UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington, D.C.
20549
FORM
10-K
[
X ]
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ANNUAL REPORT PURSUANT TO SECTION
13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
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For
the fiscal year ended
December 31,
2008.
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or
[ ]
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TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
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For
the transition period from __________
to__________.
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Commission
file number
000-50961
PENNSYLVANIA COMMERCE
BANCORP, INC.
(Exact
name of registrant as specified in its charter)
Pennsylvania
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25-1834776
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(State
or other jurisdiction of
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(I.R.S.
Employer Identification No.)
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incorporation
or organization)
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3801 Paxton Street,
P.O. Box 4999, Harrisburg, PA
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17111-0999
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(Address
of principal executive offices)
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(Zip
Code)
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Registrant’s
telephone number, including area code:
(800)
653-6104
Securities
registered pursuant to Section 12(b) of the Act:
Title
of each class
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Name
of each exchange on which registered
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Common Stock, $1.00
par value
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NASDAQ Stock Market
LLC
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Securities
registered pursuant to Section 12(g) of the Act: None
(Title
of Class)
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act. [ ] Yes [X] No
Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 of Section 15(d) of the Act.[ ] Yes [X] No
Indicate by check mark whether the
registrant (1) has filed all reports required to be filed by Section 13 or 15(d)
of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days. [X]
Yes [ ] No
Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K (§229.405 of this chapter) is not contained herein, and will not
be contained, to the best of registrant’s knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. [ ]
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange
Act.
Large
accelerated filer [ ]
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Accelerated
filer [X]
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Non-accelerated
filer (Do not check if a smaller reporting company.) [
]
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Smaller
reporting company
[ ]
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Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). [ ] Yes [X] No
The
aggregate market value of voting stock held by non-affiliates of the registrant
as of the last business day of the Company’s most recently completed second
fiscal quarter, June 30, 2008, was $107,250,855.
The
number of shares of the registrant’s common stock, par value $1.00 per share,
outstanding as of February 27, 2009 was 6,488,241.
DOCUMENTS
INCORPORATED BY REFERENCE:
Part II
incorporates certain information by reference to the registrant’s Annual Report
to Shareholders for the fiscal year ended December 31, 2008 (the “Annual
Report”). Part III incorporates certain information by reference to the
registrant’s Proxy Statement for the 2009 Annual Meeting of
Shareholders.
PENNSYLVANIA
COMMERCE BANCORP, INC.
FORM
10-K CROSS-REFERENCE INDEX
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Page
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Part
I.
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Item
1.
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Business
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Item
1A.
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Risk
Factors
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Item
1B.
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Unresolved
Staff Comments
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Item
2.
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Properties
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Item
3.
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Legal
Proceedings
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Item
4.
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Submission
of Matters to a Vote of Security Holders
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Part
II.
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Item
5.
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Market
for Registrant’s Common Equity, Related Stockholder Matters
and
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Issuer
Purchases of Equity Securities
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Item
6.
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Selected
Financial Data
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Item
7.
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Management’s
Discussion and Analysis of Financial Condition and
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Results
of Operations
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(The
information required by this item is incorporated by reference from
the
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Company’s
2008 Annual Report.)
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Item
7A.
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Quantitative
and Qualitative Disclosures about Market Risk
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(The
information required by this item is incorporated by reference from
the
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Company’s
2008 Annual Report.)
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Item
8.
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Financial
Statements and Supplementary Data
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(The
information required by this item is incorporated by reference from
the
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Company’s
2008 Annual Report.)
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Item
9.
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Changes
In and Disagreements with Accountants on Accounting and
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Financial
Disclosure (This item is omitted since it is not
applicable)
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Item
9A.
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Controls
and Procedures
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Item
9B.
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Other
Information
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Part
III.
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Item
10.
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Directors,
Executive Officers and Corporate Governance
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Item
11.
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Executive
Compensation
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Item
12.
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Security
Ownership of Certain Beneficial Owners and Management and
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Related
Stockholder Matters
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Item
13.
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Certain
Relationships and Related Transactions, and Director
Independence
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Item
14.
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Principal
Accounting Fees and Services
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Part
IV.
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Item
15.
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Exhibits,
Financial Statement Schedules
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Signatures
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Part I.
Item
1.
Business
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 (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, including those discussed in Item 1A “Risk
Factors” and Item 7 “Management’s Discussion and Analysis of Financial Condition
and Results of Operations” and elsewhere in this annual report on Form 10-K,
could cause the Company’s financial performance to differ materially from that
expressed in such forward-looking statements:
·
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Company’s
ability to successfully transition all services currently provided to it,
by TD Bank, N.A. and Commerce Bancorp LLC (formerly Commerce Bancorp,
Inc.) to the Company’s new service provider, Fiserv Solutions,
Inc.
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·
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the
receipt of a $6 million fee from TD Bank if the transition of all services
is completed by the required dates as called for in the Transition
Agreement between the two parties;
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·
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whether
the transactions contemplated by the merger agreement with Republic First
will be approved by the shareholders of both companies and by the
applicable federal, state and local regulatory
authorities;
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·
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the
Company’s ability to complete the proposed merger with Republic First
Bancorp, Inc., to integrate successfully Republic First’s assets,
liabilities, customers, systems and management personnel into the
Company’s operations, and to realize expected cost savings and revenue
enhancements within expected
timeframes;
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·
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the
possibility that expected Republic First merger-related charges are
materially greater than forecasted or that final purchase price
allocations based on fair value of the acquired assets and liabilities at
the effective date of the merger and related adjustments to yield and/or
amortization of the acquired assets and liabilities are materially
different from those forecasted;
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·
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adverse
changes in the Company’s or Republic First’s loan portfolios and the
resulting credit risk-related losses and
expenses;
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·
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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;
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·
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general
economic or business conditions, either nationally, regionally or in the
communities in which either the Company or Republic First does business,
may be less favorable than expected, resulting in, among other things, a
deterioration in credit quality or a reduced demand for
credit;
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·
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continued
levels of loan quality and volume
origination;
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·
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the
adequacy of loss reserves;
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·
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the
impact of changes in financial services’ laws and regulations (including
laws concerning taxes, banking, securities and
insurance);
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·
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the
willingness of customers to substitute competitors’ products and services
for the Company’s products and services and vice
versa;
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·
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unanticipated
regulatory or judicial proceedings;
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·
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interest
rate, market and monetary
fluctuations;
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·
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the
timely development of competitive new products and services by the Company
and the acceptance of such products and services by
customers;
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·
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changes
in consumer spending and saving habits relative to the financial services
we provide;
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·
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effect
of terrorists attacks and threats of actual
war;
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·
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and
the success of the Company at managing the risks involved in the
foregoing.
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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 foregoing list of important factors is not exclusive and you are
cautioned not to place undue reliance on these forward-looking statements, which
speak only as of the date of this document. 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, concerning events or circumstances after
the date of this report, refer to the Company’s filings with the Securities and
Exchange Commission (“SEC”).
