________________________________________________________________________________



                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K

             X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
                   For the fiscal year ended December 31, 2002
                                       OR
            TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
      For the transition period from ________________ to ________________.
                            Commission File #0-12874

                       [GRAPHIC OMITTED][GRAPHIC OMITTED]
             (Exact name of registrant as specified in its charter)
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<S>                                                                <C>

                New Jersey                                           22-2433468
State of other jurisdiction of incorporation           (I.R.S. Employee Identification Number)
             or organization)
              Commerce Atrium
            1701 Route 70 East                                       08034-5400
          Cherry Hill, New Jersey                                    (Zip Code)
 (Address of principal executive offices)

        Registrant's telephone number, including area code: 856-751-9000
                             ______________________
     Securities registered pursuant to Section 12(b) of the Act:

                     Common Stock                                                New York Stock Exchange
                 ----------------------                              -------------------------------------------------
                    Title of Class                                      Name of Each Exchange on Which Registered

     Securities registered pursuant to Section 12(g) of the Act: None
                             ______________________

     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 report(s), and (2) has been subject to such
filing requirements for the past 90 days. Yes X    No ____.
                                              ---
     Indicate by check mark if disclosure of delinquent  filers pursuant to Item
405 of Regulation S-K (ss. 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 an  accelerated  filer (as
defined in Rule 12b-2 of the Act).Yes X No __.
                                     ---
     The aggregate  market value of the voting stock held by  non-affiliates  of
the Registrant was approximately $2,750,085,590. (1)

                      APPLICABLE ONLY TO CORPORATE ISSUERS:

     Indicate the number of shares  outstanding of each of the issuer's  classes
of common stock, as of the last practicable date.

              Common Stock $1.00 Par Value                                          68,766,342
       -------------------------------------------                    ----------------------------------------
                     Title of Class                                   No. of Shares Outstanding as of 3/21/03
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                       DOCUMENTS INCORPORATED BY REFERENCE

     Part  III   incorporates   certain   information   by  reference  from  the
Registrant's Proxy Statement for the 2003 Annual Meeting of Shareholders.
                             ______________________

(1) The aggregate  dollar amount of the voting stock set forth equals the number
of shares of the Registrant's  Common Stock outstanding reduced by the number of
shares of Common Stock held by officers,  directors, and shareholders owning 10%
or more of the Registrant's  Common Stock,  multiplied by $44.20,  the last sale
price for the Registrant's  Common Stock on June 28, 2002, the last business day
of  the  Registrant's  most  recently  completed  second  fiscal  quarter.   The
information  provided  shall in no way be  construed  as an  admission  that any
person  whose  holdings  are  excluded  from this figure is an  affiliate of the
Registrant or that such person is the beneficial owner of the shares reported as
being held by him, and any such inference is hereby disclaimed.  The information
provided  herein  is  included  solely  for the  recordkeeping  purposes  of the
Securities and Exchange Commission.


________________________________________________________________________________
<PAGE>

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                                                        COMMERCE BANCORP, INC.
                                                  FORM 10-K CROSS-REFERENCE INDEX

                                                                                                                              Page
                                     Part I
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Item 1.    Business..............................................................................................................1
Item 2.    Properties............................................................................................................7
Item 3.    Legal Proceedings ....................................................................................................7
Item 4.    Submission of Matters to a Vote of Security Holders...................................................................7


                                     Part II
Item 5.    Market for Registrant's Common Equity and Related Stockholder Matters ................................................8
Item 6.    Selected Financial Data ..............................................................................................8
Item 7.    Management's Discussion and Analysis of Financial Condition and Results of Operations ...............................10
Item 7A.   Quantitative and Qualitative Disclosures About Market Risk ..........................................................21
Item 8.    Financial Statements and Supplementary Data .........................................................................22
Item 9.    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.................................45


                                    Part III
Item 10.   Directors and Executive Officers of the Registrant...................................................................45
Item 11.   Executive Compensation...............................................................................................45
Item 12.   Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.......................45
Item 13.   Certain Relationships and Related Transactions.......................................................................45
Item 14.   Controls and Procedures..............................................................................................45


                                     Part IV
Item 15.   Exhibits, Financial Statement Schedules and Reports on Form 8-K .....................................................46
           Signatures...........................................................................................................49
           Section 302 Certifications...........................................................................................50

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<PAGE>


                                     PART I
Item 1. Business

Forward-Looking Statements

     Commerce  Bancorp,  Inc. (the "Company") may from time to time make various
written or oral "forward looking statements"  including  statements contained in
the  Company's  filings  with the  Securities  and Exchange  Commission  ("SEC")
(including  this Annual  Report on Form 10-K and the  exhibits  hereto),  in its
reports to shareholders and in other  communications  by the Company,  which are
made in good faith by the Company pursuant to 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  that are
sometimes beyond the Company's control.  You will generally be able to recognize
a  forward-looking   statement  because  it  contains  the  words  "anticipate,"
"believe,"   "estimate,"  "expect,"  "project,"   "objective,"  "may,"  "could,"
"should,"  "would,"  "intend,"  "forecast,"  "plan" or  similar  expressions  to
identify it as a forward-looking statement.

     The following factors,  among others,  could cause the Company's  financial
performance to differ  materially  from that  expressed in such  forward-looking
statements: the strength of the United States and world economies in general and
the  strength  of  the  local  economies  in  which  the  Company  conducts  its
operations; 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; inflation; interest rates, market and monetary fluctuations; the
Company's  timely  development of competitive  new products and services and the
acceptance  of such  products  and services by  customers;  the  willingness  of
customers to  substitute  competitors'  products and services for the  Company's
products  and  services  and vice  versa;  the impact of  changes  in  financial
services  laws  and  regulations,  including  laws  concerning  taxes,  banking,
securities and insurance; technological changes; future acquisitions; the growth
and  profitability  of the Company's  noninterest  or fee income being less than
expected;  the ability to maintain  the growth and  further  development  of the
Company's  community-based  retail branch network; the ability to hire and train
qualified  personnel to sustain the  Company's  expansion  plans;  the Company's
ability to expand its  community-based  retail  branch  network to new  markets;
unanticipated  regulatory or judicial proceedings;  changes in consumer spending
and saving habits;  and the Company's  success at managing the risks involved in
the foregoing. The Company cautions that the foregoing list of important factors
is not exclusive.

     The Company cautions you that any such  forward-looking  statements are not
guarantees  of  future   performance   and  involve  known  and  unknown  risks,
uncertainties  and other factors which may cause the Company's  actual  results,
performance  or  achievements  to differ  materially  from the  future  results,
performance or achievements the Company has anticipated in such  forward-looking
statements.  You should note that many  factors,  some of which are discussed in
this Annual  Report on Form 10-K could  affect the  Company's  future  financial
results and could cause those results to differ  materially from those expressed
or implied in the Company's forward-looking statements contained or incorporated
by reference  in this  document.  The Company  does not  undertake to update any
forward-looking  statement,  whether written or oral, that may be made from time
to time by or on behalf of the Company.

General

     The  Company  is a New Jersey  business  corporation  registered  as a bank
holding company under the Bank Holding Company Act of 1956, as amended ("Holding
Company Act").  The Company was  incorporated  on December 9, 1982 and became an
active bank holding company on June 30, 1983 through the acquisition of Commerce
Bank, N.A., referred to as Commerce NJ.

     As of December  31, 2002,  the Company had total  assets of $16.4  billion,
total loans of $5.8 billion, and total deposits of $14.5 billion. The address of
the Company's principal executive office is Commerce Atrium, 1701 Route 70 East,
Cherry Hill, New Jersey,  08034-5400 and the telephone number is (856) 751-9000.
The Company operates:

     o    four nationally chartered bank subsidiaries:

          o    Commerce Bank, N.A., Cherry Hill, New Jersey;

          o    Commerce Bank/Pennsylvania, N.A., Devon, Pennsylvania;

          o    Commerce Bank/Shore, N.A., Toms River, New Jersey;

          o    Commerce Bank/Delaware, N.A., Wilmington Delaware; and

     o    one New Jersey state chartered bank subsidiary:

          o    Commerce Bank/North, Ramsey, New Jersey.

     These five bank subsidiaries, referred to collectively as the banks, as of
December 31, 2002 had over 224 full service retail branch offices located in the
states of New Jersey, Pennsylvania, Delaware and New York. These banks provide a
full range of retail and commercial banking services for consumers and small and
mid-sized companies. Lending services are focused on commercial real estate and
commercial and consumer loans to local borrowers. These banks' lending and
investment activities are funded principally by retail deposits gathered through
each bank's retail branch office network.

                                                                               1
<PAGE>

     The Company's primary growth strategy is the opening of new full service
branch offices of which 40 opened in 2002 and 34 opened in 2001. The Company
expects to open an additional 45 full service branch offices in 2003. The
Company has also developed its full service branch office network through the
following strategic acquisitions:

          o    on January 2, 1987, the Company  acquired all of the  outstanding
               shares  of  Commerce  Bank/Pennsylvania,  N.A.,  referred  to  as
               Commerce PA;

          o    on December 31, 1988 the Company  acquired all of the outstanding
               shares of Citizens State Bank of New Jersey,  Forked River, which
               was  subsequently  converted  to a national  charter  and renamed
               Commerce Bank/Shore, N.A., referred to as Commerce Shore;

          o    on  September  30,  1993,   the  Company   acquired  all  of  the
               outstanding  shares of The Coastal Bank,  Ocean City, New Jersey,
               which was merged with and into Commerce NJ;

          o    on January 21, 1997, the Company acquired  Independence  Bancorp,
               Inc., a bank holding company  headquartered in Bergen County, New
               Jersey. Independence Bancorp, Inc.'s wholly-owned state-chartered
               bank   subsidiary,   Independence   Bank  of  New   Jersey,   was
               subsequently renamed Commerce Bank/North, referred to as Commerce
               North;

          o    on January 15, 1999, the Company acquired Community First Banking
               Company,   referred  to  as  CFBC,  a  one-bank  holding  company
               headquartered  in Tinton Falls, New Jersey.  CFBC's  wholly-owned
               bank  subsidiary,  Tinton  Falls State Bank,  was merged with and
               into Commerce Shore; and

          o    on January 15,  1999,  the Company  acquired  Prestige  Financial
               Corp.,   referred   to  as  PFC,  a  one-bank   holding   company
               headquartered  in  Flemington,  New  Jersey.  PFC's  wholly-owned
               state-chartered   bank  subsidiary,   Prestige  State  Bank,  was
               subsequently re-chartered as a national bank and renamed Commerce
               Bank/Central,  N.A.  Commerce  Central  was merged  with and into
               Commerce NJ in 2001.

     In  1998,  the  Company  received  regulatory  approvals  to open  Commerce
Bank/Delaware, N.A., referred to as Commerce Delaware. Commerce Delaware's first
branch opened in New Castle County, Delaware, on December 18, 1999.

     Commerce NJ operates a nonbank subsidiary,  Commerce Capital Markets, Inc.,
Philadelphia,  Pennsylvania,  referred to as  Commerce  Capital  Markets,  which
engages in various securities,  investment banking and brokerage activities.  On
March 27, 1998, the Company  completed the  acquisition of A.H.  Williams & Co.,
Inc., Philadelphia, Pennsylvania, a public finance investment firm, and combined
A.H.  Williams & Co., Inc. with Commerce  Capital,  the bank  securities  dealer
division of Commerce NJ, to form Commerce Capital Markets.

     In  addition,  the  Company,  through  Commerce  Insurance  Services,  Inc.
(formerly Commerce National Insurance  Services,  Inc.), a nonbank subsidiary of
Commerce  Bank/North,  referred to as Commerce Insurance,  operates an insurance
brokerage agency  concentrating on commercial  property,  casualty and surety as
well as  personal  lines of  insurance  and  employee  benefits  for  clients in
multiple states,  primarily  Delaware,  New Jersey,  New York and  Pennsylvania.
Since 1996,  Commerce Insurance has completed several strategic  acquisitions of
insurance brokerage agencies the most recent of which include the following:

          o    in 2001,  Fitzsimmons  Insurance  and Financial  Services,  Inc.,
               Business  Training  Systems,  Inc. and Brettler  Financial Group,
               Inc. were acquired.

          o    in 2002,  Sanford  and Purvis,  Inc.,  Upper  Montclair,  NJ, was
               acquired.

          o    in 2003, The Porch Agency, Bridgeton, NJ, was acquired.

     As a legal  entity  separate  and  distinct  from  its  bank  and  non-bank
subsidiaries, the Company's principal sources of revenues are dividends and fees
from its bank and non-bank  subsidiaries.  The subsidiaries  that operate in the
banking, insurance and securities business can pay dividends only if they are in
compliance  with  the  applicable  regulatory  requirements  imposed  on them by
federal and state regulatory authorities.

The Banks

     As of December  31, 2002,  Commerce NJ had total  assets of $10.1  billion,
total  deposits  of $7.8  billion,  and  total  shareholders'  equity  of $582.1
million;  Commerce PA had total assets of $3.4 billion,  total  deposits of $3.1
billion and total  shareholders'  equity of $231.7  million;  Commerce Shore had
total  assets  of $2.1  billion,  total  deposits  of  $1.9  billion  and  total
shareholders' equity of $130.5 million;  Commerce North had total assets of $1.9
billion,  total  deposits of $1.7  billion,  and total  shareholders'  equity of
$130.4 million; and Commerce Delaware had total assets of $225.6 million,  total
deposits of $203.7 million, and total shareholders' equity of $19.9 million.

     Commerce NJ provides  retail and commercial  banking  services  through 111
retail branch offices in Central and Southern New Jersey,  and  Metropolitan New
York.;  Commerce PA provides retail and commercial  banking  services through 53
retail branch offices in Philadelphia,  Bucks, Chester,  Delaware and Montgomery
Counties  in  Southeastern  Pennsylvania;  Commerce  Shore  provides  retail and
commercial  banking  services  through  29 retail  branch  offices  in Ocean and
Monmouth  Counties,  New Jersey;  Commerce North provides  retail and commercial
banking  services  through  25  retail  branch  offices  in Bergen  and  Passaic
Counties,  New Jersey;  and Commerce  Delaware  provides  retail and  commercial
banking services through 6 retail branch offices in New Castle County, Delaware.

2
<PAGE>

Service Areas

     The  Company's  primary  service  areas  includes New Jersey,  Metropolitan
Philadelphia and New York, and Northern  Delaware.  The Company has attempted to
locate its branches in the fastest growing communities within its service areas.
Retail deposits gathered through these focused branching  activities are used to
support lending throughout the Company.

Retail Banking Services and Products

     Each bank provides a broad range of retail  banking  services and products,
including free checking accounts, subject to minimum balances, savings programs,
money market accounts, negotiable orders of withdrawal accounts, certificates of
deposit, safe deposit facilities,  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 and
automated  teller  facilities.  Each bank  also  offers  construction  loans and
permanent mortgages for houses.

Trust Services

     Commerce NJ,  Commerce PA and Commerce  Delaware each offer trust  services
primarily  focusing on corporate trust  services,  particularly as bond trustee,
paying agent, and registrar for municipal bond offerings.

Commercial Banking Services and Products

     Each bank offers a broad range of commercial  banking  services,  including
free checking accounts, subject to minimum balance, night depository facilities,
money market accounts, certificates of deposit, short-term loans for seasonal or
working capital  purposes,  term loans for fixed assets and expansion  purposes,
revolving credit plans and other commercial loans and leases to fit the needs of
its customers.  Each bank also finances the construction of business  properties
and makes real estate mortgage loans on completed buildings.  Where the needs of
a customer  exceed a bank's legal lending limit for any one customer,  such bank
may  participate  with  other  banks,  including  the other  banks  owned by the
Company, in making a loan.

     Additional information pertaining to the Company's segments is set forth in
"Note 19 - Segment  Reporting" of the Company's Notes to Consolidated  Financial
Statements which appear elsewhere herein.

Commerce Insurance

     Commerce  Insurance operates one of the nation's largest regional insurance
brokerage firm concentrating on commercial property, casualty and surety as well
as personal lines.  In addition,  Commerce  Insurance  offers a line of employee
benefit  programs  including  group  as  well  as  individual   medical,   life,
disability,  pension, and risk management services. Commerce Insurance currently
operates out of 12 locations in New Jersey, 2 locations in  Pennsylvania,  and 2
locations  in  Delaware.  Commerce  Insurance  places  insurance  for clients in
multiple states, primarily New Jersey, Pennsylvania, New York, and Delaware.

Commerce Capital Markets

     Commerce  Capital  Markets  engages  in  various   securities,   investment
management  and  brokerage  activities,  including  trading,  underwriting,  and
advisory  services.  Commerce  Capital  Markets'  principal place of business is
Philadelphia,   Pennsylvania,  with  branch  locations  in  Cherry  Hill,  South
Plainfield,  Ramsey and Toms River, New Jersey; New York, New York;  Burlingame,
California; and Cambridge, Massachusetts.

Commerce Capital Trust II

     Commerce Capital Trust II, a wholly-owned  subsidiary of the Company,  is a
statutory  business  trust  created  under  Delaware  law. On March 11, 2002 the
Company  issued $200.0  million of 5.95%  Convertible  Trust Capital  Securities
through Commerce Capital Trust II.

Other Activities

     NA Asset Management,  a Delaware corporation,  is a wholly-owned subsidiary
of Commerce  NJ that  purchases,  holds and sells  investments  of Commerce  NJ.
Commerce Mortgage  Acceptance Corp., a Delaware  corporation,  is a wholly-owned
subsidiary of Commerce NJ that is utilized in the  securitization of residential
mortgage loans. Shore Asset Management Corporation, a Delaware corporation, is a
wholly-owned  subsidiary  of  Commerce  Shore  that  purchases,  holds and sells
investments of Commerce Shore. North Asset Management,  a Delaware  corporation,
is a wholly-owned subsidiary of Commerce North that purchases,  holds, and sells
investments  of  Commerce  North.  Delaware  Asset  Management,   a  New  Jersey
corporation,  is a wholly-owned  subsidiary of Commerce Delaware that purchases,
holds, and sells investments of Commerce Delaware.  Commerce  Commercial Leasing
LLC, a New Jersey Limited  Liability  Company,  is a wholly-owned  subsidiary of
Commerce NJ that provides business leasing services.

     The Company has an equity  investment  in  Pennsylvania  Commerce  Bancorp,
Inc., Camp Hill, Pennsylvania (14.47% beneficial ownership assuming the exercise
of  all  outstanding  warrants  held  by  the  Company).  The  Company  and  its
subsidiaries  provide  marketing  support  and  technical  support  services  to
Pennsylvania  Commerce Bancorp,  Inc. and its wholly owned subsidiary,  Commerce
Bank/Harrisburg.

 Risk Factors

     The Company is subject to a number of risk factors including, among others,
business and economic conditions,  monetary and other governmental policies, and
competition.  These factors,  and others,  could impact the Company's  business,
financial

                                                                               3
<PAGE>

condition  and results of  operations.  In the normal  course of  business,  the
Company assumes various types of risk, which include, among others, credit risk,
interest rate risk,  liquidity risk and risk associated with trading activities.
The  Company  has  risk  management  processes  designed  to  provide  for  risk
identification, measurement and monitoring.

 Competition

     The Company's  service area is characterized by intense  competition in all
aspects  and areas of its  business  from  commercial  banks,  savings  and loan
associations,  mutual  savings  banks  and  other  financial  institutions.  The
Company's  competitors,  including credit unions,  consumer  finance  companies,
factors, insurance companies and money market mutual funds, compete with lending
and deposit  gathering  services  offered by the Company.  Many competitors have
substantially  greater financial resources with larger lending limits and larger
branch systems than the Company's.

     In commercial transactions, Commerce NJ's, Commerce PA's, Commerce Shore's,
Commerce  North's,  and  Commerce  Delaware's  legal  lending  limit to a single
borrower  (approximately  $88.8  million,  $31.3 million,  $19.7 million,  $18.7
million,  and $2.8 million,  respectively,  as of December 31, 2002) enables the
banks  to  compete  effectively  for  the  business  of  smaller  and  mid-sized
businesses.  The combined legal lending limit of the Company is $161.3  million.
These legal lending limits are lower than that of various competing institutions
and may  act as a  constraint  on the  bank's  effectiveness  in  competing  for
financing in excess of these limits.

     The Company  believes that it is able to compete on a  substantially  equal
basis with larger financial institutions because its banks offer longer hours of
operation than those offered by most of the Company's competitors, free checking
accounts for customers  maintaining  minimum  balances and competitive  interest
rates on savings and time accounts with low minimum deposit requirements.

     The Company seeks to provide  personalized  services  through  management's
knowledge and awareness of its market area, customers and borrowers. The Company
believes this knowledge and awareness  provides a business  advantage in serving
the retail  depositors  and the small and mid-sized  commercial  borrowers  that
comprise the Company's customer base.

 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 AND ITS
SUBSIDIARIES.  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  registered  as a bank  holding  company  under the Holding
Company Act, and is  therefore  subject to  supervision  and  regulation  by the
Federal  Reserve Board ("FRB").  The Company is also regulated by the New Jersey
Department of Banking and Insurance (the "Department").

     Under the Holding  Company Act, the Company is required to secure the prior
approval  of the FRB  before it can  merge or  consolidate  with any other  bank
holding company or acquire all or substantially all of the assets of any bank or
acquire direct or indirect ownership or control of any voting shares of any bank
that is not already  majority  owned by it, if after such  acquisition  it would
directly or indirectly  own or control more than 5% of the voting shares of such
bank.

     The Company is  generally  prohibited  under the  Holding  Company Act from
engaging in, or acquiring  direct or indirect  ownership or control or more than
5% of the voting shares of any company engaged in nonbanking  activities  unless
the FRB,  by order or  regulation,  has found such  activities  to be so closely
related to banking or managing or controlling  banks as to be a proper  incident
thereto.  In  making  such  a  determination,  the  FRB  considers  whether  the
performance  of these  activities  by a bank holding  company can  reasonably be
expected to produce  benefits to the public which outweigh the possible  adverse
effects.

     Satisfactory  financial  condition,  particularly  with  regard to  capital
adequacy,  and  satisfactory  Community  Reinvestment  Act,  as amended  ("CRA")
ratings are generally  prerequisites to obtaining federal regulatory approval to
make  acquisitions.  All of the Company's  subsidiary  banks are currently rated
"satisfactory" under the CRA.

     In addition, under the Holding Company Act, the Company is required to file
periodic  reports of its operations  with, and is subject to examination by, the
FRB.

     The  Company  is  under  the  jurisdiction  of the  SEC and  various  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.

     There are various legal restrictions on the extent to which the Company and
its nonbank subsidiaries can borrow or otherwise obtain credit from its banking
subsidiaries. In general, these restrictions require that any such extensions of
credit must be secured



                                                                               4
<PAGE>

by designated amounts of specified  collateral and are limited, as to any one of
the Company or such nonbank  subsidiaries,  to ten percent of the lending bank's
capital  stock  and  surplus,  and  as to  the  Company  and  all  such  nonbank
subsidiaries  in the  aggregate,  to 20 percent of such lending  bank's  capital
stock and surplus.  Further,  a bank holding  company and its  subsidiaries  are
prohibited  from engaging in certain tie-in  arrangements in connection with any
extension of credit, lease or sale of property or furnishing of services.

     The Financial Institutions Reform,  Recovery and Enforcement Act ("FIRREA")
contains  a  "cross-guarantee"  provision  that  could  result  in  any  insured
depository  institution  owned by the Company being assessed for losses incurred
by the FDIC in connection  with  assistance  provided to, or the failure of, any
other depository  institution owned by the Company.  Also, under FRB policy, the
Company is  expected  to act as a source of  financial  strength  to each of its
banking  subsidiaries  and to  commit  resources  to  support  each such bank in
circumstances  where such bank might not be in a  financial  position to support
itself.  Consistent with the "source of strength"  policy for subsidiary  banks,
the FRB has stated that, as a matter of prudent banking,  a bank holding company
generally  should not  maintain a rate of cash  dividends  unless its net income
available to common shareholders has been sufficient to fully fund the dividends
and the prospective rate of earnings retention appears to be consistent with the
corporation's capital needs, asset quality and overall financial condition.

     A discussion of capital  guidelines  and capital is included in the section
entitled  "Stockholders'  Equity and Dividends"  contained within  "Management's
Discussion  and  Analysis of  Financial  Condition  and  Results of  Operations"
included  elsewhere herein.  Commerce NJ, Commerce PA, Commerce Shore,  Commerce
North, and Commerce Delaware

     Commerce NJ,  Commerce  PA,  Commerce  Shore,  and  Commerce  Delaware,  as
national  banks,  are subject to the National  Bank Act. Each is also subject to
the supervision of, and is regularly  examined by, the Office of the Comptroller
of the Currency ("OCC") and is required to furnish quarterly reports to the OCC.
The approval of the OCC is required for the  establishment of additional  branch
offices by any national bank, subject to applicable state law restrictions.

