Commerce 11K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 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, 2004
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 the 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, 2004 and 2003
 
 
Contents
 
   
Audited Financial Statements
  
   
   
Supplemental Schedule
  
   

 

 




 
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 the Commerce Bancorp, Inc. 401(k) Retirement Plan as of December 31, 2004 and 2003, 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. We were not engaged to perform an audit of the Plan’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Plan's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and 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, 2004 and 2003, 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, 2004, 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 21, 2005
 

1

Commerce Bancorp, Inc. 401(k) Retirement Plan
 
Statements of Assets Available for Benefits
 
   
December 31
  
   
2004
  
2003
  
 
Assets
          
Investments, at fair value
  
$
195,721,040
  
$
164,533,385
  
Employer contributions receivable
    
912,832
    
821,602
  
Assets available for benefits
  
$
196,633,872
  
$
165,354,987
  
 
See accompanying notes.

2

Commerce Bancorp, Inc. 401(k) Retirement Plan
 
Statements of Changes in Assets Available for Benefits
 
   
Year ended December 31
  
   
2004
  
2003
  
           
Additions:
          
Contributions:
          
Participant
 
$
12,078,886
  
$
8,836,056
  
Employer match
   
3,327,307
    
3,364,610
  
Rollovers and transfers in from other plans
    
2,382,876
    
1,528,631
  
Total contributions
    
17,789,069
    
13,729,297
  
               
Investment income:
              
Net appreciation in fair value of investments
    
29,334,318
    
28,140,557
  
Interest and dividends
    
1,954,460
    
2,548,039
  
Total investment income
    
31,288,778
    
30,688,596
  
Total additions
    
49,077,847
    
44,417,893
  
               
Deductions:
              
Benefits paid directly to participants
    
17,418,962
    
7,580,938
  
Other
    
380,000
    
51,042
  
Total deductions
    
17,798,962
    
7,631,980
  
               
Net increase in assets available for benefits
    
31,278,885
    
36,785,913
  
               
Assets available for benefits:
              
Beginning of year
    
165,354,987
    
128,569,074
  
End of year
  
$
196,633,872
  
$
165,354,987
  
 
See accompanying notes.

 


3


Commerce Bancorp, Inc. 401(k) Retirement Plan
 
Notes to Financial Statements
 
December 31, 2004
 
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. 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.
 
Contributions
 
Each year, participants may contribute 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 2004 and 2003, 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.
 
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 self-directed investments.
 

 


4
 

Commerce Bancorp, Inc. 401(k) Retirement Plan
 
Notes to Financial Statements (continued)

1. Description of Plan (continued)
 
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 $212,100 and $105,000 were used to offset matching employer contributions paid in 2005 and 2004, 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. 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. Effective January 1, 2004, the Company amended the Plan to allow the amount forfeited to be used to reimburse the Company for administrative expense incurred by the Plan or to reduce Company matching contributions. During December 2004, 20,498 forfeited shares were sold resulting in proceeds of approximately $1.3 million. The Company used the proceeds to reduce the employer match contributions and to offset administrative costs. Prior to January 1, 2004, amounts forfeited were reallocated among the accounts of the remaining participants as though the forfeited amounts were Employer contributions.
 
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. The Plan had no outstanding distributions payable as of December 31, 2004 or 2003, respectively.
 
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. Administrative costs totaling $380,000 and $307,000 were paid by the Company in 2004 and 2003, respectively. For 2004 and 2003, 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. 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 Nationwide Life Insurance Company of America. The Commerce Bancorp, Inc. Common Stock and self-directed accounts are administered by Janney Montgomery Scott. During the years ended December 31, 2004 and 2003, the Plan’s investments appreciated 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
  
   
2004
  
2003
  
           
Pooled accounts
  
$
3,878,448
  
$
5,296,670
  
Commerce Bancorp, Inc. Common Stock
   
21,847,860
    
18,317,339
  
Other
    
3,608,010
    
4,526,548
  
   
$
29,334,318
  
$
28,140,557
  

Investments that represent 5% or more of the fair value of the Plan’s assets are as follows:
 
   
December 31
  
   
2004
  
2003
  
           
Commerce Bancorp, Inc. Common Stock (includes
  $93.6 million and $81.0 million in 2004 and 2003,
  respectively, in nonparticipant-directed accounts)
  
$
135,648,889
  
$
117,133,011
  
Provident Domestic Aggressive Fund
    
10,130,573
   
-
  
 
 
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:
 
   
2004
  
2003
  
           
Investments, at fair value at January 1
  
$
81,022,890
  
$
70,422,147
  
Dividend income
    
1,150,004
    
1,050,376
  
Net appreciation in fair value
    
17,079,498
    
14,614,192
  
Distributions to participants
    
(4,379,859
)
  
(5,063,825
)
Forfeited shares and dividends
    
(1,287,439
)
  
-
  
Investments, at fair value at December 31
  
$
93,585,094
  
$
81,022,890
  

 
 
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 2,101,145 and 2,218,005 shares of the common stock of the Company at December 31, 2004 and 2003, respectively. The Plan held 7,000 shares of Commerce Capital Trust II preferred shares at December 31, 2004 and 2003.
 
During 2004 and 2003, the Plan received $1,691,028 and $1,497,149, respectively, in dividends from the Company.
 
7. Risks and Uncertainties
 
The Plan invests in various investment securities. Investment securities are exposed to various risks such as interest rate, market and credit risks. Due to the level of risk associated with certain investment securities, it is at least reasonably possible that changes in the values of investment securities will occur in the near term and that such changes could materially affect participants' account balances and the amounts reported in the statements of assets available for benefits.
 

 


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, 2004
 


 
Identity of issue, borrower,
lessor or similar party
Description
Current
value
 
 
Pooled Accounts
    
 
Provident Stable Value Fund
Units of pooled accounts
$6,252,327
 
Provident Global Aggressive Fund
Units of pooled accounts
4,443,969
 
Provident Domestic Aggressive Fund
Units of pooled accounts
10,130,573
 
Provident Domestic Moderate Fund
Units of pooled accounts
8,238,114
 
Provident Domestic Conservative Fund
Units of pooled accounts
3,336,752
 
American Century Ultra Fund
Units of pooled accounts
3,658,397
 
Janus Aspen WW GW Fund
Units of pooled accounts
3,589,086
 
Fidelity VIP II Contra Fund
Units of pooled accounts
5,459,086
 
Fixed Income Fund
Units of pooled accounts
212,064
 
Scudder Equity 500 IX
Units of pooled accounts
6,355,792
 
Total Pooled Accounts
Units of pooled accounts
51,676,160
 
 
Common Stock
    
†*
Commerce Bancorp, Inc. (nonparticipant-directed)
Shares of common stock
93,585,094
*
Commerce Bancorp, Inc. (participant-directed)
Shares of common stock
28,902,427
*
Commerce Bancorp, Inc. (self-directed)
Shares of common stock
13,161,368
 
Total Common Stock
  
135,648,889
       
 
Self-directed investments
  
8,015,634
 
Loans receivable from participants
Interest rates ranging from 6.25% to 9.75%
380,357
     
$195,721,040

* Party-in-interest to the Plan.
 
† The cost associated with the nonparticipant-directed shares is $8,630,893.
 
“Cost” is not required for participant-directed investments.
 
11