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                                  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 [FEE REQUIRED]
                   For the fiscal year ended December 31, 2001
                                       OR
[ ]         TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

      For the transition period from ________________ to ________________.
                            Commission File #0-12874

                             COMMERCE BANCORP, INC.
             (Exact name of registrant as specified in its charter)

           New Jersey                                        22-2433468
(State of other jurisdiction                              (I.R.S. Employee
 of incorporation or organization)                     Identification Number)

         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 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. [X]
     The aggregate  market value of voting stock held by  non-affiliates  of the
Registrant is $2,580,539,000. (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                      66,145,263
-------------------------------    ---------------------------------------------
        Title of Class                No. of Shares Outstanding as of 2/28/02
                          ----------------------------
                       DOCUMENTS INCORPORATED BY REFERENCE
     Part  III   incorporates   certain   information   by  reference  from  the
Registrant's Proxy Statement for the 2002 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 amount of
Common Stock held by officers,  directors,  and shareholders owning in excess of
10% of the  Registrant's  Common Stock multiplied by the last sale price for the
Registrant's  Common Stock on February 28, 2002. The information  provided shall
in no way be  construed  as an  admission  that the  officer,  director,  or 10%
shareholder  in the  Registrant  may be deemed an affiliate of the Registrant or
that he 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  purpose of the  Securities and Exchange
Commission.
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<PAGE>

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

                                                                            Page
                                     Part I
Item 1.     Business..........................................................
Item 2.     Properties........................................................
Item 3.     Legal Proceedings ................................................
Item 4.     Submission of Matters to a Vote of Security Holders...............
                                  Part II
Item 5.     Market for the Registrant's Common Stock and Related
            Stockholders Matters .............................................
Item 6.     Selected Financial Data ..........................................
Item 7.     Management's Discussion and Analysis of Financial Condition
            and Results of Operations ........................................
Item 7A.    Quantitative and Qualitative Disclosures About Market Risk .......
Item 8.     Financial Statements and Supplementary Financial Data ............
Item 9.     Changes in and Disagreements with Accountants on Accounting
            and Financial Disclosure
            (This item is omitted since it is not applicable)
                                 Part III
Item 10.    Directors and Executive Officers of the Registrant
Item 11.    Executive Compensation
Item 12.    Security Ownership of Certain Beneficial Owners and Management
Item 13.    Certain Relationships and Related Transactions
            (The information required by Part III has been omitted
            since it will be contained in the definitive proxy
            statement to be filed pursuant to Regulation 14A.)
                                  Part IV
Item 14.    Exhibits, Financial Statement Schedules and Reports
            on Form 8-K ......................................................
Item 15.    Signatures........................................................


<PAGE>

                                     PART I
Item 1. Business

Forward-Looking Statements

      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 and thereto),  in its reports to stockholders
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," "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  economy  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 expense  savings and revenue
enhancements  from  acquisitions  being  less  than  expected;  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 branching network;  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 and 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, 2001,  the Company had total assets of $11.4  billion,
total loans of $4.5 billion, and total deposits of $10.2 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, 2001 have over 180 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

<PAGE>

principally by retail deposits gathered through each bank's retail branch office
network.

      In addition to the opening of new full service branch offices, the Company
has  acquired  and  developed  its  bank  subsidiaries   through  the  following
transactions:

     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
          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;

     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., referred to as
          Commerce  Central.  Commerce Central was merged with and into Commerce
          NJ in 2001; and

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

     o    in December 1996,  Chesley & Cline, Inc., Mount Holly, New Jersey, was
          merged with and into Commerce National Insurance;

     o    in January 1997, Colkate,  Inc., t/a The Morrissey Agency, Mt. Laurel,
          New Jersey, was merged with and into Commerce National Insurance.

     o    in December  1997,  Joseph J. Reinhart and  Associates,  Inc.,  Cherry
          Hill,  NJ, a risk/loss  management and loss  investigation  consulting
          firm, and Associated  Insurance Management Inc.,  Haddonfield,  NJ, an
          employee and executive  benefit  consulting firm, were merged with and
          into Commerce National Insurance;

     o    in August 1998, J.A. Montgomery,  Inc.,  Wilmington,  DE, an insurance
          brokerage   agency,   was  merged  with  and  into  Commerce  National
          Insurance;

     o    in November 1999,  Mullaney  Insurance  Associates,  Oakhurst,  NJ, an
          insurance brokerage agency, was merged with and into Commerce National
          Insurance; and

     o    in  January  2000,  Traber and  Vreeland,  Inc.,  Randolph,  NJ and in
          October  2000,  Guarantee  Service  Agency,  Inc. t/a Maywood  Agency,
          Maywood,  NJ, insurance brokerage agencies,  were merged with and into
          Commerce National Insurance.

     o    in 2001, 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 National
          Insurance.

      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.

<PAGE>

Commerce NJ

      Commerce NJ provides  retail and commercial  banking  services  through 83
retail branch offices in Central and Southern New Jersey,  and  Metropolitan New
York City.

      As of December  31, 2001,  Commerce NJ had total  assets of $6.8  billion,
total  deposits  of $5.3  billion,  and  total  shareholders'  equity  of $382.0
million.

Service Area

      Commerce  NJ's  primary  service  area  includes  Central and Southern New
Jersey and Metropolitan  New York City.  Commerce NJ has attempted to locate its
branches in the fastest  growing  communities  within its service  area.  Retail
deposits gathered through these focused branching activities are used to support
lending throughout the Company.

Retail Banking Activities

      Commerce  NJ  provides  a broad  range  of  retail  banking  services  and
products,  including free checking  accounts,  subject to minimum balances,  and
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.  Commerce NJ also
offers construction loans and permanent mortgages for houses.

Trust Activities

      Commerce NJ offers trust services  primarily  focusing on corporate  trust
activities,  particularly  as bond  trustee,  paying  agent,  and  registrar for
municipal bond offerings.

Commercial Banking Activities

      Commerce NJ 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 to fit the  needs of its
customers. Commerce NJ also finances the construction of business properties and
makes real estate  mortgage loans on completed  buildings.  Where the needs of a
customer  exceed  Commerce  NJ's  legal  lending  limit  for any  one  customer,
approximately $63.1 million as of December 31, 2001, Commerce NJ may participate
with other banks,  including  Commerce PA,  Commerce  Shore,  Commerce North and
Commerce Delaware in making a loan.

Commerce PA

      As of December  31, 2001,  Commerce PA had total  assets of $2.3  billion,
total deposits of $2.0 billion and total shareholders' equity of $126.1 million.

      Commerce PA provides  retail and commercial  banking  services  through 47
retail branch offices in Philadelphia,  Bucks, Chester,  Delaware and Montgomery
Counties in Southeastern Pennsylvania.

      Commerce PA  generally  provides  the same retail and  commercial  banking
services  and products as Commerce  NJ,  Commerce  Shore,  Commerce  North,  and
Commerce Delaware. Commerce PA offers trust services similar to those offered by
Commerce NJ.

Commerce Shore

      As of December 31, 2001,  Commerce Shore had total assets of $1.6 billion,
total deposits of $1.5 billion and total shareholders' equity of $97.8 million.

      Commerce Shore provides retail and commercial  banking services through 27
retail branch offices in Ocean and Monmouth Counties, New Jersey.

      Commerce Shore generally  provides the same retail and commercial  banking
services and products as Commerce NJ, Commerce PA, Commerce North,  and Commerce
Delaware. Commerce Shore does not offer trust services.

Commerce North

      As of December 31, 2001,  Commerce North had total assets of $1.4 billion,
total deposits of $1.3 billion, and total shareholders' equity of $84.0 million.

      Commerce North provides retail and commercial  banking services through 22
retail branch offices in Bergen and Passaic Counties, New Jersey.

      Commerce North generally  provides the same retail and commercial  banking
services and products as Commerce NJ, Commerce PA, Commerce Shore,  and Commerce
Delaware. Commerce North does not offer trust services.

<PAGE>

Commerce Delaware

      As of December  31,  2001,  Commerce  Delaware  had total assets of $158.0
million,  total deposits of $147.5 million,  and total  shareholders'  equity of
$10.7 million.

      Commerce  Delaware  generally  provides  the same  retail  and  commercial
banking  services and products as Commerce NJ, Commerce PA, Commerce Shore,  and
Commerce North. Commerce Delaware offers trust services similar to those offered
by Commerce NJ.

      Commerce Delaware provides retail and commercial  banking services through
5 retail branch offices in New Castle County, Delaware.

Commerce National Insurance

      Commerce National  Insurance  operates as a regional  insurance  brokerage
firm  concentrating  on  commercial  property,  casualty  and  surety as well as
personal  lines.  In  addition,  Commerce  National  Insurance  offers a line of
employee  benefit programs  including both group as well as individual  medical,
life,  disability,  pension,  and risk management  services.  Commerce  National
Insurance  currently  operates out of 16 locations in New Jersey and 2 locations
in  Delaware.  Commerce  National  Insurance  places  insurance  for  clients in
multiple states, primarily New Jersey, Pennsylvania, New York, and Delaware.

Commerce Capital Markets

      Commerce  Capital  Markets is a  wholly-owned  subsidiary  of the  Company
engaging 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,  Fort  Lauderdale,  Florida  and
Cambridge, Massachussetts.

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.

      As part of the Commerce  Network,  the Company has an equity investment in
Commerce Bank/Harrisburg, Camp Hill, Pennsylvania (14.68% beneficial ownership).
The Commerce Network provides  marketing  support and technical support services
to its members.

Risk Factors

      The  Company  is  subject  to a number of risk  factors  including,  among
others,   business  and  economic  conditions,   monetary  and  other  policies,
competition,  and risk relating to asset management performance,  fund servicing
and  acquisitions.  These  factors,  and  others,  could  impact  the  Company's
business, financial 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  us.  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  $63.1 million,  $20.4 million,  $15.3 million,
$12.9 million, and $1.6 million,  respectively, as of December 31, 2001) enables
us to compete effectively for the business of smaller and mid-sized  businesses.
However,  these legal lending limits are considerably 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.

<PAGE>

      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 FRB.
The Company is also regulated by the New Jersey Department of Banking.

      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. See "Interstate Banking."

      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 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
Community Reinvestment Act.

      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  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 Federal  Reserve  Board 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.

<PAGE>

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 New Jersey Department of Banking and Insurance
("Department")  and the FDIC,  and is required to furnish  quarterly  reports to
each  agency.  The  Approval of the  Department  and 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 Community  Reinvestment  Act, as amended  ("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.

      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 Federal Reserve Board 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.

<PAGE>

Commerce National Insurance/ Commerce Capital Markets

      Commerce National  Insurance,  a nonbank  subsidiary of Commerce North, is
currently  subject to supervision,  regulation and examination by the New Jersey
Department  of  Banking  and  Insurance,   as  well  as  other  state  insurance
departments where they operate.  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  National  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.

Recent Legislation

      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  expands  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 new  legislation  creates a new  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 Federal Reserve Board 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 Federal Reserve Board 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 new financial  activities  authorized by the Act may also be engaged
in by a "financial subsidiary" of a national or state bank, except for insurance
or annuity underwriting,  insurance company portfolio  investments,  real estate
investment and development,  and merchant banking,  which must be conducted in a
financial  holding company.  Commerce Capital  Investments,  Inc. is a financial
subsidiary  of  Commerce  NJ. 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  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 U.S.  Securities and
Exchange  Commission  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.

      Except for the  increase  in  competitive  pressures  faced by all banking
organizations that is a likely consequence of the Act, the Company believes that
the legislation and implementing regulations are likely to have a more immediate
impact on large  regional  and  national  institutions  than on  community-based
institutions engaged principally in traditional banking activities.  Because the
legislation  permits bank holding  companies to engage in activities  previously
prohibited  altogether or severely restricted because of the risks they posed to
the  banking  system,   implementing  regulations  impose  strict  and  detailed
prudential  safeguards on affiliations among banking and nonbanking companies in
a holding company organization.

      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 exact impact of
the Act on the Company and its subsidiaries, if any, cannot be predicted at this
time.

      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.

<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,  2001,  the  Company had in excess of 5,300  full-time
equivalent employees.

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 2001.

<PAGE>
                                    PART II

Item 5.     Market for the Registrant's Common Stock and Related
            Stockholders Matters


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

<PAGE>

Item 6.     Selected Financial Data

Commerce Bancorp, Inc. and Subsidiaries Selected Financial Data

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                                             Year Ended December 31,
------------------------------------------------------------------------------------------------------------------------------------
(dollars in thousands,
except per share data)                           2001               2000               1999               1998               1997
------------------------------------------------------------------------------------------------------------------------------------
<S>                                       <C>                 <C>                <C>                <C>                <C>
Income Statement Data:
 Net interest income                      $      401,326      $     296,930      $     244,367      $     194,661      $    165,322
 Provision for loan losses                        26,384             13,931              9,175              8,762             5,805
 Noninterest income                              196,805            150,760            114,596             96,277            62,410
 Noninterest expense                             420,036            315,357            252,523            213,950           153,804
 Income before income taxes                      151,711            118,402             97,265             68,226            68,123
 Net income                                      103,022             80,047             65,960             42,155            44,432
Balance Sheet Data:
 Total assets                             $   11,363,703      $   8,296,516      $   6,635,793      $   5,424,190      $  4,387,851
 Loans (net)                                   4,516,431          3,638,580          2,922,706          2,249,061         1,638,836
 Securities available for sale                 4,152,704          2,021,326          1,664,257          1,305,004         1,330,684
 Securities held to maturity                   1,132,172          1,513,456          1,201,892          1,220,874           985,676
 Trading securities                              282,811            109,306            117,837             85,359             7,911
 Federal funds sold                                                  52,000              5,300             10,395            15,813
 Deposits                                     10,185,594          7,387,594          5,608,920          4,928,808         3,784,576
 Long-term debt                                   23,000             23,000             23,000             24,282            25,308
 Trust preferred securities                       57,500             57,500             57,500             57,500            57,500
 Stockholders' equity                            636,570            492,224            356,756            323,552           279,900
Per Share Data:
 Net income-basic                         $         1.59      $        1.30      $        1.13      $        0.75      $       0.82
 Net income-diluted                                 1.51               1.25               1.08               0.71              0.79
 Cash dividends                                     0.55               0.48               0.41               0.44              0.27
 Book value                                         9.70               7.77               6.00               5.64              5.14
 Average shares outstanding:
  Basic                                           64,666             61,755             58,310             56,509            53,429
  Diluted                                         68,102             64,223             60,930             59,324            56,125
Selected Ratios:
 Performance
 Return on average assets                           1.08%              1.09%              1.12%              0.87%             1.12%
 Return on average equity                          17.64              19.81              19.63              13.57             17.87
 Net interest margin                                4.76               4.62               4.65               4.42              4.59
Liquidity and Capital
  Average loans to average deposits                48.04%             52.17%             50.31%             44.71%            45.07%
  Dividend payout                                  34.59              37.45              36.64              58.55             33.31
  Stockholders' equity to total assets              5.60               5.93               5.38               5.96              6.38
  Risk-based capital:
   Tier 1                                          10.81              10.79              11.40              12.09             14.91
   Total                                           11.96              11.92              12.72              13.71             17.06
  Leverage capital                                  6.24               6.92               7.02               7.05              7.69
Asset Quality
  Non-performing assets to total
   year-end assets                                  0.16%              0.20%              0.18%              0.27%             0.43%
  Net charge-offs to average loans
   outstanding                                      0.19               0.11               0.08               0.08              0.13
  Non-performing loans to total
   year-end loans                                   0.37               0.37               0.29               0.38              0.78
  Allowance for loan losses to total
   end of year loans                                1.46               1.32               1.30               1.37              1.45
  Allowance for loan losses to non-
   performing loans                               397.73             356.84             442.09             364.86            187.35
</TABLE>

<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.