General
Pennsylvania
Commerce Bancorp, Inc. (the “Company”) is a Pennsylvania business corporation,
which is registered as a bank holding company under the Bank Holding Company Act
of 1956, as amended (the “Holding Company Act”). The Company was
incorporated on April 23, 1999 and became an active bank holding company on July
1, 1999 through the acquisition of 100% of the outstanding shares of Commerce
Bank/Harrisburg (the “Bank”) the Company’s wholly owned banking subsidiary. On
June 15, 2000, the Company issued $5 million of 11.00% Trust Capital Securities
through Commerce Harrisburg Capital Trust I, a newly formed Delaware business
trust subsidiary of the Company. Proceeds of this offering were
invested in the Bank and all $5 million of the Trust Capital Securities
qualifies as Tier 1 capital for regulatory capital purposes. On September 28,
2001, the Company issued $8 million of 10.00% Trust Capital Securities through
Commerce Harrisburg Capital Trust II (“Trust II”), a newly formed Delaware
business trust subsidiary of the Company. Proceeds of this offering
were invested in the Bank and all $8 million of the Trust Capital
Securities qualifies as Tier 1 capital for regulatory capital
purposes. On September 29, 2006, the Company issued $15 million of
7.75% Trust Capital Securities through Commerce Harrisburg Capital Trust III
(“Trust III”), a newly formed Delaware business trust subsidiary of the
Company. Proceeds of this offering were invested in the Bank and all
$15 million of the Trust Capital securities qualifies as Tier 1 Capital for
regulatory capital purposes.
Pursuant
to a Transition Agreement with TD Bank, N.A. and Commerce Bancorp LLC (formerly
Commerce Bancorp, Inc.), which terminated the Network Agreement and Master
Services Agreement with Commerce Bank N.A. (now known as TD Bank, N.A.), the
Company has a non exclusive royalty free license until September 30, 2009 to
continue using the name “Commerce Bank” and, subject to certain limitations, the
red “C” logo,
within
its primary service area. Under the Transition Agreement, certain services
provided under the Master Services Agreement were continued until July 15, 2009
or at the Bank’s option, until August 15, 2009, and certain tail services until
August 15, 2009. The Bank has entered into a master agreement with
Fiserv Solutions, Inc. to provide many of the administrative and data processing
services that have been provided by TD Bank. For additional information
concerning TD Bank and the transition to Fiserv as a service provider, refer to
the discussion in Item 1A “Risk Factors” included in this annual report on Form
10-K.
On
November 10, 2008, we announced that we entered into a plan of merger,
to
acquire Republic First Bancorp, Inc. (“Republic First”) headquartered in
Philadelphia,
PA. Republic First, with total assets of approximately
$952.0
million as of December 31, 2008, will be merged with and into
Pennsylvania
Commerce and the combined company will be renamed Metro
Bancorp,
Inc. This transaction is expected to close in the second quarter
2009,
subject to regulatory and shareholder approval for both
companies.
As of
December 31, 2008, the Company had approximately $2.1 billion in assets, $1.6
billion in deposits, $1.5 billion in total net loans (including loans held for
sale), and $114 million in stockholders’ equity. The Bank has applied to be a
member of the Federal Reserve System. Substantially all of the Bank’s
deposits are insured up to applicable limits by the Deposit Insurance Fund of
the Federal Deposit Insurance Corporation (FDIC) to the fullest extent permitted
by law. The Company’s total revenues (net interest income plus
noninterest income) were $104.1 million and the Company recorded $12.9 million
in net income for the year ended December 31, 2008.
The
Company’s principal executive offices are located at 3801 Paxton Street,
Harrisburg, Pennsylvania 17111, and its telephone number is (800)
653-6104.
As of
December 31, 2008, the Company had 1,077 employees, of which 789 were full-time
employees. Management believes the Company’s relationship with its employees is
good.
Commerce
Bank/Harrisburg
The
Company has one reportable segment, consisting of Commerce Bank/Harrisburg (the
Bank), as described in Note 1 of the Notes to Consolidated Financial Statements
for the year ended December 31, 2008 included at Item 8 of this
Report.
On July
13, 1984, the Bank filed an application to establish a state-chartered banking
institution with the Pennsylvania Department of Banking. On September 7, 1984,
the Bank was granted preliminary approval of its application, and on September
11, 1984, was incorporated as a Pennsylvania state-chartered banking institution
under the laws of the Commonwealth of Pennsylvania. The Bank opened for business
on June 1, 1985.
On
October 7, 1994, the Bank was converted from a Pennsylvania state-chartered
banking institution to a national banking association under the laws of the
United States of America and changed its name to “Commerce Bank/Harrisburg,
National Association.” The Bank’s conversion was consummated pursuant to
preliminary and conditional approval of the conversion granted by the Office of
the Comptroller of the Currency (OCC) on July 5, 1994 in response to a letter of
intent to convert to a national bank filed by the Bank with the OCC on April 6,
1994.
On June
3, 2008, Commerce Bank/Harrisburg, N.A. filed an application to convert from a
national charter to a state-chartered banking institution with the Pennsylvania
Department of Banking. On November 7, 2008, the Pennsylvania Department of
Banking approved the application of Commerce Bank/Harrisburg, N.A. to convert
from a national bank charter to a state bank charter. As a result of the
conversion to a state chartered bank, Commerce Bank/Harrisburg will now be
supervised jointly by the Pennsylvania Department of Banking and the FDIC. The
Company will continue to be supervised by the Federal Reserve Bank, which
supervises all bank holding companies.
The Bank
provides a full range of retail and commercial banking services for consumers
and small and mid-sized companies. The Bank’s lending and investment activities
are funded principally by retail deposits gathered through its retail store
office network.
Service
Area
The Bank
offers its lending and depository services from its main office in Lemoyne,
Pennsylvania, and its thirty-two other full-service stores located in
Cumberland, Dauphin, York, Berks, Lancaster and Lebanon Counties,
Pennsylvania.
Retail
and Commercial Banking Activities
The Bank
provides a broad range of retail banking services and products including free
personal checking accounts and business checking accounts (subject to a minimum
balance), regular savings accounts, money market accounts, interest checking
accounts, fixed rate certificates of deposit, individual retirement accounts,
club accounts, debit card services, and safe deposit facilities. Its services
also include a full range of lending activities including commercial
construction and real estate loans, land development and business loans,
commercial lines of credit, consumer loan programs (including installment loans
for home improvement and the purchase of consumer goods and automobiles), home
equity and Visa Gold card revolving lines of credit, overdraft checking
protection, student loans and automated teller facilities. The Bank also offers
construction loans and permanent mortgages for homes. The Bank is a participant
in the Small Business Administration Loan Program and is an approved lender for
qualified applicants.
The Bank
directs its commercial lending principally toward businesses that require funds
within the Bank’s legal lending limit, as determined from time to time, and that
otherwise do business and/or are depositors with the Bank. The Bank also
participates in inter-bank credit arrangements in order to take part in loans
for amounts that are in excess of its lending limit or to limit the
concentration of lending to any individual. The Company is not dependent on any
one or more major customers, and its business is not seasonal.
The
Company has focused its strategy for growth primarily on the further development
of its community-based retail-banking network. The objective of this corporate
strategy is to build earnings growth potential for the future as the retail
store network matures. The Company’s store concept uses a prototype or
standardized store office building, convenient locations and active marketing,
all designed to attract retail deposits. While the Company has not yet announced
plans to open any new stores in 2009 it does intend to continue to open multiple
stores over the next several years. It has been the Company’s experience that
most newly opened store offices incur operating losses during the first 18 to 24
months of operations and become profitable thereafter. The Company’s retail
approach to banking emphasizes a combination of long-term customer
relationships, quick responses to customer needs, active marketing, convenient
locations, free checking for customers maintaining certain minimum balances and
extended hours of operation.
Competitive
Business Conditions / Competitive Position
The
Company’s current primary service area, the south central Pennsylvania area,
including portions of Cumberland, Dauphin, York, Berks, Lancaster and Lebanon
Counties, is characterized by intense competition for banking business. The Bank
competes with local commercial banks as well as numerous regionally based
commercial banks, most of which have assets, capital, and lending limits larger
than that of the Bank. The Bank competes with respect to its lending activities
as well as in attracting demand, savings, and time deposits with other
commercial banks, savings banks, insurance companies, regulated small loan
companies, credit unions, and with issuers of commercial paper and other
securities such as shares in money market funds. Among those institutions, the
Bank has a share of approximately 5% of the bank deposits in its market
area.