     Commerce North, as a New Jersey state-chartered bank, is subject to the New
Jersey Banking Act. Commerce North is also subject to the supervision of, and is
regularly  examined by, the  Department and the FDIC, and is required to furnish
quarterly reports to each agency. The approval of the Department and the FDIC is
necessary for the  establishment  of any  additional  branch  offices by any New
Jersey state-chartered bank, subject to applicable state law restrictions.

     Under present New Jersey law,  Commerce NJ,  Commerce  Shore,  and Commerce
North  would be  permitted  to operate  offices at any  location  in New Jersey,
subject to prior regulatory  approval.  Under present New York law,  Commerce NJ
would be  permitted to operate  offices at any location in New York,  subject to
certain home office protection rules and subject to regulatory  approval.  Under
present  Pennsylvania  law,  Commerce PA would be permitted  to operate  offices
within any county in Pennsylvania,  subject to prior regulatory approval.  Under
present Delaware law, Commerce Delaware would be permitted to operate offices at
any location in Delaware at which  deposits are  received,  checks are paid,  or
money is lent, subject to prior regulatory approval.

     Under  the  CRA,  a  bank  has  a  continuing  and  affirmative  obligation
consistent  with its safe and sound  operation  to help meet the credit needs of
its entire community, including low- and moderate-income neighborhoods. CRA does
not  establish   specific   lending   requirements  or  programs  for  financial
institutions nor does it limit an institution's  discretion to develop the types
of products  and  services  that it believes  are best suited to its  particular
community,  consistent  with CRA. CRA requires  that the  applicable  regulatory
agency to assess an  institution's  record of meeting  the  credit  needs of its
community  and to take such record  into  account in its  evaluation  of certain
applications  by such  institution.  The CRA requires  public  disclosure  of an
institution's  CRA rating and requires  that the  applicable  regulatory  agency
provide a written  evaluation of an  institution's  CRA performance  utilizing a
four-tiered descriptive rating system. An institution's CRA rating is considered
in determining whether to grant charters, branches and other deposit facilities,
relocations,  mergers,  consolidations  and acquisitions.  Performance less than
satisfactory  may be the basis for denying an  application.  In addition,  under
applicable  regulations  a bank  having a less than  satisfactory  rating is not
entitled  to  participate  on the bid list for FDIC  offerings.  For their  most
recent examinations, Commerce NJ, Commerce PA, Commerce Shore, Commerce Delaware
and Commerce North each received a "satisfactory" rating.

     Commerce NJ,  Commerce PA, Commerce  Shore,  Commerce  North,  and Commerce
Delaware are also members of the FDIC and, except for Commerce North, members of
the FRB and, therefore,  are subject to additional regulation by these agencies.
Some of the aspects of the lending and deposit business of Commerce NJ, Commerce
PA, Commerce Shore, Commerce North, and Commerce Delaware which are regulated by
these  agencies   include  personal   lending,   mortgage  lending  and  reserve
requirements.  The  operation  of Commerce  NJ,  Commerce  PA,  Commerce  Shore,
Commerce  North,  and Commerce  Delaware  are also subject to numerous  federal,
state and local laws and regulations  which set forth specific  restrictions and
procedural  requirements  with respect to interest rates on loans, the extension
of credit,  credit practices,  the disclosure of credit terms and discrimination
in credit transactions.

     Commerce NJ,  Commerce PA, Commerce  Shore,  Commerce  North,  and Commerce
Delaware are subject to certain limitations on the amount of cash dividends that
they  can pay.  See Note 18 of the  Company's  Notes to  Consolidated  Financial
Statements which appears elsewhere herein.



                                                                               5
<PAGE>

     A discussion of capital  guidelines  and capital is included in the section
entitled  "Stockholders'  Equity and Dividends"  contained within  "Management's
Discussion  and  Analysis of  Financial  Condition  and  Results of  Operations"
included elsewhere herein.

     The OCC has authority under the Financial  Institutions  Supervisory Act to
prohibit  national  banks from  engaging  in any  activity  which,  in the OCC's
opinion,   constitutes  an  unsafe  or  unsound  practice  in  conducting  their
businesses.  The FRB has similar  authority  with respect to the Company and the
Company's non-bank subsidiaries.  The FDIC has similar authority with respect to
Commerce North.

     All  of  the  deposits  of  the  banking  subsidiaries  are  insured  up to
applicable limits by the FDIC and are subject to deposit insurance  assessments.
The  insurance  assessments  are based upon a matrix  that takes into  account a
bank's capital level and supervisory rating. Effective January 1, 1996, the FDIC
reduced  the  insurance  premiums it charged on bank  deposits to the  statutory
minimum of $2,000 annually for "well capitalized" banks.

Commerce Insurance/ Commerce Capital Markets

     Commerce  Insurance,  a nonbank  subsidiary of Commerce North, is currently
subject to supervision, regulation and examination by the Department, as well as
other state insurance departments where it operates. Commerce Capital Markets, a
nonbank  subsidiary  of Commerce  NJ,  engages in certain  permitted  securities
activities and is regulated by the SEC. Commerce Capital Markets is also subject
to rules and regulations  promulgated by the National  Association of Securities
Dealers, Inc., the Securities Investors Protection Corporation and various state
securities  commissions  and with  respect  to  public  finance  activities  the
Municipal Securities Rulemaking Board.

     Both Commerce  Insurance and Commerce  Capital  Markets are also subject to
various  state laws and  regulations  in which they do business.  These laws and
regulations  are  primarily  intended  to benefit  clients and  generally  grant
supervisory agencies broad administrative  powers,  including the power to limit
or restrict the carrying on of business for failure to comply with such laws and
regulations.  In such event, the possible sanctions which may be imposed include
the suspension of individual employees,  limitations on engaging in business for
specific periods, censures and fines.

Gramm-Leach-Bliley Act

     On November  12, 1999 the  Gramm-Leach-Bliley  Act (the "Act")  became law,
repealing  the  1933  Glass-Steagall  Act's  separation  of the  commercial  and
investment  banking  industries.  The  Act  expanded  the  range  of  nonbanking
activities  a bank  holding  company may engage in,  while  preserving  existing
authority for bank holding  companies to engage in  activities  that are closely
related to  banking.  The Act  created a category  of holding  company  called a
"Financial Holding Company," a subset of bank holding companies that satisfy the
following criteria: (1) all of the depository  institution  subsidiaries must be
well capitalized and well managed; and (2) the holding company must have made an
effective election with the FRB that it elects to be a financial holding company
to engage in activities that would not have been permissible  before the Act. In
order  for the  election  to be  effective,  all of the  depository  institution
subsidiaries  must have a CRA rating of  "satisfactory" or better as of its most
recent  examination.  The  Company  has not  elected to be a  financial  holding
company.  Financial  holding  companies  may engage in any activity  that (i) is
financial  in  nature  or  incidental  to  such  financial  activity  or (ii) is
complementary  to a financial  activity and does not pose a substantial  risk to
the safety and soundness of  depository  institutions  or the  financial  system
generally.  The Act specifies  certain  activities that are financial in nature.
These  activities  include  acting as principal,  agent or broker for insurance;
underwriting,  dealing  in or  making  a market  in  securities;  and  providing
financial and investment  advice. The FRB and the Secretary of the Treasury have
authority to decide  whether other  activities  are also  financial in nature or
incidental to financial  activity,  taking into account  changes in  technology,
changes in the banking marketplace, competition for banking services and so on.

     These financial activities  authorized by the Act may also be engaged in by
a  "financial  subsidiary"  of a national  or state  bank,  except  for  annuity
underwriting,  insurance company portfolio  investments,  real estate investment
and development,  and merchant  banking,  which must be conducted in a financial
holding company. In order for the new financial activities to be engaged in by a
financial  subsidiary of a national or state bank,  the Act requires each of the
parent bank (and its  sister-bank  affiliates) to be well  capitalized  and well
managed;  the  aggregate  consolidated  assets of all of that  bank's  financial
subsidiaries may not exceed the lesser of 45% of its  consolidated  total assets
or $50.0 billion; the bank must have at least a satisfactory CRA rating; and, if
that  bank is one of the 100  largest  national  banks,  it  must  meet  certain
financial rating or other comparable requirements.

     The Act  establishes  a system of  functional  regulation,  under which the
federal  banking  agencies  will  regulate the banking  activities  of financial
holding companies and banks' financial subsidiaries, the SEC will regulate their
securities  activities  and  state  insurance  regulators  will  regulate  their
insurance activities. The Act also provides new protections against the transfer
and use by financial institutions of consumers' nonpublic, personal information.

     The  foregoing  discussion is qualified in its entirety by reference to the
statutory  provisions  of the Act and the  implementing  regulations  which  are
adopted by various government agencies pursuant to the Act.

     THE RULES GOVERNING THE REGULATION OF FINANCIAL  SERVICES  INSTITUTIONS AND
THEIR HOLDING COMPANIES ARE VERY DETAILED AND TECHNICAL.  ACCORDINGLY, THE ABOVE
DISCUSSION  IS  GENERAL  IN NATURE AND DOES NOT  PURPORT  TO BE  COMPLETE  OR TO
DESCRIBE  ALL OF THE LAWS AND  REGULATIONS  THAT  APPLY TO THE  COMPANY  AND ITS
SUBSIDIARIES.



6
<PAGE>

National Monetary Policy

     In addition to being affected by general economic conditions, the Company's
earnings  and growth are  affected by the  policies of  regulatory  authorities,
including the OCC, 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  significant
effects  on the  operating  results  of  commercial  banks  in the  past and are
expected to continue to do so in the future.  The effects of these policies upon
the Company's future business, earnings and growth cannot be predicted.

Employees

     As of December  31,  2002,  the  Company  had in excess of 6,800  full-time
equivalent employees.

Available Information

     The  Company's  internet  address is  www.yesbank.com.  The  Company  makes
available free of charge on or through www.yesbank.com its annual report on Form
10-K,  quarterly  reports  on Form 10-Q and  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 it to, the SEC.

     In addition,  the Company will  provide,  at no cost,  paper or  electronic
copies of its reports and other filings (excluding  exhibits) made with the SEC.
Requests should be directed to:

                             Commerce Bancorp, Inc.
                                 Commerce Atrium
                               1701 Route 70 East
                           Cherry Hill, NJ 08034-5400
                           Attn: C. Edward Jordan, Jr.
                            Executive Vice President

The information on the website listed above, is not and should not be considered
part of this annual report on Form 10-K and is not incorporated by reference in
this document. This website is and is only intended to be an inactive textual
reference.

Item 2. Properties

     The executive and administrative offices of the Company and Commerce NJ are
located at 1701 Route 70 East, Cherry Hill, New Jersey. This six-story structure
is owned by the Company. The Company and Commerce NJ occupy the majority of this
building.

     The Company and its  subsidiaries  own or lease numerous other premises for
use in conducting  business  activities.  The facilities owned or occupied under
lease by the Company's subsidiaries are considered by management to be adequate.

     Additional  information pertaining to the Company's properties is set forth
in "Note 7 - Bank  Premises,  Equipment  and Leases" of the  Company's  Notes to
Consolidated Financial Statements which appear elsewhere herein.


Item 3. Legal Proceedings

     Other than  routine  litigation  incidental  to its  business,  neither the
Company  or any of its  subsidiaries,  nor  any of the  Company's  or any of its
subsidiaries' properties, are subject to any material legal proceedings, nor are
any such proceedings known to be contemplated.

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 2002.



                                                                               7
<PAGE>




                                     Part II

Item 5.  Market  for the  Registrant's  Common  Equity and  Related  Stockholder
Matters

     See Item 7, Management's Discussion and Analysis of Financial Condition and
Results of Operations;  Stockholders'  Equity and Dividends  included  elsewhere
herein.

     See Item 12, Security Ownership of Certain Beneficial Owners and Management
and Related  Stockholder  Matters for disclosure  regarding the Company's Equity
Compensation Plans.

Dividend Policy

     It is the present  intention  of the  Company's  Board of  Directors to pay
quarterly cash dividends on the Company's common stock. However, the declaration
and payment of future dividends will be subject to determination and declaration
by the Board of Directors, which will consider the Company's earnings, financial
condition and capital needs and applicable regulatory requirements.  See Note 18
of the  Company's  Notes to  Consolidated  Financial  Statements  which  appears
elsewhere herein.

Item 6. Selected Financial Data

The following selected consolidated financial data should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Company's consolidated financial statements and accompanying
notes included elsewhere herein.



8
<PAGE>
<TABLE>
<CAPTION>




-------------------------------------------------------------------------------------------------------------------------------
                                                                           Year Ended December 31,
-------------------------------------------------------------------------------------------------------------------------------
(dollars in thousands, except per share data)         2002            2001            2000           1999            1998
--------------------------------------------------------------------------------------------------------------------------------
<S>                                                  <C>             <C>            <C>            <C>             <C>
Income Statement Data:
 Net interest income                                 $  572,755      $  401,326     $  296,930     $  244,367      $  194,661
 Provision for loan losses                               33,150          26,384         13,931          9,175           8,762
 Noninterest income                                     257,466         196,805        150,760        114,596          96,277
 Noninterest expense                                    579,168         420,036        315,357        252,523         213,950
 Income before income taxes                             217,903         151,711        118,402         97,265          68,226
 Net income                                             144,815         103,022         80,047         65,960          42,155
Balance Sheet Data:
 Total assets                                       $16,403,981     $11,363,703     $8,296,516     $6,635,793      $5,424,190
 Loans (net)                                          5,731,856       4,516,431      3,638,580      2,922,706       2,249,061
 Securities available for sale                        7,806,779       4,152,704      2,021,326      1,664,257       1,305,004
 Securities held to maturity                            763,026       1,132,172      1,513,456      1,201,892       1,220,874
 Trading securities                                     326,479         282,811        109,306        117,837          85,359
 Federal funds sold                                                                     52,000          5,300          10,395
 Deposits                                            14,548,841      10,185,594      7,387,594      5,608,920       4,928,808
 Long-term debt                                                          23,000         23,000         23,000          24,282
 Trust preferred securities                                              57,500         57,500         57,500          57,500
 Convertible trust preferred securities                 200,000
 Stockholders' equity                                   918,010         636,570        492,224        356,756         323,552
Per Share Data:
 Net income-basic                                     $    2.16       $    1.59      $    1.30       $   1.13       $    0.75
 Net income-diluted                                        2.04            1.51           1.25           1.08            0.71
 Cash dividends                                            0.60            0.55           0.48           0.41            0.44
 Book value                                               13.53            9.70           7.77           6.00            5.64
 Average shares outstanding:
 Basic                                                   66,795          64,666         61,755         58,310          56,509
 Diluted                                                 70,903          68,102         64,223         60,930          59,324
Selected Ratios:
 Performance
 Return on average assets                                  1.05 %          1.08  %        1.09  %        1.12   %        0.87%
 Return on average equity                                 18.50           17.64          19.81          19.63           13.57
 Net interest margin                                       4.69            4.76           4.62           4.65            4.42
Liquidity and Capital
 Average loans to average deposits                        42.48 %         48.04  %       52.17  %       50.31   %       44.71%
 Dividend payout                                          27.78           34.59          37.45          36.64           58.55
 Stockholders' equity to total assets                      5.60            5.60           5.93           5.38            5.96
 Risk-based capital:
 Tier 1                                                   11.47           10.81          10.79          11.40           12.09
 Total                                                    12.51           11.96          11.92          12.72           13.71
 Leverage capital                                          6.37            6.24           6.92           7.02            7.05
Asset Quality
 Non-performing assets to total year-end assets            0.11 %          0.16  %        0.20  %        0.18   %        0.27%
 Net charge-offs to average loans outstanding              0.18            0.19           0.11           0.08            0.08
 Non-performing loans to total
 year-end loans                                            0.24            0.37           0.37           0.29            0.38
 Allowance for loan losses to total
 end of year loans                                         1.56            1.46           1.32           1.30            1.37
 Allowance for loan losses to non-
 performing loans                                        640.18          397.73         356.84         442.09          364.86

</TABLE>


                                                                               9
<PAGE>

Item 7. Management's  Discussion and Analysis of Financial Condition and Results
of Operations

Management's  Discussion  and  Analysis of  Financial  Condition  and Results of
Operations  of  the  Company  analyzes  the  major  elements  of  the  Company's
consolidated  balance  sheets and  statements of income.  This section should be
read in conjunction  with the Company's  consolidated  financial  statements and
accompanying notes.

Application of Critical Accounting Policies

The Company's  consolidated financial statements are prepared in accordance with
accounting principles generally accepted in the United States and follow general
practices  within the  industries  in which it  operates.  Application  of these
principles  requires  management to make estimates,  assumptions,  and judgments
that affect the amounts  reported in the financial  statements and  accompanying
notes.  These  estimates,  assumptions,  and judgments are based on  information
available  as of the  date of the  financial  statements;  accordingly,  as this
information changes, the financial statements could reflect different estimates,
assumptions,  and judgments. Certain policies inherently have a greater reliance
on the use of estimates,  assumptions,  and judgments and as such have a greater
possibility  of  producing  results  that  could be  materially  different  than
originally reported.

The Company's accounting policies are fundamental to understanding  Management's
Discussion and Analysis of Financial  Condition and Results of  Operations.  The
Company has identified two policies as being critical:  the policies  related to
the allowance for loan losses and  capitalization  of branch costs. The Company,
in  consultation  with the Audit  Committee,  has reviewed  and  approved  these
critical accounting policies (further described in Note 1 Significant Accounting
Policies to the Consolidated Financial Statements.)

The  allowance  for loan  losses  represents  management's  estimate of probable
credit losses  inherent in the loan  portfolio of the Company.  Determining  the
amount of the  allowance  for loan losses is  considered  a critical  accounting
estimate  because it  requires  significant  judgment  and the use of  estimates
related  to the  amount and timing of  expected  future  cash flows on  impaired
loans,  estimated losses on pools of homogeneous  loans based on historical loss
experience,  and consideration of current economic trends and conditions, all of
which may be  susceptible  to  significant  change.  Note 1 to the  Consolidated
Financial  Statements  describes the methodology used to determine the allowance
for loan losses and a discussion of the factors driving changes in the amount of
the  allowance  for loan  losses is included  in the  Allowance  for Loan Losses
discussion  within  this  Management's  Discussion  and  Analysis  of  Financial
Condition and Results of Operations.

In addition,  due to the Company's recent growth and plans for future expansion,
management has identified the accounting for the capitalization of fixed assets,
including costs related to branch construction,  as an application of a critical
accounting policy. In accordance with accounting  principles  generally accepted
in the United  States,  when  capitalizing  costs for branch  construction,  the
Company  includes  the  costs of  purchasing  the  land,  developing  the  site,
constructing the building (or leasehold improvements if the property is leased),
and furniture,  fixtures and equipment  necessary to equip the branch. All other
pre-opening and post-opening costs related to branches are expensed as incurred.

2002 Overview

In 2002, the Company again posted increases in net income, deposits,  loans, and
assets.  The increase in net income was due to increases in net interest  income
and noninterest  income,  which offset  increases in both the provision for loan
losses and noninterest  expenses.  Loan growth totaled 27% for 2002, and deposit
growth  totaled 43%. At December 31, 2002, the Company had total assets of $16.4
billion,  total  loans of $5.8  billion,  total  investment  securities  of $8.9
billion,   and  total  deposits  of  $14.5  billion.   The  Company   remains  a
deposit-driven  financial institution with emphasis on core deposit accumulation
and  retention  as a basis for sound  growth and  profitability.  The  Company's
continued  ability to grow  deposits,  resulting in  significant  earning  asset
growth, permitted the Company to report $585.9 million in net interest income on
a tax equivalent  basis in 2002, an increase of $173.2 million or 42% over 2001.
As more fully depicted in the chart below,  the increase in net interest  income
in both  2002  and 2001 was  almost  entirely  due to  volume  increases  in the
Company's earning assets.



          ------------------------------------------------------------
                              Net Interest Income
          ------------------------------------------------------------
                 Volume         Rate            Total Increase
                Increase        Change
                (in  millions) (in  millions) (in millions)  % increase
 2002           $174.0           ($0.8)        $173.2            42%
 2001             91.4            15.1         $106.5            35%
-----------------------------------------------------------------------


Segment Reporting

The Company  operates one reportable  segment of business,  Community  Banks, as
more fully described in Note 19 to the Consolidated  Financial  Statements.  The
following  table  summarizes  net income by  segment  for each of the last three
years:

 -----------------------------------------------------------
                                    Net Income
 -----------------------------------------------------------
                           2002        2001        2000
 -----------------------------------------------------------
 Community Banks          $139,560    $ 95,574     $77,262
 Parent/Other                5,255       7,448       2,785
 -----------------------------------------------------------
 Consolidated total       $144,815    $103,022     $80,047
 -----------------------------------------------------------


Average Balances and Net Interest Income

The table on page 12 sets forth balance sheet items on a daily average basis for
the years ended December 31, 2002,  2001 and 2000 and presents the daily average
interest  rates earned on assets and the daily  average  interest  rates paid on
liabilities  for such periods.  During 2002,  average  interest  earning  assets
totaled  $12.5  billion,  an increase of $3.8  billion,  or 44% over 2001.  This
increase  resulted  primarily  from  the  increase  in the  average  balance  of
investments,  which rose $2.8 billion,  and the average balance of loans,  which
rose $1.1  billion


10
<PAGE>

during 2002.  The growth in the average  balance of interest  earning assets was
funded  primarily by an increase in the average  balance of deposits  (including
noninterest-bearing demand deposits) of $3.8 billion.

Net Interest Income and Net Interest Margin

Net interest margin on a tax equivalent basis was 4.69% for 2002, a decrease of
7 basis points from 2001.

Net interest  income is the  difference  between the  interest  income on loans,
investments and other interest-earning  assets and the interest paid on deposits
and other  interest-bearing  liabilities.  Net  interest  income is the  primary
source of earnings for the Company.

Net interest income on a tax-equivalent  basis (which adjusts for the tax-exempt
status of income earned on certain loans and  investments to express such income
as if it were  taxable)  for 2002 was  $585.9  million,  an  increase  of $173.2
million, or 42%, over 2001. Interest income on a tax-equivalent  basis increased
to $768.5  million from $615.7  million,  or 25%.  This  increase was  primarily
related to volume  increases  in the loan and  investment  portfolios.  Interest
expense for 2002 fell $20.4  million to $182.6  million  from $203.0  million in
2001. This decrease was primarily  related to decreases in the rates paid on the
Company's deposits and debt instruments.

The  tax-equivalent  yield on interest  earning  assets during 2002 was 6.15%, a
decrease  of 95 basis  points from 7.10% in 2001.  The cost of  interest-bearing
liabilities  decreased 115 basis points in 2002 to 1.81% from 2.96% in 2001. The
decrease resulted  primarily from decreased general market interest rates during
2002 as compared to 2001. The cost of total funding  sources  decreased 88 basis
points in 2002 to 1.46% from 2.34%.

The following  table presents the major factors that  contributed to the changes
in net  interest  income  for the  years  ended  December  31,  2002 and 2001 as
compared to the respective previous periods.
<TABLE>
<CAPTION>

-----------------------------------------------------------------------------------------------------------------------------
                                    2002 vs. 2001                                        2001 vs. 2000
                                 Increase (Decrease)                                  Increase (Decrease)
                                Due to Changes in (1)                                    Due to Changes in (1)
-----------------------------------------------------------------------------------------------------------------------------
                      Volume       Rate          Total                   Volume                 Rate               Total
-----------------------------------------------------------------------------------------------------------------------------
                   (dollars in thousands)
Interest on
  Investments:
<S>            <C>      <C>     <C>             <C>             <C>
   Taxable         $ 156,146      ($ 29,870)     $ 126,276             $  71,674             $  (9,886)           $  61,788
   Tax-exempt          1,968           (214)         1,754                   297                  (110)                 187
   Trading             1,558            253          1,811                 3,669                (2,256)               1,413
Federal
    Funds sold        (1,802)        (3,270)        (5,072)                3,448                (1,976)               1,472
Interest on
 loans:
   Commercial
     mortgages        31,083        (17,921)        13,792                27,325               (11,170)              16,155
   Commercial         16,240        (17,045)          (805)               18,542               (12,473)               6,069
   Consumer           27,817        (13,936)        13,881                 8,428                   850                9,278
   Tax-exempt          1,612           (499)         1,113                 5,492                  (638)               4,854
 ---------------------------------------------------------------------------------------------------------------------------
Total
interest
  Income             234,622       (81,872)        152,750               138,875               (37,659)             101,216
 ---------------------------------------------------------------------------------------------------------------------------
Interest
expense:
  Regular
   Savings             9,678        (12,093)        (2,415)                5,777               (10,065)              (4,288)
  N.O.W.
   Accounts            1,128         (2,606)        (1,478)                1,821                (2,104)                (283)
  Money
   Market plus        17,669        (24,332)        (6,663)               12,622               (21,759)              (9,137)
  Time
   Deposits           20,708        (20,730)           (22)               17,471                (3,237)              14,234
  Public funds         2,960        (19,455)       (16,495)              (16,495)               (7,443)               8,804

  Other
   Borrowed
   Money                 379         (2,048)        (1,669)               16,247                (6,957)             (13,435)
  Long-term
   Debt                8,090            227          8,317                                      (1,223)              (1,223)
 ---------------------------------------------------------------------------------------------------------------------------
Total
interest
  Expense             60,612        (81,037)       (20,425)               47,461               (52,789)              (5,328)
Net increase       $ 174,010      ($    835)     $ 173,175             $  91,413             $  15,131            $ 106,544
-------------------------------------------------------------
(1) Changes due to both volume and rate have been allocated to volume or rate
    changes in proportion to the absolute dollar amounts of the change in each.