2001 Overview

In 2001,  the Company  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 24% for 2001, and deposit
growth  totaled 38%. At December 31, 2001, the Company had total assets of $11.4
billion,  total  loans of $4.5  billion,  total  investment  securities  of $5.6
billion, and total deposits of $10.2 billion.

Segment Reporting

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

--------------------------------------------------------------------------------
                                                  Net Income
--------------------------------------------------------------------------------
                                     2001            2000            1999
--------------------------------------------------------------------------------
Community Banks                       $95,574          $77,262         $66,313
Parent/Other                            7,448            2,785            (353)
--------------------------------------------------------------------------------
Consolidated total                   $103,022          $80,047         $65,960
--------------------------------------------------------------------------------

Average Balances and Net Interest Income

The table on page 46 sets forth balance sheet items on a daily average basis for
the years ended December 31, 2001,  2000 and 1999 and presents the daily average
interest  rates earned on assets and the daily  average  interest  rates paid on
liabilities  for such periods.  During 2001,  average  interest  earning  assets
totaled  $8.7  billion,  an increase  of $2.1  billion,  or 31% over 2000.  This
increase  resulted  primarily  from  the  increase  in the  average  balance  of
investments,  which rose $1.2 billion,  and the average balance of loans,  which
rose $747.8 million  during 2001. 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 $2.3 billion.  The
growth  in  interest  bearing  liabilities  was  offset by a  decrease  in other
borrowed money, which fell $173.8 million to an average balance of $94.3 million
during 2001.

Net Interest Income and Net Interest Margin

Net interest margin on a tax-equivalent basis was 4.76% for 2001, an increase of
14 basis points from 2000.

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 2001 was  $412.7  million,  an  increase  of $106.6
million, or 35%, over 2000. Interest income on a tax-equivalent  basis increased
to $615.7  million from $514.5  million,  or 20%.  This  increase was  primarily
related to volume  increases  in the loan and  investment  portfolios.  Interest
expense for 2001 fell $5.4  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  tax-equivalent  yield on interest  earning  assets during 2001 was 7.10%, a
decrease of 66 basis points from 7.76% in 2000.

<PAGE>
Management's Discussion and Analysis of
Financial Condition and Results of Operations

The cost of  interest-bearing  liabilities  decreased 93 basis points in 2001 to
2.96% from 3.89% in 2000. The decrease resulted primarily from decreased general
market interest rates during 2001 as compared to 2000. The cost of total funding
sources decreased 80 basis points in 2001 to 2.34% from 3.14%.

The following  table presents the major factors that  contributed to the changes
in net  interest  income  for the  years  ended  December  31,  2001 and 2000 as
compared to the respective previous periods.

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------
                            2001 vs. 2000                   2000 vs. 1999
                         Increase (Decrease)             Increase (Decrease)
                        Due to Changes in (1)           Due to Changes in (1)
-----------------------------------------------------------------------------------
                     Volume     Rate      Total      Volume      Rate      Total
-----------------------------------------------------------------------------------
(dollars in thousands)
<S>                   <C>       <C>        <C>       <C>         <C>      <C>
Interest on
  investments:
   Taxable            $71,674   $(9,886)   $61,788   $25,664     $9,371   $35,035
   Tax-exempt             297      (110)       187     1,029         54     1,083
   Trading              3,669    (2,256)     1,413     3,708        492     4,200
   Federal
     funds sold         3,448    (1,976)     1,472     3,224        263     3,487
Interest on loans:
   Commercial
real estate            27,325   (11,170)    16,155    23,976      2,956    26,932
   Commercial          18,542   (12,473)     6,069    18,348      4,111    22,459
   Consumer             8,428       850      9,278    19,198      4,261    23,459
   Tax-exempt           5,492      (638)     4,854     5,676        551     6,227
-----------------------------------------------------------------------------------
Total interest
  income              138,875   (37,659)   101,216   100,823     22,059   122,882
-----------------------------------------------------------------------------------
Interest expense:
  Regular
   savings              5,777   (10,065)    (4,288)    9,306      6,795    16,101
  N.O.W.
   accounts             1,821    (2,104)      (283)   (2,445)     2,293      (152)
  Money
   market plus         12,622   (21,759)    (9,137)   17,307     10,546    27,853
  Time
   deposits            17,471    (3,237)    14,234       565      3,621     4,186
  Public funds         16,247    (7,443)     8,804     7,550      4,289    11,839

  Other
   borrowed
   money               (6,478)   (6,957)   (13,435)    5,352      1,711     7,063
  Long-term
   debt                          (1,223)    (1,223)                (600)     (600)
-----------------------------------------------------------------------------------
Total interest
  expense              47,461   (52,789)    (5,328)   37,635     28,655    66,290
-----------------------------------------------------------------------------------
Net increase          $91,413   $15,131   $106,544   $63,188    $(6,596)  $56,592
-----------------------------------------------------------------------------------
<FN>
(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.
</FN>
</TABLE>

Noninterest Income

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
National Insurance Services,  Inc. (Commerce National Insurance),  the Company's
insurance brokerage  subsidiary 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 $22.8 million in 2001, an increase of $7.5 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 $27.8
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
versus 2000.

Noninterest Expenses

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 $26.7 million to $82.9 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.

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 70.06%,  70.72%,  and 70.36% in 2001,
2000, and 1999,  respectively.  The Company's efficiency ratio remains above its
peer group primarily due to its aggressive expansion activities.

<PAGE>
Management's Discussion and Analysis of
Financial Condition and Results of Operations

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

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------------
                                                                    Year Ended December 31,
--------------------------------------------------------------------------------------------------------------------------------
                                            2001                            2000                               1999
--------------------------------------------------------------------------------------------------------------------------------
(dollars in thousands)         Average              Average    Average                Average    Average               Average
Earning Assets                 Balance    Interest   Rate      Balance     Interest    Rate      Balance     Interest   Rate
--------------------------------------------------------------------------------------------------------------------------------
<S>                           <C>          <C>        <C>     <C>          <C>          <C>     <C>          <C>        <C>
Investment securities
      Taxable                 $4,083,493   $261,535   6.40%   $2,964,401   $199,747     6.74%   $2,583,530   $164,712   6.38%
      Tax-exempt                  78,572      5,098   6.49        74,001      4,911     6.64        58,503      3,828   6.54
      Trading                    186,678     10,382   5.56       120,702      8,969     7.43        70,800      4,769   6.74
--------------------------------------------------------------------------------------------------------------------------------
Total investment securities    4,348,743    277,015   6.37     3,159,104    213,627     6.76     2,712,833    173,309   6.39
Federal funds sold               166,619      5,937   3.56        69,841      4,465     6.39        19,419        978   5.04
Loans
      Commercial real estate   1,581,118    125,072   7.91     1,235,690    108,917     8.81       963,679     81,985   8.51
      Commercial                 949,205     74,143   7.81       711,826     68,074     9.56       519,963     45,615   8.77
      Consumer                 1,427,586    116,262   8.14     1,323,795    106,984     8.08     1,086,487     83,525   7.69
      Tax-exempt                 193,678     17,303   8.93       132,507     12,449     9.40        71,926      6,222   8.65
--------------------------------------------------------------------------------------------------------------------------------
Total loans                    4,151,587    332,780   8.02     3,403,818    296,424     8.71     2,642,055    217,347   8.23
--------------------------------------------------------------------------------------------------------------------------------
Total earning assets          $8,666,949   $615,732   7.10    $6,632,763   $514,516     7.76%   $5,374,307   $391,634   7.29%
--------------------------------------------------------------------------------------------------------------------------------
Sources of Funds
--------------------------------------------------------------------------------------------------------------------------------
Interest-bearing liabilities
      Regular savings         $1,643,145   $ 32,647   1.99%   $1,352,364   $ 36,935     2.73%   $1,011,642   $ 20,834   2.06%
      N.O.W. accounts            251,352      5,634   2.24       170,118      5,918     3.48       240,409      6,070   2.52
      Money market plus        2,748,236     57,920   2.11     2,149,329     67,057     3.12     1,594,602     39,204   2.46
      Time deposits            1,247,741     61,415   4.92       892,780     47,181     5.28       882,081     42,995   4.87
      Public funds               790,001     36,669   4.64       439,972     27,865     6.33       320,768     16,026   5.00
--------------------------------------------------------------------------------------------------------------------------------
Total deposits                 6,680,475    194,285   2.91     5,004,563    184,956     3.70     4,049,502    125,129   3.09

Other borrowed money              94,257      3,508   3.72       268,304     16,943     6.31       183,554      9,880   5.38
Long-term debt                    80,500      5,248   6.52        80,500      6,471     8.04        80,500      7,071   8.78
--------------------------------------------------------------------------------------------------------------------------------
Total deposits and interest-
bearing liabilities            6,855,232    203,041   2.96     5,353,367    208,370     3.89     4,313,556    142,080   3.29
Noninterest-bearing funds
      (net)                    1,811,717                       1,279,396                         1,060,751
--------------------------------------------------------------------------------------------------------------------------------
Total sources to fund
      earning assets          $8,666,949   $203,041   2.34    $6,632,763   $208,370     3.14    $5,374,307   $142,080   2.64
--------------------------------------------------------------------------------------------------------------------------------
Net interest income and
      margin tax-equivalent
      basis                                 412,691   4.76                  306,146     4.62                  249,554   4.65
Tax-exempt adjustment                        11,365                           9,216                             5,187
--------------------------------------------------------------------------------------------------------------------------------
Net interest income and
      margin                               $401,326   4.63%                $296,930     4.48%                $244,367   4.55%
--------------------------------------------------------------------------------------------------------------------------------
Other Balances
--------------------------------------------------------------------------------------------------------------------------------
Cash and due from banks       $  417,110                      $  328,390                        $  251,438
Other assets                     519,799                         431,884                           312,652
Total assets                   9,546,794                       7,348,963                         5,903,869
Demand deposits
      (noninterest-bearing)    1,962,354                       1,519,313                         1,202,412
Other liabilities                145,084                          72,162                            51,921
Stockholders' equity             584,124                         404,121                           335,982
--------------------------------------------------------------------------------------------------------------------------------
<FN>
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.
</FN>
</TABLE>

<PAGE>
Management's Discussion and Analysis of
Financial Condition and Results of Operations

Income Taxes

The  provision  for federal and state  income  taxes for 2001 was $48.7  million
compared to $38.4 million in 2000 and $31.3  million in 1999.  The effective tax
rate was  32.1%,  32.4% and 32.2% in 2001,  2000,  and 1999,  respectively.  The
decrease in the  effective  income tax rate is  primarily  due to  increases  in
tax-exempt interest income versus both 2000 and 1999, respectively.

Net Income

Net income for 2001 was $103.0  million,  an increase of $23.0  million,  or 29%
over the $80.0 million  recorded for 2000. 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 2001 was $1.51  compared  to
$1.25 per common share for 2000.

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
1.08%, 1.09% and 1.12% for 2001, 2000 and 1999, 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
17.64%, 19.81% and 19.63% for 2001, 2000 and 1999, 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 1997 through 2001.

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------
                                            December 31,
---------------------------------------------------------------------------------
                        2001        2000        1999        1998         1997
---------------------------------------------------------------------------------
(dollars in thousands)
<S>                   <C>         <C>         <C>         <C>         <C>
Commercial real estate:
  Owner-occupied      $  750,562  $  685,916  $  512,087  $  425,764  $  332,745
  Investor/developer     664,605     471,604     395,086     330,769     270,822
  Construction           460,957     380,804     185,712     122,797      64,948
---------------------------------------------------------------------------------
                       1,876,124   1,538,324   1,092,885     879,330     668,515

Commercial:
  Term                   600,374     469,564     393,953     282,556     211,827
  Line of credit         556,977     430,811     277,917     192,485     118,631
  Demand                     440       1,400       1,328         417         617
---------------------------------------------------------------------------------
                       1,157,791     901,775     673,198     475,458     331,075

Consumer:
  Mortgages
   (1-4 family
 residential)            471,680     351,644     428,453     322,310     184,479
  Installment            161,647     154,415     125,856      96,188      89,150
  Home equity            872,974     710,848     621,597     494,047     377,437
  Credit lines            43,196      30,254      19,099      12,993      12,330
---------------------------------------------------------------------------------
                       1,549,497   1,247,161   1,195,005     925,538     663,396
---------------------------------------------------------------------------------
Total loans           $4,583,412  $3,687,260  $2,961,088  $2,280,326  $1,662,986
---------------------------------------------------------------------------------
</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
(owner occupies greater than 50% of the property), investor/developer loans, and
construction loans.  Owner-occupied and other investor/developer loans generally
have  five  year  call  provisions  and  bear  the  personal  guarantees  of the
principals  involved.   Construction  loans  include  loans  for  owner-occupied
buildings,   investor/developer   and  single  family  residential   properties.
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 the New  Jersey/Southeastern  Pennsylvania/Delaware  market area.
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.

