SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 11-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 15 (d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended December 31, 2002
-----------------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15 (d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from to
------------------ ---------------------
Commission file number 333-26965
-----------------------------------
A. Full title of the plan and address of the plan, if different from that of the
issuer named below:
Commerce Bancorp, Inc. 401(k) Retirement Plan
B. Name of issuer of the securities held pursuant to the plan and the address of
its principal executive office:
Commerce Bancorp, Inc.
1701 Route 70 East
Cherry Hill, NJ 08034-5400
(856) 751-9000
Commerce Bancorp, Inc. 401(k) Retirement Plan
Financial Statements and Supplemental Schedule
Years ended December 31, 2002 and 2001
Contents
Report of Independent Auditors.............................................1
Audited Financial Statements
----------------------------
Statements of Assets Available for Benefits................................2
Statements of Changes in Assets Available for Benefits.....................3
Notes to Financial Statements..............................................4
Supplemental Schedule
---------------------
Schedule H, Line 4i - Schedule of Assets (Held at End of Year)............11
Signatures................................................................12
Exhibit Index.............................................................13
Report of Independent Auditors
Board of Directors
Commerce Bancorp, Inc.
We have audited the accompanying statements of assets available for benefits of
the Commerce Bancorp, Inc. 401(k) Retirement Plan (the Plan) as of December 31,
2002 and 2001, and the related statements of changes in assets available for
benefits for the years then ended. These financial statements are the
responsibility of the Plan's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the assets available for benefits of the Plan at December
31, 2002 and 2001, and the changes in its assets available for benefits for the
years then ended, in conformity with accounting principles generally accepted in
the United States.
Our audits were performed for the purpose of forming an opinion on the financial
statements taken as a whole. The accompanying supplemental schedule of assets
(held at end of year) as of December 31, 2002 is presented for purposes of
additional analysis and is not a required part of the financial statements but
is supplementary information required by the Department of Labor's Rules and
Regulations for Reporting and Disclosure under the Employee Retirement Income
Security Act of 1974. This supplemental schedule is the responsibility of the
Plan's management. The supplemental schedule has been subjected to the auditing
procedures applied in our audits of the financial statements and, in our
opinion, is fairly stated in all material respects in relation to the financial
statements taken as a whole.
/s/ Ernst & Young LLP
Philadelphia, Pennsylvania
June 20, 2003
1
Commerce Bancorp, Inc. 401(k) Retirement Plan
Statements of Assets Available for Benefits
December 31
2002 2001
---------------------------------------
Assets
Investments, at fair value $127,587,195 $ 52,607,334
Contributions receivable:
Participant 321,137 230,893
Employer 660,742 572,942
---------------------------------------
981,879 803,835
---------------------------------------
Assets available for benefits $128,569,074 $ 53,411,169
=======================================
See accompanying notes.
2
Commerce Bancorp, Inc. 401(k) Retirement Plan
Statements of Changes in Assets Available for Benefits
Year ended December 31
2002 2001
----------------------------------------
Additions:
Contributions:
Participant contributions $ 6,939,753 $ 5,331,117
Employer match contributions 2,645,179 2,093,100
Rollovers and transfers in from other plans 1,456,831 1,088,663
Consolidation of Commerce Bancorp, Inc. ESOP assets 65,944,305 -
----------------------------------------
Total contributions 76,986,068 8,512,880
Investment income:
Net appreciation in
fair value of investments 4,506,196 635,224
Interest and dividends 1,586,767 674,704
----------------------------------------
Total investment income 6,092,963 1,309,928
----------------------------------------
Total additions 83,079,031 9,822,808
Deductions:
Benefits paid directly to participants 7,820,762 5,593,246
Other 100,364 33,514
----------------------------------------
Total deductions 7,921,126 5,626,760
----------------------------------------
Net increase 75,157,905 4,196,048
Assets available for benefits:
Beginning of year 53,411,169 49,215,121
----------------------------------------
End of year $128,569,074 $ 53,411,169
See accompanying notes.
3
Commerce Bancorp, Inc. 401(k) Retirement Plan
Notes to Financial Statements
December 31, 2002
1. Description of Plan
The following description of the Commerce Bancorp, Inc. 401(k) Retirement Plan
(the Plan) provides only general information. Participants should refer to the
Plan agreement for a more complete description of the Plan's provisions.
General
The Plan, established April 1, 1997, is a defined contribution plan covering all
eligible employees of Commerce Bancorp, Inc. (the Company) who have at least six
months of service and are age 21 or older. The Plan is subject to the provisions
of the Employee Retirement Income Security Act of 1974 (ERISA).
Effective January 1, 2002, the Commerce Bancorp, Inc. Employee Stock Ownership
Plan (ESOP) was merged with and into the Commerce Bancorp, Inc. 401(k)
Retirement Plan to allow for greater administrative efficiencies. In connection
with this merger, $65,944,305 of net assets were transferred into the Plan
during January 2002. The net assets of the former ESOP are
nonparticipant-directed and are maintained in a separate account (the ESOP
Account) for each participant in accordance with the Plan.