</TABLE>




                                                                              11
<PAGE>
<TABLE>
<CAPTION>




                            Commerce Bancorp, Inc. and Subsidiaries Average Balances and Net Interest Income

------------------------------------------------------------------------------------------------------------------------------------
                                                                  Year Ended December 31,
------------------------------------------------------------------------------------------------------------------------------------
                                             2002                            2001                        2000
------------------------------------------------------------------------------------------------------------------------------------
(dollars in thousands)            Average                Average    Average                Average    Average               Average
Earning Assets                    Balance   Interest      Rate      Balance     Interest    Rate      Balance    Interest     Rate
------------------------------------------------------------------------------------------------------------------------------------
Investment securities
<S>                              <C>                   <C>    <C>         <C>        <C>    <C>         <C>       <C>


     Taxable                    $ 6,835,820   $387,811    5.67 %  $4,083,493     $261,535    6.40 % $2,964,401    $199,747    6.74 %
     Tax-exempt                     110,235      6,852    6.22        78,572        5,098    6.49       74,001       4,911    6.64
     Trading                        214,016     12,193    5.70       186,678       10,382    5.56      120,702       8,969    7.43
------------------------------------------------------------------------------------------------------------------------------------
Total investment securities       7,160,071    406,856    5.68     4,348,743      277,015    6.37    3,159,104     213,627    6.76
Federal funds sold                   54,043        865    1.60       166,619        5,937    3.56       69,841       4,465    6.39
Loans
     Commercial mortgages         2,037,091    138,864    6.82     1,581,118      125,072    7.91    1,235,690     108,917    8.81
     Commercial                   1,219,182     73,338    6.02       949,205       74,143    7.81      711,826      68,074    9.56
     Consumer                     1,815,679    130,143    7.17     1,427,586      116,262    8.14    1,323,795     106,984    8.08
     Tax-exempt                     212,261     18,416    8.68       193,678       17,303    8.93      132,507      12,449    9.40
------------------------------------------------------------------------------------------------------------------------------------
Total loans                       5,284,213    360,761    6.83     4,151,587      332,780    8.02    3,403,818     296,424    8.71
------------------------------------------------------------------------------------------------------------------------------------
Total earning assets            $12,498,327   $768,482    6.15 %  $8,666,949     $615,732    7.10 % $6,632,763    $514,516    7.76 %
------------------------------------------------------------------------------------------------------------------------------------
Sources of Funds
------------------------------------------------------------------------------------------------------------------------------------
Interest-bearing liabilities
     Regular savings            $ 2,416,884   $ 30,232    1.25 %  $1,643,145     $ 32,647    1.99 % $1,352,364    $ 36,935    2.73 %
     N.O.W. accounts                344,951      4,156    1.20       251,352        5,634    2.24      170,118       5,918    3.48
     Money market plus            4,193,963     51,257    1.22     2,748,236       57,920    2.11    2,149,329      67,057    3.12
     Time deposits                1,882,823     61,393    3.26     1,247,741       61,415    4.92      892,780      47,181    5.28
     Public funds                   925,827     20,174    2.18       790,001       36,669    4.64      439,972      27,865    6.33
------------------------------------------------------------------------------------------------------------------------------------
Total deposits                    9,764,448    167,212    1.71     6,680,475      194,285    2.91    5,004,563     184,956    3.70

Other borrowed money                118,734      1,839    1.55        94,257        3,508    3.72      268,304      16,943    6.31
Long-term debt                      199,464     13,565    6.80        80,500        5,248    6.52       80,500       6,471    8.04
------------------------------------------------------------------------------------------------------------------------------------
Total deposits and interest-
bearing liabilities              10,082,646    182,616    1.81     6,855,232      203,041    2.96    5,353,367     208,370    3.89
Noninterest-bearing funds
     (net)                        2,415,681                        1,811,717                         1,279,396
------------------------------------------------------------------------------------------------------------------------------------
Total sources to fund
     earning assets             $12,498,327    182,616    1.46    $8,666,949     $203,041    2.34   $6,632,763    $208,370    3.14
------------------------------------------------------------------------------------------------------------------------------------
Net interest income and
     margin tax-equivalent
     basis                                    $585,866    4.69                    412,691    4.76                  306,146    4.62
Tax-exempt adjustment                           13,111                             11,365                            9,216
                                            -----------                      -------------                     ------------
Net interest income and margin                $572,755    4.58 %                 $401,326    4.63 %               $296,930    4.48 %
------------------------------------------------------------------------------------------------------------------------------------
Other Balances
------------------------------------------------------------------------------------------------------------------------------------
Cash and due from banks         $   630,134                       $  417,110                        $  328,390
Other assets                        702,898                          519,799                           431,884
Total assets                     13,752,237                        9,546,794                         7,348,963
Demand deposits
     (noninterest-bearing)        2,674,233                        1,962,354                         1,519,313
Other liabilities                   212,775                          145,084                            72,162
Stockholders' equity                782,583                          584,124                           404,121
------------------------------------------------------------------------------------------------------------------------------------

Notes --Weighted average yields on tax-exempt obligations have been computed on
a tax-equivalent basis assuming a federal tax rate of 35%.
      --Non-accrual loans have been included in the average loan balance.
      --Investment securities include investments available for sale.
      --Consumer loans include loans held for sale.


</TABLE>

12
<PAGE>


Noninterest Income

For 2002,  noninterest  income  totaled  $257.5  million,  an  increase of $60.7
million  or 31% from  2001.  The  growth in  noninterest  income  was  primarily
reflected in  increased  deposit and service  fees and other  operating  income,
including  the  Company's  insurance  and capital  markets  divisions.  Commerce
Insurance,  the Company's insurance brokerage subsidiary recorded a 12% increase
in  revenues  or $6.1  million  to $55.9  million  from  $49.8  million in 2001.
Commerce  Capital  Markets  generated  noninterest  revenues of $35.1 million in
2002,  an increase  of $13.0  million or 59% from  revenues of $22.0  million in
2001. The growth in  noninterest  income is more fully depicted in the following
chart.

                                 2002           2001
                              ------------   ------------
Deposit Charges & Service         $130,993       $100,912
   Fees
Other Operating Income:
    Insurance                       55,875         49,803
    Capital Markets                 35,082         22,049
    Loan Brokerage Fees             18,655         10,976
    Other                           16,861         13,065
                              ------------   ------------
                                   126,473         95,893
                              ------------   ------------
Total NonInterest Income          $257,466       $196,805


Noninterest Expenses

Noninterest  expenses  totaled  $579.2  million for 2002,  an increase of $159.1
million, or 38% over 2001.  Contributing to this increase was the addition of 40
new  branches.  With the  addition  of these  new  offices,  staff,  facilities,
marketing,  and related expenses rose accordingly.  Other  noninterest  expenses
rose $37.2 million to $124.1 million in 2002. This increase  included  increased
bank-card   related  service  charges  of  $8.3  million,   increased   business
development  expenses of $6.6 million, and increased  professional  services and
insurance expenses of $5.4 million.

A key industry  productivity  measure is the operating  efficiency  ratio.  This
ratio expresses the relationship of noninterest  expenses  (excluding other real
estate  expenses)  to net interest  income plus  noninterest  income  (excluding
non-recurring  gains).  This ratio equaled 69.73%,  70.06%, and 70.72%, in 2002,
2001, and 2000,  respectively.  The Company's efficiency ratio remains above its
peer group primarily due to its aggressive expansion activities. Income Taxes

The  provision  for federal and state  income  taxes for 2002 was $73.1  million
compared to $48.7 million in 2001 and $38.4  million in 2000.  The effective tax
rate was  33.5%,  32.1% and 32.4% in 2002,  2001,  and 2000,  respectively.  The
increase in the  effective  income tax rate for 2002 is due  primarily to higher
state income taxes under newly enacted tax laws in New Jersey.

Net Income

Net income for 2002 was $144.8  million,  an increase of $41.8  million,  or 41%
over the $103.0 million recorded for 2001. The increase in net income was due to
increases in net interest income and noninterest income,  which offset increases
in both the provision for loan losses and noninterest expenses.

Diluted  net income  per share of common  stock for 2002 was $2.04  compared  to
$1.51 per common share for 2001.

Return on Average Equity and Average Assets

Two industry measures of the performance by a banking institution are its return
on average assets and return on average equity. Return on average assets ("ROA")
measures  net  income in  relation  to total  average  assets  and  indicates  a
company's  ability to employ its  resources  profitably.  The  Company's ROA was
1.05%,  1.08%,  and 1.09%  for 2002,  2001,  and 2000,  respectively.  Return on
average  equity  ("ROE") is determined by dividing  annual net income by average
stockholders'  equity and indicates  how  effectively a company can generate net
income on the  capital  invested  by its  stockholders.  The  Company's  ROE was
18.50%, 17.64%, and 19.81% for 2002, 2001, and 2000, respectively.

The Company's ROE excluding the accumulated other comprehensive income component
of  stockholders  equity  (the  unrealized  appreciation  /depreciation  of  its
available for sale securities) was 20.28%, 18.33%, and 18.00% for 2002, 2001 and
2000 respectively.

Loan Portfolio

The following table summarizes the loan portfolio of the Company by type of loan
as of December 31, for each of the years 1998 through 2002.
<TABLE>
<CAPTION>
 -------------------------------------------------------------------------------------------------------------------------
                                                                December 31,
 -------------------------------------------------------------------------------------------------------------------------
                              2002                     2001             2000               1999                 1998
 -------------------------------------------------------------------------------------------------------------------------
<S>                                      <C>                 <C>          <C>                  <C>                   <C>
 (dollars in thousands)
 Commercial real estate:
   Owner-occupied                        $1,345,306          $1,028,408   $  945,599       $ 634,726          $ 516,477
   Investor/developer                       885,276             799,799      578,982         452,579            361,115
  Residential
   construction                             102,080              47,917       13,743           5,580              1,738
 -----------------------------------------------------------------------------------------------------------------------
                                          2,332,662           1,876,124    1,538,324       1,092,885            879,330

 Commercial:
   Term                                     842,869             600,374      469,564         393,953            282,556
   Line of credit                           683,640             556,977      430,811         277,917            192,485
   Demand                                       317                 440        1,400           1,328                417
 -----------------------------------------------------------------------------------------------------------------------
                                          1,526,826           1,157,791      901,775         673,198            475,458

 Consumer:
   Mortgages
    (1-4 family
 residential)                               626,652             471,680      351,644         428,453            322,310
   Installment                              140,493             161,647      154,415         125,856             96,188
   Home equity                            1,139,589             872,974      710,848         621,597            494,047
   Credit lines                              56,367              43,196       30,254          19,099             12,993
 -----------------------------------------------------------------------------------------------------------------------
                                          1,963,101           1,549,497    1,247,161       1,195,005            925,538
 -----------------------------------------------------------------------------------------------------------------------
 Total loans                             $5,822,589          $4,583,412   $3,687,260      $2,961,088         $2,280,326
 -----------------------------------------------------------------------------------------------------------------------

</TABLE>


The  Company   manages  risk   associated   with  its  loan  portfolio   through
diversification,   underwriting  policies  and  procedures,   and  ongoing  loan
monitoring efforts. The commercial real estate portfolio includes owner-occupied
permanent  and  construction  loans  (owner  occupies  greater  than  50% of the
property);  investor/developer permanent and construction loans; and residential
construction loans.  Owner-occupied and investor/developer  loans generally have



                                                                              13
<PAGE>


five year call  provisions  and bear the personal  guarantees of the  principals
involved.  Financing  for  investor/developer   construction  is  generally  for
pre-leased or pre-sold  property,  while  residential  construction  is provided
against firm agreements of sale with speculative  construction generally limited
to two samples per project.  The commercial loan portfolio is comprised of loans
to businesses  in New Jersey,  Philadelphia  and the New York City  metropolitan
areas.   These  loans  are  generally  secured  by  business  assets,   personal
guarantees,  and/or personal assets of the borrower. The consumer loan portfolio
is comprised  primarily of loans secured by first and second  mortgage  liens on
residential real estate.  The contractual  maturity ranges of the loan portfolio
and the amount of loans with predetermined  interest rates and floating rates in
each maturity  range,  as of December 31, 2002,  are summarized in the following
table.
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------
                                                December 31, 2002
--------------------------------------------------------------------------------------------------
                         Due in One Year or   Due in One to   Due in Over Five
                               Less            Five Years        Years                 Total
--------------------------------------------------------------------------------------------------
<S>                         <C>             <C>              <C>                       <C>
(dollars in thousands)
Commercial real
 estate:
   Owner-occupied           $  394,166      $ 804,569        $  146,571                $1,345,306
   Investor/
    developer                  220,464        626,545            38,267                   885,276
   Residential
construction                    77,127         24,797               156                   102,080
--------------------------------------------------------------------------------------------------
                               691,757      1,455,911           184,994                 2,332,662
Commercial:
   Term                        296,311        457,426            89,132                   842,869
   Line of credit              656,650         26,990                                     683,640
   Demand                          129            188                                         317
--------------------------------------------------------------------------------------------------
                               953,090        484,604            89,132                 1,526,826
Consumer:
   Mortgages
    (1-4 family
     Residential)               73,065         57,901           495,686                   626,652
   Installment                  54,920         64,085            21,488                   140,493
   Home equity                 110,573        379,274           649,742                 1,139,589
   Credit lines                 24,480         31,887                                      56,367
--------------------------------------------------------------------------------------------------
                               263,038        533,147         1,166,916                 1,963,101
--------------------------------------------------------------------------------------------------
Total loans                 $1,907,885     $2,473,662        $1,441,042                $5,822,589
--------------------------------------------------------------------------------------------------
Interest rates:
   Predetermined            $  686,249     $1,782,506        $  874,323                $3,343,078
   Floating                  1,221,636        691,156           566,719                 2,479,511
--------------------------------------------------------------------------------------------------
Total loans                 $1,907,885     $2,473,662        $1,441,042                $5,822,589
-------------------------------------------------------------------------------------------------
</TABLE>

During 2002,  loans  increased  $1.2  billion,  or 27% from $4.6 billion to $5.8
billion.  At December 31, 2002, loans  represented 40% of total deposits and 35%
of total assets. All segments of the loan portfolio  experienced growth in 2002,
especially owner-occupied loans, commercial loans, and consumer loans.

The Company has traditionally  been an active provider of commercial real estate
loans to  creditworthy  local  borrowers,  with such loans secured by properties
within the Company's  primary trade area. Owner occupied  properties grew $317.0
million or 31% and the $1.3 billion outstanding at December 31, 2002 represented
58% of commercial  real estate.  Commercial loan growth of $369.0 million or 32%
was led by  activity  in the middle  market and  healthcare  sectors.  Growth in
consumer loans of $414.0 million, or 27%, was primarily in home equity lending.

Non-Performing Loans and Assets

Non-performing  assets  (non-performing  loans and other real estate,  excluding
loans past due 90 days or more and still accruing interest) at December 31, 2002
were $17.8 million or .11% of total assets, as compared to $18.4 million or .16%
of total assets at December 31, 2001.

Total non-performing loans (non-accrual loans, and restructured loans, excluding
loans past due 90 days or more and still accruing interest) at December 31, 2002
were  $14.2  million  as  compared  to $16.8  million  a year ago.  The  Company
generally places a loan on non-accrual  status and ceases accruing interest when
loan payment performance is deemed  unsatisfactory.  Generally loans past due 90
days are placed on non-accrual status,  unless the loan is both well secured and
in the process of  collection.  At December 31, 2002,  loans past due 90 days or
more and still accruing  interest  amounted to $620  thousand,  compared to $519
thousand at December 31, 2001.  Additional  loans  considered  by the  Company's
internal loan review  department as potential  problem loans of $30.3 million at
December 31, 2002 have been  evaluated as to risk  exposure in  determining  the
adequacy of the allowance for loan losses.

Other real estate (ORE) totaled $3.6 million at December 31, 2002 as compared to
$1.5 million at December 31, 2001.  These  properties  have been written down to
the lower of cost or fair value less disposition costs.

The Company has on an ongoing basis updated  appraisals on non-performing  loans
secured by real estate.  In those  instances  where updated  appraisals  reflect
reduced  collateral  values,  an evaluation of the borrowers'  overall financial
condition is made to determine  the need,  if any,  for possible  writedowns  or
appropriate additions to the allowance for loan losses.

The following summary presents  information  regarding  non-performing loans and
assets as of December 31, 1998 through 2002.




14
<PAGE>
<TABLE>
<CAPTION>



------------------------------------------------------------------------------------------------
                                                Year Ended December 31,
------------------------------------------------------------------------------------------------
                            2002        2001        2000        1999         1998
------------------------------------------------------------------------------------------------
<S>                     <C>          <C>        <C>          <C>         <C>
(dollars in thousands)
Non-accrual loans (1):
  Commercial            $ 5,412      $ 6,835    $ 4,955      $ 2,254     $ 2,655
  Consumer                2,734        1,484      1,295          674         831
  Real estate
   Construction             131        1,590      1,459           55
   Mortgage               5,891        6,924      5,840        5,230       4,849
------------------------------------------------------------------------------------------------
  Total non-accrual
   loans                 14,168       16,833     13,549        8,213       8,335
------------------------------------------------------------------------------------------------
Restructured loans (1):
  Commercial                  5            8         11          277          17
  Real estate
   mortgage                                          82          192         217
------------------------------------------------------------------------------------------------
  Total restructured
   loans                      5            8         93          469         234
------------------------------------------------------------------------------------------------
Total non-performing
  loans                  14,173       16,841     13,642        8,682       8,569
------------------------------------------------------------------------------------------------
Other real estate         3,589        1,549      2,959        3,523       6,081
------------------------------------------------------------------------------------------------
Total non-performing
  assets(1):            $17,762      $18,390    $16,601      $12,205     $14,650
------------------------------------------------------------------------------------------------
Non-performing
  assets as a percent
  of total assets          0.11%       0.16%       0.20%       0.18%        0.27%
------------------------------------------------------------------------------------------------
Loans past due 90
  days or more and
still                      $620         $519    $   489      $   499     $ 1,029
  accruing interest
------------------------------------------------------------------------------------------------
(1)  Interest  income  of  approximately  $1,352,000,   $2,092,000,  $1,731,000,
     $986,000,  and  $1,030,000  would have been recorded in 2002,  2001,  2000,
     1999, and 1998  respectively,  on  non-performing  loans in accordance with
     their original terms.  Actual interest  recorded on these loans amounted to
     $275,000 in 2002, $237,000 in 2001, $525,000 in 2000, $255,000 in 1999, and
     $266,000 in 1998.
</TABLE>


Allowance for Loan Losses

The  allowance for loan losses is  maintained  at a level  believed  adequate by
management to absorb losses inherent in the loan portfolio.  In conjunction with
an internal  loan review  function that  operates  independently  of the lending
function,  management  monitors the loan portfolio to identify risks on a timely
basis so that an appropriate allowance can be maintained. Based on an evaluation
of the loan portfolio,  management  presents a quarterly review of the loan loss
reserve to the Board of Directors,  indicating  any changes in the reserve since
the last review and any  recommendations  as to adjustments  in the reserve.  In
making its evaluation,  in addition to the factors  discussed below,  management
considers the results of recent regulatory examinations, which typically include
a review of the allowance for loan losses as an integral part of the examination
process.

In establishing the allowance,  management evaluates individual large classified
loans and nonaccrual  loans, and determines an aggregate reserve for those loans
based on that review.  An allowance for the  remainder of the loan  portfolio is
also determined based on historical loss experience within the components of the
portfolio. These allocations may be modified if current conditions indicate that
loan losses may differ from historical experience, based on economic factors and
changes in portfolio mix and volume.

In addition,  a portion of the allowance is established  for losses  inherent in
the loan  portfolio  which  have not been  identified  by the more  quantitative
processes  described  above.  This  determination  inherently  involves a higher
degree  of  subjectivity,  and  considers  risk  factors  that  may not have yet
manifested themselves in the Company's historical loss experience. Those factors
include  changes  in  levels  and  trends  of  charge-offs,  delinquencies,  and
nonaccrual loans,  trends in volume and terms of loans,  changes in underwriting
standards and practices,  portfolio mix, tenure of loan officers and management,
entrance into new  geographic  markets,  changes in credit  concentrations,  and
national and local economic trends and conditions.  While the allowance for loan
losses is  maintained  at a level  believed  to be adequate  by  management  for
estimated  losses  in the loan  portfolio,  determination  of the  allowance  is
inherently subjective, as it requires estimates, all of which may be susceptible
to  significant  change.  Changes in these  estimates may impact the  provisions
charged to expense in future periods.

The allowance for loan losses is increased by provisions  charged to expense and
reduced by loan charge-offs net of recoveries.  Charge-offs occur when loans are
deemed to be  uncollectible.  During  2002,  net  charge-offs  amounted  to $9.4
million,  or .18% of average loans  outstanding  for the year,  compared to $8.1
million, or .19% of average loans outstanding for 2001. During 2002, the Company
recorded  provisions of $33.2 million to the allowance for loan losses  compared
to $26.4 million for 2001. At December 31, 2002, the allowance  aggregated $90.7
million or 1.56% of total loans.  The increase in the provision in 2002 reflects
the increases in charge-offs and the growth in the loan portfolio. Additionally,
the increase in the provision for 2002 reflects the ongoing uncertainty with the
overall economy and risks associated with the mix of the loan portfolio,  tenure
of loan officers and entrance into new geographic markets.

The following  table  presents,  for the periods  indicated,  an analysis of the
allowance for loan losses and other related data.
<TABLE>
<CAPTION>

-------------------------------------------------------------------------------------------------
                                                  Year Ended December 31,
 -------------------------------------------------------------------------------------------------
                                2002         2001        2000          1999           1998
 -------------------------------------------------------------------------------------------------
<S>                        <C>            <C>        <C>          <C>           <C>
 (dollars in thousands)
 Balance at beginning
    of period              $66,981        $48,680    $38,382      $31,265       $24,150
 Provisions charged to
    operating expenses      33,150         26,384     13,931        9,175         8,762
 -------------------------------------------------------------------------------------------------
                           100,131         75,064     52,313       40,440        32,912
 -------------------------------------------------------------------------------------------------
 Recoveries of loans
    previously charged-off:
      Commercial               815            552        313          551           418
      Consumer                 339            288        249          286           305
      Commercial real
       estate                  176            134         14          132           764
 -------------------------------------------------------------------------------------------------
 Total recoveries            1,330            974        576          969         1,487
 -------------------------------------------------------------------------------------------------
 Loans charged-off:
      Commercial            (7,181)        (5,862)    (2,936)      (1,599)       (1,281)
      Consumer              (3,514)        (2,784)    (1,220)      (1,078)       (1,352)
      Commercial real
       estate                  (33)          (411)       (53)        (350)         (501)
 -------------------------------------------------------------------------------------------------
 Total charged-off         (10,728)        (9,057)    (4,209)      (3,027)       (3,134)
 -------------------------------------------------------------------------------------------------
 Net charge-offs            (9,398)        (8,083)    (3,633)      (2,058)       (1,647)
 -------------------------------------------------------------------------------------------------
 Balance at end of period  $90,733        $66,981    $48,680      $38,382       $31,265
 -------------------------------------------------------------------------------------------------
 Net charge-offs as a
    percentage of average
    loans outstanding         0.18%      0.19%        0.11%         0.08%            0.08%
 -------------------------------------------------------------------------------------------------
 Allowance for loan losses
    as a percentage of
    year-end loans            1.56%      1.46%        1.32%         1.30%            1.37%
 -------------------------------------------------------------------------------------------------

</TABLE>



                                                                              15
<PAGE>




Allocation of the Allowance for Loan Losses

The following  table details the  allocation of the allowance for loan losses to
the various categories. The allocation is made for analytical purposes and it is
not  necessarily  indicative  of the  categories in which future loan losses may
occur.  The total  allowance is  available to absorb  losses from any segment of
loans.