<PAGE>
Management's Discussion and Analysis of
Financial Condition and Results of Operations

The  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, 2001, are summarized in the following table.

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------
                                           December 31, 2001
---------------------------------------------------------------------------------
                          Due in One    Due in One     Due in Over
                         Year or Less  to Five Years    Five Years       Total
---------------------------------------------------------------------------------
(dollars in thousands)
<S>                        <C>           <C>            <C>           <C>
Commercial real
 estate:
   Owner-occupied
   and investor/
     developer               $249,259    $1,048,784       $117,124    $1,415,167
   Construction               282,350       174,891          3,716       460,957
---------------------------------------------------------------------------------
                              531,609     1,223,675        120,840     1,876,124
Commercial:
   Term                       244,102       302,740         53,532       600,374
   Line of credit             536,235        20,742                      556,977
   Demand                         120           320                          440
---------------------------------------------------------------------------------
                              780,457       323,802         53,532     1,157,791
Consumer:
   Mortgages
     (1-4 family
      Residential)             13,094        40,889        417,697       471,680
   Installment                 71,799        76,435         13,413       161,647
   Home equity                 95,964       322,727        454,283       872,974
   Credit lines                17,242        25,954                       43,196
---------------------------------------------------------------------------------
                              198,099       466,005        885,393     1,549,497
---------------------------------------------------------------------------------
Total loans                $1,510,165    $2,013,482     $1,059,765    $4,583,412
---------------------------------------------------------------------------------
Interest rates:
   Predetermined             $516,738    $1,537,090       $755,763    $2,809,591
   Floating                   993,427       476,392        304,002     1,773,821
---------------------------------------------------------------------------------
Total loans                $1,510,165    $2,013,482     $1,059,765    $4,583,412
---------------------------------------------------------------------------------
</TABLE>

During 2001,  loans increased  $896.2 million,  or 24% from $3.7 billion to $4.6
billion.  At December 31, 2001, loans  represented 45% of total deposits and 40%
of total assets. All segments of the loan portfolio  experienced growth in 2001,
including  loans  secured by  commercial  real  estate,  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. At December 31, 2001,  $750.6 million,
or 53%, of commercial real estate loans (other than  construction)  were secured
by owner-occupied properties.  Commercial loan growth was led by activity in the
middle market and healthcare sectors. Growth in consumer loans was due primarily
to home equity loans and home equity lines of credit.

Commercial  real estate  construction  loans  increased  $80.2 million to $461.0
million  in 2001.  At  December  31,  2001,  construction  loans for 1-4  family
residential  dwellings  totaled $47.9 million and construction  loans secured by
commercial  properties amounted to $181.1 million. The balance of $232.0 million
was for  land  development,  of  which  $101.8  million  was  primarily  for the
development  portion of residential  tract  financing.  As of December 31, 2001,
there were no concentrations of loans to any one type of industry  exceeding 10%
of total loans.

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, 2001
were $18.4 million or .16% of total assets, as compared to $16.6 million or .20%
of total assets at December 31, 2000.

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, 2001
were  $16.8  million  as  compared  to $13.6  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, 2001,  loans past due 90 days or
more and still accruing  interest  amounted to $519  thousand,  compared to $489
thousand at December 31, 2000.  Additional  loans  considered  by the  Company's
internal loan review  department as potential  problem loans of $17.8 million at
December 31, 2001 have been  evaluated as to risk  exposure in  determining  the
adequacy of the allowance for loan losses.

Other real estate (ORE) totaled $1.5 million at December 31, 2001 as compared to
$3.0 million at December 31, 2000.  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.

<PAGE>
Management's Discussion and Analysis of
Financial Condition and Results of Operations

The following summary presents  information  regarding  non-performing loans and
assets as of December 31, 1997 through 2001.

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------
                                          Year Ended December 31,
---------------------------------------------------------------------------------
                              2001       2000       1999       1998      1997
---------------------------------------------------------------------------------
(dollars in thousands)
<S>                           <C>       <C>        <C>        <C>       <C>
Non-accrual loans (1):
  Commercial                  $6,835    $ 4,955    $ 2,254    $ 2,655   $ 2,937
  Consumer                     1,484      1,295        674        831       703
  Real estate
   Construction                1,590      1,459         55                1,345
   Mortgage                    6,924      5,840      5,230      4,849     7,886
---------------------------------------------------------------------------------
  Total non-accrual
   Loans                      16,833     13,549      8,213      8,335    12,871
---------------------------------------------------------------------------------
Restructured loans (1):
  Commercial                       8         11        277         17        19
  Real estate
   Mortgage                                  82        192        217
---------------------------------------------------------------------------------
  Total restructured
   Loans                           8         93        469        234        19
---------------------------------------------------------------------------------
Total non-performing
  Loans                       16,841     13,642      8,682      8,569    12,890
---------------------------------------------------------------------------------
Other real estate              1,549      2,959      3,523      6,081     5,845
---------------------------------------------------------------------------------
Total non-performing
  Assets(1):                 $18,390    $16,601    $12,205    $14,650   $18,735
---------------------------------------------------------------------------------
Non-performing
  assets as a percent
  of total assets                0.16%      0.20%      0.18%     0.27%     0.43%
---------------------------------------------------------------------------------
Loans past due 90
  days or more and still
  accruing interest             $519    $   489    $   499    $ 1,029   $   818
---------------------------------------------------------------------------------
<FN>
(1)   Interest  income  of  approximately  $2,092,000,   $1,731,000,   $986,000,
      $1,030,000 and $1,434,000  would have been recorded in 2001,  2000,  1999,
      1998 and 1997  respectively,  on  non-performing  loans in accordance with
      their original terms.  Actual interest recorded on these loans amounted to
      $237,000 in 2001, $525,000 in 2000, $255,000 in 1999, $266,000 in 1998 and
      $323,000 in 1997.
</FN>
</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,  an unallocated  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,
changes in credit  concentrations,  and national and local  economic  trends and
conditions.  While  the  allowance  consists  of an  allocated  and  unallocated
portion, both portions are available to absorb losses inherent in the total loan
portfolio.

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  2001,  net  charge-offs  amounted  to $8.1
million,  or .19% of average loans  outstanding  for the year,  compared to $3.6
million or .11% of average loans  outstanding for 2000. During 2001, the Company
recorded  provisions of $26.4 million to the allowance for loan losses  compared
to $13.9 million for 2000. At December 31, 2001, the allowance  aggregated $67.0
million or 1.46% of total loans and provided  coverage of 398% of non-performing
loans.  The  increase  in the  provision  in  2001  reflects  the  increases  in
non-performing  assets,  the  charge-offs  and the growth in the loan portfolio.
Additionally,  the increase in the Company's  allowance for loan losses reflects
the current  uncertainty  with the overall economy and risks associated with the
mix of the loan  portfolio,  including  newer  products  such as health care and
asset-based lending, leasing and trade finance


<PAGE>
Management's Discussion and Analysis of
Financial Condition and Results of Operations

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,
---------------------------------------------------------------------------------
                                2001      2000       1999      1998      1997
---------------------------------------------------------------------------------
(dollars in thousands)
<S>                            <C>       <C>        <C>       <C>       <C>
Balance at beginning
   of period                   $48,680   $38,382    $31,265   $24,150   $20,397
Provisions charged to
   operating expenses           26,384    13,931      9,175     8,762     5,805
---------------------------------------------------------------------------------
                                75,064    52,313     40,440    32,912    26,202
---------------------------------------------------------------------------------
Recoveries of loans
   previously charged-off:
      Commercial                   552       313        551       418       360
      Consumer                     288       249        286       305       415
      Commercial real
        estate                     134        14        132       764       144
---------------------------------------------------------------------------------
Total recoveries                   974       576        969     1,487       919
---------------------------------------------------------------------------------
Loans charged-off:
      Commercial                (5,862)   (2,936)    (1,599)   (1,281)   (1,481)
      Consumer                  (2,784)   (1,220)    (1,078)   (1,352)   (1,344)
      Commercial real
        estate                    (411)      (53)      (350)     (501)     (146)
---------------------------------------------------------------------------------
Total charged-off               (9,057)   (4,209)    (3,027)   (3,134)   (2,971)
---------------------------------------------------------------------------------
Net charge-offs                 (8,083)   (3,633)    (2,058)   (1,647)   (2,052)
---------------------------------------------------------------------------------
Balance at end of period       $66,981   $48,680    $38,382   $31,265   $24,150
---------------------------------------------------------------------------------
Net charge-offs as a
   percentage of average
   loans outstanding              0.19%      0.11%     0.08%     0.08%     0.13%
---------------------------------------------------------------------------------
Allowance for loan losses
   as a percentage of
   year-end loans                 1.46%      1.32%     1.30%     1.37%     1.45%
---------------------------------------------------------------------------------
</TABLE>

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>
----------------------------------------------------------------------------------------------------------------------------------
                                                      Allowance for Loan Losses at December 31,
----------------------------------------------------------------------------------------------------------------------------------
                                2001              2000                  1999                   1998                  1997
----------------------------------------------------------------------------------------------------------------------------------
                                  % Gross             % Gross               % Gross               % Gross                % Gross
                          Amount    Loans    Amount     Loans     Amount      Loans      Amount     Loans      Amount      Loans
----------------------------------------------------------------------------------------------------------------------------------
(dollars in thousands)
<S>                       <C>         <C>    <C>          <C>     <C>           <C>      <C>          <C>      <C>           <C>
 Commercial               $24,110     25%    $20,396      24%     $14,268       23%      $ 7,738      21%      $ 5,236       20%
 Consumer                   9,915     34       4,632      34        4,120       40         7,800      41         6,406       40
 Commercial real
  estate                   32,956     41      23,652      42       19,994       37        15,727      38        12,508       40
----------------------------------------------------------------------------------------------------------------------------------
                          $66,981    100%    $48,680     100%     $38,382      100%      $31,265     100%      $24,150      100%
----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>
Management's Discussion and Analysis of
Financial Condition and Results of Operations

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.

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
                                                  December 31,
--------------------------------------------------------------------------------
                                      2001            2000           1999
--------------------------------------------------------------------------------
(dollars in thousands)
<S>                                   <C>            <C>             <C>
U.S. Government agency
   and mortgage-backed
   obligations                        $3,994,523     $1,900,912      $1,582,933
Obligations of state and
   political subdivisions                 82,922         46,544          42,182
Equity securities                         16,325         16,825           9,107
Other                                     58,934         57,045          30,035
--------------------------------------------------------------------------------
Securities available
   for sale                           $4,152,704     $2,021,326      $1,664,257
--------------------------------------------------------------------------------
U.S. Government agency
   and mortgage-backed
   obligations                        $1,044,266     $1,437,993      $1,134,115
Obligations of state and
   political subdivisions                 50,602         42,938          35,667
Other                                     37,304         32,525          32,110
--------------------------------------------------------------------------------
Securities held to
   maturity                           $1,132,172     $1,513,456      $1,201,892
--------------------------------------------------------------------------------
</TABLE>

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  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  are carried at market  value,  with gains and losses,  both
realized and unrealized, included in other operating income.

In total, investment securities increased $1.9 billion from $3.6 billion to $5.6
billion at December 31, 2001. Deposit growth and other funding sources were used
to increase the Company's investment portfolio. The available for sale portfolio
increased  $2.1 billion to $4.2  billion,  and the  securities  held to maturity
portfolio  decreased  $381.3  million to $1.1  billion  at  year-end  2001.  The
portfolio of trading  securities  increased $173.5 million from year-end 2000 to
$282.8  million at year-end  2001.  At December 31,  2001,  the average life and
duration of the investment portfolio were approximately 5.8 years and 4.3 years,
respectively,  as compared to 6.9 years and 4.9 years, respectively, at December
31, 2000. At December 31, 2001 the yield on the  portfolio was 6.38%,  down from
6.80% at December 31, 2000.

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, 2001,
the yield on the  investment  portfolio was 6.37%, a decrease of 39 basis points
from 6.76% in fiscal 2000.

At December 31, 2001, the net unrealized  appreciation  in securities  available
for sale included in  stockholders'  equity totaled $15.8  million,  net of tax,
compared to net unrealized depreciation of $5.2 million, net of tax, at December
31, 2000.

The  contractual  maturity  distribution  and  weighted  average  yield  of  the
Company's  investment  portfolio  (excluding  equity and trading  securities) at
December 31, 2001, 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.

<PAGE>
Management's Discussion and Analysis of
Financial Condition and Results of Operations

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                                      December 31, 2001
------------------------------------------------------------------------------------------------------------------------------------
                                 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
------------------------------------------------------------------------------------------------------------------------------------
(dollars in thousands)
<S>                              <C>       <C>     <C>        <C>      <C>        <C>      <C>          <C>      <C>          <C>
Securities available for sale:
U.S. Government agency and
   mortgage-backed obligations   $57,615   2.01%    $7,466    7.07%                        $3,929,442   6.37%    $3,994,523   6.31%
Obligations of state and
   political subdivisions          2,521   7.04     13,755    7.20       9,831    6.32         56,815   7.66         82,922   7.41
Other securities                   3,560   5.91        997    5.03      23,674    7.24         30,703   8.17         58,934   7.60
------------------------------------------------------------------------------------------------------------------------------------
                                 $63,696   2.43%   $22,218    7.06%    $33,505    6.97%    $4,016,960   6.41%    $4,136,379   6.35%
------------------------------------------------------------------------------------------------------------------------------------
Securities held to maturity:
U.S. Government agency and
   mortgage-backed obligations   $     2   7.00%   $23,340    6.39%    $81,352    6.65%      $939,572   6.63%    $1,044,266   6.63%
Obligations of state and
   political subdivisions         49,827   4.52                            775    7.30                               50,602   4.56
Other securities                  36,696   5.69        455    9.50                                153   2.78         37,304   5.72
------------------------------------------------------------------------------------------------------------------------------------
                                 $86,525   5.02%   $23,795    6.45%    $82,127    6.65%      $939,725   6.63%    $1,132,172   6.51%
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>
Management's Discussion and Analysis of
Financial Condition and Results of Operations

Deposits

Total  deposits at December  31,  2001 were $10.2  billion,  an increase of $2.8
billion or 38% above total  deposits of $7.4 billion at December  31, 2000.  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
certificates of deposit, retail and public, in excess of $100 thousand. Deposits
in the various core  categories  increased  $2.6 billion from  year-end  2000 to
year-end 2001.  Certificates  of deposit in excess of $100 thousand,  retail and
public, increased $305.1 million from year-end 2000.