Other
institutions may have the ability to finance wide-ranging advertising campaigns,
and to allocate investment assets to regions of highest yield and demand. Many
institutions offer services, such as trust services and international banking,
which the Bank does not directly offer (but which the Bank may offer indirectly
through other institutions). Many institutions, by virtue of their greater total
capital, can have substantially higher lending limits than the
Bank.
In
commercial transactions, the Bank’s legal lending limit to a single borrower
(approximately $26.4 million as of December 31, 2008) enables it to compete
effectively for the business of smaller companies. However, this legal lending
limit is lower than that of some of the Bank’s competing institutions and thus
may act as a constraint on the Bank’s effectiveness in competing for financing
in excess of these limits.
In
consumer transactions, the Bank believes it is able to compete on a
substantially equal basis with larger financial institutions because it offers
longer hours of operation, personalized service and competitive interest rates
on savings and time accounts with low minimum deposit requirements.
In order
to compete with other financial institutions both within and beyond its primary
service area, the Bank uses, to the fullest extent possible, the flexibility
which independent status permits. This includes an emphasis on specialized
services for the small businessperson and professional contacts by the Bank’s
officers, directors and employees, and the greatest possible efforts to
understand fully the financial situation of relatively small borrowers. The size
of such borrowers, in management’s opinion, often inhibits close attention to
their needs by larger institutions. The Bank may seek to arrange for loans in
excess of its lending limit on a participation basis with other financial
institutions. As of the end of 2008, all participations totaled
approximately $32.1 million. Participations are used to more fully
service customers whose loan demands exceed the Bank’s lending
limit.
The Bank
endeavors to be competitive with all competing financial institutions in its
primary service area with respect to interest rates paid on time and savings
deposits, its overdraft charges on deposit accounts, and interest rates charged
on loans.
Supervision
and Regulation
The
following discussion sets forth certain of the material elements of the
regulatory framework applicable to bank holding companies and their subsidiaries
and provides certain specific information relevant to the Company. The
regulatory framework is intended primarily for the protection of depositors,
other customers and the Federal Deposit Insurance Funds and not for the
protection of security holders. To the extent that the following information
describes statutory and regulatory provisions, it is qualified in its entirety
by reference to the particular statutory and regulatory provisions. A change in
applicable statutes, regulations or regulatory policy may have a material effect
on the business of the Company.
The
Company
The
Company is subject to the jurisdiction of the Securities and Exchange Commission
(“SEC”) and of state securities commissions for matters relating to the offering
and sale of its securities and is subject to the SEC’s rules and regulations
relating to periodic reporting, reporting to shareholders, proxy solicitation
and insider trading.
The
Sarbanes-Oxley Act of 2002 implemented a broad range of corporate governance,
accounting and reporting measures for companies that have securities registered
under the Securities Exchange Act of 1934, such as the Company. Specifically,
the Sarbanes-Oxley Act and the various regulations promulgated thereunder,
established, among other things: (i) new requirements for audit committees,
including independence, expertise, and responsibilities; (ii) additional
responsibilities regarding financial statements for the Chief Executive Officer
and Chief Financial Officer of the reporting company; (iii) new standards
for auditors and the regulation of audits, including independence provisions
that restrict non-audit services that accountants may provide to their audit
clients; (iv) increased disclosure and reporting obligations for the
reporting company and their directors and executive officers, including
accelerated reporting of stock transactions and a prohibition on trading during
pension blackout periods; (v) a prohibition on personal loans to directors
and officers, except certain loans made by insured financial institutions on
non-preferential terms and in compliance with other bank regulatory
requirements; and (vi) a range of new and increased civil and criminal
penalties for fraud and other violations of the securities laws. The Company has
addressed the requirements imposed by regulations relating to the Sarbanes-Oxley
Act, including forming a Nominating and Corporate Governance Committee (and
establishing its charter), adopting a Code of Ethics applicable to the Company’s
Chief Executive Officer, Chief Financial Officer and principal accounting
officer (in addition to the Code of Conduct already in place for all employees
and Board Members of the Company), and meeting NASDAQ’s and the SEC’s procedural
and disclosure requirements.
In 1999,
the Gramm-Leach-Bliley Act (better known as the Financial Services Modernization
Act of 1999) became law. The law permits bank holding companies to become
financial holding companies and thereby affiliate with securities firms and
insurance companies and engage in other activities that are financial in nature.
A bank holding company may become a financial holding company if each of its
subsidiary banks is well capitalized, is well managed and has at least a
satisfactory rating under the Community Reinvestment Act, by filing a
declaration that the bank holding company wishes to become a financial holding
company. Also, no regulatory approval is required for a financial holding
company to acquire a company, other than a bank or savings association, engaged
in activities that are financial in nature or incidental to activities that are
financial in nature, as determined by the Federal Reserve Board. The Financial
Services Modernization Act defines "financial in nature" to include: securities
underwriting, dealing and market making; sponsoring mutual funds and investment
companies; insurance underwriting and agency; merchant banking activities; and
activities that the Federal Reserve Board has determined to be closely related
to banking. A national bank also may engage, subject to limitations on
investment, in activities that are financial in nature, other than insurance
underwriting, insurance company portfolio investment, real estate development
and real estate investment, through a financial subsidiary of the bank, if the
bank is well capitalized, well managed and has at least a satisfactory Community
Reinvestment Act rating. Banks chartered under the Pennsylvania Banking Code are
generally permitted to engage in the same types of activities that are
permissible for national banks. Except for the increase in competitive pressures
faced by all banking organizations that is a likely consequence of the Act, the
Company believes that the legislation and implementing regulations are likely to
have a more immediate impact on large regional and national institutions than on
community-based institutions engaged principally in traditional banking
activities. Because the legislation permits bank holding companies to engage in
activities previously prohibited altogether or severely restricted because of
the risks they posed to the banking system, implementing regulations impose
strict and detailed prudential safeguards on affiliations among banking and
non-banking companies in a holding company organization.
The
Company is subject to the provisions of the Bank Holding Company Act of 1956, as
amended and to supervision and examination by the Federal Reserve Bank (“FRB”).
Under the Bank Holding Company Act, the Company must secure the prior approval
of the FRB before it may own or control, directly or indirectly, more than 5% of
the voting shares or substantially all of the assets of any institution,
including another bank (unless it already owns a majority of the voting stock of
the bank).
Satisfactory
financial condition, particularly with regard to capital adequacy, and
satisfactory Community Reinvestment Act ratings are generally prerequisites to
obtaining federal regulatory approval to make acquisitions. The Bank is
currently rated “satisfactory” under the Community Reinvestment Act. The Company
and the Bank are both subject to various regulatory capital requirements
administered by Federal banking agencies. Failure to meet minimum capital
requirements can initiate certain mandatory and possible additional
discretionary actions by regulators that, if undertaken, could have a direct
material effect on the Company’s financial statements. Management believes, as
of December 31, 2008, that the Company and the Bank meet all capital adequacy
requirements to which they are subject. Also, at December 31, 2008, the
consolidated capital levels of the Company and of the Bank met the definition of
a “well-capitalized” financial institution. For further discussion regarding
capital adequacy, please refer to Item 7 “Management’s Discussion and Analysis
of Financial Condition and Results of Operations” as well as Note 15 of Notes to
Consolidated Financial Statements for the year ended December 31, 2008 included
in Item 8 in this annual report on Form 10-K.