<TABLE>
<CAPTION>

<PAGE>


 -------------------------------------------------------------------------------------------------------------------------
                                                   Allowance for Loan Losses at December 31,
 -------------------------------------------------------------------------------------------------------------------------
                            2002                2001                2000                1999               1998
 -------------------------------------------------------------------------------------------------------------------------
                               % Gross             % Gross             % Gross             % Gross            % Gross
                       Amount   Loans      Amount   Loans     Amount    Loans     Amount    Loans     Amount   Loans
 -------------------------------------------------------------------------------------------------------------------------
<S>                     <C>        <C>     <C>         <C>     <C>        <C>      <C>          <C>    <C>        <C>
 (dollars in
 thousands)
  Commercial            $33,708    26%     $24,110     25%     $20,396    24%      $14,268      23%    $ 7,738    21%
  Consumer               14,497    34        9,915     34        4,632    34         4,120      40       7,800    41
  Commercial real
  estate                 42,528    40       32,956     41       23,652    42        19,994      37      15,727    38
 -------------------------------------------------------------------------------------------------------------------------
                        $90,733   100%     $66,981    100%     $48,680   100%      $38,382     100%    $31,265   100%
 -------------------------------------------------------------------------------------------------------------------------

</TABLE>

Investment Securities

The following table  summarizes the book value of securities  available for sale
and securities held to maturity by the Company as of the dates shown.

-----------------------------------------------------------
                                   December 31,
-----------------------------------------------------------
                            2002       2001        2000
-----------------------------------------------------------
(dollars in thousands)
U.S. Government agency
and mortgage-backed
   obligations           $7,659,737  $3,994,523 $1,900,912
Obligations of state
 and political
 subdivisions                23,185      82,922     46,544
Equity securities            24,054      16,325     16,825
Other                        99,803      58,934     57,045
-----------------------------------------------------------
Securities available
   for sale              $7,806,779  $4,152,704 $2,021,326
-----------------------------------------------------------
U.S. Government agency
and mortgage-backed
   obligations           $  624,688  $1,044,266 $1,437,993
Obligations of state
 and political               91,204      50,602     42,938
 subdivisions
Other                        47,134      37,304     32,525
-----------------------------------------------------------
Securities held to
   maturity              $  763,026  $1,132,172 $1,513,456
-----------------------------------------------------------

The Company has segregated a portion of its  investment  portfolio as securities
available for sale. The balance of the investment  portfolio  (excluding trading
securities) is categorized as securities held to maturity. Investment securities
are  classified  as  available  for sale if they  might be sold in  response  to
changes in interest rates,  prepayment  risk, the Company's income tax position,
the need to  increase  regulatory  capital,  liquidity  needs  or other  similar
factors. These securities are carried at fair market value with unrealized gains
and losses,  net of income tax  effects,  recognized  in  Stockholders'  Equity.
Investment  securities  are  classified as held to maturity when the Company has
the intent and ability to hold those securities to maturity.  Securities held to
maturity  are  carried at cost and  adjusted  for  accretion  of  discounts  and
amortization of premiums.  Trading securities,  primarily municipal  securities,
are  carried  at  market  value,  with  gains  and  losses,  both  realized  and
unrealized, included in other operating income.

In total, investment securities increased $3.3 billion from $5.6 billion to $8.9
billion at December 31, 2002. Deposit growth and other funding sources were used
to increase the Company's investment portfolio. The available for sale portfolio
increased  $3.7 billion to $7.8  billion,  and the  securities  held to maturity
portfolio  decreased  $369.0  million to $763.0  million at year-end  2002.  The
portfolio of trading  securities  increased  $43.7 million from year-end 2001 to
$326.5  million at year-end  2002.  At December 31,  2002,  the average life and
duration of the investment portfolio were approximately 3.0 years and 2.5 years,
respectively,  as compared to 5.8 years and 4.3 years, respectively, at December
31, 2001. At December 31, 2002 the yield on the  portfolio was 5.30%,  down from
6.38% at December 31, 2001. The decrease in yield was due to lower  reinvestment
rates,  which reflect lower general market interest rates in 2002 as compared to
2001.  The  decrease  in  duration  and  average  life was due to the decline in
general market  interest  rates,  which resulted in increased  prepayments and a
decrease  in the  duration  of the  Company's  existing  portfolio.  In addition
management  made a  conscious  decision  to  maintain  a shorter  duration  when
reinvesting  funds in 2002, in  anticipation of a rise in interest rates in 2003
and subsequent years.

The Company's  investment portfolio consists primarily of U.S. Government agency
and  mortgage-backed  obligations.  These securities have little, if any, credit
risk  since  they are  either  backed by the full  faith and  credit of the U.S.
Government,  or are guaranteed by an agency of the U.S.  Government,  or are AAA
rated.  These  investment  securities  carry fixed  coupons  whose rate does not
change over the life of the  securities.  Certain  securities  are  purchased at
premiums or  discounts.  Their yield will change  depending on any change in the
estimated  rate of  prepayments.  The Company  amortizes  premiums  and accretes
discounts  over the  estimated  average life of the  securities.  Changes in the
estimated average life of the investment  portfolio will lengthen or shorten the
period in which the premium or discount  must be  amortized  or  accreted,  thus
affecting the Company's investment yields. For the year ended December 31, 2002,
the yield on the  investment  portfolio was 5.68%, a decrease of 69 basis points
from 6.37% in fiscal 2001.  The decrease in yield is a reflection of the general
decline  in



16
<PAGE>

market  interest  rates  in  2002,  which  impacted  returns  on  the  Company's
reinvestment of funds.

At December 31, 2002, the net unrealized  appreciation  in securities  available
for sale included in  stockholders'  equity totaled $113.6 million,  net of tax,
compared  to net  unrealized  appreciation  of  $15.8  million,  net of tax,  at
December 31, 2001.

The  contractual  maturity  distribution  and  weighted  average  yield  of  the
Company's  investment  portfolio  (excluding  equity and trading  securities) at
December 31, 2002, are summarized in the following table. Weighted average yield
is calculated by dividing  income within each maturity range by the  outstanding
amortized  cost  amount of the  related  investment  and has been tax  effected,
assuming a federal tax rate of 35%, on tax-exempt obligations.
<TABLE>
<CAPTION>

-------------------------------------------------------------------------------------------------------------------------
                                                                    December 31, 2002
-------------------------------------------------------------------------------------------------------------------------
                                 Due Under 1 Year   Due 1-5 Years    Due 5-10 Years  Due Over 10 Years       Total
-------------------------------------------------------------------------------------------------------------------------
                                  Amount   Yield   Amount    Yield    Amount  Yield    Amount   Yield    Amount    Yield
-------------------------------------------------------------------------------------------------------------------------
<S>                               <C>       <C>     <C>       <C>    <C>        <C>  <C>         <C>    <C>         <C>
(dollars in thousands)
Securities available for sale:
U.S. Government agency and
   mortgage-backed obligations    $36,954   1.73%   $32,676   2.12%  $252,972   4.52%$7,337,135  5.22%  $7,659,737  5.17%
Obligations of state and
   political subdivisions           3,211   6.91     14,468   7.03      3,581   6.78      1,925  5.08       23,185  6.81
Other securities                   10,786   1.54     10,907   5.78     49,000   7.85     29,110  8.53       99,803  7.14
-------------------------------------------------------------------------------------------------------------------------
                                  $50,951   2.01%   $58,051   4.03%  $305,553   5.08%$7,368,170  5.23%  $7,782,725  5.20%
-------------------------------------------------------------------------------------------------------------------------
Securities held to maturity:
U.S. Government agency and
   mortgage-backed obligations    $   907   7.89%   $12,192   7.30%   $77,670   6.85%  $533,919  6.76%  $  624,688  6.79%
Obligations of state and
   political subdivisions          37,357   2.86        224   2.17      4,798   7.20     48,825  5.71       91,204  4.63
Other securities                   47,134   3.81                                                            47,134  3.81
-------------------------------------------------------------------------------------------------------------------------
                                  $85,398   3.44%   $12,416   7.22%   $82,468   6.87%  $582,744  6.68%  $  763,026  6.36%
-------------------------------------------------------------------------------------------------------------------------
</TABLE>


Deposits

Total  deposits at December  31,  2002 were $14.5  billion,  an increase of $4.4
billion or 43% above total  deposits of $10.2 billion at December 31, 2001.  The
Company remains a  deposit-driven  financial  institution  with emphasis on core
deposit   accumulation   and   retention   as  a  basis  for  sound  growth  and
profitability.  The Company  regards core  deposits as all  deposits  other than
public  certificates  of  deposit.  Deposits  in  the  various  core  categories
increased  $4.3 billion from year-end  2001 to year-end  2002.  Certificates  of
deposit in excess of $100 thousand,  retail and public,  increased $69.0 million
from year-end 2001.

Total  deposits  averaged $12.4 billion for 2002, an increase of $3.8 billion or
44% above the 2001 average.  The average balance of  noninterest-bearing  demand
deposits in 2002 was $2.7  billion,  a $711.9  million or 36% increase  over the
average  balance for 2001.  The average  total balance of passbook and statement
savings accounts  increased  $773.7 million,  or 47% compared to the prior year.
The average balance of interest-bearing demand accounts (money market and N.O.W.
accounts)  for 2002 was $4.5  billion,  a $1.5 billion or 51% increase  over the
average  balance for the prior year.  The average  balance of time  deposits for
2002 was $2.8 billion, a $770.9 million or 38% increase over the average balance
for 2001. For 2002, the cost of total deposits was 1.34% as compared to 2.25% in
2001.

The  Company  believes  that its record of  sustaining  core  deposit  growth is
reflective  of the  Company's  retail  approach to banking  which  emphasizes  a
combination of superior customer service, convenient branch locations,  extended
hours of operation,  free checking  accounts (subject to a small minimum balance
requirement) and active marketing.

The average balances and weighted average rates of deposits for each of the
years 2002, 2001, and 2000 are presented below.
<TABLE>
<CAPTION>

-------------------------------------------------------------------------------------------------------------------------
                                                      2002                      2001                      2000
-------------------------------------------------------------------------------------------------------------------------
                                              Average      Average      Average      Average      Average     Average
                                              Balance        Rate       Balance        Rate       Balance       Rate
-------------------------------------------------------------------------------------------------------------------------
<S>                                          <C>                        <C>                       <C>
(dollars in thousands)
Demand deposits:
  Noninterest-bearing                        $ 2,674,233                $1,962,354                $1,519,313
  Interest-bearing (money market and
   N.O.W. accounts)                            4,538,914     1.22%       2,999,588     2.12%       2,319,447    3.15%
Savings deposits                               2,416,884     1.25        1,643,145     1.99        1,352,364    2.73
Time deposits/public funds                     2,808,650     2.90        2,037,742     4.81        1,332,752    5.63
-------------------------------------------------------------------------------------------------------------------------
Total deposits                               $12,438,681                $8,642,829                $6,523,876
-------------------------------------------------------------------------------------------------------------------------

</TABLE>



                                                                              17
<PAGE>
<TABLE>
<CAPTION>

The remaining maturity of certificates of deposit for $100,000 or more as of
December 31, 2002, 2001 and 2000 is presented below:

-------------------------------------------------------------------------------------------------------------------------
Maturity                                                2002                     2001                     2000
-------------------------------------------------------------------------------------------------------------------------
<C>                                                   <C>                      <C>                        <C>
(dollars in thousands)
3 months or less                                      $  950,299               $  897,304                 $641,342
3 to 6 months                                            116,721                  137,388                   98,763
6 to 12 months                                           103,449                   70,630                   54,489
Over 12 months                                            10,646                    6,820                   12,420
-------------------------------------------------------------------------------------------------------------------------
Total                                                 $1,181,115               $1,112,142                 $807,014
-------------------------------------------------------------------------------------------------------------------------
</TABLE>

Interest Rate Sensitivity and Liquidity

The  Company's  risk of loss arising  from adverse  changes in the fair value of
financial  instruments,  or market risk, is composed  primarily of interest rate
risk.  The  primary  objective  of  the  Company's  asset/liability   management
activities  is to maximize net  interest  income  while  maintaining  acceptable
levels of interest rate risk. The Company's  Asset/Liability Committee (ALCO) is
responsible for  establishing  policies to limit exposure to interest rate risk,
and to ensure  procedures  are  established  to  monitor  compliance  with those
policies.  The  guidelines  established by ALCO are reviewed and approved by the
Company's Board of Directors.

An interest rate sensitive asset or liability is one that, within a defined time
period,  either  matures or  experiences  an  interest  rate change in line with
general  market  interest  rates.  Historically,   the  most  common  method  of
estimating  interest  rate  risk  was to  measure  the  maturity  and  repricing
relationships between  interest-earning assets and interest-bearing  liabilities
at specific  points in time ("GAP"),  typically one year.  Under this method,  a
company   is   considered   liability   sensitive   when  the   amount   of  its
interest-bearing  liabilities exceeds the amount of its interest-earning  assets
within the one year  horizon.  However,  assets  and  liabilities  with  similar
repricing  characteristics  may not  reprice  at the  same  time or to the  same
degree. As a result,  the Company's GAP does not necessarily  predict the impact
of changes in general levels of interest rates on net interest income.

The following  table  illustrates the GAP position of the Company as of December
31, 2002.
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------
                                                              Interest Rate Sensitivity Gaps
                                                                    December 31, 2002
----------------------------------------------------------------------------------------------------------------------

                                     1-90       91-180     181-365        1-5         Beyond
                                     Days        Days        Days        Years        5 Years         Total
----------------------------------------------------------------------------------------------------------------------
<S>                                 <C>          <C>        <C>          <C>          <C>          <C>
(dollars in millions)
Rate sensitive:
  Interest-earning
   assets
   Loans                            $2,899.4     $ 118.5    $ 189.1      $1,703.7     $ 994.7      $5,905.4
   Investment
    securities                      1,287.2      1,124.0    1,479.0      4,172.0        834.1      8,896.3
----------------------------------------------------------------------------------------------------------------------
Total interest-
  earning assets                    4,186.6      1,242.5    1,668.1      5,875.7      1,828.8      14,801.7
----------------------------------------------------------------------------------------------------------------------
Interest-bearing
  liabilities
  Transaction
   accounts                         2,689.8                                           5,807.2      8,497.0
  Time deposits                     1,204.6        380.7      752.0        471.4                   2,808.7
  Other borrowed
   money                              391.6                                                          391.6
  Long-term debt                                                                        200.0        200.0
----------------------------------------------------------------------------------------------------------------------
Total interest-
  bearing
  liabilities                       4,286.0        380.7      752.0        471.4      6,007.2      11,897.3
----------------------------------------------------------------------------------------------------------------------
Period gap                            (99.4)       861.8      916.1      5,404.3      (4,178.4)    $2,904.4
----------------------------------------------------------------------------------------------------------------------
Cumulative gap                       $(99.4)      $762.4    $1,678.5     $7,082.8     $2,904.4
----------------------------------------------------------------------------------------------------
Cumulative gap as a
  percentage of total
  interest-earning
  assets                               (0.7)%                  5.2%       11.3%         47.9%       19.6%
----------------------------------------------------------------------------------------------------------------------



--------------------------------------------------------
</TABLE>

Management  believes  that the  simulation  of net interest  income in different
interest rate environments  provides a more meaningful  measure of interest rate
risk. Income  simulation  analysis captures not only the potential of all assets
and liabilities to mature or reprice, but also the probability that they will do
so. Income simulation also attends to the relative  interest rate  sensitivities
of these items,  and projects  their  behavior over an extended  period of time.
Finally,  income simulation permits management to assess the probable effects on
the balance  sheet not only of changes in interest  rates,  but also of proposed
strategies for responding to them.

The Company's  income  simulation  model analyzes  interest rate  sensitivity by
projecting net income over the next 24 months in a flat rate scenario versus net
income in alternative  interest rate scenarios.  Management  continually reviews
and  refines  its  interest  rate risk  management  process in  response  to the
changing   economic   climate.   Currently,   the  Company's  model  projects  a
proportionate  plus 200 and minus 100 basis point  change  during the next year,
with rates remaining constant in the second year.



18
<PAGE>

The  Company's  Asset/Liability  Committee  (ALCO) policy has  established  that
interest income  sensitivity will be considered  acceptable if net income in the
above  interest  rate  scenario  is  within  15% of net  income in the flat rate
scenario  in the first  year and  within  30% over the two year time  frame.  At
December 31, 2002, the Company's  income  simulation  model indicates net income
would  decrease  by 5.4% and  7.3% in the  first  year and over a two year  time
frame,  respectively,  if rates  decreased as described  above, as compared to a
decrease  of 3.3% and 13.1%,  respectively,  at  December  31,  2001.  The model
projects  that net income  would  increase by 8.8% and  increase by 13.5% in the
first year and over a two year time frame,  respectively,  if rates increased as
described  above,  as  compared  to a decrease  of 2.1% and an increase of 1.7%,
respectively,  at  December  31,  2001.  All of these  forecasts  are  within an
acceptable level of interest rate risk per the policies established by ALCO.

In the event the model  indicates  an  unacceptable  level of risk,  the Company
could  undertake a number of actions that would reduce this risk,  including the
sale of a portion of its available  for sale  investment  portfolio,  the use of
risk  management  strategies  such as  interest  rate  swaps  and  caps,  or the
extension of the maturities of its short-term borrowings.

Management  also  monitors  interest  rate risk by  utilizing a market  value of
equity model. The model assesses the impact of a change in interest rates on the
market value of all the  Company's  assets and  liabilities,  as well as any off
balance  sheet items.  The model  calculates  the market value of the  Company's
assets and liabilities in excess of book value in the current rate scenario, and
then compares the excess of market value over book value given an immediate plus
200 and minus 100  basis  point  change in  rates.  The  Company's  ALCO  policy
indicates that the level of interest rate risk is  unacceptable if the immediate
plus 200 or minus 100 basis point change would result in the loss of 50% or more
of the excess of market value over book value in the current rate  scenario.  At
December 31, 2002, the market value of equity  indicates an acceptable  level of
interest rate risk.

The market value of equity model  reflects  certain  estimates  and  assumptions
regarding the impact on the market value of the Company's assets and liabilities
given an immediate  plus 200 or minus 100 basis point change in interest  rates.
One of the key  assumptions  is the market value  assigned to the Company's core
deposits,  or the core deposit  premium.  The Company has  completed and updated
comprehensive  core  deposit  studies  in order to assign  its own core  deposit
premiums as permitted by  regulation.  The studies have  consistently  confirmed
management's  assertion  that the Company's  core deposits have stable  balances
over long periods of time, and are generally  insensitive to changes in interest
rates.  Thus,  these core deposit  balances  provide an internal hedge to market
value fluctuations in the Company's fixed rate assets.  Management  believes the
core deposit  premiums  produced by its core  deposit  study and utilized in its
market value of equity model at December 31, 2002 provide an accurate assessment
of the Company's interest rate risk.

Although the use of  derivatives  in 2002 was  minimal,  the Company may utilize
interest rate derivatives to manage interest rate risk,  including interest rate
swaps,   interest   rate  caps  and  floors,   interest   rate   forwards,   and
exchange-traded  futures  and  options  contracts.  Further  discussion  of  the
accounting for derivative  instruments is included in Note 1 to the consolidated
financial statements.

Liquidity  involves the Company's ability to raise funds to support asset growth
or reduce  assets to meet deposit  withdrawals  and other  borrowing  needs,  to
maintain reserve requirements and to otherwise operate the Company on an ongoing
basis.  The  Company's  liquidity  needs  are  primarily  met by  growth in core
deposits,  its cash and  federal  funds  sold  position,  and cash flow from its
amortizing  investment and loan  portfolios.  If necessary,  the Company has the
ability to raise liquidity through collateralized borrowings,  FHLB advances, or
the sale of its available for sale investment portfolio. As of December 31, 2002
the Company had in excess of $6.9  billion in  immediately  available  liquidity
which  includes  securities  that  could  be  sold or  used  for  collateralized
borrowings,  cash on hand,  and borrowing  capacities  under  existing  lines of
credit.  During 2002, deposit growth and short-term borrowings were used to fund
growth in the loan portfolio and purchase additional investment securities.

Other Borrowed Money

Other  borrowed  money,  or short-term  borrowings,  which consist  primarily of
securities  sold under  agreement to repurchase,  federal funds  purchased,  and
lines of credit, were used in 2002 to meet short-term liquidity needs. For 2002,
short-term  borrowings  averaged  $118.7 million as compared to $94.3 million in
2001.  The average rate on the  Company's  short-term  borrowings  was 1.55% and
3.72% during 2002 and 2001,  respectively.  As of December 31, 2002,  short-term
borrowings  included  $391.6  million of  securities  sold under  agreements  to
repurchase at an average rate of 1.56%, compared to $199.6 million at an average
rate of 1.71% as of December 31, 2001.

Long-Term Debt

On March 11, 2002 the Company  issued $200  million of 5.95%  Convertible  Trust
Capital  Securities  through  Commerce Capital Trust II, a newly formed Delaware
business  trust  subsidiary  of  the  Company.  The  Convertible  Trust  Capital
Securities mature in 2032.  Holders of the Convertible Trust Capital  Securities
may convert each security into 0.9478 shares of Company common stock, subject to
adjustment,  if (1) the closing sale price of Company  common stock for at least
20 trading  days in a period of 30  consecutive  trading days ending on the last
trading day of any calendar  quarter  beginning with the quarter ending June 30,
2002 is more than 110% of the Convertible  Trust Capital  Securities  conversion
price  ($52.75  at  December  31,  2002)  then in effect on the last day of such
calendar  quarter,  (2) the assigned credit rating by Moody's of the Convertible
Trust Capital  Securities is at or below Bal, (3) the Convertible  Trust Capital
Securities are called for redemption,  or (4) specified  corporate  transactions
have  occurred.  All $200 million of the  Convertible  Trust Capital



                                                                              19
<PAGE>

Securities  qualify as Tier 1 capital for  regulatory  capital  purposes.  As of
December  31,  2002,  the   Convertible   Trust  Capital   Securities  were  not
convertible.  The net proceeds of this offering were used for general  corporate
purposes, including the redemption of the Company's $57.5 million of 8.75% Trust
Capital  Securities  on July 1, 2002 and the  repayment of the  Company's  $23.0
million of 8 3/8% subordinated notes on May 20, 2002.

Stockholders' Equity and Dividends

At December 31, 2002,  stockholders'  equity totaled $918.0  million,  up $281.4
million or 44% over stockholders' equity of $636.6 million at December 31, 2001.
This increase was due to the  Company's  net income for the year,  shares issued
under dividend  reinvestment  and compensation and benefit plans, and unrealized
appreciation on securities available for sale. Stockholders' equity as a percent
of total assets was 5.60% at December 31, 2002 and 2001, respectively.

Risk-based capital standards issued by bank regulatory authorities in the United
States attempt to relate a banking  company's capital to the risk profile of its
assets  and  provide  the basis for which all  banking  companies  and banks are
evaluated in terms of capital adequacy. The risk-based capital standards require
all  banks to have Tier 1 capital  of at least 4% and total  capital,  including
Tier 1 capital, of at least 8% of risk-adjusted  assets. Tier 1 capital includes
stockholders'  equity  (adjusted  for  goodwill,  other  intangibles,   and  the
unrealizedappreciation/depreciation  in securities  available for sale) plus the
Convertible Trust Capital  Securities.  Total capital is comprised of all of the
components of Tier 1 capital plus qualifying  subordinated  debt instruments and
the reserve for possible loan losses.

Banking  regulators have also issued leverage ratio  requirements.  The leverage
ratio requirement is measured as the ratio of Tier 1 capital to adjusted average
assets.  The following  table provides a comparison of the Company's  risk-based
capital ratios and leverage ratio to the minimum regulatory requirements for the
periods indicated.

------------------------------------------------------------
                                             Minimum
                        December 31,       Regulatory
                                          Requirements
------------------------------------------------------------
                        2002   2001      2002       2001
------------------------------------------------------------
Risk based capital ratios:
   Tier 1               11.47% 10.81%      4.00%      4.00%
   Total capital        12.51  11.96       8.00       8.00
Leverage ratio           6.37   6.24       4.00       4.00
------------------------------------------------------------

The Federal Deposit  Insurance  Corporation  Improvement Act of 1991 ("FDICIA"),
which  became law in December of 1991,  required  each  federal  banking  agency
including  the Board of Governors of the FRB, to revise its  risk-based  capital
standards to ensure that those standards take adequate  account of interest rate
risk, concentration of credit risk and the risks of non-traditional  activities,
as  well  as  reflect  the  actual  performance  and  expected  risk  of loss on
multi-family  mortgages.  This law also  requires each federal  banking  agency,
including  the FRB, to specify,  by  regulation,  the levels at which an insured
institution would be considered "well  capitalized,"  "adequately  capitalized,"
"undercapitalized,"    "significantly    undercapitalized,"    or    "critically
undercapitalized."  At December 31, 2002,  the  Company's  consolidated  capital
levels  and  each of the  Company's  banking  subsidiaries  met  the  regulatory
definition  of a "well  capitalized"  financial  institution,  i.e.,  a leverage
capital ratio exceeding 5%, a Tier 1 risk-based  capital ratio exceeding 6%, and
a total risk-based capital ratio exceeding 10%.

The Company's  common stock is listed for trading on the New York Stock Exchange
under the symbol CBH. The quarterly  market price ranges and dividends  paid per
common share for each of the last two years are shown in the table below. Prices
and  dividends  per share have been  adjusted to reflect the 2 for 1 stock split
with a  record  date of  December  3,  2001.  As of March 3,  2003,  there  were
approximately 52,000 holders of record of the Company's common stock.