Total  deposits  averaged  $8.6 billion for 2001, an increase of $2.1 billion or
32% above the 2000 average.  The average balance of  noninterest-bearing  demand
deposits in 2001 was $2.0  billion,  a $443.0  million or 29% increase  over the
average  balance for 2000.  The average  total balance of passbook and statement
savings accounts  increased  $290.7 million,  or 22% compared to the prior year.
The average balance of interest-bearing demand accounts (money market and N.O.W.
accounts) for 2001 was $3.0 billion,  a $680.1  million or 29% increase over the
average  balance for the prior year.  The average  balance of time  deposits for
2001 was $2.0 billion,  a $705.0 million  increase over the average  balance for
2000.  For 2001,  the cost of total  deposits  was 2.25% as compared to 2.84% in
2000.

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 free  checking  accounts  (subject  to a small  minimum  balance
requirement),  convenient branch locations, extended hours of operation, quality
service, and active marketing.

The average  balances  and  weighted  average  rates of deposits for each of the
years 2001, 2000 and 1999 are presented below.


<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------
                                                    2001                     2000                      1999
----------------------------------------------------------------------------------------------------------------------
                                            Average     Average      Average     Average       Average      Average
                                            Balance       Rate       Balance      Rate         Balance        Rate
----------------------------------------------------------------------------------------------------------------------
(dollars in thousands)
<S>                                         <C>           <C>       <C>             <C>       <C>             <C>
Demand deposits:
  Noninterest-bearing                      $1,962,354              $1,519,313                $1,202,412
  Interest-bearing (money market and
   N.O.W. accounts)                         2,999,588     2.12%     2,319,447       3.15%     1,835,011       2.47%
Savings deposits                            1,643,145     1.99      1,352,364       2.73      1,011,642       2.06
Time deposits/public funds                  2,037,742     4.81      1,332,752       5.63      1,202,849       4.91
----------------------------------------------------------------------------------------------------------------------
Total deposits                             $8,642,829              $6,523,876                $5,251,914
----------------------------------------------------------------------------------------------------------------------
</TABLE>

The  remaining  maturity of  certificates  of deposit for $100,000 or more as of
December 31, 2001, 2000 and 1999 is presented below:

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------
Maturity                                     2001                 2000                1999
-----------------------------------------------------------------------------------------------
(dollars in thousands)
<S>                                        <C>                 <C>                  <C>
3 months or less                           $897,304            $641,342             $323,029
3 to 6 months                               137,388              98,763               49,983
6 to 12 months                               70,630              54,489               22,733
Over 12 months                                6,820              12,420                7,628
-----------------------------------------------------------------------------------------------
Total                                    $1,112,142            $807,014             $403,373
-----------------------------------------------------------------------------------------------
</TABLE>

<PAGE>
Management's Discussion and Analysis of
Financial Condition and Results of Operations

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 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, 2001.

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------
                                      Interest Rate Sensitivity Gaps
                                            December 31, 2001
-----------------------------------------------------------------------------------

                         1-90      91-180   181-365      1-5     Beyond
                         Days       Days      Days      Years    5 Years    Total
-----------------------------------------------------------------------------------
(dollars in millions)
<S>                    <C>         <C>       <C>       <C>       <C>       <C>
Rate sensitive:
  Interest-earning
   assets
   Loans               $2,022.8    $  74.7   $ 170.7   $1,559.5  $ 812.3   $4,640.0
   Investment
    securities            478.6      436.8     775.9    2,915.2    961.0    5,567.5
------------------------------------------------------------------------------------
Total interest-
  earning assets        2,501.4      511.5     946.6    4,474.7  1,773.3   10,207.5
------------------------------------------------------------------------------------
Interest-bearing
  liabilities
  Transaction
   accounts             1,723.8                                  3,810.9    5,534.7
  Time deposits         1,119.3      397.0     551.1      180.1             2,247.5
  Other borrowed
   money                  264.6                                               264.6
  Long-term debt                                           23.0     57.5       80.5
------------------------------------------------------------------------------------
Total interest-
  bearing
  liabilities           3,107.7      397.0     551.1      203.1  3,868.5    8,127.3
------------------------------------------------------------------------------------
Period gap               (606.3)     114.5     395.5    4,271.7 (2,095.1)  $2,080.2
------------------------------------------------------------------------------------
Cumulative gap          $(606.3)   $(491.8)   $(96.3)  $4,175.3 $2,080.2
---------------------------------------------------------------------------
Cumulative gap as a
  percentage of total
  interest-earning
  assets                   (5.9)%     (4.8)%  (0.9)%     40.9%    20.4%
----------------------------------------------------------------------------
</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  200 basis point change during the next year, with rates remaining
constant in the second year.

The  Company's  Asset/Liability  Committee  (ALCO) policy has  established  that
interest income  sensitivity will be

<PAGE>
Management's Discussion and Analysis of
Financial Condition and Results of Operations

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, 2001,  the  Company's  income
simulation  model  indicates net income would  decrease by 3.3% and 13.1% in the
first year and over a two year time frame,  respectively,  if rates decreased as
described above, as compared to an increase of 5.0% and 2.6%,  respectively,  at
December 31, 2000. The model projects that net income would decrease by 2.1% and
increase by 1.7% in the first year and over a two year time frame, respectively,
if rates  increased  as described  above,  as compared to a decrease of 7.9% and
8.1%,  respectively,  at December 31, 2000. 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 200
basis point change in rates.  The Company's ALCO policy indicates that the level
of interest  rate risk is  unacceptable  if the immediate 200 basis point change
would  result in the loss of 60% or more of the excess of market value over book
value in the current rate  scenario.  At December 31, 2001,  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  200 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, 2001 provide an accurate assessment of the Company's interest rate risk.

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, 2001
the Company had in excess of $4.0  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 2001, deposit growth and short-term borrowings were used to fund
growth in the loan portfolio and purchase additional investment securities.

Short-Term Borrowings

Short-term  borrowings,  or other  borrowed  money,  which consist  primarily of
securities  sold under  agreement to repurchase,  federal funds  purchased,  and
lines of credit, were used in 2001 to meet short-term liquidity needs. For 2001,
short-term  borrowings  averaged  $94.3 million as compared to $268.3 million in
2000.  The average rate on the  Company's  short-term  borrowings  was 3.72% and
6.31% during 2001 and 2000,  respectively.  As of December 31, 2001,  short-term
borrowings  included  $199.6  million of  securities  sold under  agreements  to
repurchase at an average rate of 1.71%.

Long-Term Debt

In 1997,  the Company  issued $57.5  million of 8.75% Trust  Capital  Securities
through  Commerce  Capital  Trust  I, a newly  formed  Delaware  business  trust
subsidiary of the Company.  All $57.5  million of the Trust  Capital  Securities
qualify as Tier I capital for regulatory capital purposes.

<PAGE>
Management's Discussion and Analysis of
Financial Condition and Results of Operations

Stockholders' Equity and Dividends

At December 31, 2001,  stockholders'  equity totaled $636.6  million,  up $144.3
million or 29% over stockholders' equity of $492.2 million at December 31, 2000.
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, 2001, as compared to 5.93% at December
31, 2000.

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
unrealized  appreciation/depreciation in securities available for sale) plus the
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
--------------------------------------------------------------------------------
                                 2001      2000         2001           2000
--------------------------------------------------------------------------------
Risk based capital ratios:
   Tier 1                       10.81%     10.79%        4.00%          4.00%
   Total capital                11.96      11.92         8.00           8.00
Leverage ratio                   6.24       6.92         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 Federal  Reserve  System  ("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,  2001,  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%.

On February 27, 2002,  the Company  announced that it proposes to privately sell
up to $175 million of convertible  trust preferred shares comprised of preferred
securities  issued by a business  trust to be formed by  Commerce  Bancorp.  The
offering will be made pursuant to SEC Rule 144A only to qualified  institutional
and  certain  other  accredited  investors.   The  Company  intends  to  file  a
registration  statement  with  the  SEC to  register  the  resale  of the  trust
preferred and the underlying  common securities by the purchasers in the private
placement.  The  proceeds of the  offering  will be used for  general  corporate
purposes,   including  among  other  things  contributions  to  the  capital  of
subsidiary banks to fund their growth and operations.  A portion of the proceeds
may also be used to repay currently outstanding debt.

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  February  28,  2002,  there were
approximately 24,000 holders of record of the Company's common stock.

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------
                               Common Share Data
-------------------------------------------------------------------------------
                                       Market Prices
                                 --------------------------   Cash Dividends
                                     High          Low           Per Share
-------------------------------------------------------------------------------
<S>                                  <C>          <C>           <C>
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

2000 Quarter Ended
 December 31                         $35.00       $25.34        $0.12250
 September 30                         29.25        23.31         0.12250
 June 30                              24.47        18.94         0.12250
 March 31                             19.81        15.66         0.11667
-------------------------------------------------------------------------------
</TABLE>

<PAGE>
Management's Discussion and Analysis of
Financial Condition and Results of Operations

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 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.  See  notes 4 and 7 to the  Company's  consolidated  financial
statements included elsewhere herein.

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.

Results of Operations - 2000 versus 1999

Net income for 2000 was $80.0 million compared to $66.0 million in 1999. Diluted
net income per common share was $1.25 compared to $1.08 per common share for the
prior year.

Net  interest  income  on a  tax-equivalent  basis for 2000  amounted  to $306.1
million, an increase of $56.6 million, or 23% over 1999.

Interest income on a  tax-equivalent  basis  increased  $122.9 million or 31% to
$514.5 million in 2000. This increase was primarily  related to volume increases
in the loan and  investment  portfolios.  Interest  expense  for 2000 rose $66.3
million to $208.4  million  from  $142.1  million  in 1999.  This  increase  was
primarily related to increases in the Company's levels of deposits.

The provision for loan losses was $13.9 million in 2000 compared to $9.2 million
in the prior year.

For 2000,  noninterest  income  totaled  $150.8  million,  an  increase of $36.2
million or 32% from 1999.  The  increase was due  primarily  to increased  other
operating income,  which rose $23.4 million from 1999,  including an increase of
$13.2 million in revenues from Commerce National Insurance. In addition, deposit
charges and service fees  increased  $12.1  million  over 1999 due  primarily to
higher transaction volumes,  and net investment  securities gains increased $631
thousand over the prior year.

Noninterest  expenses  totaled  $315.4  million  for 2000,  an increase of $62.8
million, or 25% over 1999.  Contributing to this increase was the addition of 30
new branches during 2000 and the expansion of Commerce National Insurance.  With
the  addition of these new offices,  staff,  facilities,  marketing  and related
expenses  rose  accordingly.  Other  noninterest  expenses rose $13.8 million to
$56.2 million in 2000. This increase  resulted  primarily from higher  bank-card
related service charges,  increased business  development  expenses,  and higher
provisions for non-credit-related losses.

Mergers and Acquisitions

During 2001, the Company acquired 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 National
Insurance.  The Company issued  approximately  108,000 shares of common stock in
exchange for all of the outstanding  shares of these agencies.  The transactions
were  accounted  for as  poolings  of  interests.  However,  the Company did not
restate the financial statements of the periods prior to the acquisitions as the
changes, in the aggregate, were immaterial.

<PAGE>
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.

<PAGE>
Item 8.     Financial Statements and Supplementary Financial Data

Commerce Bancorp, Inc. and Subsidiaries
Consolidated Balance Sheets

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------
                                                                                            December 31,
--------------------------------------------------------------------------------------------------------------------------
               (dollars in thousands)                                              2001                      2000
--------------------------------------------------------------------------------------------------------------------------
<S>                                                                                 <C>                      <C>
Assets         Cash and due from banks                                              $  557,738               $  443,918
               Federal funds sold                                                            0                   52,000
               -----------------------------------------------------------------------------------------------------------
                   Cash and cash equivalents                                           557,738                  495,918
               Loans held for sale                                                      73,261                   41,791
               Trading securities                                                      282,811                  109,306
               Securities available for sale                                         4,152,704                2,021,326
               Securities held to maturity                                           1,132,172                1,513,456
                   (market value 2001-$1,146,345; 2000-$1,503,202)
               Loans                                                                 4,583,412                3,687,260
                   Less allowance for loan losses                                       66,981                   48,680
               -----------------------------------------------------------------------------------------------------------
                                                                                     4,516,431                3,638,580
               Bank premises and equipment, net                                        362,992                  276,097
               Other assets                                                            285,594                  200,042
               -----------------------------------------------------------------------------------------------------------
                                                                                   $11,363,703               $8,296,516
--------------------------------------------------------------------------------------------------------------------------
Liabilities    Deposits:
                   Demand:
                      Interest-bearing                                              $3,608,709               $2,628,358
                      Noninterest-bearing                                            2,403,637                1,789,371
                   Savings                                                           1,925,919                1,436,800
                   Time                                                              2,247,329                1,533,065
               -----------------------------------------------------------------------------------------------------------
                            Total deposits                                          10,185,594                7,387,594

               Other borrowed money                                                    264,554                  283,714
               Other liabilities                                                       196,485                   52,484
               Trust Capital Securities - Commerce Capital Trust I                      57,500                   57,500
               Long-term debt                                                           23,000                   23,000
               -----------------------------------------------------------------------------------------------------------
                                                                                    10,727,133                7,804,292
--------------------------------------------------------------------------------------------------------------------------
Stockholders'  Common stock, 65,832,559 shares issued                                   65,833                   49,627
Equity             (63,522,906 shares in 2000)
               Capital in excess of par or stated value                                461,897                  422,375
               Retained earnings                                                        94,698                   27,083
               Accumulated other comprehensive income (loss)                            15,764                   (5,239)
               -----------------------------------------------------------------------------------------------------------
                                                                                       638,192                  493,846
               Less treasury stock, at cost                                              1,622                    1,622
               -----------------------------------------------------------------------------------------------------------
                            Total stockholders' equity                                 636,570                  492,224
               -----------------------------------------------------------------------------------------------------------
                                                                                   $11,363,703               $8,296,516
               -----------------------------------------------------------------------------------------------------------
</TABLE>
               See accompanying notes.