Participants of various other employee benefit plans became eligible to
participate in the Plan as a result of acquisitions by the Company. The
following are net assets of other benefit plans which were transferred into the
Plan during 2002 and 2001, respectively:
2002 2001
-----------------------------------
Sanford & Purvis $0.1 million -
Business Training - $0.1 million
Contributions
Each year, participants may contribute up to 15% of pretax annual compensation
as defined in the Plan up to maximum IRS limitations. Participants may also
contribute amounts representing distributions from other qualified retirement
plans. The Company may, but is not obligated to, contribute a matching
contribution for the plan year as determined by the board of directors. In 2002
and 2001, the Company provided a matching contribution equal to the employee
contribution up to a maximum of 2.5% of the employee's salary. Contributions are
subject to certain limitations.
4
Commerce Bancorp, Inc. 401(k) Retirement Plan
Notes to Financial Statements (continued)
1. Description of Plan (continued)
Contributions (continued)
Participants may direct employer and employee contributions in any of various
fund options offered by the Plan or they may elect to open accounts that allow
participant-directed investments.
Participant Accounts
Each participant's 401(k) account is credited with (a) the participant's
contributions; (b) Company's contributions; (c) Plan earnings; and (d), is
charged with an allocation of administrative expenses if any costs are paid by
the Plan. Allocations are based on participant earnings or account balances, as
defined. Forfeitures of Company matching contributions arising from breaks in
service experienced by participants with less than fully vested interests in the
Plan shall be applied as promptly as possible to reduce Company matching
contributions. Forfeited employer's contributions of $59,000 were used to offset
matching contributions paid in the first quarter of 2003. The benefit to which a
participant is entitled is the benefit that can be provided from the
participant's account.
Each participant's ESOP Account is credited with an allocation of Plan earnings
and an allocation of forfeitures based on participant earnings or account
balances, as defined. The benefit to which a participant is entitled is the
benefit that can be provided from the participant's account. When a participant
terminates employment or otherwise suffers five (5) consecutive breaks in
service (fewer than 501 hours of service worked per year), all or a portion of
his or her nonvested interest may be forfeited. If this happens, the amount
forfeited is reallocated among the accounts of the remaining participants as
though the forfeited amount was an Employer contribution. At December 31, 2002,
100% of forfeited nonvested accounts had been reallocated to active
participants.
Vesting
Participants are immediately vested in their contributions and all investment
earnings thereon that have been allocated to their accounts.
5
Commerce Bancorp, Inc. 401(k) Retirement Plan
Notes to Financial Statements (continued)
1. Description of Plan (continued)
Vesting (continued)
Participants vest in the Company matching contributions (if any) based on the
following:
Participant's Years of Service Vested Percentage
-----------------------------------------------------------------------
Less than 2 None
2 but fewer than 3 20%
3 but fewer than 4 40%
4 but fewer than 5 60%
5 but fewer than 6 80%
6 years or more 100%
Loans
Participants may borrow funds from the Plan subject to requirements of the Plan.
The loans are secured by the balance in the participant's account and bear
interest at a rate commensurate with local prevailing rates as determined by the
Plan administrator. Principal and interest is paid ratably through payroll
deductions.
Payment of Benefits
Benefits are payable upon retirement, death, disability, or termination of
employment. Benefits are distributed to the participant or beneficiary in a
lump-sum payment as provided in the provisions of the Plan. Included in assets
available for benefits at December 31, 2002 and 2001 is $72,000 and $30,000,
respectively, which represents amounts due to participants who have requested
withdrawals.
Plan Termination
Although it has not expressed any intent to do so, the Company has the right
under the Plan to discontinue its contributions at any time and to terminate the
Plan subject to the provisions of ERISA. In the event of Plan termination,
participants will become 100% vested in any previously unvested Company
contributions.
6
Commerce Bancorp, Inc. 401(k) Retirement Plan
Notes to Financial Statements (continued)
1. Description of Plan (continued)
Administrative Costs
Administrative costs of the Plan are paid by the Company, unless the Company
elects to have such costs paid by the Plan. For 2002 and 2001, no administrative
costs were paid by the Plan.
2. Summary of Significant Accounting Policies
Investment Valuation and Income Recognition
The Plan's investments are stated at fair value which is based on net asset
value of shares on the last business day of the plan year for pooled accounts
and the last available quoted market price for shares of common stock and debt
securities. The participant loans are valued at their outstanding balances,
which approximate fair value. Purchases and sales of securities are recorded on
a trade-date basis. The cost of investments sold is determined on an average
historical cost basis. Interest income is recorded on the accrual basis.
Dividends are recorded on the ex-dividend date.
Use of Estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
that affect the amounts reported in the financial statements and accompanying
notes. Actual results could differ from those estimates.