------------------------------------------------------------
                     Common Share Data
------------------------------------------------------------
                           Market Prices    Cash Dividends
                         -------------------
                           High      Low       Per Share
------------------------------------------------------------
2002 Quarter Ended
 December 31                $47.23   $36.42     $0.15000
 September 30                47.85    38.88      0.15000
 June 30                     50.24    43.70      0.15000
 March 31                    45.05    38.20      0.15000

2001 Quarter Ended
 December 31                $39.34   $34.05     $0.13750
 September 30                38.79    30.55      0.13750
 June 30                     36.35    29.40      0.13750
 March 31                    33.28    26.90      0.13750
------------------------------------------------------------

The Company  offers a Dividend  Reinvestment  and Stock  Purchase  Plan by which
dividends on the Company's  common stock and optional  monthly cash payments may
be invested in the Company's  common Stock at a 3% discount  (subject to change)
to the market price and without payment of brokerage commissions.

Related Parties

The Company engaged in certain activities with entities that would be considered
related parties.  Management believes disbursements made to related parties were
substantially  equivalent  to those that  would  have been paid to  unaffiliated
companies  for similar  goods and  services.  See notes 4 and 7 to the Company's
consolidated financial statements included elsewhere herein.




20
<PAGE>



Results of Operations - 2001 versus 2000

Net  income  for 2001 was  $103.0  million  compared  to $80.0  million in 2000.
Diluted net income per common share was $1.51 compared to $1.25 per common share
for the prior year.

Net  interest  income  on a  tax-equivalent  basis for 2001  amounted  to $412.7
million, an increase of $106.5 million, or 35% over 2000.

Interest income on a  tax-equivalent  basis  increased  $101.2 million or 20% to
$615.7 million in 2001. This increase was primarily  related to volume increases
in the loan and  investment  portfolios.  Interest  expense  for 2001  fell $5.3
million to $203.0  million  from  $208.4  million  in 2000.  This  decrease  was
primarily  related to decreases in the rates paid on the Company's  deposits and
other borrowed money.

The  provision  for loan  losses  was $26.4  million in 2001  compared  to $13.9
million in the prior year.

For 2001,  noninterest  income  totaled  $196.8  million,  an  increase of $46.0
million  or 31% from  2000.  The  growth in  noninterest  income  was  primarily
reflected in  increased  deposit and service  fees and other  operating  income,
including  the  Company's  insurance  and capital  markets  divisions.  Commerce
Insurance recorded an increase of $4.2 million in revenues to $49.8 million from
$45.6 million in 2000. Commerce Capital Markets generated  noninterest  revenues
of $22.0  million in 2001,  an increase of $6.7 million  from  revenues of $15.3
million in 2000.  Fees related to bank cards  increased $6.9 million in 2001. In
addition, deposit charges and service fees increased $26.2 million over 2000 due
primarily to higher transaction  volumes.  These increases were partially offset
by a decrease in investment security gains of $2.2 million from 2000.

Noninterest  expenses  totaled  $420.0  million for 2001,  an increase of $104.7
million, or 33% over 2000.  Contributing to this increase was the addition of 34
new  branches.  With the  addition  of these  new  offices,  staff,  facilities,
marketing,  and related expenses rose accordingly.  Other  noninterest  expenses
rose $27.5 million to $86.9 million in 2001.  This increase  included  increased
bank-card   related  service  charges  of  $3.3  million,   increased   business
development   expenses  of  $4.3   million,   and   increased   provisions   for
non-credit-related losses of $4.0 million.

Mergers and Acquisitions

During  2002,  the Company  purchased  Sanford and Purvis,  Inc.,  an  insurance
brokerage  agency.  The Company  issued  approximately  113,000 shares of common
stock in connection with this immaterial acquisition.

                           ---------------------------

Item 7A.   Quantitative and Qualitative Disclosures About Market Risk

See Item 7,  Management's  Discussion  and Analysis of Financial  Condition  and
Results  of  Operations;   Interest  Rate  Sensitivity  and  Liquidity  included
elsewhere herein.



                                                                              21
<PAGE>

<TABLE>
<CAPTION>


Item 8.       Financial Statements and Supplementary Financial Data

Consolidated Balance Sheets

Commerce Bancorp, Inc. and Subsidiaries Selected Financial Data
Consolidated Statements of Cash Flows

--------------------------------------------------------------------------------------------------------------------------------
                                                                                                       December 31
--------------------------------------------------------------------------------------------------------------------------------
                     (dollars in thousands)                                                     2002               2001
--------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                            <C>               <C>
Assets               Cash and due from banks                                                   $  811,434        $  557,738
                     Federal funds sold
                     -----------------------------------------------------------------------------------------------------------
                        Cash and cash equivalents                                                 811,434           557,738
                     Loans held for sale                                                           96,920            73,261
                     Trading securities                                                           326,479           282,811
                     Securities available for sale                                              7,806,779         4,152,704
                     Securities held to maturity                                                  763,026         1,132,172
                        (market value 2002 -$791,889; 2001- $1,146,345)
                     Loans                                                                      5,822,589         4,583,412
                        Less allowance for loan losses                                             90,733            66,981
                     -----------------------------------------------------------------------------------------------------------
                                                                                                5,731,856         4,516,431
                     Bank premises and equipment, net                                             499,189           362,992
                     Other assets                                                                 368,298           285,594
                     -----------------------------------------------------------------------------------------------------------
                     Total assets                                                             $16,403,981       $11,363,703
--------------------------------------------------------------------------------------------------------------------------------
Liabilities          Deposits:
                        Demand:
                           Interest-bearing                                                    $5,635,351        $3,608,709
                           Noninterest-bearing                                                  3,243,091         2,403,637
                        Savings                                                                 2,861,677         1,925,919
                        Time                                                                    2,808,722         2,247,329
                     -----------------------------------------------------------------------------------------------------------
                               Total deposits                                                  14,548,841        10,185,594

                     Other borrowed money                                                         391,641           264,554
                     Other liabilities                                                            345,489           196,485
                     Trust Capital Securities - Commerce Capital Trust I                                             57,500
                     Convertible Trust Capital Securities - Commerce Capital Trust II             200,000
                     Long-term debt                                                                                  23,000
                     -----------------------------------------------------------------------------------------------------------
                                                                                               15,485,971        10,727,133
--------------------------------------------------------------------------------------------------------------------------------
Stockholders'        Common stock, 68,043,171 shares issued                                        68,043            65,833
Equity                  (65,832,559 shares in 2001)
                     Capital in excess of par or stated value                                     538,795           461,897
                     Retained earnings                                                            199,604            94,698
                     Accumulated other comprehensive income                                       113,614            15,764
                     -----------------------------------------------------------------------------------------------------------
                                                                                                  920,056           638,192
                     Less treasury stock, at cost, 209,794 shares (200,118 shares in                2,046             1,622
                     2001)
                     -----------------------------------------------------------------------------------------------------------
                               Total stockholders' equity                                         918,010           636,570
                     -----------------------------------------------------------------------------------------------------------
                     Total liabilities and stockholders' equity                               $16,403,981       $11,363,703
                     -----------------------------------------------------------------------------------------------------------
                     See accompanying notes.


</TABLE>


22
<PAGE>


<TABLE>
<CAPTION>

Consolidated Statements of Income

--------------------------------------------------------------------------------------------------------------------------------
                                                                                            Year Ended December 31,
--------------------------------------------------------------------------------------------------------------------------------
                   (dollars in thousands, except per share amounts)                  2002            2001            2000
--------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                  <C>             <C>             <C>
Interest           Interest and fees on loans                                        $354,315        $326,723        $292,066
Income             Interest on investment securities                                  400,191         271,707         208,769
                   Other interest                                                         865           5,937           4,465
                   -------------------------------------------------------------------------------------------------------------
                                Total interest income                                 755,371         604,367         505,300
                   -------------------------------------------------------------------------------------------------------------

--------------------------------------------------------------------------------------------------------------------------------
Interest           Interest on deposits:
Expense                 Demand                                                         55,413          63,554          72,975
                        Savings                                                        30,232          32,647          36,935
                        Time                                                           81,567          98,084          75,046
                   -------------------------------------------------------------------------------------------------------------
                                Total interest on deposits                            167,212         194,285         184,956
                   Interest on other borrowed money                                     1,839           3,508          16,943
                   Interest on long-term debt                                          13,565           5,248           6,471
                   -------------------------------------------------------------------------------------------------------------
                                Total interest expense                                182,616         203,041         208,370
                   -------------------------------------------------------------------------------------------------------------

                   Net interest income                                                572,755         401,326         296,930
                   Provision for loan losses                                           33,150          26,384          13,931
                   -------------------------------------------------------------------------------------------------------------
                   Net interest income after provision for loan losses                539,605         374,942         282,999
--------------------------------------------------------------------------------------------------------------------------------
Noninterest        Deposit charges and service fees                                   130,993         100,912          74,685
Income             Other operating income                                             126,473          94,913          72,862
                   Net investment securities gains                                          0             980           3,213
                   -------------------------------------------------------------------------------------------------------------
                                Total noninterest income                              257,466         196,805         150,760
                   -------------------------------------------------------------------------------------------------------------

--------------------------------------------------------------------------------------------------------------------------------
Noninterest        Salaries and benefits                                              276,933         198,034         148,799
Expense            Occupancy                                                           56,498          39,152          31,419
                   Furniture and equipment                                             66,700          50,724          40,436
                   Office                                                              31,186          26,808          23,548
                   Marketing                                                           23,733          18,378          11,706
                   Other                                                              124,118          86,940          59,449
                   -------------------------------------------------------------------------------------------------------------
                                Total noninterest expenses                            579,168         420,036         315,357
                   -------------------------------------------------------------------------------------------------------------
                   Income before income taxes                                         217,903         151,711         118,402
                   Provision for federal and state income taxes                        73,088          48,689          38,355
                   -------------------------------------------------------------------------------------------------------------
                   Net income                                                        $144,815        $103,022        $ 80,047
                   -------------------------------------------------------------------------------------------------------------

                   Net income per common and common equivalent share:
                            Basic                                                    $  2.16         $  1.59         $  1.30
                   -------------------------------------------------------------------------------------------------------------
                            Diluted                                                  $  2.04         $  1.51         $  1.25
                   -------------------------------------------------------------------------------------------------------------
                   Average common and common equivalent shares outstanding:
                            Basic                                                     66,795          64,666           61,755
                   -------------------------------------------------------------------------------------------------------------
                            Diluted                                                   70,903          68,102           64,223
                   -------------------------------------------------------------------------------------------------------------
                   Cash dividends, common stock                                      $  0.60         $  0.55         $  0.48
                   -------------------------------------------------------------------------------------------------------------
                   See accompanying notes.
</TABLE>




                                                                              23
<PAGE>

<TABLE>
<CAPTION>


Consolidated Statements of Cash Flows
------------------------------------------------------------------------------------------------------------------------------
                                                                                           Year Ended December 31,
------------------------------------------------------------------------------------------------------------------------------
                   (dollars in thousands)                                             2002           2001           2000
------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                  <C>            <C>             <C>
Operating          Net income                                                        $144,815       $103,022        $80,047
Activities         Adjustments to reconcile net income to net cash
                      provided by operating activities:
                        Provision for loan losses                                      33,150         26,384         13,931
                        Provision for depreciation, amortization
                          and accretion                                                70,462         44,263         32,596
                        Gains on sales of securities available for sale                                 (980)        (3,213)
                        Proceeds from sales of loans held for sale                  1,375,768        688,752         56,101
                        Originations of loans held for sale                        (1,399,427)      (720,222)       (92,188)
                        Net loan (chargeoffs)                                          (9,398)        (8,083)        (3,633)
                        Net (increase) decrease in trading securities                 (43,668)      (173,505)         8,531
                        Increase in other assets                                     (132,972)       (97,711)       (17,494)
                        Increase in other liabilities                                 150,194        148,055         26,271
                        Deferred income tax expense (benefit)                           6,359         (4,054)        (2,812)
                   -----------------------------------------------------------------------------------------------------------
                                Net cash provided by operating activities             195,283          5,921         98,137

Investing          Proceeds from the sales of securities available for sale         1,506,996        381,341        410,541
Activities         Proceeds from the maturity of securities available for sale      2,413,025        895,077        345,160
                   Proceeds from the maturity of securities held to maturity          486,292        384,388        174,124
                   Purchase of securities available for sale                       (7,437,004)    (3,311,356)    (1,055,694)
                   Purchase of securities held to maturity                           (118,221)       (68,420)      (127,194)
                   Net increase in loans                                           (1,289,825)      (906,160)    (1,095,712)
                   Proceeds from sales of loans                                        50,649         10,008         10,622
                   Purchases of premises and equipment                               (194,559)      (128,137)      (109,701)
                   -----------------------------------------------------------------------------------------------------------
                                Net cash used by investing activities              (4,582,647)    (2,743,259)    (1,447,854)

Financing          Net increase in demand and savings deposits                      3,801,855      2,083,736      1,314,974
Activities         Net increase in time deposits                                      561,393        714,264        463,700
                   Net increase (decrease) in other borrowed money                    127,087        (19,160)      (274,378)
                   Dividends paid                                                     (39,911)       (35,400)       (29,761)
                   Issuance of Convertible Trust Capital Securities                   200,000
                   Redemption of Trust Capital Securities                             (57,500)
                   Decrease in long-term debt                                         (23,000)
                   Proceeds from issuance of common stock under
                     dividend reinvestment and other stock plans                       66,809         53,004         53,670
                   Other                                                                4,327          2,714         (5,494)
                   -----------------------------------------------------------------------------------------------------------
                                Net cash provided by financing activities           4,641,060      2,799,158       1,522,711

                   Increase in cash and cash equivalents                              253,696         61,820        172,994
                   Cash and cash equivalents at beginning of year                     557,738        495,918        322,924
                   -----------------------------------------------------------------------------------------------------------
                   Cash and cash equivalents at end of year                          $811,434       $557,738       $495,918
                   -----------------------------------------------------------------------------------------------------------

                   Supplemental disclosures of cash flow information: Cash paid
                     during the year for:
                        Interest                                                     $185,143       $201,127       $206,144
                        Income taxes                                                   59,644         48,826         36,373
                   Other noncash activities:
                     Securitization of loans                                                                        358,918
                   -----------------------------------------------------------------------------------------------------------
                   See accompanying notes.
</TABLE>


24
<PAGE>

<TABLE>
<CAPTION>




Consolidated Statements of Changes in Stockholders' Equity
----------------------------------------------------------------------------------------------------------------
Years ended December 31, 2002, 2001 and 2000
                                                            Capital in
(in thousands, except per share amounts)         Common      Excess of  Retained   Treasury   Accumulated
                                                  Stock      Par or     Earnings    Stock    Other
                                                             Stated                          Compre-hensive
                                                              Value                          Income       Total
-------------------------------------------------------------------------------------------------------------------
<S>                                           <C>         <C>          <C>       <C>      <C>        <C>
Balances at December 31, 1999                   $44,418     $321,443     $32,263   $(1,624) $(39,744)  $356,756
Acquisition of insurance brokerage agencies         470         (450)     (5,519)                        (5,499)
(602 shares)
-------------------------------------------------------------------------------------------------------------------
As adjusted balance at January 1, 2000           44,888      320,993      26,744    (1,624)  (39,744)   351,257
Net income                                                                80,047                         80,047
 Other comprehensive income, net of tax
 Unrealized gain on securities (pre-tax ($52,382)                                             33,837     33,837
 Reclassification adjustment (pre-tax ($1,027)                                                   668        668
                                                                                                      -------------
 Other comprehensive income                                                                              34,505
                                                                                                      -------------
       Total comprehensive income                                                                       114,552
Common stock dividend and cash paid in lieu of
 fractional shares (2,834 shares)                 2,214       47,734     (50,031)                           (83)
Cash dividends paid                                                      (29,678)                       (29,678)
Shares issued under dividend reinvestment and
 compensation and benefit plans (3,230 shares)    2,523       51,147                                     53,670
Other                                                 2        2,501           1         2                2,506
-------------------------------------------------------------------------------------------------------------------
Balances at December 31, 2000                   $49,627     $422,375     $27,083   $(1,622)  $(5,239)  $492,224
Acquisition of insurance brokerage agencies         108         (885)                                      (777)
(108 shares)
-------------------------------------------------------------------------------------------------------------------
As adjusted balance at January 1, 2001           49,735      421,490      27,083    (1,622)   (5,239)   491,447
Net income                                                               103,022                        103,022
 Other comprehensive income, net of tax
 Unrealized gain on securities (pre-tax                                                       20,525     20,525
$31,924)
 Reclassification adjustment (pre-tax $735)                                                      478        478
                                                                                                      -------------
 Other comprehensive income                                                                              21,003
                                                                                                      -------------
       Total comprehensive income                                                                       124,025
Cash dividends paid                                                      (35,400)                       (35,400)
Shares issued under dividend reinvestment and
 compensation and benefit plans (2,202 shares)    2,202       50,802                                     53,004
Restatement of par value                        (17,865)      17,865
Shares issued pursuant to stock split            31,761      (31,761)
Other                                                          3,501          (7)                         3,494
-------------------------------------------------------------------------------------------------------------------
Balances at December 31, 2001                   $65,833     $461,897     $94,698   $(1,622)  $15,764   $636,570
Net income                                                               144,815                        144,815
 Other comprehensive income, net of tax
 Unrealized gain on securities (pre-tax                                                       97,850     97,850
$153,397)
 Reclassification adjustment (pre-tax $0)
                                                                                                      -------------
 Other comprehensive income                                                                              97,850
                                                                                                      -------------
       Total comprehensive income                                                                       242,665
Cash dividends paid                                                      (39,911)                       (39,911)
Shares issued under dividend reinvestment and
 compensation and benefit plans (2,098 shares)    2,098       64,711                                     66,809
Acquisition of insurance brokerage agency           113        4,633                                      4,746
(113 shares)
Other                                                (1)       7,554           2      (424)               7,131
-------------------------------------------------------------------------------------------------------------------
Balances at December 31, 2002                   $68,043     $538,795    $199,604   $(2,046) $113,614   $918,010
-------------------------------------------------------------------------------------------------------------------
See accompanying notes.

</TABLE>


                                                                              25
<PAGE>


Notes to Consolidated Financial Statements


1. Significant Accounting Policies

Basis of Presentation

The consolidated  financial statements include the accounts of Commerce Bancorp,
Inc.  (the  Company) and its  wholly-owned  subsidiaries,  Commerce  Bank,  N.A.
(Commerce  NJ),  Commerce   Bank/Pennsylvania,   N.A.  (Commerce  PA),  Commerce
Bank/Shore,   N.A.  (Commerce  Shore),  Commerce  Bank/North  (Commerce  North),
Commerce Bank/Delaware,  N.A. (Commerce Delaware),  Commerce Insurance Services,
Inc., formerly Commerce National Insurance Services,  Inc. (Commerce Insurance),
Commerce  Capital  Trust  I,  Commerce  Capital  Trust II and  Commerce  Capital
Markets,  Inc.  (CCMI).  All  material   intercompany   transactions  have  been
eliminated.  Certain amounts from prior years have been  reclassified to conform
with  2002  presentation.  All  common  stock and per  share  amounts  have been
adjusted  to reflect  the 2 for 1 stock  split with a record date of December 3,
2001.

The Company is a multi-bank  holding company  headquartered  in Cherry Hill, New
Jersey,  operating  primarily  in the  metropolitan  Philadelphia,  New  Jersey,
Delaware  and  metropolitan  New York  markets.  Through its  subsidiaries,  the
Company  provides  retail  and  commercial  banking  services,  corporate  trust
services,   insurance  brokerage  services,  and  certain  securities  services,
including trading, underwriting and advisory services.

The preparation of financial statements in conformity with accounting principles
generally  accepted in the United States  requires  management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.

Investment Securities

CCMI maintains a portfolio of trading  account  securities  which are carried at
market.  Gains and losses,  both realized and unrealized,  are included in other
operating  income.  Trading  gains of $12.8  million,  $10.6  million,  and $8.4
million  were  recorded  in  2002,  2001,  and  2000,  respectively,   including
unrealized  gains of $1.2  million and  $265,000 at December  31, 2002 and 2001,
respectively.

Investment  securities  are  classified as held to maturity when the Company has
the intent and ability to hold those securities to maturity.  Securities held to
maturity  are  stated  at cost and  adjusted  for  accretion  of  discounts  and
amortization of premiums.

Those  securities  that might be sold in response to changes in market  interest
rates,  prepayment risk, the Company's income tax position, the need to increase
regulatory  capital,  or similar other  factors are  classified as available for
sale.  Available for sale securities are carried at fair value,  with unrealized
gains and losses,  net of tax, reported as a component of stockholders'  equity.
The amortized cost of debt securities in this category is adjusted for accretion
of  discounts  and  amortization  of  premiums.  Realized  gains and  losses are
determined on the specific  certificate  method and are included in  noninterest
income.

Loans

Loans  are  stated  at  principal  amounts  outstanding,  net of  deferred  loan
origination fees and costs.  Interest income on loans is accrued and credited to
interest  income  monthly  as  earned.  Loans  held for sale  are  valued  on an
aggregate  basis  at the  lower  of  cost  or  fair  value.  Net  deferred  loan
origination  fees and costs are generally  considered as adjustments of interest
rate yields and are amortized  into  interest  income on loans over the terms of
the related loans.

Loans are placed on a non-accrual  status and cease accruing  interest when loan
payment  performance is deemed  unsatisfactory.  However,  all loans past due 90
days are placed on non-accrual status,  unless the loan is both well secured and
in the process of collection.

Allowance for Loan Losses

The allowance for loan losses is increased by provisions  charged to expense and
reduced  by  loan  charge-offs  net  of  recoveries.   Based  upon  management's
evaluation  of the  loan  portfolio,  the  allowance  is  maintained  at a level
considered  adequate to absorb estimated  inherent losses in the loan portfolio.
The level of the allowance is based on an evaluation of the risk characteristics
included in the loan portfolio,  including such factors as changes in levels and
trends of charge-offs, delinquencies, and nonaccrual loans, trends in volume and
terms of loans, changes in underwriting standards and practices,  portfolio mix,
tenure of loan officers and  management,  entrance into new geographic  markets,
changes in credit  concentrations,  and national and local  economic  trends and
conditions,  and other  relevant  factors,  all of which may be  susceptible  to
significant change.

26
<PAGE>



                                      Notes to Consolidated Financial Statements


Bank Premises and Equipment

Bank premises and equipment are carried at cost less  accumulated  depreciation.
Depreciation  and amortization  are determined on the  straight-line  method for
financial reporting  purposes,  and accelerated methods for income tax purposes.
When capitalizing costs for branch construction,  the Company includes the costs
of  purchasing  the land,  developing  the site,  constructing  the building (or
leasehold  improvements if the property is leased), and furniture,  fixtures and
equipment  necessary to equip the branch. All other pre-opening and post-opening
costs related to branches are expensed as incurred.

Other Real Estate (ORE)

Real estate  acquired in  satisfaction  of a loan is reported in other assets at
the lower of cost or fair value less disposition costs.  Properties  acquired by
foreclosure or deed in lieu of foreclosure  are  transferred to ORE and recorded
at the  lower  of cost or fair  value  less  disposition  costs  based  on their
appraised value at the date actually or constructively received.  Losses arising
from the acquisition of such property are charged against the allowance for loan
losses.  Subsequent  adjustments  to the carrying  values of ORE  properties are
charged to operating expense. Included in Other noninterest expense is $231,000,
$1.7 million and $1.0 million related to ORE expenses,  net for 2002,  2001, and
2000, respectively.

Intangible Assets

On January 1, 2002, the Company  adopted the provisions of Financial  Accounting
Standards Board (FASB) Statement No. 142, "Goodwill and Other Intangible Assets"
(FAS 142),  which  addresses the accounting and reporting for acquired  goodwill
and other intangible  assets and supersedes APB Opinion 17. Under the provisions
of FAS 142, goodwill and certain other intangible  assets,  which do not possess
finite useful lives,  are no longer  amortized into net income over an estimated
life but rather are tested at least  annually for  impairment  based on specific
guidance  provided in the new  standard.  Intangible  assets  determined to have
finite lives,  $4.0 million at December 31, 2002,  will continue to be amortized
over their estimated  useful lives,  generally 10-15 years, and also continue to
be  subject  to  impairment  testing.  The  adoption  of FAS 142 did not  have a
material impact on the results of operations of the Company.  The excess of cost
over fair value of net assets  acquired  (goodwill)  is included in other assets
and amounted to $4.5 million at December 31, 2002.

Advertising Costs

Advertising costs are expensed as incurred.

Income Taxes

The  provision  for income taxes is based on current  taxable  income.  Deferred
income taxes are provided on temporary  differences between amounts reported for
financial statement and tax purposes.