<PAGE>

Commerce Bancorp, Inc. and Subsidiaries
Consolidated Statements of Income

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------------
                                                                                              Year Ended December 31,
----------------------------------------------------------------------------------------------------------------------------------
             (dollars in thousands, except per share amounts)                    2001               2000                  1999
----------------------------------------------------------------------------------------------------------------------------------
<S>                                                                               <C>                <C>                <C>
Interest     Interest and fees on loans                                           $326,723           $292,066           $215,170
Income       Interest on investment securities                                     271,707            208,769            170,300
             Other interest                                                          5,937              4,465                978
             ---------------------------------------------------------------------------------------------------------------------
                               Total interest income                               604,367            505,300            386,448
             ---------------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------------------------
Interest     Interest on deposits:
Expense            Demand                                                           63,554             72,975             45,274
                   Savings                                                          32,647             36,935             20,835
                   Time                                                             98,084             75,046             59,021
             ---------------------------------------------------------------------------------------------------------------------
                               Total interest on deposits                          194,285            184,956            125,130
             Interest on other borrowed money                                        3,508             16,943              9,880
             Interest on long-term debt                                              5,248              6,471              7,071
             ---------------------------------------------------------------------------------------------------------------------
                               Total interest expense                              203,041            208,370            142,081
             ---------------------------------------------------------------------------------------------------------------------

             Net interest income                                                   401,326            296,930            244,367
             Provision for loan losses                                              26,384             13,931              9,175
             ---------------------------------------------------------------------------------------------------------------------
             Net interest income after provision for loan losses                   374,942            282,999            235,192
----------------------------------------------------------------------------------------------------------------------------------
Noninterest  Deposit charges and service fees                                       84,065             56,306             44,196
Income       Other operating income                                                111,760             91,241             67,818
             Net investment securities gains                                           980              3,213              2,582
             ---------------------------------------------------------------------------------------------------------------------
                               Total noninterest income                            196,805            150,760            114,596
             ---------------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------------------------
Noninterest  Salaries and benefits                                                 198,034            148,799            121,882
Expense      Occupancy                                                              39,152             31,419             22,407
             Furniture and equipment                                                50,724             40,436             31,659
             Office                                                                 26,808             23,548             21,356
             Audit and regulatory fees and assessments                               4,024              3,256              2,623
             Marketing                                                              18,378             11,706             10,155
             Other                                                                  82,916             56,193             42,441
             ---------------------------------------------------------------------------------------------------------------------
                               Total noninterest expenses                          420,036            315,357            252,523
             ---------------------------------------------------------------------------------------------------------------------
             Income before income taxes                                            151,711            118,402             97,265
             Provision for federal and state income taxes                           48,689             38,355             31,305
             ---------------------------------------------------------------------------------------------------------------------
             Net income                                                           $103,022           $ 80,047           $ 65,960
             ---------------------------------------------------------------------------------------------------------------------

             Net income per common and common equivalent share:
                         Basic                                                    $  1.59            $  1.30           $   1.13
             ---------------------------------------------------------------------------------------------------------------------
                         Diluted                                                  $  1.51            $  1.25           $   1.08
             ---------------------------------------------------------------------------------------------------------------------
             Average common and common equivalent shares outstanding:
                         Basic                                                     64,666              61,755             58,310
             ---------------------------------------------------------------------------------------------------------------------
                         Diluted                                                   68,102              64,223             60,930
             ---------------------------------------------------------------------------------------------------------------------
             Cash dividends, common stock                                           $0.55            $  0.48           $   0.41
             ---------------------------------------------------------------------------------------------------------------------
</TABLE>
             See accompanying notes.

<PAGE>

Commerce Bancorp, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                                                             Year Ended December 31,
------------------------------------------------------------------------------------------------------------------------------------
            (dollars in thousands)                                                 2001              2000                1999
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                             <C>                 <C>             <C>
Operating   Net income                                                             $103,022            $80,047         $    65,960
Activities  Adjustments to reconcile net income to net cash
               (used) provided by operating activities:
                  Provision for loan losses                                          26,384             13,931               9,175
                  Provision for depreciation, amortization
                     and accretion                                                   44,263             32,596              28,186
                  Gains on sales of securities available for sale                      (980)            (3,213)             (2,582)
                  Proceeds from sales of loans held for sale                        689,302             56,101             111,055
                  Originations of loans held for sale                              (720,222)           (92,188)            (94,341)
                  Net loan (chargeoffs)                                              (8,083)            (3,633)             (2,058)
                  Net decrease (increase) in trading securities                    (173,505)             8,531             (32,478)
                  Increase in other assets                                          (97,711)           (17,494)            (60,142)
                  Increase (decrease) in other liabilities                          148,055             26,271             (23,064)
                  Deferred income tax benefit                                        (4,054)            (2,812)             (3,468)
            ------------------------------------------------------------------------------------------------------------------------
                              Net cash provided (used) by operating
                              activities                                              6,471             98,137              (3,757)

Investing   Proceeds from the sales of securities available for sale                381,341            410,541             398,274
Activities  Proceeds from the maturity of securities available for sale             895,077            345,160             313,373
            Proceeds from the maturity of securities held to maturity               384,388            174,124             241,690
            Purchase of securities available for sale                            (3,311,356)        (1,055,694)         (1,002,738)
            Purchase of securities held to maturity                                 (68,420)          (127,194)           (236,623)
            Net increase in loans                                                  (906,160)        (1,095,712)           (820,299)
            Proceeds from sales of loans                                             10,008             10,622               9,769
            Purchases of premises and equipment                                    (128,137)          (109,701)            (73,303)
            ------------------------------------------------------------------------------------------------------------------------
                              Net cash used by investing activities              (2,743,259)        (1,447,854)         (1,169,857)

Financing   Net increase in demand and savings deposits                           2,083,736          1,314,974             721,147
Activities  Net increase (decrease) in time deposits                                714,264            463,700             (41,035)
            Net (decrease) increase in other borrowed money                         (19,160)          (274,378)            530,247
            Dividends paid                                                          (35,400)           (29,761)            (23,476)
            Proceeds from issuance of common stock under
               dividend reinvestment and other stock plans                           53,004             53,670              31,428
            Other                                                                     2,714             (5,494)                612
            ------------------------------------------------------------------------------------------------------------------------
                              Net cash provided by financing activities           2,799,158          1,522,711            1,218,923

            Increase in cash and cash equivalents                                    61,820            172,994              45,309
            Cash and cash equivalents at beginning of year                          495,918            322,924             277,615
            ------------------------------------------------------------------------------------------------------------------------
            Cash and cash equivalents at end of year                               $557,738           $495,918         $   322,924
            ------------------------------------------------------------------------------------------------------------------------

            Supplemental  disclosures  of cash  flow  information:
               Cash paid during the year for:
                  Interest                                                         $201,127           $206,144         $   141,810
                  Income taxes                                                       48,826             36,373              26,753
            Other noncash activities:
               Transfer of securities to securities available for sale                                                      91,010
               Securitization of loans                                                                 358,918             129,768
            ------------------------------------------------------------------------------------------------------------------------
</TABLE>
            See accompanying notes.

<PAGE>

Commerce Bancorp, Inc. and Subsidiaries
Consolidated Statements of Changes in Stockholders' Equity

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
Years ended December 31, 2001, 2000 and 1999
                                                                Capital in                                    Accumulated
                                                                 Excess of                                       Other
                                                                  Par or               Commitment               Compre-
(in thousands, except per share amounts)    Common   Preferred    Stated     Retained      to        Treasury   hensive
                                             Stock     Stock      Value      Earnings     ESOP        Stock      Income       Total
------------------------------------------------------------------------------------------------------------------------------------
<S>                                         <C>       <C>       <C>          <C>        <C>         <C>       <C>         <C>
Balances at December 31, 1998                $40,988   $    0    $236,928     $41,536    $(1,282)    $(1,624)  $  7,006    $323,552
Acquisition of insurance brokerage
  agencies (148 shares)                          110                  212                                                       322
------------------------------------------------------------------------------------------------------------------------------------
As adjusted balance at January 1, 1999        41,098        0     237,140      41,536     (1,282)     (1,624)     7,006     323,874
Net income                                                                     65,960                                        65,960
 Other comprehensive income, net of tax
  Unrealized loss on securities
     (pre-tax ($71,923)                                                                                         (45,431)    (45,431)
  Reclassification adjustment
     (pre-tax ($1,919)                                                                                           (1,319)     (1,319)
                                                                                                                         -----------
 Other comprehensive income                                                                                                 (46,750)
                                                                                                                         -----------
         Total comprehensive income                                                                                          19,210
Common stock dividend and cash paid
   in lieu of fractional shares
   (2,290 shares)                              1,790               49,968     (51,890)                                         (132)
Cash dividends paid                                                           (23,343)                                      (23,343)
Shares issued under dividend reinvestment
   and compensation and benefit plans
   (1,960 shares)                              1,530               29,897                                                    31,427
Other                                                               4,438                  1,282                              5,720
------------------------------------------------------------------------------------------------------------------------------------
Balances at December 31, 1999                $44,418   $    0    $321,443     $32,263    $     0     $(1,624)  $(39,744)   $356,756
Acquisition of insurance brokerage
   agencies (602 shares)                         470                 (450)     (5,519)                                       (5,499)
------------------------------------------------------------------------------------------------------------------------------------
As adjusted balance at January 1, 2000        44,888        0     320,993      26,744          0      (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   $    0    $422,375     $27,083     $    0     $(1,622)  $ (5,239)   $492,224
Acquisition of insurance brokerage agencies
   (108 shares)                                  108                 (885)                                                     (777)
------------------------------------------------------------------------------------------------------------------------------------
As adjusted balance at January 1, 2001        63,630              407,595      27,083          0      (1,622)    (5,239)    491,447
Net income                                                                    103,022                                       103,022
 Other comprehensive income, net of tax
  Unrealized gain on securities
     (pre-tax $31,924)                                                                                           20,525      20,525
  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   $    0    $461,897     $94,698     $    0     $(1,622)   $15,764    $636,570
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes.

<PAGE>

Commerce Bancorp, Inc. and Subsidiaries
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 National Insurance
Services,  Inc.  (Commerce  National  Insurance),  Commerce Capital Trust I, and
Commerce Capital Markets,  Inc. (CCMI). All material  intercompany  transactions
have been eliminated. Certain amounts from prior years have been reclassified to
conform with 2001 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  activities,
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
Trading account securities are carried at market value.  Gains and losses,  both
realized and unrealized,  are included in other operating income.  Trading gains
of $10.6 million,  $8.4 million,  and $7.8 million were recorded in 2001,  2000,
and 1999, respectively,  including unrealized gains of $265,000 and $2.4 million
at December 31, 2001 and 2000, 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.  Loan  origination  fees 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

<PAGE>
Commerce Bancorp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements

based  on an  evaluation  of the  risk  characteristics  included  in  the  loan
portfolio,  including  such  factors  as  the  volume  and  composition  of  the
portfolio,  historical loan loss experience,  present and prospective  financial
condition of borrowers,  general  national and local  economic  conditions,  and
other relevant factors, all of which may be susceptible to significant change.

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.

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 $1.7
million,  $1.0 million and $1.8 million  related to Other Real Estate  expenses,
net for 2001, 2000 and 1999, respectively.

Intangible Assets
The excess of cost over fair value of net assets acquired (goodwill) is included
in other assets and is being amortized on a straight-line  basis over the period
of expected  benefit,  which  approximates 15 years.  Goodwill  amounted to $1.9
million and $2.2  million at December  31,  2001 and 2000,  respectively.  Other
intangible  assets are  amortized  on a  straight-line  basis over 10 to 15 year
lives.  Other intangibles  amounted to $1.4 million and $1.6 million at December
31, 2001 and 2000, respectively.

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 2001 and 2000 were
approximately $16.7 million and $7.1 million, respectively.

Derivative Financial Instruments
The  Company  utilizes  an  interest  rate  swap to  manage  interest  rate risk
associated with its Commerce  Capital Trust  Securities.  Net amounts payable or
receivable from this contract are accrued as an adjustment to interest  expense.
Management  has  determined the swap to be effective swap since the terms of the
swap  are  substantially  identical  to those  contained  in the  Trust  Capital
Securities.  The Company  adopted the provisions of SFAS No. 133 "Accounting for
Derivative  Instruments and Hedging Activities" (FAS 133) as of January 1, 2001.
Under FAS 133 derivatives are carried at fair value with  correpsonding  changes
recognized in other  comprehensive  income. The cumulative effect of adoption of
FAS 133 and the unrealized gain on the swap were not material.

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.

<PAGE>
Commerce Bancorp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements

Recent Accounting Statements
In June 2001, the FASB issued Statement No. 141,  "Business  Combinations"  (FAS
141), which replaces APB Opinion 16. FAS 141 requires all business  combinations
to  be   accounted   for   by   the   purchase   method   and   eliminates   the
pooling-of-interests  method of accounting for business  combinations  initiated
after June 30, 2001. While FAS 141 will affect how future business combinations,
if undertaken,  are accounted for and disclosed in the financial statements, the
issuance  of  the  new  guidance  had no  effect  on the  Company's  results  of
operations, financial position, or liquidity during 2001.