The
Company is required to file an annual report with the Federal Reserve Board and
any additional information that the Federal Reserve Board may require pursuant
to the Bank Holding Company Act. The Federal Reserve Board may also make
examinations of the Company and any or all of its subsidiaries. Further, a bank
holding company and its subsidiaries are prohibited from engaging in certain
tying arrangements in connection with the extension of credit or provision for
any property or service. Thus, an affiliate of the Company, such as the Bank,
may not condition the extension of credit, the lease or sale of property or
furnishing of any services on (i) the customer’s obtaining or providing some
additional credit, property or services from or to the Bank or other
subsidiaries of the Company, or (ii) the customer’s refraining from doing
business with a competitor of the Bank, the Company or of its
subsidiaries. The Company or the Bank may impose conditions to the
extent necessary to reasonably assure the soundness of credit
extended.
Subsidiary
banks of a bank holding company are subject to certain restrictions imposed by
the Federal Reserve Act on (i) any extension of credit to the bank holding
company or any of its subsidiaries, (ii) investments in the stock or other
securities of the bank holding company, and (iii) taking the stock or securities
of the bank holding company as collateral for loans to any
borrower.
The
Bank
The Bank
became a state-chartered bank on November 7, 2008, following approval by the
Pennsylvania Department of Banking of the Bank’s application to convert from a
national bank charter to a state bank charter. As a nationally chartered bank,
the Bank had been subject to regulation, supervision and examination by the
Office of the Comptroller of the Currency. The Bank is now supervised jointly by
the Pennsylvania Department of Banking and the FDIC. The Bank has applied to be
a member of the Federal Reserve System. The Bank’s deposits are insured by the
FDIC up to applicable legal limits. Some of the aspects of the lending and
deposit business of the Bank that are regulated by these agencies include
personal lending, mortgage lending and reserve requirements. The Bank is also
subject to numerous federal, state and local laws and regulations which set
forth specific restrictions and procedural requirements with respect to the
payment of dividends to the Company, extension of credit, credit practices, the
disclosure of credit terms and discrimination in credit
transactions. The approval of these agencies is required for the
establishment of additional store offices.
Under the
Federal Deposit Insurance Act, subject to certain exceptions, no person may
acquire control of the Bank without giving at least sixty days’ prior written
notice to the FDIC. Under this Act and its regulations, control of the Bank is
generally presumed to be the power to vote ten percent (10%) or more of the
Common Stock. The FDIC is empowered to disapprove any such acquisition of
control.
The
amount of funds that the Bank may lend to a single borrower is limited generally
under the Pennsylvania Banking Code of 1965 to 15% of the aggregate of its
capital, surplus and undivided profits and capital securities (all as defined by
statute and regulation).
The FDIC
has authority under the Financial Institutions Supervisory Act to prohibit state
banks from engaging in any activity, which, in the FDIC’s opinion, constitutes
an unsafe or unsound practice in conducting their businesses. The
Federal Reserve Board has similar authority with respect to the
Company.
As a
consequence of the extensive regulation of commercial banking activities in the
United States, the Company’s business is particularly susceptible to being
affected by federal and state legislation and regulations, which may affect the
cost of doing business.
The
Uniting and Strengthening America by Providing Appropriate Tools Required to
Intercept and Obstruct Terrorism Act of 2001 (the “USA Patriot Act”) imposes
additional obligations on U.S. financial institutions, including banks, to
implement policies, procedures and controls, which are reasonably designed to
detect and report instances of money laundering and the financing of terrorism.
In addition, provisions of the USA Patriot Act require the federal financial
institution regulatory agencies to consider the effectiveness of a financial
institution's anti-money laundering activities when reviewing bank
applications.
National
Monetary Policy
In
addition to being affected by general economic conditions, the earnings and
growth of the Company are affected by the policies of regulatory authorities,
including the Pennsylvania Department of Banking, the FRB and the FDIC. An
important function of the FRB is to regulate the money supply and credit
conditions. Among the instruments used to implement these objectives are open
market operations in U.S. Government securities, setting the discount rate, and
changes in reserve requirements against bank deposits. These instruments are
used in varying combinations to influence overall growth and distribution of
credit, bank loans, investments and deposits, and their use may also affect
interest rates charged on loans or paid on deposits.
The
monetary policies and regulations of the FRB have had a significant effect on
the operating results of commercial banks in the past and are expected to
continue to do so in the future. The effects of such policies upon the future
business, earnings, and growth of the Company cannot be predicted.
Environmental
Laws
The costs
and effects of compliance with environmental laws, federal, state and local, on
the Company are minimal.
Available
Information
The
Company makes available free of charge under the Investor Relations link on the
Company’s website,
www.commercepc.com
,
its annual report on Form 10-K, quarterly reports on Form 10-Q, current reports
on Form 8-K, and amendments to those reports filed or furnished pursuant to
Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable
after the Company electronically files such material with, or furnishes to, the
SEC. Additionally, the SEC maintains an Internet site that contains
reports, proxy and information statements, and other information regarding
issuers that file electronically with the SEC at the web address,
www.sec.gov
.
Item
1A.
Risk
Factors
The
Company’s financial results are subject to a number of risks. The factors
discussed below highlight risks that management believes are most relevant to
the Company’s current operations. This list does not capture all risks
associated with the Company’s business. Additional risks, including those that
generally affect the banking and financial services industries and those that
management currently believes are immaterial may also negatively impact the
Company’s liquidity, financial position, or results of operations.
We
plan to continue to grow rapidly and there are risks associated with rapid
growth.
Over the
past five years we have experienced significant growth in net income, assets,
loans and deposits, all of which have been achieved through organic growth. We
intend to continue to rapidly expand our business and operations.
Subject
to regulatory approvals, we are targeting to open 15-20 new stores over the next
five years. The cost to construct and furnish a new store will be approximately
$3.1 million, excluding the cost to lease or purchase the land on which the
store is located. Our ability to manage growth successfully will depend on our
ability to attract qualified personnel and maintain cost controls and asset
quality while attracting additional loans and deposits on favorable terms, as
well as on factors beyond our control, such as economic conditions and
competition. If we grow too quickly and are not able to attract qualified
personnel, control costs and maintain asset quality, this continued rapid growth
could materially adversely affect our financial performance.
Growth
may require us to raise additional capital in the future, but that capital may
not be available when it is needed.
We
anticipate that our existing capital will satisfy our capital requirements for
the foreseeable future. However, we may at some point need to raise additional
capital to support continued growth. Our ability to raise additional
capital, if needed, will depend on our financial performance and on conditions
in the capital markets at that time, which are outside of our control. The
current financial crisis affecting the banking system and financial markets,
which has resulted in a tightening in the credit markets, could have an adverse
effect on our ability to raise additional capital. Accordingly, we
cannot assure you of our ability to raise additional capital, if needed, on
acceptable terms. If we cannot raise additional capital when needed, our ability
to further expand our operations through internal growth, branching, de novo
bank formations and/or acquisitions could be materially impaired.
Unfavorable
economic and market conditions due to the current global financial crisis may
adversely affect our financial position and results of operations.
