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, 2003
-----------------------------------------------
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, 2003 and 2002
Contents
Report of Independent Registered Public Accounting Firm....................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 Registered Public Accounting Firm
Board of Directors
Commerce Bancorp, Inc.
We have audited the accompanying statements of assets available for benefits of
Commerce Bancorp, Inc. 401(k) Retirement Plan (the "Plan") as of December 31,
2003 and 2002, 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 the standards of the Public Company
Accounting Oversight Board (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, 2003 and 2002, and the changes in its assets available for benefits for the
years then ended, in conformity with U.S. generally accepted accounting
principles.
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, 2003, 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 for the year ended
December 31, 2003 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 11, 2004
1
Commerce Bancorp, Inc. 401(k) Retirement Plan
Statements of Assets Available for Benefits
December 31
2003 2002
------------ ------------
Assets
Investments, at fair value $164,533,385 $127,587,195
Contributions receivable:
Participant 321,137
Employer 821,602 660,742
------------ ------------
821,602 981,879
------------ ------------
Assets available for benefits $165,354,987 $128,569,074
============ ============
See accompanying notes.
2
Commerce Bancorp, Inc. 401(k) Retirement Plan
Statements of Changes in Assets Available for Benefits
Year ended December 31
2003 2002
------------ ------------
Additions:
Contributions:
Participant $ 8,836,056 $ 6,939,753
Employer match 3,364,610 2,586,550
Rollovers and transfers in from other plans 1,528,631 1,456,831
Consolidation of Commerce Bancorp, Inc. ESOP assets 65,944,305
------------ ------------
Total contributions 13,729,297 76,927,439
Investment income:
Net appreciation in fair value of investments 28,140,557 4,564,825
Interest and dividends 2,548,039 1,586,767
------------ ------------
Total investment income 30,688,596 6,151,592
------------ ------------
Total additions 44,417,893 83,079,031
Deductions:
Benefits paid directly to participants 7,580,938 7,820,762
Other 51,042 100,364
------------ ------------
Total deductions 7,631,980 7,921,126
------------ ------------
Net increase in assets available for benefit 36,785,913 75,157,905
Assets available for benefits:
Beginning of year 128,569,074 53,411,169
------------ ------------
End of year
$165,354,987 $128,569,074
============ ============
See accompanying notes.
3
Commerce Bancorp, Inc. 401(k) Retirement Plan
Notes to Financial Statements
December 31, 2003
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. During 2002,
net assets totaling $0.1 million were transferred into the Plan as a result of
the Sanford & Purvis acquisition. No assets, resulting from acquisitions, were
transferred into the plan during 2003.
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 2003
and 2002, 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 approximately $105,000 and
$59,000 were used to offset matching contributions paid in 2004 and 2003,
respectively. 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, 2003
and 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 is $72,000 which represents amounts
due to participants who have requested withdrawals. There were no distributions
submitted for processing in 2003 that were not paid in 2003.
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 2003 and 2002, 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 U.S. generally
accepted accounting principles 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,
2003 and 2002, the Plan's investments appreciated (depreciated) in fair value as
follows:
7
Commerce Bancorp, Inc. 401(k) Retirement Plan
Notes to Financial Statements (continued)
3. Investments (continued)
Year ended December 31
2003 2002
---------------------------------------
Pooled accounts $ 5,296,670 $ (2,766,681)
Commerce Bancorp, Inc. Common Stock 18,317,339 7,082,633
Other 4,526,548 248,873
---------------------------------------
$ 28,140,557 $ 4,564,825
=======================================
Investments that represent 5% or more of the fair value of the Plan's assets are
as follows:
December 31
2003 2002
---------------------------------------
Commerce Bancorp, Inc. Common Stock (includes $81.0 million in
nonparticipant-directed accounts) $117,133,011 $ 98,763,727
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:
2003 2002
Investments, at fair value at January 1, $70,422,147 $ --
Merger of ESOP assets -- 65,944,305
Dividend income 1,050,376 990,721
Net appreciation in fair value 14,614,192 6,153,181
Distributions to participants (5,063,825) (2,666,060)
Administrative expense -- --
------------------- ------------------
Investments, at fair value at December 31, $81,022,890 $70,422,147
=================== ==================
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 July 8, 2003, 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 2,218,005 and 2,285,816 shares of the common stock of the Company
at December 31, 2003 and 2002, respectively. The Plan held 7,000 shares of
Commerce Capital Trust II preferred shares at December 31, 2003 and 2002.
During 2003 and 2002, the Plan received $1,497,149 and $1,391,825, 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) (continued)
December 31, 2003
Identity of issue, borrower, Current
lessor or similar party Description value
---------------------------------------------------------------------------------------------------
Pooled Accounts
Provident Stable Value Fund Units of pooled accounts $ 5,462,816
Provident Global Aggressive Fund 3,202,302
Provident Domestic Aggressive Fund 7,855,130
Provident Domestic Moderate Fund 6,023,953
Provident Domestic Conservative Fund 2,207,702
American Century Ultra Fund 2,485,951
Deposit Account
Janus Aspen WW GW Fund 2,780,720
Fidelity VIP II Contra Fund 3,150,255
Scudder Equity 500 IX 3,753,064
--------------------
Total Pooled Accounts 36,921,893
Common Stock
+*Commerce Bancorp, Inc.
(nonparticipant-directed) Shares of common stock 81,022,890
*Commerce Bancorp, Inc. (participant-directed) 20,101,414
*Commerce Bancorp, Inc.
(self-directed) 16,008,707
--------------------
Total Common Stock 117,133,011
Self-directed investments 10,196,922
Loans receivable from participants Interest rates ranging from 5.00% to
10.50% 281,559
--------------------
$ 164,533,385
====================
* Party-in-interest to the Plan.
+ The cost associated with the nonparticipant-directed shares is $9,339,302.
"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 25, 2004 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.
13