � $ 13,065 � 2.80 � � $ 1,727,845 � $ 14,559 � 3.41 � Net interest income and margin on a tax-equivalent basis $ 18,937 4.15 % $ 17,134 3.67 % $ 13,444 3.08 % Tax-exempt adjustment � 354 � 314 � 216 Net interest income and margin � � � � $ 18,583 � 4.07 % � � � � $ 16,820 � 3.60 % � � � � $ 13,228 � 3.04 % � � � Other Balances: Cash and due from banks $ 46,913 $ 52,086 $ 48,377 Other assets 89,927 90,652 89,736 Total assets 1,950,449 1,987,011 1,865,958 Demand deposits (noninterest-bearing) 270,345 266,407 262,022 Other liabilities 11,041 8,918 7,902 Stockholders' equity � � 113,172 � � � � � � � � 110,885 � � � � � � � � 102,699 � � � � � � � Pennsylvania Commerce Bancorp, Inc. and Subsidiaries Summary of Allowance for Loan Losses and Other Related Data (unaudited) � � � 3/31/2008 � 3/31/2007 � (dollar amounts in thousands) Three Months Ended Year-ended12/31/2007 � Balance at beginning of period $ 10,742 $ 9,685 $ 9,685 Provisions charged to operating expense � 975 � � � 480 � � 1,762 � 11,717 10,165 11,447 � Recoveries on loans charged-off: Commercial 124 1 11 Consumer 6 5 53 Real estate � 0 � � � 8 � � 8 � Total recoveries 130 14 72 � Loans charged-off: Commercial (165 ) (176 ) (634 ) Consumer (38 ) (9 ) (69 ) Real estate � (17 ) � � (2 ) � (74 ) � Total charged-off � (220 ) � � (187 ) � (777 ) � Net charge-offs � (90 ) � � (173 ) � (705 ) � Balance at end of period $ 11,627 � � $ 9,992 � $ 10,742 � � Net charge-offs as a percentage of average loans outstanding 0.01 % 0.02 % 0.07 % � Allowance for loan losses as a percentage of period-end loans 0.96 % 0.95 % 0.93 % � Pennsylvania Commerce Bancorp, Inc. and Subsidiaries Summary of Non-Performing Loans and Assets (unaudited) � � March 31, � December 31, � September 30, � June 30, � March 31, 2008 � 2007 � 2007 � 2007 � 2007 Nonaccrual loans: Commercial $ 1,158 $ 534 $ 997 $ 1,362 $ 945 Consumer 120 57 57 54 19 Real Estate: Construction 284 385 529 520 394 Mortgage � 2,183 � � � 1,959 � � � 1,767 � � � 1,784 � � � 2,207 � Total nonaccrual loans 3,745 2,935 3,350 3,720 3,565 Loans past due 90 days or more and still accruing 15 0 0 0 0 Renegotiated loans � 0 � � � 0 � � � 0 � � � 0 � � � 0 � Total non-performing loans 3,760 2,935 3,350 3,720 3,565 � Foreclosed real estate � 588 � � � 489 � � � 390 � � � 300 � � � 300 � � Total non-performing assets $ 4,348 � � $ 3,424 � � $ 3,740 � � $ 4,020 � � $ 3,865 � � � Non-performing loans to total loans 0.31 % 0.25 % 0.30 % 0.34 % 0.34 % � Non-performing assets to total assets 0.22 % 0.17 % 0.19 % 0.21 % 0.20 % � Non-performing loan coverage 309 % 366 % 319 % 278 % 280 % � Allowance for loan losses as a percentage of total period-end loans 0.96 % 0.93 % 0.96 % 0.96 % 0.95 % � Non-performing assets / capital reserves 4 % 3 % 3 % 3 % 3 %