3. Investments
The Plan's pooled accounts are administered by Provident Mutual Life Insurance
Company. The Commerce Bancorp, Inc. Common Stock and self-directed accounts are
administered by Janney Montgomery Scott. During the years ended December 31,
2002 and 2001, the Plan's investments appreciated (depreciated) in fair value as
determined by quoted market prices as follows:
Year ended December 31
2002 2001
-------------------------------------
Pooled accounts $(2,825,310) $(1,011,155)
Commerce Bancorp, Inc. Common Stock 7,082,633 1,351,506
Other 248,873 294,873
------------------------------------
$ 4,506,196 $ 635,224
====================================
7
Commerce Bancorp, Inc. 401(k) Retirement Plan
Notes to Financial Statements (continued)
3. Investments (continued)
Investments that represent 5% or more of the fair value of the Plan's assets are
as follows:
December 31
2002 2001
---------------------------------------
Commerce Bancorp, Inc. Common Stock $ 98,763,727 $ 26,075,870
Provident Domestic Aggressive Fund - 5,216,624
Provident Domestic Moderate Fund - 2,868,261
4. Nonparticipant-Directed Investments
Nonparticipant-directed investments are the investments in Commerce Bancorp,
Inc. common stock previously owned by the ESOP, which were merged into the Plan
effective January 1, 2002. Information about the nonparticipant-directed
investments in the common stock of the Company and the significant components of
changes in those investments is as follows:
Investments, at fair value at January 1, 2002 $ -
Merger of ESOP assets 65,944,305
Dividend income 990,721
Net appreciation in fair value 6,153,181
Distributions to participants (2,666,060)
Administrative expense -
------------------
Investments, at fair value at December 31, 2002 $ 70,422,147
==================
There were no nonparticipant-directed investments in 2001.
8
Commerce Bancorp, Inc. 401(k) Retirement Plan
Notes to Financial Statements (continued)
5. Income Tax Status
The Plan has received a determination letter from the Internal Revenue Service
dated October 17, 1998, stating that the Plan is qualified under Section 401(a)
of the Internal Revenue Code (the Code) and, therefore, the related trust is
exempt from taxation. Subsequent to this issuance of the determination letter,
the Plan has been amended. Once qualified, the Plan is required to operate in
conformity with the Code to maintain the qualification. The Plan administrator
believes the Plan is being operated in compliance with the applicable
requirements of the Code and, therefore, believes that the Plan is qualified and
the related trust is tax-exempt.
6. Transactions with Parties-in-Interest
The Plan held 2,285,816 and 662,834 shares of the common stock of the Company at
December 31, 2002 and 2001, respectively. The Plan held 7,000 shares of Commerce
Capital Trust II preferred shares at December 31, 2002.
During 2002 and 2001, the Plan received $1,391,825 and $367,729, respectively,
in dividends from the Company.
9
Supplemental Schedule
---------------------
10
Commerce Bancorp, Inc. 401(k) Retirement Plan
Schedule H, Line 4i -
Schedule of Assets (Held at End of Year)
December 31, 2002
Description of investment,
Identity of issue, borrower, including maturity date,
lessor or similar party rate of interest, collateral, Current
par or maturity value value
------------------------------------------------------------------------------------------------------------
Pooled Accounts
Provident Stable Value Fund Units of pooled accounts $ 3,326,020
Provident Global Aggressive Fund 2,002,771
Provident Domestic Aggressive Fund 4,945,143
Provident Domestic Moderate Fund 3,546,201
Provident Domestic Conservative Fund 1,325,669
American Ultra Fund 1,204,631
Deposit Account 14,863
Janus Adviser WW GW Fund 1,506,722
Fidelity VIP II Contra Fund 1,482,135
Scudder Equity 500 IX 1,614,195
---------------------
Total Pooled Accounts 20,968,350
Common Stock
+*Commerce Bancorp, Inc.
(nonparticipant-directed) Shares of common stock
70,422,147
*Commerce Bancorp, Inc. (participant-directed) 14,344,844
*Commerce Bancorp, Inc. (self-directed) 13,996,736
---------------------
Total Common Stock 98,763,727
Self-directed investments 7,562,395
Loans receivable from participants Interest rates ranging from 5.25% to
10.15% 292,723
---------------------
$ 127,587,195
=====================
* Party-in-interest to the Plan.
+ The cost associated with the nonparticipant-directed shares is $9,199,906.
"Cost" is not required for participant-directed investments.
11
SIGNATURES
The Plan. Pursuant to the requirements of the Securities Exchange Act of 1934,
the trustees (or other persons who administer the employee benefit plan) have
duly caused this annual report to be signed on its behalf by the undersigned
hereunto duly authorized.
COMMERCE BANCORP, INC. RETIREMENT PLAN 401 (K)
Date: June 30, 2003 By: /s/ Douglas J. Pauls
--------------------------------
Commerce Bancorp, Inc.
Douglas J. Pauls
Senior Vice President and
Chief Financial Officer
12
EXHIBIT INDEX
Exhibit No. Description
----------- -----------
23.1 Consent of Ernst & Young LLP.
99.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
13