Restriction on Cash and Due From Banks

The Banks are required to maintain  reserve  balances  with the Federal  Reserve
Bank. The weighted average amount of the reserve balances for 2002 and 2001 were
approximately $39.6 million and $12.2 million, respectively.

Derivative Financial Instruments

The  Company  may enter  into  derivative  transactions  principally  to protect
against the risk of adverse  price or interest  rate  movements  on the value of
certain assets and liabilities and on future cash flows. The Company applies the
provisions of Statement No. 133,  "Accounting  for  Derivative  Instruments  and
Hedging  Activities"  (FAS 133), as amended,  in accounting  for its  derivative
transactions.  Under the guidelines of FAS 133, all derivative  instruments  are
required  to be carried at fair value on the  balance  sheet.  FAS 133  provides
special hedge accounting  provisions,  which permit the change in the fair value
of the hedged item related to the risk being hedged to be recognized in earnings
in the same period and in the same income  statement  line as the change in fair
value of the derivative.

As part of CCMI's  broker-dealer  activities,  the  Company  maintains a trading
securities  portfolio  for  distribution  to  customers  in order to meet  those
customers' needs.  Derivative  instruments,  primarily interest rate futures and
options, are used in order to reduce the exposure to interest rate risk relating
to the trading portfolio. These contracts are carried at fair value with changes
in fair value included in other operating income.



                                                                              27
<PAGE>


Recent Accounting Statements

In October 2002,  the FASB issued  Statement No. 147,  "Acquisitions  of Certain
Financial  Institutions,"  (FAS 147) which  amends FAS No. 72,  "Accounting  for
Certain Acquisitions of Banking or Thrift Institutions," FASB Interpretation No.
9, "Applying APB Opinions No. 16 and 17 When a Savings and Loan Association or a
Similar Institution Is Acquired in a Business  Combination  Accounted for by the
Purchase Method," and FAS No. 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets." FAS No. 147 removes  acquisitions of financial  institutions
from the scope of both FAS No.  72 and FASB  Interpretation  No. 9 and  requires
that  those  transactions  be  accounted  for in  accordance  with FAS No.  141,
"Business Combinations" and FAS No. 142, "Goodwill and Other Intangible Assets."
FAS No. 147 addresses the financial  accounting and reporting  requirements  for
the  acquisition  of  all or  part  of a  financial  institution,  except  for a
transaction  between two or more mutual  enterprises,  and provides  guidance on
accounting   for   the   impairment   and   disposal   of   acquired   long-term
customer-relationship   intangible   assets,   including   those   acquired   in
transactions  between two or more mutual enterprises.  FAS No. 147 was effective
October 1, 2002 and did not have a material impact on the financial condition or
operating results of the Company.

In  January  2003,  the FASB  issued  FASB  Interpretation  No.  46 ("FIN  46"),
"Consolidation  of Variable  Interest  Entities." This  interpretation  provides
guidance on how to identify a variable  interest  entity  ("VIE") and  determine
when  the  assets,   liabilities,   noncontrolling  interests,  and  results  of
operations  of a VIE need to be included in a company's  consolidated  financial
statements.   The  new  accounting  provisions  of  this  interpretation  became
effective  upon issuance for all new variable  interest  entities  created after
January 31,  2003,  and to  variable  interest  entities in which an  enterprise
obtains an  interest  after that date.  It applies to the first  fiscal  year or
interim period beginning after June 15, 2003, to variable  interest  entities in
which an enterprise  holds a variable  interest that it acquired before February
1, 2003.  While the impact is  currently  being  assessed,  management  does not
expect the adoption of FIN 46 to have a material impact on the Company's results
of operations and financial position.

In December 2002, the FASB issued Statement No. 148, "Accounting for Stock-Based
Compensation - Transition and  Disclosure"  (FAS 148).  This statement  provides
alternative methods of transition for a voluntary change to the fair value based
method of  accounting  for  stock-based  employee  compensation  and  amends the
disclosure   requirement   of  FAS  No.   123,   "Accounting   for   Stock-Based
Compensation."  This  statement  is  effective  for fiscal  years  ending  after
December  15,  2002 and did not have an impact  on the  financial  condition  or
operating results of the Company.

The Company will  continue to follow APB Opinion No. 25,  "Accounting  for Stock
Issued to Employees" and related  Interpretations to account for its stock-based
compensation  plans.  If the Company had  accounted  for stock options under the
fair value provisions of FAS 123, net income and net income per share would have
been as follows (in thousands, except per share amounts):

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------
                                                         2002               2001              2000
----------------------------------------------------------------------------------------------------------
<S>                                                   <C>                 <C>               <C>
Pro forma net income                                  $136,386            $97,430           $73,456

Pro forma net income per share:
     Basic                                            $   2.04            $  1.51           $  1.19
     Diluted                                              1.94               1.44              1.15
----------------------------------------------------------------------------------------------------------
</TABLE>


The fair value of options  granted in 2002,  2001, and 2000 was estimated at the
date of grant using a  Black-Scholes  option  pricing  model with the  following
weighted  average  assumptions:  risk-free  interest  rates of  4.41% to  6.54%,
dividend  yields of 2.50% to 3.00%,  volatility  factors of the expected  market
price  of the  Company's  common  stock of .304 to .332,  and  weighted  average
expected lives of the options of 4.75 years.

The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded  options which have no vesting  restrictions  and are fully
transferable.  In addition,  option valuation models require the input of highly
subjective  assumptions  including the expected stock price volatility.  Because
the Company's stock options have  characteristics  significantly  different from
those of traded options, and because changes in the subjective input assumptions
can materially  affect the fair value  estimate,  in management's  opinion,  the
existing models do not necessarily provide a reliable single measure of the fair
value of its stock options.




28
<PAGE>

2. Mergers and Acquisitions

During  2002,  the Company  purchased  Sanford and Purvis,  Inc.,  an  insurance
brokerage  agency.  The Company  issued  approximately  113,000 shares of common
stock in connection with this immaterial acquisition.

In 2001, the Company  purchased  Fitzsimmons  Insurance and Financial  Services,
Inc.,  Business  Training  Systems,  Inc. and Brettler  Financial  Group,  Inc.,
insurance  brokerage  agencies,   which  were  merged  with  and  into  Commerce
Insurance.  The Company issued  approximately  108,000 shares of common stock in
exchange for all of the outstanding  shares of these agencies in connection with
these immaterial acquisitions.

3. Investment Securities

A summary of the  amortized  cost and market value of  securities  available for
sale and  securities  held to maturity (in  thousands)  at December 31, 2002 and
2001 follows:

<TABLE>
<CAPTION>

 -----------------------------------------------------------------------------------------------------------------------------------
                                                                          December 31,
 -----------------------------------------------------------------------------------------------------------------------------------
                                                2002                                                   2001
 -----------------------------------------------------------------------------------------------------------------------------------
                                         Gross        Gross                                     Gross        Gross
                        Amortized     Unrealized    Unrealized      Market       Amortized   Unrealized    Unrealized     Market
                           Cost          Gains       Losses         Value          Cost         Gains        Losses        Value
 -----------------------------------------------------------------------------------------------------------------------------------
<S>                     <C>             <C>          <C>          <C>            <C>             <C>        <C>          <C>
 U.S. Government agency
 and mortgage-backed
    obligations         $7,491,768      $172,699     $(4,730)     $7,659,737     $3,974,752      $41,312    $(21,541)    $3,994,523
 Obligations of state
 and political
 subdivisions               22,041         1,144                      23,185         83,727          768      (1,573)        82,922
 Equity securities          18,898         5,156                      24,054         11,666        4,828        (169)        16,325
 Other                      96,291         3,512                      99,803         58,175        1,256        (497)        58,934
 -----------------------------------------------------------------------------------------------------------------------------------
 Securities available
    for sale            $7,628,998      $182,511     $(4,730)     $7,806,779     $4,128,320      $48,164    $(23,780)    $4,152,704
 -----------------------------------------------------------------------------------------------------------------------------------
 U.S. Government agency
    and mortgage-backed
    obligations           $624,688       $27,847                    $652,535     $1,044,266      $16,917     $(2,742)    $1,058,441
 Obligations of state
 and political
 subdivisions               91,204         1,041     $   (25)         92,220         50,602                                  50,602
 Other                      47,134                                    47,134         37,304                       (2)        37,302
 -----------------------------------------------------------------------------------------------------------------------------------
 Securities held to
    maturity              $763,026       $28,888     $   (25)       $791,889     $1,132,172      $16,917     $(2,744)    $1,146,345
 -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>

The amortized  cost and  estimated  market value of  investment  securities  (in
thousands)  at December  31,  2002,  by  contractual  maturity  are shown below.
Expected  maturities will differ from  contractual  maturities  because obligors
have the right to repay obligations without prepayment penalties.

 ----------------------------------------------------------------------------------------------------------
                                                    Available for Sale             Held to Maturity
 ----------------------------------------------------------------------------------------------------------
                                                  Amortized     Market Value  Amortized Cost   Market
                                                    Cost                                         Value
 ----------------------------------------------------------------------------------------------------------
<S>                                              <C>            <C>                 <C>          <C>
Due in one year or less                          $   50,821     $   50,951          $ 84,491     $ 84,491
Due after one year through five years                54,399         55,464               224          224
Due after five years through ten years               49,372         52,581             4,798        4,990
Due after ten years                                  30,674         31,036            48,825       49,649
Mortgage backed securities                        7,424,834      7,592,693           624,688      652,535
Equity securities                                    18,898         24,054
----------------------------------------------------------------------------------------------------------
                                                 $7,628,998     $7,806,779          $763,026     $791,889
----------------------------------------------------------------------------------------------------------
</TABLE>

Proceeds from sales of securities  available for sale during 2002, 2001 and 2000
were $1.51 billion, $381.3 million and $410.5 million, respectively. Gross gains
of $6.8  million,  $2.2 million and $3.2  million were  realized on the sales in
2002,  2001,  and 2000,  respectively,  and gross losses of $6.8  million,  $1.2
million and $0 were realized in 2002, 2001 and 2000, respectively.

At December 31, 2002 and 2001,  investment  securities  with a carrying value of
$2.1 billion and $1.6 billion, respectively,  were pledged to secure deposits of
public funds.

                                                                              29
<PAGE>

4.  Loans               The  following  is a summary  of loans  outstanding  (in
                        thousands) at December 31, 2002 and 2001:

<TABLE>
<CAPTION>

<S>                                                               <C>                     <C>
 ----------------------------------------------------------------------------------------------------------
                                                                            December 31,
 ----------------------------------------------------------------------------------------------------------
                                                                     2002                   2001
 ----------------------------------------------------------------------------------------------------------
Commercial real estate:
     Owner-occupied                                               $1,345,306              $1,028,408
     Investor/developer                                              885,276                 799,799
     Residential construction                                        102,080                  47,917
 ----------------------------------------------------------------------------------------------------------
                                                                   2,332,662               1,876,124
Commercial loans:
     Term                                                            842,869                 600,374
     Line of credit                                                  683,640                 556,977
     Demand                                                              317                     440
 ----------------------------------------------------------------------------------------------------------
                                                                   1,526,826               1,157,791
Consumer:
     Mortgages (1-4 family residential)                              626,652                 471,680
     Installment                                                     140,493                 161,647
     Home equity                                                   1,139,589                 872,974
     Credit lines                                                     56,367                  43,196
 ----------------------------------------------------------------------------------------------------------
                                                                   1,963,101               1,549,497
 ----------------------------------------------------------------------------------------------------------
                                                                  $5,822,589              $4,583,412
 ----------------------------------------------------------------------------------------------------------
</TABLE>

Loans to executive  officers and directors of the Company and its  subsidiaries,
and companies with which they are associated, are made in the ordinary course of
business  and  on   substantially   the  same  terms  as  comparable   unrelated
transactions.  Such  loans  approximated  $124.8  million  and $70.1  million at
December 31, 2002 and 2001, respectively.

The Company purchased goods and services, including legal services, from related
parties.  Such  disbursements  aggregated $5.9 million,  $4.5 million,  and $2.8
million,   in  2002,   2001,  and  2000,   respectively.   Management   believes
disbursements  made to related  parties were  substantially  equivalent to those
that  would  have been paid to  unaffiliated  companies  for  similar  goods and
services.



<PAGE>
<TABLE>
<CAPTION>


5. Allowance for Loan Losses

The  following  is an analysis of changes in the  allowance  for loan losses (in
thousands) for 2002, 2001 and 2000:


 ----------------------------------------------------------------------------------------------------------
                                                            2002              2001             2000
 ----------------------------------------------------------------------------------------------------------

<S>              <C>                                       <C>               <C>               <C>
Balance, January 1                                         $66,981           $48,680           $38,382
Provision charged to operating expense                      33,150            26,384            13,931
Recoveries of loans previously charged off                   1,330               974               576
Loan charge-offs                                           (10,728)           (9,057)           (4,209)
 ----------------------------------------------------------------------------------------------------------
Balance, December 31                                       $90,733           $66,981           $48,680
 ----------------------------------------------------------------------------------------------------------
</TABLE>



30
<PAGE>




6. Non-accrual and Restructured Loans and Other Real Estate

The total of non-performing loans (non-accrual and restructured loans)
was $14.2 million and $16.8 million at December 31, 2002 and 2001,
respectively. Non-performing loans of $3.8 million, $0.9 million and
$1.3 million net of charge offs of $0, $17,000 and $26,000 were
transferred to other real estate during 2002, 2001 and 2000,
respectively. Other real estate ($3.6 million and $1.5 million at
December 31, 2002 and 2001, respectively) is included in other assets.

At December 31, 2002 and 2001, the recorded investment in loans
considered to be impaired under FASB Statement No. 114 "Accounting by
Creditors for Impairment of a Loan" totaled $9.0 million and $12.2
million, respectively, all of which are included in non-performing
loans. As permitted, all homogenous smaller balance consumer and
residential mortgage loans are excluded from individual review for
impairment. The majority of impaired loans were measured using the
fair market value of collateral. Impaired loans averaged approximately
$10.6 million and $10.7 million during 2002 and 2001, respectively.
Interest income of approximately $1.4 million, $2.1 million, and $1.7
million would have been recorded on non-performing loans (including
impaired loans) in accordance with their original terms in 2002, 2001,
and 2000, respectively. Actual interest income recorded on these loans
amounted to $275,000, $237,000, and $525,000 during 2002, 2001, and
2000, respectively.



7. Bank Premises, Equipment, and Leases

A summary of bank premises and equipment (in thousands) is as follows:
<TABLE>
<CAPTION>

 ----------------------------------------------------------------------------------------------------------
                                                                                December 31,
                                                                   --------------------------------------
                                                                           2002               2001
 ----------------------------------------------------------------------------------------------------------
<S>                                                                       <C>                  <C>
Land                                                                      $123,880             $ 84,893
Buildings                                                                  247,508              172,139
Leasehold improvements                                                      43,130               23,648
Furniture, fixtures and equipment                                          265,712              217,777
Leased property under capital leases                                           124                  124
 ----------------------------------------------------------------------------------------------------------
                                                                           680,354              498,581

Less accumulated depreciation
  and amortization                                                         181,165              135,589
 ----------------------------------------------------------------------------------------------------------
                                                                          $499,189             $362,992
 ----------------------------------------------------------------------------------------------------------
</TABLE>

At December 31, 2002,  the Company  leased from various  related  parties  under
separate  operating  lease  agreements  the land on which it has  constructed 19
offices. Rents paid under these agreements represent market rates, are supported
by independent  appraisals and approved by the independent  members of the Board
of Directors.  The aggregate annual rental under these leases was  approximately
$1.6  million,  $1.8  million,  and  $1.6  million  in  2002,  2001,  and  2000,
respectively.  These  leases  expire  periodically  beginning  in  2004  but are
renewable through 2040.




                                                                              31
<PAGE>




Total  rent  expense   charged  to  operations   under   operating   leases  was
approximately $21.8 million in 2002, $11.6 million in 2001, and $10.4 million in
2000. Total depreciation expense charged to operations was $52.7 million,  $41.2
million and $32.1 million in 2002, 2001 and 2000, respectively.

The future minimum rental commitments, by year, under the non-cancelable leases,
including  escalation  clauses,  are as follows (in  thousands)  at December 31,
2002:

--------------------------------------------------------------------------------
                                                                  Operating
--------------------------------------------------------------------------------
2003                                                                $ 18,337
2004                                                                  18,577
2005                                                                  19,120
2006                                                                  18,601
2007                                                                  22,701
Later years                                                          196,547
--------------------------------------------------------------------------------
Net minimum lease payments                                          $292,883

The Company has obtained architectural design and facilities management services
for over  twenty-five  years from a business owned by the spouse of the Chairman
of the Board of the Company.  The Company spent $4.6 million,  $2.3 million, and
$2.0  million in 2002,  2001,  and 2000,  respectively,  for such  services  and
related  costs.  Additionally,  the business  received  additional  revenues for
project management of approximately $3.5 million, $1.9 million, and $1.6 million
in 2002, 2001, and 2000, respectively,  on furniture and facility purchases made
directly  by  the  Company.   Management   believes  these   disbursements  were
substantially  equivalent  to those that  would  have been paid to  unaffiliated
companies for similar services. The Board of Directors believes this arrangement
has been an important  factor in the success of the Commerce brand. In 2003, the
Board  approved  the  transfer,  without  cost,  into the Company of the project
management  services.  The business will continue to provide  architectural  and
design services to the Company.


8.  Deposits

The  aggregate  amount of time  certificates  of  deposits in  denominations  of
$100,000  or more was $1.2  billion and $1.1  billion at  December  31, 2002 and
2001, respectively.

9. Other Borrowed Money


Other borrowed money consists  primarily of securities sold under  agreements to
repurchase,  federal funds purchased,  and lines of credit.  The following table
represents information for other borrowed money:
<TABLE>
<CAPTION>

----------------------------------------------------------------------------------------------------------
                                                                      December 31,
                                                ----------------------------------------------------------
                                                            2002                          2001
                                                ----------------------------------------------------------
                                                                  Average                      Average
                                                   Amount           Rate           Amount         Rate
----------------------------------------------------------------------------------------------------------
<S>                                                <C>             <C>            <C>              <C>
Securities sold under
     agreements to repurchase                      $391,641        1.56%          $199,554         1.71%
Federal funds purchased                                                             65,000         2.00
----------------------------------------------------------------------------------------------------------
                                                   $391,641                       $264,554
----------------------------------------------------------------------------------------------------------
Average amount outstanding                         $118,734        1.55%          $ 94,257         3.72%
Maximum month-end balance                           391,641                        264,554
----------------------------------------------------------------------------------------------------------
</TABLE>

As of December 31, 2002, the Company had a line of credit of $536.2 million from
the Federal Home Loan Bank of New York, all of which was available and a line of
credit of $155.9 million from the Federal Home Loan Bank of  Pittsburgh,  all of
which was  available.  In addition,  CCMI had a line of credit of $10.0  million
from another bank, all of which was available.



32
<PAGE>


10. Long-Term Debt

On July 15, 1993, the Company issued $23.0 million of 8 3/8% subordinated  notes
due  2003.  All of these  notes  were  redeemed  on May 20,  2002 at the  stated
liquidation amount ($101 per note) plus accrued interest to May 20, 2002.

In 1997,  the Company  issued $57.5  million of 8.75% Trust  Capital  Securities
through  Commerce  Capital Trust I, a Delaware  business trust subsidiary of the
Company.  All of these Trust Capital Securities were redeemed on July 1, 2002 at
the stated liquidation amount ($25 per capital security) plus accrued and unpaid
distributions thereon to July 1, 2002.

On March 11, 2002 the Company issued $200.0 million of 5.95%  Convertible  Trust
Capital  Securities  through  Commerce Capital Trust II, a newly formed Delaware
business  trust  subsidiary  of  the  Company.  The  Convertible  Trust  Capital
Securities mature in 2032.  Holders of the Convertible Trust Capital  Securities
may convert each security into 0.9478 shares of Company common stock, subject to
adjustment,  if (1) the closing sale price of Company  common stock for at least
20 trading  days in a period of 30  consecutive  trading days ending on the last
trading day of any calendar  quarter  beginning with the quarter ending June 30,
2002 is more than 110% of the Convertible  Trust Capital  Securities  conversion
price  ($52.75  at  December  31,  2002)  then in effect on the last day of such
calendar  quarter,  (2) the assigned credit rating by Moody's of the Convertible
Trust Capital  Securities is at or below Bal, (3) the Convertible  Trust Capital
Securities are called for redemption,  or (4) specified  corporate  transactions
have occurred.  All $200.0 million of the Convertible  Trust Capital  Securities
qualify as Tier 1 capital for regulatory  capital  purposes.  As of December 31,
2002, the Convertible  Trust Capital  Securities were not  convertible.  The net
proceeds of this offering were used for general  corporate  purposes,  including
the redemption of the Company's $57.5 million of 8.75% Trust Capital  Securities
on July 1, 2002 and the  repayment  of the  Company's  $23.0  million  of 8 3/8%
subordinated notes on May 20, 2002.


11. Income Taxes

The provision for income taxes consists of the following (in thousands):

---------------------------------------------------------------------
                            2002             2001           2000
---------------------------------------------------------------------
Current:
     Federal               $62,660         $52,085          $40,563
     State                   4,069             658              604
Deferred:
     Federal                 6,359          (4,054)          (2,812)
---------------------------------------------------------------------
                           $73,088         $48,689          $38,355
---------------------------------------------------------------------

The above  provision  includes  income taxes related to securities  gains of $0,
$400 thousand and $1.1 million for 2002, 2001 and 2000, respectively.
<TABLE>
<CAPTION>

The provision for income taxes differs from the expected statutory provision as
follows:

----------------------------------------------------------------------------------------------------------
                                                                2002             2001            2000
----------------------------------------------------------------------------------------------------------
<S>                                                              <C>             <C>              <C>
Expected provision at statutory rate:                            35.0%           35.0%            35.0%
Difference resulting from:
     Tax-exempt interest on loans                                (1.7)           (2.0)            (1.4)
     Tax-exempt interest on securities                           (1.8)           (1.8)            (2.1)
     State income taxes (net of federal benefit)                  1.2             0.3              0.3
     Purchase accounting adjustments                              0.0             0.1              0.1
     Other, including acquisition costs                           0.8             0.5              0.5
----------------------------------------------------------------------------------------------------------
                                                                 33.5%           32.1%            32.4%
----------------------------------------------------------------------------------------------------------
</TABLE>

Deferred  income  taxes  reflect  the net tax effects of  temporary  differences
between the carrying  amounts of assets and liabilities for financial  reporting
purposes and the amounts used for income tax purposes.


                                                                              33
<PAGE>




The significant  components of the Company's deferred tax liabilities and assets
as of December 31, 2002 and 2001 are as follows (in thousands):
<TABLE>
<CAPTION>

----------------------------------------------------------------------------------------------------------
                                                                             2002              2001
----------------------------------------------------------------------------------------------------------
Deferred tax assets:
<S>                                                                        <C>                <C>
     Loan loss reserves                                                    $30,960            $22,359
     Intangibles                                                             2,837              3,153
     Other reserves                                                          2,702              2,645
     Other                                                                     274              2,711
----------------------------------------------------------------------------------------------------------
Total deferred tax assets                                                   36,773             30,868
----------------------------------------------------------------------------------------------------------
Deferred tax liabilities:
     Depreciation                                                          (16,157)            (4,979)
     Fair value adjustment, available for sale securities                  (64,167)            (8,620)
     Other                                                                  (2,875)            (1,788)
----------------------------------------------------------------------------------------------------------
Total deferred tax liabilities                                             (83,199)           (15,387)
----------------------------------------------------------------------------------------------------------
Net deferred (liabilities) assets                                         $(46,426)           $15,481
----------------------------------------------------------------------------------------------------------
</TABLE>

No valuation allowance was recognized for the deferred tax assets at December
31, 2002 and 2001, respectively.


12. Commitments and Letters of Credit

In the normal course of business,  there are various outstanding  commitments to
extend  credit,  such as  letters  of  credit,  which are not  reflected  in the
accompanying  consolidated financial statements.  These arrangements have credit
risk  essentially  the same as that involved in extending loans to customers and
are subject to the  Company's  normal  credit  policies.  Collateral is obtained
based on management's  credit assessment of the borrower.  At December 31, 2002,
the Company had  outstanding  standby  letters of credit in the amount of $368.5
million.

In addition,  the Company is committed as of December 31, 2002 to advance $307.8
million on construction loans, $606.3 million on home equity lines of credit and
$1.2  billion  on lines of credit.  All other  commitments  total  approximately
$450.1 million.  The Company anticipates no material losses as a result of these
transactions.


13. Common Stock

At December 31, 2002, the Company's  common stock had a par value of $1.00.  The
Company had 150,000,000 shares authorized as of this date.

On December 17, 2002, the Board of Directors  declared a cash dividend of $0.165
for  each  share  of  common  stock  outstanding  payable  January  20,  2003 to
shareholders  of record on January 6, 2003.  On November 21, 2001,  the Board of
Directors  declared  a 2 for 1 stock  split  payable  on  December  18,  2001 to
shareholders of record on December 3, 2001. Additionally, the Board adjusted the
par value per share to $1.00 from $1.5625.





