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