Economic
and market conditions in the United States and around the world have
deteriorated significantly and may remain depressed for the foreseeable
future. Conditions such as slowing or negative growth and the
sub-prime debt devaluation crisis have resulted in a low level of liquidity in
many financial markets, and extreme volatility in credit, equity and fixed
income markets. These economic developments could have various
effects on our business, including insolvency of major customers, an
unwillingness of customers to borrow or to repay funds already borrowed and a
negative impact on the investment income we are able to earn on our investment
portfolio. The potential effects of the current global financial
crisis are difficult to forecast and mitigate. As a consequence, our
operating results for a particular period are difficult to
predict. Distress in the credit markets and issues relating to
liquidity among financial institutions have resulted in the failure of some
financial institutions around the world and others have been forced to seek
acquisition partners. The United States and other governments have taken
unprecedented steps in efforts to stabilize the financial system, including
investing in financial institutions. There can be no assurance that these
efforts will succeed. Our business and our financial condition and
results of operations could be adversely affected by (1) continued or
accelerated disruption and volatility in financial markets; (2) continued
capital and liquidity concerns regarding financial institutions;
(3) limitations resulting from further governmental action in an effort to
stabilize or provide additional regulation of the financial system; or
(4) recessionary conditions that are deeper or longer lasting than
currently anticipated.
The
cost of re-naming and re-branding the Company and the Bank and transitioning
certain services from TD Bank to Fiserv may be more costly than
anticipated.
Prior to
December 30, 2008, the Company and the Bank were parties to a Network Agreement
and Master Services Agreement with Commerce Bank N.A. (now known as TD Bank,
N.A.). The Network Agreement granted the Company and the Bank the
right to use the name “Commerce Bank” together with trademarks and service marks
which have been registered by Commerce Bank N.A. and previously utilized in
connection with its banking business including, but not limited to, the red “C”
logo. Under the Master Services Agreement, TD Bank performed a broad
range of administrative and data processing services for the Bank for which the
Bank paid various services fees. The Network Agreement and the Master
Services Agreement and Addenda were terminated as of December 30, 2008 when the
parties executed a Transition Agreement. Under the Transition
Agreement, certain services provided under the Master Services Agreement were
continued until July 15, 2009 or at the Bank’s option, until August 15, 2009,
and certain tail services until August 15, 2009. The Bank has entered
into a Master Agreement with Fiserv Solutions, Inc. to provide many of the
administrative and data processing services presently provided by TD
Bank. If all services provided by TD Bank under the Transition
Agreement (except tail services) are terminated on or before July 15, 2009, and
if all tail services terminate by or on August 15, 2009, TD Bank will pay the
Bank an incentive fee in the amount of $6,000,000. However, if all
services other than tail services terminate on or after July 16, 2009 but on or
before August 15, 2009 and if all tail services terminate on or before August
15, 2009, the incentive fee will be reduced to $3,250,000. If these
deadlines are not met by the Bank, TD Bank will pay no incentive
fee. The Transition Agreement also grants the Company and the Bank a
non exclusive royalty free license until September 30, 2009 to continue using
the name “Commerce Bank” and, subject to certain limitations, the red “C” logo,
each in the same form and manner consistent with past
practice. By September 30, 2009, the Company intends to change
its name to Metro Bancorp, Inc. and both the Bank and Republic First Bancorp,
Inc. (Republic First) will re-brand their banking business as Metro Bank
and use as their new primary trademark a red “M” logo. Several
companies in the United States, including companies in the banking and financial
services industries, use variations of the word “Metro” and the letter “M” as
part of a trademark or trade name. As such, we face potential
objections to our use of these marks. If there are any objections, we
may incur additional costs to defend our use, and may be required to further
re-brand our banking business. If the transition and conversion
process does not proceed as planned, we may receive no incentive fee from TD
Bank and incur additional costs.
Changes
in interest rates could reduce our income and cash flows.
Our
operating income and net income depend to a great extent on our net interest
margin, i.e., the difference between the interest yields we receive on loans,
securities and other interest earning assets and the interest rates we pay on
interest-bearing deposits and other liabilities. These rates are highly
sensitive to many factors beyond our control, including competition, general
economic conditions and monetary and fiscal policies of various governmental and
regulatory authorities, including the Board of Governors of the Federal Reserve
System, referred to as "FRB." If the rate of interest we pay on our
interest-bearing deposits and other liabilities increases more than the rate of
interest we receive on loans, securities and other interest earning assets, our
net interest income, and therefore our earnings, could be adversely affected.
Our earnings could also be adversely affected if the rates on our loans and
other investments fall more quickly than those on our deposits and other
liabilities.
We
operate in a highly regulated environment; changes in laws and regulations and
accounting principles may adversely affect us.
We are
subject to extensive regulation, supervision, and legislation which govern
almost all aspects of our operations. The laws and regulations applicable to the
banking industry could change at any time and are primarily intended for the
protection of customers, depositors and the deposit insurance funds. Any changes
to these laws or any applicable accounting principles may negatively impact our
results of operations and financial condition. While we cannot predict what
effect any presently contemplated or future changes in the laws or regulations
or their interpretations would have on us, these changes could be materially
adverse to our investors and shareholders.
"Anti-takeover"
provisions may make it more difficult for a third party to acquire control of
us, even if the change in control would be beneficial to
shareholders.
We are a
Pennsylvania corporation. Anti-takeover provisions in Pennsylvania law and our
articles of incorporation and bylaws could make it more difficult for a third
party to acquire control of us. These provisions could adversely affect the
market price of our common stock and could reduce the amount that shareholders
might receive if we are sold. For example, our articles of incorporation provide
that our Board of Directors may issue up to 960,000 shares of preferred stock
without shareholder approval, subject to the rights of the outstanding preferred
shares. In addition, "anti-takeover" provisions in our articles of incorporation
and federal and state laws, including Pennsylvania law, may restrict a third
party's ability to obtain control of the Company and may prevent shareholders
from receiving a premium for their shares of our common stock.
Our
common stock is not insured by any governmental agency and, therefore,
investment in it involves risk.
Our
common stock is not a deposit account or other obligation of any bank, and is
not insured by the FDIC, or any other governmental agency, and is subject to
investment risk, including possible loss.
Our
common stock is currently traded on the NASDAQ Global Select Market. During the
twelve months ended December 31, 2008, the average daily trading volume for our
common stock was approximately 12,400 shares.
The sale
of a large number of these shares could adversely affect our stock price and
could impair our ability to raise capital through the sale of equity securities.
Sales of our common stock could adversely affect the market price of our common
stock and could impair our future ability to raise capital through the sale of
equity securities. As of December 31, 2008, there were 6,446,421 shares of our
common stock outstanding. Most of these shares are available for resale in the
public market without restriction, except for shares held by our affiliates.
Generally, our affiliates may either sell their shares under a registration
statement or in compliance with the volume limitations and other requirements
imposed by Rule 144 adopted by the SEC.
In
addition, as of December 31, 2008, we had the authority to issue up to
approximately 781,786 shares of our common stock under our stock option plans
and 255,000 shares under our Dividend Reinvestment and Stock Purchase
Plan.
Our
executive officers, directors and other five percent or greater shareholders own
a significant percentage of our company, and could influence matters requiring
approval by our shareholders.
As of
December 31, 2008, our executive officers and directors as a group owned and had
the right to vote approximately 24.4% of our outstanding stock and other five
percent or greater shareholders owned and had the right to vote approximately
20.1% of our outstanding common stock. These shareholders, acting together,
would be able to influence matters requiring approval by our shareholders,
including the election of directors. This concentration of ownership might also
have the effect of delaying or preventing a change of control of Pennsylvania
Commerce.
Item
1B.
Unresolved Staff
Comments
None.
Item
2.
Properties
As of
December 31, 2008, the Company owned 18 properties and leased 24 other
properties. The properties owned are not subject to any material liens,
encumbrances, or collateral assignments. The principal executive office of the
Company is owned and is located at 3801 Paxton Street, Harrisburg, Pennsylvania,
17111. The Bank presently has 33 stores located in the following Pennsylvania
counties: Cumberland, Berks, Dauphin, Lebanon, Lancaster, and York.
Item
3.