34
<PAGE>
<TABLE>
<CAPTION>




14. Earnings Per Share

The  calculation  of earnings per share  follows (in  thousands,  except for per
share amounts):

  --------------------------------------------------------------------------------------------------------
                                                                       Year Ended December 31,
                                                            ----------------------------------------------
  (dollars in thousands)                                         2002            2001           2000
  --------------------------------------------------------------------------------------------------------
<S>                                                             <C>              <C>           <C>
  Basic:
  Net income applicable to common stock                         $144,815         $103,022      $80,047
  --------------------------------------------------------------------------------------------------------
  Average common shares outstanding                               66,795           64,666       61,755
  --------------------------------------------------------------------------------------------------------
  Net income per common share                                      $2.16            $1.59        $1.30
  --------------------------------------------------------------------------------------------------------

  Diluted:
  Net income applicable to common stock
       on a diluted basis                                       $144,815         $103,022      $80,047
  --------------------------------------------------------------------------------------------------------

  Average common shares outstanding                               66,795           64,666       61,755
  Additional shares considered in diluted
       computation assuming:
         Exercise of stock options                                 4,108            3,436        2,468
  --------------------------------------------------------------------------------------------------------

  Average common and common equivalent
       shares outstanding                                         70,903           68,102       64,223
  --------------------------------------------------------------------------------------------------------

  Net income per common and common
       equivalent share                                            $2.04            $1.51        $1.25
  --------------------------------------------------------------------------------------------------------
</TABLE>


15.  Benefit Plans

Employee Stock Option Plan

The Company has the 1997 Employee  Stock Option Plan (the Plan) for the officers
and  employees  of the  Company and its  subsidiaries  as well as a plan for its
non-employee  directors.  The Plan  authorizes  the issuance of up to 17,234,000
shares of common stock (as adjusted  for stock  dividends)  upon the exercise of
options.  As of December  31,  2002,  options to purchase  11,844,480  shares of
common  stock have been  issued  under the Plan.  The option  price for  options
issued under the Plan must be at least equal to 100% of the fair market value of
the Company's  common stock as of the date the option is granted.  These options
generally  become  exercisable to the extent of 25% annually  beginning one year
from the date of grant,  although the amount exercisable beginning one year from
the date of grant may be greater  depending on the employees' length of service.
All  options  granted  after  December  31,  2002 will  vest  over  four  years,
regardless of the years of service.  The options  expire not later than 10 years
from the date of grant. In addition,  there are options  outstanding  from prior
stock option plans of the Company,  which were granted under similar  terms.  No
additional options may be issued under these prior plans.




                                                                              35
<PAGE>
<TABLE>
<CAPTION>



Information concerning option activity for the periods indicated is as follows:

  --------------------------------------------------------------------------------------------------------
                                                          Shares Under               Weighted Average
                                                             Option                   Exercise Price
  --------------------------------------------------------------------------------------------------------
<S>                  <C>                                    <C>                             <C>
  Balance at January 1, 2000                                10,391,936                      15.39
  Options granted                                               98,000                      18.25
  Options exercised                                          1,521,224                      11.94
  Options canceled                                             314,662                      20.21
  Balance at December 31, 2000                               8,654,050                      15.86
  --------------------------------------------------------------------------------------------------------
  Options granted                                            2,695,050                      30.68
  Options exercised                                          1,092,393                      14.70
  Options canceled                                              74,017                      26.30
  Balance at December 31, 2001                              10,182,690                      19.83
  --------------------------------------------------------------------------------------------------------
  Options granted                                            2,088,744                      40.40
  Options exercised                                            974,145                      18.59
  Options canceled                                             248,736                      29.69
  Balance at December 31, 2002                              11,048,553                      23.71
  --------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>

Information concerning options outstanding as of December 31, 2002 is as
follows:

  --------------------------------------------------------------------------------------------------------
                                          Options Outstanding                    Options Exercisable
  --------------------------------------------------------------------------------------------------------
                                           Weighted-Average    Weighted-      Exercisable     Weighted
  Range of                       Number       Remaining         Average          as of        Average
  Exercise prices             Outstanding  Contractual Life  Exercise Price   12/31/2002   Exercise Price
  --------------------------------------------------------------------------------------------------------
<S>                             <C>               <C>            <C>            <C>             <C>
  $2.37 to $10.00               1,835,405         2.7            $ 7.22         1,835,405       $ 7.22
  $10.01 to $20.00              2,730,702         6.1             17.95         2,526,510        17.86
  $20.01 to $49.37              6,482,446         7.5             30.80         3,745,532        25.60
  --------------------------------------------------------------------------------------------------------
</TABLE>

Employee Stock Ownership Plan

The Company maintains an Employee Stock Ownership Plan (ESOP) for the benefit of
its officers and employees who meet age and service requirements. As of December
31, 2002, the ESOP held 1,630,000  shares of the Company's  common stock, all of
which  were  allocated  to  participant  accounts.  Employer  contributions  are
determined at the discretion of the Board of Directors.  No contribution expense
was recorded in 2002. The total expense  associated  with the ESOP for both 2001
and 2000 was $100,000.  Effective  January 1, 2002, the ESOP was merged with and
into the Commerce  Bancorp,  Inc. 401 (k)  Retirement  Plan to allow for greater
administrative efficiencies.

Employee 401(k) Plan

The Company has a defined contribution plan under Section 401(k) of the Internal
Revenue  Code.  The plan allows all eligible  employees to defer a percentage of
their  income on a pretax basis  through  contributions  to the plan.  Under the
provisions  of the plan,  the Company may match a percentage  of the  employees'
contributions  subject to a maximum limit.  The charge to operations for Company
contributions was $2.8 million and $2.2 million for 2002 and 2001, respectively.
No employer matching contributions were made for 2000.

Post-employment or Post-retirement Benefits

The Company offers no post-employment or post-retirement benefits.



36
<PAGE>




16. Fair Value of Financial Instruments

FASB Statement No. 107, "Disclosures about Fair Value of Financial  Instruments"
(FAS  107),  requires  disclosure  of fair  value  information  about  financial
instruments,  whether or not  recognized in the balance  sheet,  for which it is
practicable to estimate that value.  In cases where quoted market prices are not
available,  fair  values are based on  estimates  using  present  value or other
valuation  techniques.  Those  techniques  are  significantly  affected  by  the
assumptions  used,  including  the  discount  rate and  estimates of future cash
flows. In that regard,  the derived fair value estimates cannot be substantiated
by comparison to independent  markets and, in many cases,  could not be realized
in immediate  settlement of the instrument.  FAS 107 excludes certain  financial
instruments and all non-financial  instruments from its disclosure requirements.
Accordingly,  the aggregate  fair value  amounts  presented do not represent the
underlying value of the Company.

The  following  table  represents  the  carrying  amounts and fair values of the
Company's financial instruments at December 31, 2002 and 2001:
<TABLE>
<CAPTION>

----------------------------------------------------------------------------------------------------------
                                                                    December 31,
                                            --------------------------------------------------------------
                                                         2002                           2001
----------------------------------------------------------------------------------------------------------
                                               Carrying          Fair         Carrying          Fair
                                                Amount          Value          Amount          Value
----------------------------------------------------------------------------------------------------------
<S>                                           <C>             <C>             <C>            <C>
Financial assets:
     Cash and cash equivalents                $  811,434      $  811,434      $  557,738     $  557,738
     Loans held for sale                          96,920          96,920          73,261         73,261
     Trading securities                          326,479         326,479         282,811        282,811
     Investment securities                     8,569,805       8,598,668       5,284,876      5,299,049
     Loans (net)                               5,731,856       5,768,650       4,516,431      4,652,219

Financial liabilities:
     Deposits                                 14,548,841      14,576,800      10,185,594     10,209,099
     Other borrowed money                        391,641         391,641         264,554        264,554
     Long-term debt                              200,000         222,000          80,500         82,352
----------------------------------------------------------------------------------------------------------
Off-balance sheet instruments:
     Standby letters of credit                                $    3,685                     $    1,616
     Commitments to extend credit                                  1,324                          1,210
</TABLE>

The following methods and assumptions were used by the Company in estimating its
fair value disclosures for financial instruments:

Cash and cash  equivalents,  loans  held for sale and  trading  securities:  The
carrying amounts reported approximate those assets' fair value.

Investment securities: Fair values for investment securities are based on quoted
market prices, where available. If quoted market prices are not available,  fair
values are based on quoted market prices of comparable instruments.

Loans: For variable-rate  loans that reprice  frequently and with no significant
change in credit risk, fair values are based on carrying values. The fair values
for other loans  receivable were estimated using  discounted cash flow analyses,
using  interest  rates  currently  being offered for loans with similar terms to
borrowers  of similar  credit  quality.  Loans with  significant  collectibility
concerns were fair valued on a loan-by-loan  basis  utilizing a discounted  cash
flow  method.  The carrying  amount of accrued  interest  approximates  its fair
value.

Deposit  liabilities:  The fair  values  disclosed  for demand  deposits  (e.g.,
interest-bearing and noninterest-bearing checking, passbook savings, and certain
types of money market accounts) are, by definition,  equal to the amount payable
on demand at the reporting date (i.e., their carrying amounts).  Fair values for
fixed-rate  certificates  of deposit are estimated  using a discounted cash flow
calculation  that applies interest rates currently being offered on certificates
of deposit to a schedule  of  aggregated  expected  monthly  maturities  on time
deposits.


                                                                              37
<PAGE>


Other borrowed money: The carrying amounts reported approximate fair value.

Long-term debt: Current quoted market prices were used to estimate fair value.

Off-balance  sheet  liabilities:  Off-balance  sheet  liabilities of the Company
consist of letters of credit,  loan  commitments  and unfunded  lines of credit.
Fair values for the Company's  off-balance  sheet  liabilities are based on fees
currently  charged to enter into  similar  agreements,  taking into  account the
remaining terms of the agreements and the counterparties' credit standing.

17. Quarterly Financial Data (unaudited)


The following  represents  summarized  unaudited quarterly financial data of the
Company which, in the opinion of management,  reflects  adjustments  (comprising
only normal recurring  accruals)  necessary for fair presentation (in thousands,
except per share amounts):
<TABLE>
<CAPTION>


 ---------------------------------------------------------------------------------------------------------
                                                              Three Months Ended
 ---------------------------------------------------------------------------------------------------------
                                     December 31      September 30          June 30         March 31
 ---------------------------------------------------------------------------------------------------------
<S>                                       <C>              <C>              <C>             <C>
 2002
 Interest income                          $202,024         $196,775         $188,368        $168,204
 Interest expense                           42,528           46,221           49,742           44,125
 Net interest income                       159,496          150,554          138,626          124,079
 Provision for loan losses                   8,000            8,000           10,250            6,900
 Provision for federal and state
    income taxes                            20,258           19,669           17,763           15,398
 Net income                                 40,574           37,689           34,802           31,750

 Net income per common share:
 Basic                                    $   0.60         $   0.56         $   0.52         $   0.48
 Diluted                                      0.57             0.53             0.49             0.45

 2001
 Interest income                          $161,198         $152,981         $147,109         $143,079
 Interest expense                           43,728           50,268           51,706           57,339
 Net interest income                       117,470          102,713           95,403           85,740
 Provision for loan losses                   7,458            6,335            7,982            4,609
 Net investment securities gains                                                                  980
 Provision for federal and state
    income taxes                            13,175           12,278           11,752           11,484
 Net income                                 28,230           26,281           25,110           23,401

 Net income per common share:
 Basic                                    $   0.43         $   0.40         $   0.39         $   0.37
 Diluted                                      0.41             0.38             0.37             0.35

</TABLE>



38
<PAGE>
<TABLE>
<CAPTION>

18.   Condensed Financial Statements of the Parent Company and Other Matters

Balance Sheets

-----------------------------------------------------------------------------------------------------------
                                                                              December 31,
-----------------------------------------------------------------------------------------------------------
(dollars in thousands)                                                 2002                   2001
-----------------------------------------------------------------------------------------------------------
<S>                                                                   <C>                       <C>
Assets
Cash                                                                  $    3,034                $  1,002
Securities available for sale                                             24,059                  35,842
Investment in subsidiaries                                             1,094,635                 700,747
Other assets                                                               9,452                  11,534
-----------------------------------------------------------------------------------------------------------
                                                                      $1,131,180                $749,125
-----------------------------------------------------------------------------------------------------------
Liabilities
Other liabilities                                                     $   13,170                $ 32,055
Trust Capital Securities                                                                          57,500
Convertible Trust Capital Securities                                     200,000
Long-term debt                                                                                    23,000
-----------------------------------------------------------------------------------------------------------
                                                                         213,170                 112,555
-----------------------------------------------------------------------------------------------------------
Stockholders' equity
Common stock                                                              68,043                  65,833
Capital in excess of par or stated value                                 538,795                 461,897
Retained earnings                                                        199,604                  94,698
Accumulated other comprehensive income                                   113,614                  15,764
-----------------------------------------------------------------------------------------------------------
                                                                         920,056                 638,192
Less treasury stock                                                        2,046                   1,622
-----------------------------------------------------------------------------------------------------------
     Total stockholders' equity                                          918,010                 636,570
-----------------------------------------------------------------------------------------------------------
                                                                      $1,131,180                $749,125
-----------------------------------------------------------------------------------------------------------

Statements of Income

-----------------------------------------------------------------------------------------------------------
                                                                        Year Ended December 31,
-----------------------------------------------------------------------------------------------------------
(dollars in thousands)                                             2002            2001           2000
-----------------------------------------------------------------------------------------------------------
Income:
     Dividends from subsidiaries                                 $  9,600        $ 22,400        $ 9,150
     Interest income                                                  552             454            497
     Other                                                          2,826           7,022          5,652
-----------------------------------------------------------------------------------------------------------
                                                                   12,978          29,876         15,299
-----------------------------------------------------------------------------------------------------------
Expenses:
     Interest expense                                              15,554           7,258          7,244
     Operating expenses                                             4,460           3,214          2,352
-----------------------------------------------------------------------------------------------------------
                                                                   20,014          10,472          9,596
(Loss) income before income taxes and equity
     in undistributed income of subsidiaries                       (7,036)         19,404          5,703
Income tax (benefit) expense                                       (5,757)          1,004          1,274
-----------------------------------------------------------------------------------------------------------
                                                                   (1,279)         20,408          6,977
Equity in undistributed income of subsidiaries                    146,094          82,614         73,070
-----------------------------------------------------------------------------------------------------------
Net income                                                       $144,815        $103,022        $80,047
-----------------------------------------------------------------------------------------------------------
</TABLE>



                                                                              39
<PAGE>
<TABLE>
<CAPTION>


Statements of Cash Flows

------------------------------------------------------------------------------------------------------------
                                                                          Year Ended December 31,
------------------------------------------------------------------------------------------------------------
(dollars in thousands)                                              2002           2001           2000
------------------------------------------------------------------------------------------------------------
<S>                                                                <C>            <C>             <C>

Operating activities:
   Net income                                                      $144,815       $103,022        $80,047
   Adjustments to reconcile net income to net
     cash provided by operating activities:
       Undistributed income of subsidiaries                        (146,094)       (82,614)       (73,070)
       Gains on sales of securities available for sale                                 470
       Decrease (increase) in other assets                            2,082          4,484         (4,430)
       (Decrease) increase in other liabilities                     (11,509)        17,874          1,723
------------------------------------------------------------------------------------------------------------
         Net cash (used) provided by operating activities           (10,706)        43,236          4,270
Investing activities:
   Investments in subsidiaries                                     (145,520)       (62,667)       (28,770)
   Proceeds from sale of securities available for sale                3,018          1,828          9,997
   Proceeds from the maturity of securities available for sale       95,972         66,422        117,863
   Purchase of securities available for sale                        (91,414)       (66,864)      (126,522)
   Other                                                                 19            352            (38)
------------------------------------------------------------------------------------------------------------
         Net cash used by investing activities                     (137,925)       (60,929)       (27,470)
Financing activities:
   Proceeds from issuance of common stock
     under dividend reinvestment and other stock plans               66,809         53,005         53,670
   Cash dividends                                                   (39,911)       (35,400)       (29,761)
Issuance of Convertible Trust Capital Securities                    206,186
Redemption of Trust Capital Securities                              (59,000)
Decrease in long-term debt                                          (23,000)
Other                                                                  (421)
------------------------------------------------------------------------------------------------------------
         Net cash provided by financing
          Activities                                                150,663         17,605         23,909
Increase (decrease) in cash and cash equivalents                      2,032            (88)           709
Cash and cash equivalents at beginning of year                        1,002          1,090            381
------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year                           $  3,034       $  1,002        $ 1,090
------------------------------------------------------------------------------------------------------------
Supplemental disclosures of cash flow information:
Cash paid during the period for:
     Interest                                                      $ 13,551       $  7,089        $ 7,089
     Income taxes                                                    56,586         48,616         36,135
------------------------------------------------------------------------------------------------------------
</TABLE>



40
<PAGE>



Holders of common  stock of the Company are entitled to receive  dividends  when
declared by the Board of Directors out of funds legally available. Under the New
Jersey  Business  Corporation  Act, the Company may pay dividends  only if it is
solvent and would not be rendered  insolvent by the dividend payment and only to
the extent of surplus  (the  excess of the net  assets of the  Company  over its
stated capital).

The approval of the  Comptroller of the Currency is required for a national bank
to pay  dividends if the total of all  dividends  declared in any calendar  year
exceeds net profits (as  defined) for that year  combined  with its retained net
profits for the preceding two calendar years. New Jersey state banks are subject
to similar dividend  restrictions.  Commerce NJ, Commerce PA, Commerce Shore and
Commerce  North can declare  dividends  in 2003 without  additional  approval of
approximately  $96.0 million,  $52.6  million,  $42.9 million and $45.7 million,
respectively, plus an additional amount equal to each bank's net profit for 2003
up to the date of any such dividend declaration.

The Federal Reserve Act requires the extension of credit by any of the Company's
banking  subsidiaries to certain  affiliates,  including Commerce Bancorp,  Inc.
(parent), be secured by readily marketable securities,  that extension of credit
to any one  affiliate  be limited to 10% of the capital and capital in excess of
par or stated  value,  as  defined,  and that  extensions  of credit to all such
affiliates  be limited to 20% of capital  and capital in excess of par or stated
value.  At  December  31,  2002  and  2001,  the  Company  complied  with  these
guidelines.

The  Company and its  subsidiaries  are  subject to various  regulatory  capital
requirements  administered  by the  federal  banking  agencies.  Failure to meet
minimum  capital  requirements  can  initiate  certain  mandatory  and  possibly
additional discretionary actions by regulators that, if undertaken, could have a
direct  material  effect on the Company's  financial  statements.  Under capital
adequacy  guidelines and the regulatory  framework for prompt corrective action,
the Company must meet specific guidelines that involve quantitative  measures of
the  Company's  assets,  liabilities,  and  certain  off-balance-sheet  items as
calculated under regulatory accounting practices.  The Company's capital amounts
and classification  are also subject to qualitative  judgments by the regulators
about components,  risk weightings,  and other factors.  As of December 31, 2002
and 2001,  the  Company and each of its  subsidiary  banks were  categorized  as
well-capitalized  under the regulatory  framework for prompt corrective  action.
There are no  conditions  or events  since  December  31,  2002 that  management
believes have changed any subsidiary bank's capital category.

Quantitative  measures  established  by  regulation to ensure  capital  adequacy
require the Company and its  subsidiaries to maintain minimum amounts and ratios
of total and Tier I capital (as defined in the regulations) to risk-based assets
(as defined) and of Tier I capital to average assets (as defined),  or leverage.
Management  believes,  as of  December  31,  2002,  that  the  Company  and  its
subsidiaries meet all capital adequacy requirements to which they are subject.



                                                                              41
<PAGE>

<TABLE>
<CAPTION>


The following  table  presents the Company's  and Commerce NJ's  risk-based  and
leverage capital ratios at December 31, 2002 and 2001:

-----------------------------------------------------------------------------------------------------------
                                                                       Per Regulatory Guidelines
-----------------------------------------------------------------------------------------------------------
                                              Actual                 Minimum         "Well Capitalized"
-----------------------------------------------------------------------------------------------------------
                                      Amount       Ratio      Amount      Ratio      Amount       Ratio
-----------------------------------------------------------------------------------------------------------
<S>                                      <C>         <C>         <C>       <C>          <C>         <C>

December 31, 2002
Company
   Risk based capital ratios:
     Tier I                              $995,826    11.47%      $347,373  4.00%        $521,059    6.00%
     Total capital                      1,086,559    12.51        697.746  8.00          868,432   10.00
   Leverage ratio                         995,826     6.37        625,219  4.00          781,524    5.00

Commerce NJ Risk based capital ratios:
     Tier 1                              $526,612     9.77       $215,519  4.00%        $323,279    6.00%
     Total capital                        586,328    10.88        431,039  8.00          538,799   10.00
   Leverage ratio                         526,612     5.75        366,657  4.00          458,321    5.00

December 31, 2001
Company
   Risk based capital ratios:
     Tier I                              $675,015    10.81%      $249,780  4.00%        $374,670    6.00%
     Total capital                        746,596    11.96        499,561  8.00          624,451   10.00
   Leverage ratio                         675,015     6.24        432,502  4.00          540,628    5.00

Commerce NJ Risk based capital ratios:
     Tier 1                              $375,144     9.61%      $156,111  4.00%        $234,167    6.00%
     Total capital                        419,926    10.76        312,222  8.00          390,278   10.00
   Leverage ratio                         375,144     6.01        249,852  4.00          312,315    5.00
</TABLE>



42
<PAGE>


19. Segment Reporting


The Company operates one reportable segment of business,  Community Banks, which
includes Commerce NJ, Commerce PA, Commerce Shore,  Commerce North, and Commerce
Delaware.  Through its Community  Banks,  the Company  provides a broad range of
retail  and  commercial   banking   services,   and  corporate  trust  services.
Parent/Other includes the holding company, Commerce Insurance (whose revenues of
$55.9  million,  $49.8  million,  and $45.6  million  in 2002,  2001,  and 2000,
respectively,  were reported in other operating income), CCMI (whose noninterest
revenues of $35.1 million,  $22.8 million,  and $15.3 million in 2002, 2001, and
2000, respectively,  were reported in other operating income),  Commerce Capital
Trust I and Commerce Capital Trust II.

Selected segment information for each of the three years ended December 31 is as
follows (in thousands):
<TABLE>
<CAPTION>

 ----------------------------------------------------------------------------------------------------------
                              2002                          2001                         2000
 ----------------------------------------------------------------------------------------------------------
                  Community  Parent/           Community  Parent/            Community  Parent/
                    Banks     Other     Total    Banks     Other     Total     Banks     Other    Total
 ----------------------------------------------------------------------------------------------------------
<S>                <C>       <C>      <C>      <C>          <C>   <C>        <C>        <C>      <C>
 Net interest      $579,687  $(6,932) $572,755 $ 402,040    $(714)$ 401,326  $298,985   $(2,055) $296,930
 income
 Provision for
 loan losses         33,150        -    33,150    26,384             26,384    13,931              13,931

 ----------------------------------------------------------------------------------------------------------
 Net interest
 income after       546,537   (6,932)  539,605   375,656     (714)  374,942   285,054    (2,055)  282,999
   provision
 Noninterest        166,384   91,082   257,466   125,418   71,387   196,805    90,464    60,296   150,760
 income
 Noninterest        500,522   78,646   579,168   358,870   61,166   420,036   263,001    52,356   315,357
 expense
 ----------------------------------------------------------------------------------------------------------
 Income
   before income    212,399    5,504   217,903   142,204    9,507   151,711   112,517     5,885   118,402
     taxes
 Income tax
   expense           72,839      249    73,088    46,630    2,059    48,689    35,255     3,100    38,355
 ----------------------------------------------------------------------------------------------------------
 Net income        $139,560   $5,255  $144,815 $  95,574 $  7,448 $ 103,022   $77,262    $2,785   $80,047
 ----------------------------------------------------------------------------------------------------------
 Average assets
     (in millions)  $12,192   $1,560   $13,752    $8,548 $    999    $9,547   $ 6,626      $723    $7,349
 ----------------------------------------------------------------------------------------------------------
</TABLE>

The  financial  information  for each  segment  is  reported  on the basis  used
internally by the Company's management to evaluate  performance.  Measurement of
the  performance  of each  segment is based on the  management  structure of the
Company and is not necessarily  comparable with financial information from other
entities.  The  information  presented  is  not  necessarily  indicative  of the
segment's  results of operations if each of the Community Banks were independent
entities.