In conjunction with the issuance of the new guidance for business  combinations,
the FASB also issued 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,  will no  longer be  amortized  into net  income  over an
estimated life but rather will be tested at least annually for impairment  based
on specific guidance provided in the new standard.  Intangible assets determined
to have finite lives will continue to be amortized over their  estimated  useful
lives and also continue to be subject to impairment  testing.  The provisions of
FAS 142,  which were  adopted by the  Company as required  effective  January 1,
2002,  will not have a  material  impact on the  results  of  operations  of the
Company.  It  is  anticipated  there  will  not  be  any  material   categorical
reclassifications or adjustments to the useful lives of finite-lived  intangible
assets as a result of adopting the new guidance.

2.   Mergers and Acquisitions

During 2001, the Company acquired 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 National
Insurance.  The Company issued  approximately  108,000 shares of common stock in
exchange for all of the outstanding shares of these agencies.

In November 1999,  Mullaney  Insurance  Associates,  Oakhurst,  NJ, an insurance
brokerage  agency was merged  with and into  Commerce  National  Insurance.  The
Company issued approximately  134,000 shares of common stock in exchange for all
of the outstanding  shares of this agency. In January 2000, Traber and Vreeland,
Inc.,  Randolph,  NJ, and in October 2000,  Guarantee  Service Agency,  Inc. t/a
Maywood Agency,  Maywood, NJ, insurance brokerage agencies, were merged with and
into Commerce  National  Insurance.  The Company  issued  approximately  602,000
shares of  common  stock in  exchange  for all the  outstanding  shares of these
agencies.

All of these transactions were accounted for as poolings of interests.  However,
financial  statements  of the periods  prior to the  acquisitions  have not been
restated, as the changes, in the aggregate, would be immaterial.

<PAGE>
Commerce Bancorp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements

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, 2001 and
2000 follows:

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                                          December 31,
------------------------------------------------------------------------------------------------------------------------------------
                                                   2001                                                  2000
------------------------------------------------------------------------------------------------------------------------------------
                                            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              $3,974,752     $41,312      $(21,541)    $3,994,523     $1,912,261     $ 6,562    $(17,911)   $1,900,912
Obligations of state and
   political subdivisions       83,727         768        (1,573)        82,922         46,528         436        (420)       46,544
Equity securities               11,666       4,828          (169)        16,325         13,823       3,170        (168)       16,825
Other                           58,175       1,256          (497)        58,934         56,989       1,083      (1,027)       57,045
------------------------------------------------------------------------------------------------------------------------------------
Securities available
   for sale                 $4,128,320     $48,164      $(23,780)    $4,152,704     $2,029,601     $11,251    $(19,526)   $2,021,326
------------------------------------------------------------------------------------------------------------------------------------
U.S. Government agency
   and mortgage-backed
   obligations              $1,044,266     $16,917       $(2,742)    $1,058,441     $1,437,993     $ 5,111    $(15,365)   $1,427,739
Obligations of state and
   political subdivisions       50,602                                   50,602         42,938                                42,938
Other                           37,304                        (2)        37,304         32,525                                32,525
------------------------------------------------------------------------------------------------------------------------------------
Securities held to
   maturity                 $1,132,172     $16,917       $(2,744)    $1,146,345     $1,513,456     $ 5,111    $(15,365)   $1,503,202
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

The amortized  cost and  estimated  market value of  investment  securities  (in
thousands)  at December  31,  2001,  by  contractual  maturity  are shown below.
Expected  maturities will differ from  contractual  maturities  because obligors
have the right to repay obligations without prepayment penalties.

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------
                                                       Available for Sale                     Held to Maturity
---------------------------------------------------------------------------------------------------------------------
                                                     Amortized          Market         Amortized             Market
                                                       Cost             Value             Cost                Value
---------------------------------------------------------------------------------------------------------------------
<S>                                                 <C>               <C>               <C>                <C>
Due in one year or less                             $   63,186        $   63,697        $   86,523         $   86,523
Due after one year through five years                   14,202            14,752               455                455
Due after five years through ten years                  32,349            33,504               775                775
Due after ten years                                     89,149            87,518               153                151
Mortgage backed securities                           3,917,768         3,936,908         1,044,266          1,058,441
Equity securities                                       11,666            16,325
----------------------------------------------------------------------------------------------------------------------
                                                    $4,128,320        $4,152,704        $1,132,172         $1,146,345
----------------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>
Commerce Bancorp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements

Proceeds from sales of securities  available for sale during 2001, 2000 and 1999
were $381.3  million,  $410.5 million and $398.3  million,  respectively.  Gross
gains of $2.2 million,  $3.2 million and $2.6 million were realized on the sales
in 2001, 2000, and 1999, respectively,  and gross losses of $1.2 million, $0 and
$27,000 were realized in 2001, 2000 and 1999, respectively.

At December 31, 2001 and 2000,  investment  securities  with a carrying value of
$1,610.3  million  and  $998.9  million,  respectively,  were  pledged to secure
deposits of public funds.


4.   Loans

The following is a summary of loans  outstanding  (in thousands) at December 31,
2001 and 2000:

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------
                                                                        December 31,
-------------------------------------------------------------------------------------------------
                                                             2001                       2000
-------------------------------------------------------------------------------------------------
<S>                                                        <C>                      <C>
Commercial real estate:
      Owner-occupied                                       $  750,562               $  685,916
      Investor/developer                                      664,605                  471,604
      Construction                                            460,957                  380,804
-------------------------------------------------------------------------------------------------
                                                            1,876,124                1,538,324
Commercial loans:
      Term                                                    600,374                  469,564
      Line of credit                                          556,977                  430,811
      Demand                                                      440                    1,400
-------------------------------------------------------------------------------------------------
                                                            1,157,791                  901,775
Consumer:
      Mortgages (1-4 family residential)                      471,680                  351,644
      Installment                                             161,647                  154,415
      Home equity                                             872,974                  710,848
      Credit lines                                             43,196                   30,254
-------------------------------------------------------------------------------------------------
                                                            1,549,497                1,247,161
-------------------------------------------------------------------------------------------------
                                                           $4,583,412               $3,687,260
-------------------------------------------------------------------------------------------------
</TABLE>

The  Company  securitized  $358.9  million  and $129.8  million  of  residential
mortgage loans during 2000 and 1999, respectively,  and included the securitized
assets in its held to  maturity  investment  portfolio.  No gains or losses were
recognized on these transactions. No loan securitizations occurred in 2001.

At December 31, 2001 and 2000,  loans of  approximately  $21.8 million and $11.2
million,  respectively,  were  outstanding  to certain of the  Company's and its
subsidiaries'  directors and officers, and approximately $48.2 million and $45.4
million,  respectively,  of loans were  outstanding  from  companies  with which
certain of the  Company's  and its  subsidiaries'  directors  and  officers  are
associated, exclusive of loans to any such person and associated companies which
in aggregate did not exceed $60,000.  The terms of these loans are substantially
the same as those prevailing at the time for comparable unrelated  transactions.
A summary (in thousands) of the related party loans  outstanding at December 31,
2001 is as follows:

<TABLE>
<CAPTION>
----------------------------------------------------------------------
                                                        2001
----------------------------------------------------------------------
<S>                                                   <C>
Balance, January 1                                     $56,563
New loans                                               30,601
Loan payments                                           17,113
----------------------------------------------------------------------
Balance, December 31                                   $70,051
----------------------------------------------------------------------
</TABLE>

<PAGE>
Commerce Bancorp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements

The  Company  engaged  in  certain  activities  with  entities  affiliated  with
directors of the Company.  The Company received real estate  appraisal  services
from a company  owned by a director of the Company.  Such real estate  appraisal
services  amounted to $252,730 in 2001,  $202,000 in 2000, and $334,000 in 1999.
The Company received legal services from two law firms of which two directors of
the Company are partners. Such aggregate legal services amounted to $2.8 million
in 2001, $1.7 million in 2000 and $1.6 million in 1999.  Other  disbursements to
related parties, including vehicle purchases,  business development expenses and
facility approval services were  approximately  $1.4 million,  $900 thousand and
$800 thousand in 2001, 2000 and 1999, respectively.


5.   Allowance for Loan Losses

The  following  is an analysis of changes in the  allowance  for loan losses (in
thousands) for 2001, 2000 and 1999:

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------
                                                         2001             2000            1999
----------------------------------------------------------------------------------------------------
<S>                                                    <C>             <C>             <C>
Balance, January 1                                      $48,680         $38,382         $31,265
Provision charged to operating expense                   26,384          13,931           9,175
Recoveries of loans previously charged off                  974             576             969
Loan charge-offs                                         (9,057)         (4,209)         (3,027)
----------------------------------------------------------------------------------------------------
Balance, December 31                                    $66,981         $48,680         $38,382
----------------------------------------------------------------------------------------------------
</TABLE>


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

The total of non-performing loans (non-accrual and restructured loans) was $16.8
million  and  $13.6  million  at  December  31,  2001  and  2000,  respectively.
Non-performing  loans of $0.9  million,  $1.3  million  and $1.6  million net of
charge offs of  $17,000,  $26,000 and  $39,000  were  transferred  to other real
estate during 2001, 2000 and 1999, respectively. Other real estate ($1.5 million
and $3.0  million at December  31, 2001 and 2000,  respectively)  is included in
other assets.

At December 31, 2001 and 2000, the recorded investment in loans considered to be
impaired under FASB Statement No. 114 "Accounting by Creditors for Impairment of
a Loan" totaled $12.2 million and $9.1 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.  At December  31,  2001,  approximately  $1.5  million was
allocated to these loans.  Impaired loans averaged  approximately $10.7 million,
$7.3  million  and $4.6  million,  during  2001,  2000 and  1999,  respectively.
Interest  income of  approximately  $2.1 million,  $1.7 million and $1.0 million
would have been recorded on non-performing  loans (including  impaired loans) in
accordance  with  their  original  terms in 2001,  2000 and 1999,  respectively.
Actual interest  income  recorded on these loans amounted to $237,000,  $525,000
and $255,000 during 2001, 2000 and 1999, respectively.

<PAGE>
Commerce Bancorp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements

7.   Bank Premises, Equipment, and Leases

A summary of bank premises and equipment (in thousands) is as follows:

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------
                                                                   December 31,
                                                       -----------------------------------
                                                          2001               2000
------------------------------------------------------------------------------------------
<S>                                                       <C>                <C>
Land                                                      $ 84,893           $  54,066
Buildings                                                  172,139             121,908
Leasehold improvements                                      23,648              20,979
Furniture, fixtures and equipment                          217,777             177,708
Leased property under capital leases                           124                 124
------------------------------------------------------------------------------------------
                                                           498,581             374,785

Less accumulated depreciation
   and amortization                                        135,589              98,688
------------------------------------------------------------------------------------------
                                                          $362,992            $276,097
------------------------------------------------------------------------------------------
</TABLE>

At December  31, 2001,  Commerce NJ leased one of its  branches  under a capital
lease with an unrelated  party.  All other branch  leases are  accounted  for as
operating  leases with the related rental  payments being expensed  ratably over
the life of the lease.

The Company leases its operations  facilities  from two limited  partnerships in
which the Company is a limited  partner at  December  31,  2001.  The leases are
accounted for as operating leases with an aggregate annual rent of $1.5 million,
which  escalates to $1.6 million in 2003 and to $1.8 million in 2010.  One lease
expires  in  2014,  and the  other  expires  in 2014 and is  renewable  for five
additional terms of five years each.

At December 31, 2001,  the Company  leased from various  related  parties  under
separate  operating  lease  agreements  the land on which it has  constructed 32
branch offices and the  headquarters  for Commerce North.  The aggregate  annual
rental under these related party leases for 2001 was approximately $2.5 million,
and  was  approximately  $1.6  million  and  $1.2  million  in  2000  and  1999,
respectively.  These  leases  expire  periodically  beginning  in  2007  but are
renewable  through 2040.  Aggregate  annual rentals  escalate to $3.6 million in
2006.

Total  rent  expense   charged  to  operations   under   operating   leases  was
approximately  $11.6 million in 2001,  $10.4 million in 2000 and $7.8 million in
1999. Total depreciation expense charged to operations was $41.2 million,  $32.1
million and $22.2 million in 2001, 2000 and 1999, respectively.

<PAGE>
Commerce Bancorp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements

The future minimum rental commitments,  by year, under the non-cancelable leases
are as follows (in thousands) at December 31, 2001:

-----------------------------------------------------------------------------
                                            Capital              Operating
-----------------------------------------------------------------------------
2002                                          $ 12                 $12,728
2003                                            12                  11,620
2004                                            12                  11,420
2005                                            12                  11,516
2006                                            12                  11,044
Later years                                    100                 110,271
-----------------------------------------------------------------------------
Net minimum lease payment                     $160                $168,599
-----------------------------------------------------------------------------
Less amount representing interest               67
-----------------------------------------------------------------------------
Present value of net minimum
      lease payments                           $93
-----------------------------------------------------------------------------

The Company has obtained interior 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 $2.3 million,  $2.0 million and $2.5
million in 2001, 2000 and 1999, respectively,  for such services.  Additionally,
the  business   received   additional   revenues  for  project   management   of
approximately  $1.9  million,  $1.6 million and $1.4  million in 2001,  2000 and
1999,  respectively,  on furniture and facility  purchases  made directly by the
Company.


8.   Deposits

The  aggregate  amount of time  certificates  of  deposits in  denominations  of
$100,000 or more was $1.1  billion and $807.0  million at December  31, 2001 and
2000, respectively.