Legal
Proceedings
The
Company is subject to certain legal proceedings and claims arising in the
ordinary course of business. It is management’s opinion that the ultimate
resolution of these claims will not have a material adverse effect on the
Company’s financial position and results of operations. The Company is not
required to make any disclosures pursuant to Section 6707A(e) of the Internal
Revenue Code.
Item
4.
Submission
of Matters to a Vote of Security Holders
There
were no matters submitted to a vote of security holders in the fourth quarter of
2008.
Part
II.
Item
5.
Market For
Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases
of Equity Securities
Pennsylvania
Commerce Bancorp, Inc. common stock currently trades on the NASDAQ Global Select
Market under the symbol COBH. The table below sets forth the prices
on the NASDAQ Global Select Market known to us for the period beginning January
1, 2007 through December 31, 2008. As of December 31, 2008, there
were approximately 2,200 holders of record of the Company’s common
stock.
|
|
Sales
Price
|
|
Quarter
Ended:
|
|
High
|
|
|
Low
|
|
December
31, 2008
|
|
$
|
31.00
|
|
|
$
|
22.23
|
|
September
30, 2008
|
|
|
33.82
|
|
|
|
20.81
|
|
June
30, 2008
|
|
|
29.39
|
|
|
|
24.01
|
|
March
31, 2008
|
|
|
27.92
|
|
|
|
23.79
|
|
December
31, 2007
|
|
$
|
33.11
|
|
|
$
|
27.46
|
|
September
30, 2007
|
|
|
31.65
|
|
|
|
22.35
|
|
June
30, 2007
|
|
|
29.28
|
|
|
|
25.20
|
|
March
31, 2007
|
|
|
29.26
|
|
|
|
26.09
|
|
Dividends
and Dividend History
The
Company distributed to stockholders 5% stock dividends in December 1992, and
annually from February 1994 through February 2004. The Company also
distributed to stockholders a two-for-one stock split (payable in the form of a
100% stock dividend) on August 7, 1995, and on February 25,
2005. Neither the Company nor the Bank has declared or paid cash
dividends on its common stock since the Bank began operations in June
1985. The Board of Directors intends to follow a policy of retaining
earnings for the purpose of increasing the Company’s and the Bank’s capital for
the foreseeable future. Although the Board of Directors anticipates
establishing a cash dividend policy in the future, no assurance can be given
that cash dividends will be paid.
The
holders of Common Stock of the Company are entitled to receive dividends as may
be declared by the Board of Directors with respect to the Common Stock out of
funds of the Company. While the Company is not subject to certain restrictions
on dividends and stock redemptions applicable to a bank, the ability of the
Company to pay dividends to the holders of its Common Stock will depend to a
large extent upon the amount of dividends paid by the Bank to the
Company. Regulatory authorities restrict the amount of cash dividends
the Bank can declare without prior regulatory approval. Presently, the Bank
cannot declare dividends in one year in excess of retained earnings subject to
risk based capital requirements.
The
ability of the Company to pay dividends on its Common Stock in the future will
depend on the earnings and the financial condition of the Bank and the Company.
The Company’s ability to pay dividends will be subject to the prior payment by
the Company of principal and interest on any debt obligations it may incur in
the future as well as other factors that may exist at the time.
Information
concerning securities authorized for issuance under equity compensation plans is
set forth in Footnote 14 to the Consolidated Financial Statements included in
the Company’s 2008 Annual Report attached to this Form 10-K as Exhibit 13 and is
incorporated herein by reference. Additional information concerning equity
compensation plans is included in Part III of this Form 10-K. The Company has
prepared a graph comparing the cumulative shareholder return on the Company’s
Common Stock as compared to the NASDAQ Bank Index and the NASDAQ Composite
Market Index for the years ended December 31, 2004 to December 31, 2008. This
graph is included in the Company’s 2008 Annual Report to Shareholders after
Table 12 in Management’s Discussion and Analysis of Financial Condition and
Results of Operations.
Item
6. Selected Financial Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pennsylvania
Commerce Bancorp, Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selected
Consolidated Financial Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
or For the Year Ended December 31,
|
|
(dollars
in thousands, except per share data)
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
|
$
|
2,140,527
|
|
|
$
|
1,979,011
|
|
|
$
|
1,866,483
|
|
|
$
|
1,641,121
|
|
|
$
|
1,277,367
|
|
Loans
held for sale
|
|
|
|
41,148
|
|
|
|
14,143
|
|
|
|
15,346
|
|
|
|
10,585
|
|
|
|
14,287
|
|
Loans
receivable (net)
|
|
|
|
1,423,064
|
|
|
|
1,146,629
|
|
|
|
973,033
|
|
|
|
815,439
|
|
|
|
638,496
|
|
Securities
available for sale
|
|
|
341,656
|
|
|
|
387,166
|
|
|
|
392,058
|
|
|
|
380,836
|
|
|
|
314,065
|
|
Securities
held to maturity
|
|
|
152,587
|
|
|
|
257,467
|
|
|
|
319,628
|
|
|
|
306,266
|
|
|
|
209,917
|
|
Federal
funds sold
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
12,000
|
|
Deposits
|
|
|
|
1,633,985
|
|
|
|
1,560,896
|
|
|
|
1,616,777
|
|
|
|
1,371,062
|
|
|
|
1,160,547
|
|
Short-term
borrowings and long-term debt
|
|
|
379,525
|
|
|
|
296,735
|
|
|
|
142,200
|
|
|
|
171,500
|
|
|
|
13,600
|
|
Stockholders'
equity
|
|
|
|
114,470
|
|
|
|
112,335
|
|
|
|
101,108
|
|
|
|
91,643
|
|
|
|
85,039
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
Statement Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
interest income
|
|
|
$
|
78,705
|
|
|
$
|
59,492
|
|
|
$
|
52,791
|
|
|
$
|
50,905
|
|
|
$
|
46,585
|
|
Provision
for loan losses
|
|
|
|
7,475
|
|
|
|
1,762
|
|
|
|
1,634
|
|
|
|
1,560
|
|
|
|
2,646
|
|
Noninterest
income
|
|
|
|
25,433
|
|
|
|
22,823
|
|
|
|
18,752
|
|
|
|
14,156
|
|
|
|
11,296
|
|
Noninterest
operating expenses
|
|
|
77,909
|
|
|
|
70,807
|
|
|
|
59,294
|
|
|
|
50,403
|
|
|
|
42,466
|
|
Income
before income taxes
|
|
|
18,754
|
|
|
|
9,746
|
|
|
|
10,615
|
|
|
|
13,098
|
|
|
|
12,769
|
|
Net
income
|
|
|
|
12,901
|
|
|
|
7,001
|
|
|
|
7,254
|
|
|
|
8,817
|
|
|
|
8,591
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
Share Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income per share:
|
Basic
|
|
$
|
2.02
|
|
|
$
|
1.11
|
|
|
$
|
1.18
|
|
|
$
|
1.47
|
|
|
$
|
1.75
|
|
|
Diluted
|
|
|
1.97
|
|
|
|
1.07
|
|
|
|
1.12
|
|
|
|
1.38
|
|
|
|
1.63
|
|
Book
value per share
|
|
|
|
17.60
|
|
|
|
17.63
|
|
|
|
16.27
|
|
|
|
15.07
|
|
|
|
14.31
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selected
Ratios:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return
on average assets
|
|
|
0.64
|
%
|
|
|
0.36
|
%
|
|
|
0.41
|
%
|
|
|
0.61
|
%
|
|
|
0.73
|
%
|
Return
on average stockholders' equity
|
|
|
11.42
|
|
|
|
6.59
|
|
|
|
7.58
|
|
|
|
9.91
|
|
|
|
14.78
|
|
Net
interest margin
|
|
|
|
4.09
|
|
|
|
3.30
|
|
|
|
3.18
|
|
|
|
3.77
|
|
|
|
4.28
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liquidity
and Capital:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
loans to average deposits
|
|
|
85.07
|
%
|
|
|
69.90
|
%
|
|
|
62.52
|
%
|
|
|
58.87
|
%
|
|
|
57.20
|
%
|
Average
stockholders' equity to average total assets
|
|
|
5.57
|
|
|
|
5.52
|
|
|
|
5.40
|
|
|
|
6.12
|
|
|
|
4.96
|
|
Risk
based capital:
|
Tier
1
|
|
|
9.67
|
|
|
|
10.03
|
|
|
|
10.00
|
|
|
|
9.79
|
|
|
|
11.57
|
|
|
Total
|
|
|
10.68
|
|
|
|
10.78
|
|
|
|
10.72
|
|
|
|
10.61
|
|
|
|
12.49
|
|
Leverage
ratio
|
|
|
|
7.52
|
|
|
|
7.26
|
|
|
|
7.31
|
|
|
|
6.69
|
|
|
|
7.79
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset
Quality:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
charge-offs to average loans outstanding
|
|
|
0.11
|
%
|
|
|
0.07
|
%
|
|
|
0.13
|
%
|
|
|
0.02
|
%
|
|
|
0.14
|
%
|
Non-performing
loans to total year-end loans
|
|
|
1.88
|
|
|
|
0.25
|
|
|
|
0.34
|
|
|
|
0.31
|
|
|
|
0.13
|
|
Non-performing
assets to total year-end assets
|
|
|
1.30
|
|
|
|
0.17
|
|
|
|
0.19
|
|
|
|
0.16
|
|
|
|
0.11
|
|
Allowance
for loan losses to total year-end loans
|
|
|
1.16
|
|
|
|
0.93
|
|
|
|
0.99
|
|
|
|
1.12
|
|
|
|
1.21
|
|
Allowance
for loan losses to non-performing loans
|
|
|
62
|
|
|
|
366
|
|
|
|
287
|
|
|
|
364
|
|
|
|
916
|
|
Item 7.