<PAGE>

20. Derivative Financial Instruments

As part of CCMI's  broker-dealer  activities,  the  Company  maintains a trading
securities  portfolio for  distribution  to its customers in order to meet those
customers' needs. In order to reduce the exposure to market risk relating to the
inventory,  the  Company  buys  and  sells a  variety  of  derivative  financial
instruments including futures and option contracts. Market risk includes changes
in interest rates or value fluctuations in the underlying financial instruments.
The Company uses notional  (contract)  amounts to measure  derivative  activity.
Notional amounts are not included on the balance sheet, as those amounts are not
actually paid or received at settlement.  The following  table reflects the open
commitments for futures and options and the associated unrealized gains (losses)
for the years ended December 31, 2002 and 2001, respectively:
<TABLE>
<CAPTION>

  ----------------------------------------------------------------------------------------------
                                       Notional Unrealized
                                              Amount                        Gain (Loss)
                                           Long (Short)                         Net
  ----------------------------------------------------------------------------------------------
<S>                                     <C>                <C>        <C>             <C>
                                            2002       2001             2002            2001
  Municipal bond futures                $ 36,500    $ (62,600)        $  278          $  241
  Treasury bond futures                  (60,000)       1,000         (2,537)            (36)
  Treasury bond put options               45,000        6,500            (23)            (43)
  Treasury bond call options            (105,000)     (76,000)        (1,342)            (46)
  -----------------------------------------------------------------------------------------------
  Total                                 $(83,500)   $(131,100)       $(3,624)           $116
  -----------------------------------------------------------------------------------------------
</TABLE>

The average  notional  amount for futures  and options  contracts  for the years
ended  December  31,  2002 and 2001  was  $106.7  million  and  $151.2  million,
respectively.  Realized and  unrealized  gains and losses  related to derivative
financial instruments are included in other operating income in the statement of
income.

                                                                              43
<PAGE>

The Board of Directors and Stockholders
Commerce Bancorp, Inc. and Subsidiaries

We have  audited  the  accompanying  consolidated  balance  sheets  of  Commerce
Bancorp,  Inc. and Subsidiaries as of December 31, 2002 and 2001 and the related
consolidated  statements of income,  changes in stockholders'  equity,  and cash
flows for each of the three years in the period ended  December 31, 2002.  These
financial  statements are the  responsibility of the Company'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,  based on our audits, the financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Commerce  Bancorp,  Inc. and Subsidiaries at December 31, 2002 and 2001, and the
consolidated  results of their  operations  and their cash flows for each of the
three years in the period ended December 31, 2002 in conformity  with accounting
principles generally accepted in the United States.


                                                               Ernst & Young LLP

Philadelphia, Pennsylvania
February 7, 2003


44
<PAGE>




Item  9.  Changes  in and  Disagreements  with  Accountants  on  Accounting  and
Financial Disclosure.

None.
                                    Part III

Item 10. Directors and Executive Officers of Registrant.

     The information called for by this item is incorporated by reference to the
Company's  definitive  proxy  statement  relating to its 2003 Annual  Meeting of
Shareholders, which will be filed with the SEC.

Item 11. Executive Compensation.

     The information called for by this item is incorporated by reference to the
Company's  definitive  proxy  statement  relating to its 2003 Annual  Meeting of
Shareholders,  which will be filed with the SEC.

Item 12.  Security  Ownership of Certain  Beneficial  Owners and  Management and
Related Stockholder Matters.

     The information called for by this item is incorporated by reference to the
Company's  definitive  proxy  statement  relating to its 2003 Annual  Meeting of
Shareholders,  which will be filed with the SEC.

The following table details information  regarding the company's existing equity
compensation plans as of December 31, 2002:

<TABLE>
<CAPTION>

                                                     (a)                       (b)                           (c)
                                                                                                Number of securities remaining
                                           Number of securities to       Weighted-average       available for future issuance
                                           be issued upon exercise      exercise price of      under equity compensation plans
                                           of outstanding options,     outsatnding options,         (excluding securities
                                             warrants and rights       warrants and rights        refelected in column (a))
                                           ------------------------- ------------------------- ---------------------------------
<S>                                              <C>                       <C>                          <C>
Equity compensation plans approved by             11,048,553                 $23.71                      5,389,520
security holders
                                           ------------------------- ------------------------- ---------------------------------
Total                                             11,048,553                  $23.71                     5,389,520
                                           ========================= ========================= =================================

</TABLE>

Item 13. Certain Relationships and Related Transactions.

     The information called for by this item is incorporated by reference to the
Company's  definitive  proxy  statement  relating to its 2003 Annual  Meeting of
Shareholders, which will be filed with the SEC.

Item 14. Controls and Procedures

     Quarterly  evaluation  of the  Company's  Disclosure  Controls and Internal
Controls.  Within  the 90 days prior to the date of this  Annual  Report on Form
10-K, the Company evaluated the effectiveness of the design and operation of its
"disclosure controls and procedures"  ("Disclosure  Controls").  This evaluation
("Controls   Evaluation")   was  done  under  the   supervision   and  with  the
participation of management,  including the Chief Executive  Officer ("CEO") and
Chief Financial Officer ("CFO").

     Limitations on the  Effectiveness  of Controls.  The Company's  management,
including the CEO and CFO, does not expect that its  Disclosure  Controls or its
"internal controls and procedures for financial reporting"  ("Internal Controls"
) will  prevent all error and all fraud.  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.  These inherent  limitations include
the  realities  that  judgments  in  decision-making  can be  faulty,  and  that
breakdowns can occur because of simple error or mistake. Additionally,  controls
can be circumvented by the individual acts of some persons,  by collusion of two
or more people,  or by  management  override of the  control.  The design of any
system of  controls  also is based in part upon  certain  assumptions  about the
likelihood of future events,  and there can be no assurance that any design will
succeed in achieving  its stated goals under all  potential  future  conditions;
over time,  control may become inadequate  because of changes in conditions,  or
the degree of  compliance  with the  policies  or  procedures  may  deteriorate.
Because  of  the  inherent  limitations  in  a  cost-effective  control  system,
misstatements due to error or fraud may occur and not be detected.

     Conclusions.  Based  upon  the  Controls  Evaluation,  the CEO and CFO have
concluded that, subject to the limitations noted above, the Disclosure  Controls
are effective to timely alert management to material information relating to the
Company during the period when its periodic reports are being prepared.

     In accordance with SEC  requirements,  the CEO and CFO note that, since the
date of the Controls  Evaluation to the date of this Annual  Report,  there have
been no significant  changes in Internal Controls or in other factors that could
significantly  affect Internal  Controls,  including any corrective actions with
regard to significant deficiencies and material weaknesses.



                                                                              45
<PAGE>



                                     Part IV

Item 15.   Exhibits, Financial Statement Schedules and Reports on Form 8-K

(a)(1) The following financial statements of Commerce Bancorp, Inc. and
       Subsidiaries are filed as part of this Form 10-K in Item 8:

     Consolidated Balance Sheets as of December 31, 2002 and 2001

     Consolidated  Statements  of Income for the years ended  December 31, 2002,
     2001 and 2000

     Consolidated  Statements  of Cash Flows for the years  ended  December  31,
     2002, 2001 and 2000

     Consolidated  Statements of Changes in  Shareholders'  Equity for the years
     ended December 31, 2002, 2001 and 2000

     Notes to Consolidated Financial Statements

     Report of Independent Auditors

(a)(2) Schedules

         All  schedules  have been  omitted  since the required  information  is
         included in the financial  statements or the notes  thereto,  or is not
         applicable.
<TABLE>
<CAPTION>

(a) (3) - Exhibits:
               <S>                   <C>

                  3.1      Restated Certificate of Incorporation of the Company, as amended.
                  3.2      By-laws of the Company, as amended.
                  4.1      Certificate of Trust of Commerce Capital Trust II, a
                           Delaware statutory trust, filed March 4, 2002. (Q)
                  4.2      Declaration of Trust of Commerce Capital Trust II, dated as of
                           March 4, 2002, among Commerce
                           Bancorp, Inc., as Depositor, The Bank of New York, as Property Trustee, The Bank of New York (Delaware),
                           as Delaware Trustee and the Administrative Trustees named therein. (Q)
                  4.3      Amended and Restated Declaration of Trust of Commerce Capital Trust II, dated as of March 11, 2002, among
                           Commerce Bancorp, Inc., as Sponsor, The Bank of New York, as Property Trustee, The Bank of New York
                           (Delaware), as Delaware Trustee, the Administrative Trustees, and the holders from time to time of
                           undivided beneficial interests in the assets of the Trust, including form of 5.95% Convertible Trust
                           Preferred Security. (Q)
                  4.4      Indenture, dated as of March 11, 2002, between Commerce Bancorp, Inc. and The Bank of New York as
                           Debenture Trustee, including form of 5.95% Junior Subordinated Convertible Debenture due March 11, 2032.
                           (Q)
                  4.5      Registration Rights Agreement, dated March 11, 2002, among Commerce Bancorp, Inc., and Commerce Capital
                           Trust II, as issuers, and Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated on
                           behalf of itself and as representative of the other initial purchasers. (Q)
                  4.6      Guarantee Agreement, dated as of March 11, 2002, between Commerce Bancorp, Inc. and The Bank of New York,
                           as Guarantee Trustee. (Q)
                 10.1      Ground lease, dated July 1, 1984, between Commerce NJ and Group Four Equities,
                           relating to the branch office in Gloucester Township, New Jersey. (A)
                 10.2      Ground lease, dated April 15, 1986, between Commerce NJ and Mount Holly
                           Equities, relating to Commerce NJ's branch office in Mt. Holly, New Jersey. (C)
                *10.3      The Company's 1984 Incentive Stock Option Plan. (A)
                *10.4      The Company's Employee Stock Ownership Plan. (F)
                 10.5      Lease, dated March 29, 1985, between Commerce PA and Devon Properties (Ltd.),
                           and lease dated September 4, 1985, between Commerce PA and Devon Properties
                           (Ltd.), relating to Commerce PA's branch office in Devon, Pennsylvania. (B)
                 10.6      Assignment of Lease and Assumption Agreement dated November 30, 1987, between
                           the Company and Commerce PA, relating to Commerce PA's branch office in Devon,
                           Pennsylvania. (C)
                 10.7      Lease between the Company and Astoria Associates, relating to the Company's and
                           Commerce NJ's headquarters facilities. (B)
                 10.8      Ground lease, dated April 15, 1986, between Commerce NJ and U.S. Equities,
                           relating to one of Commerce NJ's branch offices in Washington Township, New
                           Jersey. (D)
                 10.9      Ground lease, dated February 1, 1988, between Commerce NJ and Diversified
                           Properties of New Jersey, relating to one of Commerce NJ's branch offices in
                           Washington Township, New Jersey. (D)
                10.10      Ground lease, dated February 15, 1988, between Commerce NJ and Diversified
                           Properties of New Jersey, relating to one of Commerce NJ's branch offices in Cherry
                           Hill, New Jersey. (D)
               *10.11      The Company's 1989 Stock Option Plan for Non-Employee Directors. (E)
               *10.12      A copy of employment contracts with Vernon W. Hill, II, C. Edward Jordan, Jr., and
                           Peter Musumeci, Jr., dated January 2, 1992. (G)



46
<PAGE>

               *10.13      A copy of the Retirement Plan for Outside Directors of Commerce Bancorp, Inc. (H)
               *10.14      The Company's 1994 Employee Stock Option Plan. (I)
               *10.15      The Company's 1997 Employee Stock Option Plan. (J)
               *10.16      A copy of employment contracts with Dennis M. DiFlorio and Robert D. Falese dated
                           January 1, 1998. (K)
                10.17      Ground lease, dated June 1, 1994, between Commerce NJ and Absecon Associates,
                           L.L.C., relating to Commerce NJ's branch office in Absecon, New Jersey. (K)
                10.18      Ground lease, dated September 11, 1995, between Commerce Shore and Whiting
                           Equities, L.L.C., relating to Commerce Shore's branch office in Manchester
                           Township, New Jersey. (K)
                10.19      Ground lease, dated November 1, 1995, between Commerce NJ and Evesboro
                           Associates, L.L.C., relating to Commerce NJ's branch office in Evesham Township,
                           New Jersey. (K)
                10.20      Ground lease, dated October 1, 1996, between Commerce NJ and Triad Equities,
                           L.L.C., relating to one of Commerce NJ's branch offices in Gloucester Township, New
                           Jersey. (K)
                10.21      Ground lease, dated October 11, 1996 and First Lease Amendment dated November 25, 1996 between
                           Commerce PA and Plymouth Equities, L.L.C., relating to Commerce PA's branch office in Plymouth Township,
                           PA. (K)
                10.22      Ground lease, dated January 16, 1998, between Commerce NJ and Ewing Equities,
                           L.L.C., relating to Commerce NJ's branch in Ewing, New Jersey. (M)
               *10.23      The Company's 1998 Stock Option Plan for Non-Employee Directors. (L)
                10.24      Ground lease, dated July 31, 1998, between Commerce NJ and English Creek
                           Properties, L.L.C., relating to Commerce NJ's branch in Egg Harbor Township,
                           New Jersey. (M)
                10.25      Ground lease, dated November 30, 1998, between Commerce Shore and Brick/Burnt
                           Tavern Equities, L.L.C., relating to Commerce Shore's branch office in Brick, New Jersey. (N)
                10.26      Ground lease, dated November 30, 1998, between Commerce Shore and Aberdeen Equities,
                           L.L.C., relating to Commerce Shore's branch office in Aberdeen, New Jersey. (N)
                10.27      Ground lease, dated November 30, 1998, between Commerce NJ and Hamilton/Wash
                           Properties, L.L.C., relating to Commerce NJ's branch
                           office in Hamilton Township, New Jersey. (N)
                10.28      Ground lease, dated April 2, 1999, between Commerce PA and Abington Equities, L.L.C.,
                           relating to Commerce PA's branch office in Abington
                           Township, Pennsylvania. (N)
                10.29      Ground lease, dated October, 1999, between Commerce PA and Bensalem Equities, L.L.C.,
                           relating to Commerce PA's branch office in Bensalem, Pennsylvania. (O)
                10.30      Ground lease, dated June 9, 2000, between Commerce NJ and Galloway Equities, L.L.C., relating
                           to Commerce NJ's branch office in Galloway, New Jersey. (O)
                10.31      Ground lease, dated December 11, 2000, between Commerce PA and Chadds Ford Equities, L.L.C.,
                           relating to Commerce PA's branch office in Chadds Ford, Pennsylvania. (P)
                10.32      Ground lease, dated March 10, 2000, between Commerce PA and Chalfont Equities, L.L.C., relating
                           to Commerce PA's branch office in New Britain Township, Pennsylvania. (P)
                10.33      Ground lease, dated January 4, 2001, between Commerce PA and Warminster Equities, L.L.C., relating
                           to Commerce PA's branch office in Warminster Township, Pennsylvania. (P)
                 21.1      Subsidiaries of the Company (incorporated by reference from PART I,
                           Item 1. "BUSINESS" of this Report on Form 10-K.)
                 23.1      Consent of Ernst & Young LLP.
                 99.1      Certification of the Company's Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted
                           pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
                 99.2      Certification of the Company's Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted
                           pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
                --------------
</TABLE>

                (A)      Incorporated by reference from the Company's
                         Registration Statement on Form S-1, and Amendments Nos.
                         I and 2 thereto (Registration No. 2-94189).
                (B)      Incorporated by reference from the Company's
                         Registration Statement on Form S-2 (Registration No
                         33-12603).
                (C)      Incorporated by reference from the Company's Annual
                         Report on Form 10-K for the fiscal year ended December
                         31, 1987.
                (D)      Incorporated by reference from the Company's Annual
                         Report on Form 10-K for the fiscal year ended December
                         31, 1988.
                (E)      Incorporated by reference from the Company's
                         Registration Statement on Form S-2 and Amendments Nos.
                         1 and 2 thereto (Registration No. 33-31042).


                                                                              47
<PAGE>

                (F)      Incorporated by reference from the Company's Annual
                         Report on Form 10-K for the fiscal year ended December
                         31, 1989.
                (G)      Incorporated by reference from the Company's Annual
                         Report on Form 10-K for the fiscal year ended December
                         31, 1991.
                (H)      Incorporated by reference from the Company's Annual
                         Report on Form 10-K for the fiscal year ended December
                         31, 1992.
                (I)      Incorporated by reference from the Company's Annual
                         Report on Form 10-K for the fiscal year ended December
                         31, 1994.
                (J)      Incorporated ( by reference from the Company's
                         Definitive Proxy Statement for its 1997 Annual Meeting
                         of Shareholders, Exhibit A thereto.
                (K)      Incorporated by reference from the Company's Annual
                         Report on Form 10-K for the fiscal year ended December
                         31, 1997.
                (L)      Incorporated by reference from the Company's Definitive
                         Proxy Statement for its 1998 Annual Meeting of
                         Shareholders, Exhibit A thereto.
                (M)      Incorporated by reference from the Company's Annual
                         Report on Form 10-K for the fiscal year ended December
                         31, 1998.
                (N)      Incorporated by reference from the Company's Annual
                         Report on Form 10-K for the year ended December 31,
                         1999.
                (O)      Incorporated by reference from the Company's Annual
                         Report on Form 10-K for the year ended December 31,
                         2000.
                (P)      Incorporated by reference from the Company's Annual
                         Report on Form 10-K for the year ended December 31,
                         2001.
                (Q)      Incorporated by reference form the Company's
                         Registration Statement on Form S-3 (Registration No.
                         333-87512)
                         * Management contract or compensation plan or
                           arrangement.

          (b)  There were no reports on Form 8-K filed in the fourth  quarter of
               2002.
          (c)(d) Exhibits and Financial Statement Schedules - All other exhibits
               and  schedules  for  which  provision  is made in the  applicable
               accounting  regulation of the Securities and Exchange  Commission
               are  not   required   under  the  related   instruction   or  are
               inapplicable and, therefore, have been omitted.


48
<PAGE>


                                   SIGNATURES

     Pursuant to the  requirements  of Section 13 or 15(d) of the Securities and
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized. Commerce Bancorp, Inc.
<TABLE>
<CAPTION>

<S>                                                                  <C>
                                                              By                   /s/ VERNON W. HILL, II
                                                                             -----------------------------------
                                                                                     Vernon W. Hill, II
Date: March 28, 2003                                                         Chairman of the Board and President

                                                              By                    /s/ DOUGLAS J. PAULS
                                                                             -----------------------------------
                                                                                      Douglas J. Pauls
                                                                      Senior Vice President and Chief Financial Officer
                                                                        (Principal Financial and 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/       VERNON W. HILL, II                  Chairman of the Board and President             March 28, 2003
-----------------------------------------------
               Vernon W. Hill, II                  (Principal Executive Officer)

     /s/      C. EDWARD JORDAN JR.                 Executive Vice President and Director           March 28, 2003
-----------------------------------------------
              C. Edward Jordan Jr.

     /s/         ROBERT C. BECK                    Secretary and Director                          March 28, 2003
-----------------------------------------------
                 Robert C. Beck

     /s/         JACK R BERSHAD                    Director                                        March 28, 2003
-----------------------------------------------
                 Jack R Bershad

     /s/         JOSEPH BUCKELEW                   Director                                        March 28, 2003
-----------------------------------------------
                 Joseph Buckelew

     /s/      DONALD T. DIFRANCESCO                Director                                        March 28, 2003
-----------------------------------------------
              Donald T. DiFrancesco

     /s/         MORTON N. KERR                    Director                                        March 28, 2003
-----------------------------------------------
                 Morton N. Kerr

     /s/         STEVEN M. LEWIS                   Director                                        March 28, 2003
-----------------------------------------------
                 Steven M. Lewis

     /s/     GEORGE E. NORCROSS, III               Director                                        March 28, 2003
-----------------------------------------------
             George E. Norcross, III

     /s/        DANIEL J. RAGONE                   Director                                        March 28, 2003
-----------------------------------------------
                Daniel J. Ragone

     /s/     WILLIAM A. SCHWARTZ JR.               Director                                        March 28, 2003
-----------------------------------------------
             William A. Schwartz Jr.

     /s/     JOSEPH T. TARQUINI JR.                Director                                        March 28, 2003
-----------------------------------------------
             Joseph T. Tarquini Jr.

     /s/       FRANK C. VIDEON SR.                 Director                                        March 28, 2003
-----------------------------------------------
               Frank C. Videon Sr.
</TABLE>




                                                                              49
<PAGE>




                                  CERTIFICATION
                                  -------------

I,  Vernon W. Hill,  II , Chief  Executive  Officer of  Commerce  Bancorp,  Inc.
certify that:

1. I have reviewed this annual report on Form 10-K of Commerce Bancorp, Inc.;

2.  Based on my  knowledge,  this  annual  report  does not  contain  any untrue
statement of a material fact or omit to state a material fact  necessary to make
the statements made, in light of the  circumstances  under which such statements
were made,  not  misleading  with  respect to the period  covered by this annual
report;

3.  Based  on my  knowledge,  the  financial  statements,  and  other  financial
information  included  in this annual  report,  fairly  present in all  material
respects the financial  condition,  results of operations  and cash flows of the
registrant as of, and for, the periods presented in this annual report;

4.  The  registrant's  other  certifying  officer  and  I  are  responsible  for
establishing and maintaining  disclosure  controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

     a) designed such disclosure controls and procedures to ensure that material
     information   relating  to  the  registrant,   including  its  consolidated
     subsidiaries,  is  made  known  to  us by  others  within  those  entities,
     particularly  during  the  period  in which  this  annual  report  is being
     prepared;

     b) evaluated the effectiveness of the registrant's  disclosure controls and
     procedures  as of a date  within 90 days prior to the  filing  date of this
     annual report (the "Evaluation Date"); and

     c) presented in this annual report our conclusions  about the effectiveness
     of the disclosure controls and procedures based on our evaluation as of the
     Evaluation Date;

5. The registrant's other certifying officer and I have disclosed,  based on our
most recent evaluation,  to the registrant's auditors and the audit committee of
registrant's   board  of  directors  (or  persons   performing   the  equivalent
functions):

     a) all  significant  deficiencies  in the design or  operation  of internal
     controls which could adversely affect the  registrant's  ability to record,
     process,  summarize and report  financial data and have  identified for the
     registrant's auditors any material weaknesses in internal controls; and

     b) any fraud,  whether or not material,  that involves  management or other
     employees  who  have  a  significant  role  in  the  registrant's  internal
     controls; and

6. The registrant's other certifying officer and I have indicated in this annual
report whether there were significant  changes in internal  controls or in other
factors that could significantly affect internal controls subsequent to the date
of our most recent  evaluation,  including any corrective actions with regard to
significant deficiencies and material weaknesses.


     /s/       Vernon W. Hill, II                         Date:  March 28, 2003
----------------------------------------                        ----------------
             Chief Executive Officer





50
<PAGE>




                                  CERTIFICATION
                                  -------------

I, Douglas J. Pauls , Chief Financial Officer of Commerce Bancorp, Inc., certify
that:

1. I have reviewed this annual report on Form 10-K of Commerce Bancorp, Inc.;

2.  Based on my  knowledge,  this  annual  report  does not  contain  any untrue
statement of a material fact or omit to state a material fact  necessary to make
the statements made, in light of the  circumstances  under which such statements
were made,  not  misleading  with  respect to the period  covered by this annual
report;

3.  Based  on my  knowledge,  the  financial  statements,  and  other  financial
information  included  in this annual  report,  fairly  present in all  material
respects the financial  condition,  results of operations  and cash flows of the
registrant as of, and for, the periods presented in this annual report;

4.  The  registrant's  other  certifying  officer  and  I  are  responsible  for
establishing and maintaining  disclosure  controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

     a) designed such disclosure controls and procedures to ensure that material
     information   relating  to  the  registrant,   including  its  consolidated
     subsidiaries,  is  made  known  to  us by  others  within  those  entities,
     particularly  during  the  period  in which  this  annual  report  is being
     prepared;

     b) evaluated the effectiveness of the registrant's  disclosure controls and
     procedures  as of a date  within 90 days prior to the  filing  date of this
     annual report (the "Evaluation Date"); and

     c) presented in this annual report our conclusions  about the effectiveness
     of the disclosure controls and procedures based on our evaluation as of the
     Evaluation Date;

5. The registrant's other certifying officer and I have disclosed,  based on our
most recent evaluation,  to the registrant's auditors and the audit committee of
registrant's   board  of  directors  (or  persons   performing   the  equivalent
functions):

     a) all  significant  deficiencies  in the design or  operation  of internal
     controls which could adversely affect the  registrant's  ability to record,
     process,  summarize and report  financial data and have  identified for the
     registrant's auditors any material weaknesses in internal controls; and

     b) any fraud,  whether or not material,  that involves  management or other
     employees  who  have  a  significant  role  in  the  registrant's  internal
     controls; and

6. The registrant's other certifying officer and I have indicated in this annual
report whether there were significant  changes in internal  controls or in other
factors that could significantly affect internal controls subsequent to the date
of our most recent  evaluation,  including any corrective actions with regard to
significant deficiencies and material weaknesses.

     /s/        Douglas J. Pauls                 Date:  March 28, 2003
-------------------------------------------             --------------------
             Chief Financial Officer





                                                                              51
<PAGE>