9.   Other Borrowed Money

Other borrowed money consists  primarily of securities sold under  agreements to
repurchase, federal funds purchased, and lines of credit, including Federal Home
Loan  Bank  advances.  The  following  table  represents  information  for other
borrowed money:

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------
                                                                       December 31,
-----------------------------------------------------------------------------------------------------------
                                                          2001                               2000
                                            ---------------------------------------------------------------
                                                                Average                         Average
                                                Amount           Rate            Amount           Rate
-----------------------------------------------------------------------------------------------------------
<S>                                            <C>               <C>             <C>              <C>
Securities sold under
      agreements to repurchase                 $199,554          1.71%           $283,714         6.70%
Federal funds purchased                          65,000          2.00
-----------------------------------------------------------------------------------------------------------
                                               $264,554                          $283,714
-----------------------------------------------------------------------------------------------------------
Average amount outstanding                      $94,257          3.72%           $268,304         6.31%
Maximum month-end balance                       264,554                           583,208
-----------------------------------------------------------------------------------------------------------
</TABLE>

As of December 31, 2001, the Company had a line of credit of $453.8 million from
the Federal Home Loan Bank of New York, all of which was available and a line of
credit of $110.3 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.

<PAGE>
Commerce Bancorp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements

10.  Long-Term Debt

On July 15, 1993, the Company issued $23.0 million of 8 3/8% subordinated  notes
due 2003.  Interest on the debt is payable  semi-annually on January 15 and July
15 of each year.  The notes may be redeemed in whole or in part at the option of
the Company  after July 15,  2000 at a price from 102% to 100% of the  principal
plus  accrued  interest,  if any, to the date fixed for  redemption,  subject to
certain  conditions.  A portion  of the  notes  qualifies  for total  risk-based
capital for regulatory purposes, subject to certain limitations.

On June 9, 1997,  the  Company  issued  $57.5  million  of 8 3/4% Trust  Capital
Securities  through Commerce  Capital Trust 1, a newly formed Delaware  business
trust subsidiary.  The Trust Capital Securities  evidence a preferred  ownership
interest  in the  Trust,  of which  100% of the  common  equity  is owned by the
Company.  The Trust Capital  Securities  are  unconditionally  guaranteed by the
Company.  Interest on the debt is payable quarterly in arrears on March 31, June
30, September 30, and December 31 of each year. The Trust Capital Securities are
scheduled  to  mature on June 30,  2027.  The Trust  Capital  Securities  may be
redeemed  in whole or in part at the option of the  Company on or after June 30,
2002 at 100% of the principal plus accrued  interest,  if any, to the date fixed
for redemption,  subject to certain  conditions.  All $57.5 million of the Trust
Capital Securities qualify as Tier I capital for regulatory capital purposes.


11.  Income Taxes

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

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
                                   2001              2000             1999
--------------------------------------------------------------------------------
<S>                                <C>              <C>               <C>
Current:
      Federal                      $52,085          $40,563           $34,339
      State                            658              604               434
Deferred:
      Federal                       (4,054)          (2,812)           (2,368)
      State                                                            (1,100)
--------------------------------------------------------------------------------
                                   $48,689          $38,355           $31,305
--------------------------------------------------------------------------------
</TABLE>

The above provision  includes  income taxes related to securities  gains of $400
thousand, $1.1 million and $900 thousand for 2001, 2000 and 1999, respectively.


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

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------
                                                         2001              2000            1999
--------------------------------------------------------------------------------------------------
<S>                                                      <C>               <C>              <C>
Expected provision at statutory rate:                    35.0%             35.0%            35.0%
Difference resulting from:
      Tax-exempt interest on loans                       (2.0)             (1.4)            (0.7)
      Tax-exempt interest on securities                  (1.8)             (2.1)            (1.0)
      Purchase accounting adjustments                     0.1               0.1              0.1
      Other, including acquisition costs                  0.8               0.8             (1.2)
--------------------------------------------------------------------------------------------------
                                                         32.1%             32.4%            32.2%
--------------------------------------------------------------------------------------------------
</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.

<PAGE>
Commerce Bancorp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements

The significant  components of the Company's deferred tax liabilities and assets
as of December 31, 2001 and 2000 are as follows (in thousands):

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------
                                                                         2001               2000
-----------------------------------------------------------------------------------------------------
<S>                                                                     <C>                 <C>
Deferred tax assets:
      Loan loss reserves                                                $22,359             $15,577
      Fair value adjustment, available for sale securities                                    3,036
      Intangibles                                                         3,153               2,901
      Other reserves                                                      2,645               2,597
      Other                                                               2,711               1,738
-----------------------------------------------------------------------------------------------------
Total deferred tax assets                                                30,868              25,849
-----------------------------------------------------------------------------------------------------
Deferred tax liabilities:
      Depreciation                                                        4,979               1,440
      Fair value adjustment, available for sale securities                8,620
      Other                                                               1,788               1,326
-----------------------------------------------------------------------------------------------------
Total deferred tax liabilities                                           15,387               2,766
-----------------------------------------------------------------------------------------------------
Net deferred assets                                                     $15,481             $23,083
-----------------------------------------------------------------------------------------------------
</TABLE>

No valuation  allowance was  recognized  for the deferred tax assets at December
31, 2001 and 2000, 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   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, 2001, the Banks
had outstanding standby letters of credit in the amount of $161.6 million.

In addition,  the Banks are committed as of December 31, 2001 to advance  $343.5
million on construction loans, $325.2 million on home equity lines of credit and
$785.9 million on lines of credit.  All other  commitments  total  approximately
$334.7 million.  The Company anticipates no material losses as a result of these
transactions.


13.  Common Stock

At December 31, 2001, 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 November  21,  2001,  the Board of  Directors  declared a 2 for 1 stock split
payable on  December  18,  2001 to  stockholders  of record on December 3, 2001.
Additionally,  the Board adjusted the par value per share to $1.00 from $1.5625.
On December 19, 2001,  the Board of Directors  declared a cash dividend of $0.15
for  each  share  of  common  stock  outstanding  payable  January  18,  2002 to
stockholders of record on January 4, 2002.

<PAGE>
Commerce Bancorp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements

14.  Earnings Per Share

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

<TABLE>
<CAPTION>
  ------------------------------------------------------------------------------------------------
                                                                  Year Ended December 31,
                                                    ----------------------------------------------
  (dollars in thousands)                               2001            2000           1999
  ------------------------------------------------------------------------------------------------
<S>                                                    <C>             <C>            <C>
  Basic:
  Net income applicable to common stock                $103,022        $80,047        $65,960
  ------------------------------------------------------------------------------------------------
  Average common shares outstanding                      64,666         61,755         58,310
  ------------------------------------------------------------------------------------------------
  Net income per common share                            $ 1.59        $  1.30        $  1.13
  ------------------------------------------------------------------------------------------------

  Diluted:
  Net income applicable to common stock
        on a diluted basis                             $103,022        $80,047        $65,960
  ------------------------------------------------------------------------------------------------

  Average common shares outstanding                      64,666         61,755         58,310
  Additional shares considered in diluted
        computation assuming:
           Exercise of stock options                      3,436          2,468          2,620
  ------------------------------------------------------------------------------------------------

  Average common and common equivalent
        shares outstanding                               68,102         64,223         60,930
  ------------------------------------------------------------------------------------------------

  Net income per common and common
        equivalent share                                 $ 1.51        $  1.25        $  1.08
  ------------------------------------------------------------------------------------------------
</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. 9,880,220 options 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.  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.

<PAGE>
Commerce Bancorp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements

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

<TABLE>
<CAPTION>
  ----------------------------------------------------------------------------------------------
                                                     Shares Under             Weighted Average
                                                       Option                 Exercise Price
  ----------------------------------------------------------------------------------------------
<S>                                                    <C>                        <C>
  Balance at January 1, 1999                           9,083,212                  $13.84
  Options granted                                      2,260,256                   19.41
  Options exercised                                      690,944                    6.28
  Options canceled                                       260,588                   19.93
  Balance at December 31, 1999                        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                                      2,694,550                   30.68
  Options exercised                                    1,092,393                   14.70
  Options canceled                                        74,017                   26.30
  Balance at December 31, 2001                        10,182,190                   19.83
  ----------------------------------------------------------------------------------------------
</TABLE>

Information  concerning  options  outstanding  as of  December  31,  2001  is as
follows:

<TABLE>
<CAPTION>
  ------------------------------------------------------------------------------------------------------------------------------
                                             Options Outstanding                                  Options Exercisable
  ------------------------------------------------------------------------------------------------------------------------------
                                             Weighted-Average           Weighted-           Exercisable          Weighted
  Range of                    Number             Remaining               Average               as of              Average
  Exercise prices          Outstanding       Contractual Life        Exercise Price         12/31/2001        Exercise Price
  ------------------------------------------------------------------------------------------------------------------------------
<S>                            <C>                 <C>                   <C>                   <C>                 <C>
  $1.52 to $10.00              2,074,458           3.6                   $ 7.07                2,074,458           $ 7.07
  $10.01 to $20.00             3,111,071           7.0                    17.96                2,622,114            17.77
  $20.01 to $37.50             4,996,661           7.6                    26.29                2,166,254            21.27
  ------------------------------------------------------------------------------------------------------------------------------
</TABLE>

The  Company  has  elected  not to  adopt  the  recognition  provisions  of FASB
Statement No. 123,  "Accounting for Stock-Based  Compensation"  (FAS 123), which
requires  a fair  value  based  method  of  accounting  for all  employee  stock
compensation  plans.  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>
-----------------------------------------------------------------------------------------------
                                                 2001                2000               1999
-----------------------------------------------------------------------------------------------
<S>                                             <C>                <C>                 <C>
Pro forma net income                            $94,918            $70,706             $57,619

Pro forma net income per share:
      Basic                                     $  1.47            $  1.14             $  0.99
      Diluted                                      1.40               1.11                0.95
-----------------------------------------------------------------------------------------------
</TABLE>

The fair value of options  granted in 2001,  2000 and 1999 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  4.86% 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 .309 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

<PAGE>
Commerce Bancorp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements

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.


Employee Stock Ownership Plan
As of December 31, 2001, the Company  maintains an Employee Stock Ownership Plan
(ESOP) for the benefit of its  officers and  employees  who meet age and service
requirements. The ESOP holds 1,676,000 shares of the Company's common stock, all
of which are  allocated to  participant  accounts.  Employer  contributions  are
determined at the discretion of the Board of Directors.  The total  contribution
expense associated with the Plan for 2001, 2000, and 1999 was $100,000, $100,000
and $547,000, respectively.

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 for 2001. No employer matching contributions were
made for 2000 and 1999, respectively.

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


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, 2001 and 2000:

<TABLE>
<CAPTION>
                                     -----------------------------------------------------------------------
                                                                    December 31,
                                     -----------------------------------------------------------------------
                                                   2001                                   2000
------------------------------------------------------------------------------------------------------------
                                        Carrying           Fair             Carrying            Fair
                                          Amount          Value              Amount             Value
------------------------------------------------------------------------------------------------------------
<S>                                     <C>              <C>                <C>               <C>
Financial assets:
      Cash and cash equivalents         $  557,738       $  557,738         $  495,918        $  495,918
      Loans held for sale                   73,261           73,261             41,791            41,791
      Trading securities                   282,811          282,811            109,306           109,306
      Investment securities              5,284,876        5,299,049          3,534,782         3,524,528
      Loans (net)                        4,516,431        4,652,219          3,638,580         3,652,000

Financial liabilities:
      Deposits                          10,185,594       10,209,099          7,387,594         7,400,507
      Other borrowed money                 264,554          264,554            283,714           283,714
      Long-term debt                        80,500           82,352             80,500            81,475
------------------------------------------------------------------------------------------------------------
Off-balance sheet liabilities:
      Standby letters of credit                          $    1,616                           $    1,693
      Commitments to extend credit                            1,210                                  932
</TABLE>

<PAGE>
Commerce Bancorp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements

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.

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.

<PAGE>
Commerce Bancorp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements

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>
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

2000
Interest income                                      $138,606              $131,185             $123,283              $112,226
Interest expense                                       58,861                55,621               49,861                44,027
Net interest income                                    79,745                75,564               73,422                68,199
Provision for loan losses                               3,128                 3,668                3,642                 3,493
Net investment securities gains                         2,393                                                              820
Provision for federal and state
   income taxes                                         9,588                10,092                9,459                 9,216
Net income                                             21,384                20,991               19,377                18,295

Net income per common share:
Basic                                                $   0.34              $   0.34             $   0.32              $   0.30
Diluted                                                  0.33                  0.32                 0.31                  0.29
</TABLE>

<PAGE>
Commerce Bancorp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements

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

Balance Sheets

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------
                                                                               December 31,
------------------------------------------------------------------------------------------------------
(dollars in thousands)                                               2001                     2000
------------------------------------------------------------------------------------------------------
<S>                                                               <C>                       <C>
Assets
Cash                                                              $   1,002                 $  1,090
Securities available for sale                                        35,842                   36,392
Investment in subsidiaries                                          700,747                  536,324
Other assets                                                         11,534                   16,018
------------------------------------------------------------------------------------------------------
                                                                   $749,125                 $589,824
------------------------------------------------------------------------------------------------------
Liabilities
Other liabilities                                                  $ 32,055                 $ 17,100
Trust Capital Securities                                             57,500                   57,500
Long-term debt                                                       23,000                   23,000
------------------------------------------------------------------------------------------------------
                                                                    112,555                   97,600
------------------------------------------------------------------------------------------------------
Stockholders' equity
Common stock                                                         65,833                   49,627
Capital in excess of par or stated value                            461,897                  422,375
Retained earnings                                                    94,698                   27,083
Accumulated other comprehensive income                               15,764                   (5,239)
------------------------------------------------------------------------------------------------------
                                                                    638,192                  493,846
Less treasury stock                                                   1,622                    1,622
------------------------------------------------------------------------------------------------------
      Total stockholders' equity                                    636,570                  492,224
------------------------------------------------------------------------------------------------------
                                                                   $749,125                 $589,824
------------------------------------------------------------------------------------------------------
</TABLE>