Management’s
Discussion and Analysis of Financial Condition and Results of
Operation
The
information required by this item is incorporated by reference from the
Company’s 2008 Annual Report, which is attached to this Form 10-K as Exhibit
13.
Item 7A.
Quantitative and Qualitative
Disclosures about Market Risk
The
information required by this item is incorporated by reference from the
Company’s 2008 Annual Report, which is attached to this Form 10-K as Exhibit
13.
Item 8.
Financial Statements and
Supplementary Data
The
information required by this item is incorporated by reference from the
Company’s 2008 Annual Report, which is attached to this Form 10-K as Exhibit
13.
Item 9.
Changes and Disagreements
with Accountants on
Accounting and Financial
Disclosure
None.
Item 9A.
Controls and
Procedures
The
Company, under supervision and with the participation of its management,
including its principal executive officer and principal financial officer,
evaluated the effectiveness of the design and operation of its disclosure
controls and procedures pursuant to Rules 13a-15(e) and 15d-15(e) promulgated
under the Securities Exchange Act of 1934 (Exchange Act). Based on this
evaluation, the principal executive officer and principal financial officer
concluded that the Company’s disclosure controls and procedures are adequate and
effective as of December 31, 2008 to ensure that material information relating
to the Company and its consolidated subsidiaries is made known to them by others
within those entities, particularly during the period in which this report was
prepared.
During
the most recent fiscal quarter, there have been no changes in the Company’s
internal control over financial reporting that have materially affected or are
reasonably likely to materially affect, the Company’s internal control over
financial reporting. The Report on Management’s Assessment of Internal Control
Over Financial Reporting is provided in the next section.
A control
system, no matter how well conceived and operated, can provide only reasonable,
not absolute, assurance that the objectives of the control system are met.
Further, the design of a control system must reflect the fact that there are
resource constraints, and the benefits of controls must be considered relative
to their costs. Because of the inherent limitations in all control systems, no
evaluation of controls can provide absolute assurance that all control issues
and instances of fraud, if any, within the Company have been detected. Because
of the inherent limitations in a cost-effective control system, misstatements
due to error or fraud may occur and not be detected. The Company conducts
periodic evaluations to enhance, where necessary, its procedures and
controls.
Management’s
Report on Internal Control over Financial Reporting
Pennsylvania
Commerce Bancorp, Inc. is responsible for the preparation, integrity, and fair
presentation of the consolidated financial statements included in this annual
report. The consolidated financial statements and notes included in
this annual report have been prepared in conformity with United States generally
accepted accounting principles and necessarily include some amounts that are
based on management’s best estimates and judgments.
We, as
management of Pennsylvania Commerce Bancorp, Inc., are responsible for
establishing and maintaining effective internal control over financial reporting
that is designed to produce reliable financial statements in conformity with
United States generally accepted accounting principles. Internal
control over financial reporting includes those policies and procedures that
pertain to the maintenance of records that in reasonable detail accurately and
fairly reflect the transactions and disposition of the assets of the Company;
provide reasonable assurance that the transactions are recorded as necessary to
permit preparation of financial statement in accordance with generally accepted
accounting principles, and that receipts and expenditures of the Company are
only being made in accordance with authorizations of management and directors of
the Company; and provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the Company’s
assets that could have a material effect on the financial
statements. The system of internal control over financial reporting
as it relates to the financial statements is evaluated for effectiveness by
management and tested for liability through a program of internal
audits. Actions are taken to correct potential deficiencies as they
are identified.
Any
system of internal control, no matter how well designed, has inherent
limitations, including the possibility that a control can be circumvented or
overridden and misstatements due to error or fraud may occur and not be
detected. Also, because of changes in conditions, internal control
effectiveness may vary over time. Accordingly, even an effective
system of internal control will provide only reasonable assurance with respect
to financial statement preparation.
Management
assessed the Company’s system of internal control over financial reporting as of
December 31, 2008, in relation to criteria for effective internal control over
financial reporting as described in
Internal Control – Integrated
Framework
, issued by the Committee of Sponsoring Organizations of the
Treadway Commission. Based on this assessment, management concludes
that, as of December 31, 2008, its system of internal control over financial
reporting is effective and meets the criteria of
Internal Control – Integrated
Framework.
Beard Miller Company LLP,
an independent registered public accounting
firm, has audited the Consolidated Financial Statements of the
Corporation for the year ended December 31, 2008, appearing elsewhere in
this annual report, and has issued an attestation report on
the
effectiveness of the Corporation's internal control over
financial reporting as of December 31, 2008, as stated in their
report, which is included herein.
/s/
Gary L.
Nalbandian
Gary L.
Nalbandian
Chairman,
President and Chief Executive Officer
(Principal
Executive Officer)
/s/
Mark A.
Zody
Mark A.
Zody
Executive
Vice President and Chief Financial Officer
(Principal
Financial and Accounting Officer)
March 12,
2009
Item 9B
. Other
Information
None.
Part
III.
Item
10.
Directors, Executive
Officers and Corporate Governance
Information
responsive to this item is incorporated by reference from the Company’s
definitive proxy statement for the 2009 Annual Meeting of Shareholders, which
will be filed with the Securities and Exchange Commission on or before April 30,
2009.
In
addition to a Code of Business Conduct and Ethics applicable to all employees
and the Board of Directors, the Company has adopted a Code of Ethics for Senior
Financial Officers that is specifically applicable to its Chief Executive
Officer, Chief Financial Officer and Principal Accounting
Officer. Both of these codes are posted under the Investor Relations
link on the Company’s website,
www.commercepc.com
.
Item
11.
Executive
Compensation
Information
responsive to this item is incorporated by reference from the Company’s
definitive proxy statement for the 2009 Annual Meeting of Shareholders, which
will be filed with the Securities and Exchange Commission on or before April 30,
2009.
Item
12.
Security Ownership of
Certain Beneficial Owners and Management and Related Stockholder
Matters
Information
responsive to this item is incorporated by reference from the Company’s
definitive proxy statement for the 2009 Annual Meeting of Shareholders, which
will be filed with the Securities and Exchange Commission on or before April 30,
2009.
Item
13.
Certain Relationships and
Related Transactions, and Director Independence
Information
responsive to this item is incorporated by reference from the Company’s
definitive proxy statement for the 2009 Annual Meeting of Shareholders, which
will be filed with the Securities and Exchange Commission on or before April 30,
2009.
Item 14.
Principal Accounting Fees and
Services
Information
responsive to this item is incorporated by reference from the Company’s
definitive proxy statement for the 2009 Annual Meeting of Shareholders, which
will be filed with the Securities and Exchange Commission on or before April 30,
2009.
Part
IV.
Item 15.
Exhibits, Financial Statement
Schedules.
(a)(1)
|
The
following financial statements are incorporated by reference in Part II,
Item 8 hereof:
|
|
|
|
Consolidated
Balance Sheets as of December 31, 2008 and 2007
|
|
|
|
Consolidated
Statements of Income for the years ended December 31, 2008, 2007 and
2006
|
|
|
|
Consolidated
Statements of Stockholders’ Equity for the years ended December 31, 2008,
2007 and 2006
|
|
|
|
Consolidated
Statements of Cash Flows for the years ended December 31, 2008, 2007 and
2006
|
|
|
|
Notes
to Consolidated Financial Statements
|
|
|
|
Report
of Independent Registered Public Accounting Firm
|
|
|
(a)(2)
|
Financial
Statement Schedules (This item is omitted since information required is
either not applicable or is included in the footnotes to the Annual
Financial Statements.)
|
|
|
(a)(3)
|
List
of Exhibits:
|
|
|
2.1
|
Agreement
and Plan of Merger dated as of November 7, 2008 between Pennsylvania
Commerce Bancorp, Inc. and Republic First Bancorp, Inc. (incorporated by
reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K,
filed with the SEC on November 13, 2008).
|
|
|
3.1.
|
Amended
and Restated Articles of Incorporation of Pennsylvania Commerce Bancorp,
Inc. (incorporated by reference to Exhibit 3(i) to the Company’s Current
Report on Form 8-K, filed with the SEC on December 20,
2007)
|
|
|
3.2.
|
Amended
and Restated Bylaws of Pennsylvania Commerce Bancorp, Inc. (incorporated
by reference to Exhibit 3(ii) to the Company’s Current Report on Form 8-K,
filed with the SEC on December 20, 2007)
|
|
|
10.1
|
Master
Agreement dated as of November 7, 2008 between Fiserv Solutions, Inc. and
Commerce Bank/Harrisburg, N.A. (incorporated by reference to Exhibit 10.1
to the Company’s Current Report on Form 8-K, filed with the SEC on
November 13, 2008)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.5.
|
The
Company’s 2001 Directors Stock Option Plan, (incorporated by reference to
Exhibit 10.1 to the Company’s Current Report on Form S-8 filed with the
SEC on December 4, 2008)*
|
|
|
10.6.
|
Description
of base salaries and discretionary cash bonuses awarded to the Company’s
named executive officers, effective November 3, 2008, is incorporated by
reference to Item 5.02 of the Company’s Current Report on Form 8-K, filed
with the SEC on November 6, 2008*
|
|
|
10.7.
|
Description
of base salaries for 2009 and bonuses and discretionary option awards to
the Company’s named executive officers for the year ended December 31,
2008 is incorporated by reference to Item 5.02 of the Company’s Current
Report on Form 8-K, filed with the SEC on February 26,
2009*
|
|
|
10.9.
|
The
Company’s 2006 Employee Stock Option, (incorporated by reference to
Exhibit 10.1 to the Company’s Current Report on Form S-8 filed with the
SEC on December 4, 2008)*
|
|
|
10.10
|
Employment
Agreement dated February 23, 2009 with Gary L. Nalbandian (incorporated by
reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K
filed with the SEC on February 27, 2009)*
|
|
|
10.11
|
Employment
Agreement dated February 23, 2009 with Mark A. Zody (incorporated by
reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K
filed with the SEC on February 27, 2009)*
|
|
|
10.12
|
Form
of Employment Agreement February 23, 2009 with Messrs. Mark A. Ritter, D.
Scott Huggins and James R. Ridd (incorporated by reference to Exhibit 10.3
to the Company’s Current Report on Form 8-K filed with the SEC on February
27, 2009)*
|
|
|
11.
|
Calculation
of EPS
|
|
(The
information required by this item appears in Note 13 of the Consolidated
Financial Statements of the Company’s 2008 Annual Report to Shareholders
and is incorporated by reference herein.)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(b)
|
Exhibits
– The exhibits required to be filed as part of this report are submitted
as a separate section of this report.
|
|
|
(c)
|
Financial
Statement Schedules – None
required.
|
*
Denotes a compensatory plan or arrangement
Signatures
Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
|
Pennsylvania
Commerce Bancorp, Inc. (Registrant)
|
|
|
Date: March
16, 2009
|
By
/s/ Gary L.
Nalbandian
|
|
Gary
L. Nalbandian
|
|
Chairman
and President
|
|
|
Date: March
16, 2009
|
By
/s/ Mark A.
Zody
|
|
Mark
A. Zody
|
|
Chief
Financial Officer
|
|
(Principal
Accounting Officer)
|
Pursuant
to the requirements of the Securities and Exchange Act of 1934, this report has
been signed below by the following persons on behalf of the registrant and in
the capacities and on the dates indicated.
Signature
|
Title
|
Date
|
|
|
|
/s/
Gary L. Nalbandian
|
Chairman
of the Board, President and Director (Principal Executive
Officer)
|
March
16, 2009
|
Gary
L. Nalbandian
|
|
|
|
|
|
/s/
Mark A. Zody
|
Chief
Financial Officer (Principal Financial Officer and Principal Accounting
Officer)
|
March
16, 2009
|
Mark
A. Zody
|
|
|
|
|
|
/s/
James R. Adair
|
Director
|
March
16, 2009
|
|
|
|
James
R. Adair
|
|
|
|
|
|
/s/
John J. Cardello
|
Director
|
March
16, 2009
|
|
|
|
John
J. Cardello
|
|
|
|
|
|
/s/
Jay W. Cleveland, Jr.
|
Director
|
March
16, 2009
|
|
|
|
Jay
W. Cleveland, Jr.
|
|
|
|
|
|
/s/
Douglas S. Gelder
|
Director
|
March
16, 2009
|
|
|
|
Douglas
S. Gelder
|
|
|
|
|
|
/s/
Alan R. Hassman
|
Director
|
March
16, 2009
|
|
|
|
Alan
R. Hassman
|
|
|
|
|
|
/s/
Howell C. Mette
|
Director
|
March
16, 2009
|
|
|
|
Howell
C. Mette
|
|
|
|
|
|
/s/
Michael A. Serluco
|
Director
|
March
16, 2009
|
|
|
|
Michael
A. Serluco
|
|
|
|
|
|
/s/
Samir J. Srouji, M.D.
|
Director
|
March
16, 2009
|
|
|
|
Samir
J. Srouji, M.D.
|
|
|
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