Statements of Income

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------
                                                                           Year Ended December 31,
-------------------------------------------------------------------------------------------------------------
(dollars in thousands)                                           2001              2000             1999
-------------------------------------------------------------------------------------------------------------
<S>                                                              <C>              <C>               <C>
Income:
      Dividends from subsidiaries                                $22,400          $ 9,150           $15,750
      Interest income                                                454              497               507
      Other                                                        7,022            5,652             3,690
-------------------------------------------------------------------------------------------------------------
                                                                  29,876           15,299            19,947
-------------------------------------------------------------------------------------------------------------
Expenses:
      Interest expense                                             7,258            7,244             7,375
      Operating expenses                                           3,214            2,352             2,508
-------------------------------------------------------------------------------------------------------------
                                                                  10,472            9,596             9,883
Income before income taxes and equity
      in undistributed income of subsidiaries                     19,404            5,703            10,064
Income tax benefit                                                (1,004)          (1,274)           (2,636)
-------------------------------------------------------------------------------------------------------------
                                                                  20,408            6,977            12,700
Equity in undistributed income of subsidiaries                    82,614           73,070            53,260
-------------------------------------------------------------------------------------------------------------
Net income                                                      $103,022          $80,047           $65,960
-------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>
Commerce Bancorp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements

Statements of Cash Flows

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------
                                                                                    Year Ended December 31,
--------------------------------------------------------------------------------------------------------------------------
(dollars in thousands)                                                      2001             2000              1999
--------------------------------------------------------------------------------------------------------------------------
<S>                                                                         <C>               <C>               <C>
Operating activities:
   Net income                                                               $103,022          $80,047           $65,960
   Adjustments to reconcile net income to net
      cash provided by operating activities:
         Undistributed income of subsidiaries                                (82,614)         (73,070)          (53,260)
         (Gains) losses on sales of securities available for sale                470                               (639)
         Decrease (increase) in other assets                                   4,484           (4,430)           (1,335)
         Increase in other liabilities                                        17,874            1,723            13,846
--------------------------------------------------------------------------------------------------------------------------
            Net cash provided by operating activities                         43,236            4,270            24,572
Investing activities:
   Investment in subsidiaries                                                (62,667)         (28,770)          (31,000)
   Proceeds from sale of securities available for sale                         1,828            9,997             5,733
   Proceeds from the maturity of securities available for sale                66,422          117,863            26,980
   Purchase of securities available for sale                                 (66,864)        (126,522)          (54,723)
   Other                                                                         352              (38)               27
--------------------------------------------------------------------------------------------------------------------------
            Net cash used by investing activities                            (60,929)         (27,470)          (52,983)
Financing activities:
   Proceeds from issuance of common stock
      under dividend reinvestment and other stock plans                       53,004           53,670            31,428
   Cash dividends                                                            (35,400)         (29,761)          (23,476)
--------------------------------------------------------------------------------------------------------------------------
            Net cash provided  by financing                                   17,605           23,909             7,952
              activities
Increase (decrease) in cash and cash equivalents                                 (88)             709           (20,459)
Cash and cash equivalents at beginning of year                                 1,090              381            20,840
--------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year                                     $ 1,002          $ 1,090           $   381
--------------------------------------------------------------------------------------------------------------------------
Supplemental  disclosures of cash flow information:
   Cash paid during the period for:
      Interest                                                               $ 7,089          $ 7,089           $ 7,089
      Income taxes                                                            48,616           36,135            26,056
--------------------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

Commerce Bancorp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements

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 2002 without  additional  approval of
approximately  $79.2 million,  $20.5  million,  $32.5 million and $30.8 million,
respectively, plus an additional amount equal to each bank's net profit for 2002
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,  2001  and  2000,  the  Company  complies  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, 2001
and 2000,  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,  2001 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,  2001,  that  the  Company  and  its
subsidiaries meet all capital adequacy requirements to which they are subject.

<PAGE>
Commerce Bancorp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements

The following  table  presents the Company's  and Commerce NJ's  risk-based  and
leverage capital ratios at December 31, 2001 and 2000:

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

December 31, 2000
Company
   Risk based capital ratios:
      Tier I                                     $551,167     10.79%         $204,316     4.00%          $306,474      6.00%
      Total capital                               609,047     11.92           408,633     8.00            510,791     10.00
   Leverage ratio                                 551,167      6.92           318,444     4.00            398,055      5.00

Commerce NJ Risk based capital ratios:
      Tier 1                                     $288,630      9.80%         $117,775     4.00%          $176,663      6.00%
      Total capital                               317,052     10.77           235,550     8.00            294,438     10.00
   Leverage ratio                                 288,630      6.51           177,474     4.00            221,843      5.00
</TABLE>

<PAGE>
Commerce Bancorp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements

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 National  Insurance (whose
revenues of $49.8 million,  $45.6 million and $32.4 2 million in 2001,  2000 and
1999,  respectively,  were  reported  in other  operating  income),  CCMI (whose
noninterest revenues of $22.8 million,  $15.3 million and $12.5 million in 2001,
2000 and 1999,  respectively,  were  reported in other  operating  income),  and
Commerce Capital Trust I.

Selected segment information for each of the three years ended December 31 is as
follows:

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                      2001                                2000                               1999
------------------------------------------------------------------------------------------------------------------------------------
                        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 income      $ 402,040   $   (714)   $ 401,326    $298,985    $(2,055)   $296,930  $  251,132   $ (6,765)  $   244,367
Provision for loan
     losses                 26,384                  26,384      13,931                 13,931       9,175                    9,175
------------------------------------------------------------------------------------------------------------------------------------
Net interest income
     after provision       375,656       (714)     374,942     285,054     (2,055)    282,999     241,957     (6,765)      235,192
Noninterest income         125,418     71,387      196,805      90,464     60,296     150,760      66,127     48,469       114,596
Noninterest expense        358,870     61,166      420,036     263,001     52,356     315,357     209,808     42,715       252,523
------------------------------------------------------------------------------------------------------------------------------------
Income (loss) before
     income taxes          142,204      9,507      151,711     112,517      5,885     118,402      98,276     (1,011)       97,265
Income tax expense
     (benefit)              46,630      2,059       48,689      35,255      3,100      38,355      31,963       (658)       31,305
------------------------------------------------------------------------------------------------------------------------------------
Net income (loss)       $   95,574   $  7,448    $ 103,022     $77,262     $2,785     $80,047  $   66,313   $   (353)   $   65,960
------------------------------------------------------------------------------------------------------------------------------------
Average assets
     (in thousands)     $8,547,839   $998,955   $9,546,794  $6,626,429   $722,534  $7,348,963  $5,301,844   $602,025    $5,903,869
------------------------------------------------------------------------------------------------------------------------------------
</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>
Commerce Bancorp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements

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 year ended December 31, 2001:

  ------------------------------------------------------------------------------
                                              Notional               Unrealized
                                               Amount               Gain (Loss)
                                            Long (Short)                Net
  ------------------------------------------------------------------------------

  Municipal bond futures                       $(62,600)                $241
  Treasury bond futures                           1,000                  (36)
  Treasury bond put options                       6,500                  (43)
  Treasury bond call options                    (76,000)                 (46)
  ------------------------------------------------------------------------------
  Total                                       $(131,100)                $116
  ------------------------------------------------------------------------------

The average notional amount for futures and options contracts for the year ended
December 31, 2001 was $62.3 million and $126.0 million,  respectively.  Realized
and unrealized gains and losses related to derivative financial  instruments are
included in other operating income in the statement of income.

<PAGE>
Commerce Bancorp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements

21.  Subsequent Event (Unaudited)

On February 27, 2002,  the Company  announced that it proposes to privately sell
up to $175 million of convertible  trust preferred shares comprised of preferred
securities  issued by a business  trust to be formed by  Commerce  Bancorp.  The
offering will be made pursuant to SEC Rule 144A only to qualified  institutional
and  certain  other  accredited  investors.   The  Company  intends  to  file  a
registration  statement  with  the  SEC to  register  the  resale  of the  trust
preferred and the underlying  common securities by the purchasers in the private
placement.  The  proceeds of the  offering  will be used for  general  corporate
purposes,   including  among  other  things  contributions  to  the  capital  of
subsidiary banks to fund their growth and operations.  A portion of the proceeds
may also be used to repay currently outstanding debt.

<PAGE>


Commerce Bancorp, Inc. and Subsidiaries Report of Independent Auditors

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, 2001 and 2000 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, 2001.  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, 2001 and 2000, and the
consolidated  results of their  operations  and their cash flows for each of the
three years in the period ended December 31, 2001 in conformity  with accounting
principles generally accepted in the United States.


                                                               Ernst & Young LLP

Philadelphia, Pennsylvania
January 25, 2002

<PAGE>
                                  Part IV

Item 14.    Exhibits, Financial Statement Schedules and Reports
            on Form 8-K
            (a) (3) - Exhibits:
                    3.1    Restated Certificate of Incorporation of
                           the Company, as amended. (I)
                    3.2    By-laws of the Company, as amended. (K)
                    4.1    Form of Trust Indenture, dated July 15,
                           1993, between the Company and United Jersey
                           Bank, with respect to the Company's
                           $23,000,000 8 3/8% Subordinated Notes due
                           July 15, 2003. (I)
                    4.2    Form of Indenture between the Company and
                           Wilmington Trust Company, as Debenture
                           Trustee. (M)
                    4.3    Certificate of Trust of Commerce Capital
                           Trust I. (M)
                    4.4    Form of Amended and Restated Declaration of
                           Trust of Commerce Capital Trust I. (M)
                    4.5    Form of Capital Security Certificate for
                           Commerce Capital Trust I (included in
                           Exhibit 4.4). (M)
                    4.6    Form of Guarantee Agreement. (M)
                    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)

<PAGE>

                    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)
                    *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. (J)
                    *10.15 The Company's 1997 Employee Stock Option
                           Plan. (L)
                    *10.16 A copy of employment contracts with Dennis
                           M. DiFlorio and Robert D. Falese dated
                           January 1, 1998. (N)
                    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. (N)
                    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. (N)
                    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. (N)
                    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. (N)
                    10.21  Ground lease, dated October 11, 1996,
                           between Commerce PA and Plymouth Equities,
                           L.L.C., relating to Commerce PA's branch
                           office in Plymouth Township, PA. (N)
                    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. (P)
                    *10.23 The Company's 1998 Stock Option Plan for
                           Non-Employee Directors. (O)
                    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. (P)
                    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. (Q)
                    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. (Q)
                    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. (Q)
                    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. (Q)
                    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. (R)
                    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. (R)
                    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.
                    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.
                    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.
                    11.1   Computation of Net Income Per Share
                           (incorporated by reference from PART II,
                           Item 8. "FINANCIAL STATEMENTS AND
                           SUPPLEMENTARY FINANCIAL DATA" of this
                           Report on Form 10-K.)
                    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.

<PAGE>

                ______________
                    (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).
                    (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 Registration Statement on Form
                           S-2 and Amendments Nos. 1 and 2 thereto
                           (Registration No. 33-62702).
                    (J)    Incorporated by reference from the
                           Company's Annual Report on Form 10-K for
                           the fiscal year ended December 31, 1994.
                    (K)    Incorporated by reference from the
                           Company's Registration Statement on Form
                           S-4 (Registration No. 333-10771).
                    (L)    Incorporated by reference from the
                           Company's Definitive Proxy Statement for
                           its 1997 Annual Meeting of Shareholders,
                           Exhibit A thereto.
                    (M)    Incorporated by reference from the
                           Company's Registration Statement on Form
                           S-3 (Registration No. 333-28311).
                    (N)    Incorporated by reference from the
                           Company's Annual Report on Form 10-K for
                           the fiscal year ended December 31, 1997.
                    (O)    Incorporated by reference from the
                           Company's Definitive Proxy Statement for
                           its 1998 Annual Meeting of Shareholders,
                           Exhibit A thereto.
                    (P)    Incorporated by reference from the
                           Company's Annual Report on Form 10-K for
                           the fiscal year ended December 31, 1998.
                    (Q)    Incorporated by reference from the
                           Company's Annual Report on Form 10-K for
                           the year ended December 31, 1999.
                    (R)    Incorporated by reference from the
                           Company's Annual Report on Form 10-K for
                           the year ended December 31, 2000.
                     *     Management contract or compensation plan or
                           arrangement.
               (b) There were no reports on Form 8-K filed in the fourth quarter
               of 2001.
               (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.

<PAGE>
Item 15.    Signatures


                                   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.

                                         By        /s/ VERNON W. HILL, II
                                             -----------------------------------
                                                     Vernon W. Hill, II
Date: March 6, 2002                          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.

<TABLE>
<CAPTION>
            Signature                                       Title                             Date
            ---------                                       -----                             ----

<S>                                         <C>                                        <C>
 /s/     VERNON W. HILL, II                 Chairman of the Board and President         March 6, 2002
--------------------------------------      (Principal Executive Officer)
         Vernon W. Hill, II

 /s/    C. EDWARD JORDAN JR.                Executive Vice President and Director       March 6, 2002
--------------------------------------
        C. Edward Jordan Jr.

 /s/       ROBERT C. BECK                   Secretary and Director                      March 6, 2002
--------------------------------------
           Robert C. Beck

 /s/       JACK R BERSHAD                   Director                                    March 6, 2002
--------------------------------------
           Jack R Bershad

 /s/       JOSEPH BUCKELEW                  Director                                    March 6, 2002
--------------------------------------
           Joseph Buckelew

 /s/       MORTON N. KERR                   Director                                    March 6, 2002
--------------------------------------
           Morton N. Kerr

 /s/       STEVEN M. LEWIS                  Director                                    March 6, 2002
--------------------------------------
           Steven M. Lewis

 /s/      DANIEL J. RAGONE                  Director                                    March 6, 2002
--------------------------------------
          Daniel J. Ragone

 /s/   WILLIAM A. SCHWARTZ JR.              Director                                    March 6, 2002
--------------------------------------
       William A. Schwartz Jr.

 /s/   JOSEPH T. TARQUINI JR.               Director                                    March 6, 2002
--------------------------------------
       Joseph T. Tarquini Jr.

 /s/     FRANK C. VIDEON SR.                Director                                    March 6, 2002
--------------------------------------
         Frank C. Videon Sr.
</TABLE>