content: SECURITIES AND EXCHANGE COMMISSION
  
                               WASHINGTON, D.C. 20549
  
                                      Form 10-Q
  
  
       (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                                EXCHANGE ACT OF 1934
  
                        For the quarter ended March 31, 1999
  
                                         OR
  
       ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                                EXCHANGE ACT OF 1934
  
  
                   For the transition period from ______ to ______
  
  
                              Commission File #0-12874
  
  
                               COMMERCE BANCORP, INC.
               (Exact name of registrant as specified in its charter)
  
  
               New Jersey                                    22-2433468   
     (State or other jurisdiction of                (IRS Employer Identification
      incorporation or organization)                            Number)
  
  
       Commerce Atrium, 1701 Route 70 East, Cherry Hill, New Jersey 08034-5400
                 (Address of Principal Executive Offices) (Zip Code)
  
  
                                   (609) 751-9000
                (Registrant's telephone number, including area code)
  
  
           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  ____
  <PAGE>
                        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 practical date.
  
  
  
  
           Common Stock                               27,570,311   
         (Title of Class)                    (No. of Shares Outstanding
                                                   as of  5/07/99)
  
  
  
  
  
  <PAGE>
                       COMMERCE BANCORP, INC. AND SUBSIDIARIES
  
  
                                        INDEX
  
                                                                             Page
  
  PART I.           FINANCIAL INFORMATION
  
  Item 1.           Financial Statements
  
                    Consolidated Balance Sheets (unaudited)
                             March 31, 1999 and December 31, 1998
  
                    Consolidated  Statements  of Income  (unaudited)  
                             Three months ended March 31, 1999 and 
                             March 31, 1998
  
                    Consolidated Statements of Cash Flows (unaudited) 
                             Three months ended March 31, 1999 and 
                             March 31, 1998
  
                    Notes to Consolidated Financial Statements (unaudited)
  
  Item 2.           Management's Discussion and Analysis of Financial
                             Condition and Results of Operation
  
  Item 3.           Quantitative and Qualitative Disclosures About Market Risk
  
  PART II.          OTHER INFORMATION
  
  Item 6.           Exhibits and Reports on Form 8-K
  
  
                                        -1-
  <PAGE>
  
                       Commerce Bancorp, Inc. and Subsidiaries
                             Consolidated Balance Sheets
                                     (unaudited)
  <TABLE>
  <CAPTION>
  ---------------------------------------------------------------------------------------------------------------------------------
                                                                                                   March 31,         December 31,
                                                                                                 ----------------------------------
                      (dollars in thousands)                                                          1999               1998
  ---------------------------------------------------------------------------------------------------------------------------------
  <S>                                                                                                  <C>                <C>     
  Assets              Cash and due from banks                                                          $206,500           $267,220
                      Federal funds sold                                                                 17,500             10,395
                                                                                                 ----------------------------------
                                       Cash and cash equivalents                                        224,000            277,615
                      Loans held for sale                                                                10,559             22,418
                      Trading securities                                                                 54,236             85,359
                      Securities available for sale                                                   1,520,192          1,305,004
                      Securities held to maturity                                                     1,086,212          1,220,874
                  (market value 03/99-$1,083,054; 12/98-$1,223,667)
                      Loans                                                                           2,475,496          2,280,326
                                     Less allowance for loan losses                                      33,149             31,265
                                                                                                 ----------------------------------
                                                                                                      2,442,347          2,249,061
                      Bank premises and equipment, net                                                  155,593            147,448
                      Other assets                                                                      140,687            116,411
                                                                                                 ----------------------------------
                                                                                                     $5,633,826         $5,424,190
                                                                                                 ==================================
  
  Liabilities         Deposits:
                                     Demand:
                                       Interest-bearing                                             $ 1,674,636        $ 1,682,958
                                       Noninterest-bearing                                            1,129,285          1,162,126
                                     Savings                                                          1,001,224            973,324
                                     Time                                                             1,236,792          1,110,400
                                                                                                 ----------------------------------
                                       Total deposits                                                 5,041,937          4,928,808
  
                      Other borrowed money                                                              134,790             27,845
                      Other liabilities                                                                  40,468             60,027
                      Obligation to Employee Stock Ownership Plan (ESOP)                                  1,026              1,282
                      Trust Capital Securities - Commerce Capital Trust I                                57,500             57,500
                      Long-term debt                                                                     23,000             23,000
                                                                                                 ----------------------------------
                                                                                                      5,298,721          5,098,462
  
  Stockholders'       Common stock, 27,578,515 shares issued (27,373,983 shares in 1998)                 43,087             40,988
  Equity              Capital in excess of par or stated value                                          291,154            236,928
                      Retained earnings                                                                   2,362             43,712
                      Accumulated other comprehensive income                                              1,152              7,006
                                                                                                 ----------------------------------
                                                                                                        337,755            328,634
                      Less commitment to ESOP                                                             1,026              1,282
  
                       Less treasury stock, at cost                                                       1,624              1,624
                                                                                                 ----------------------------------
                                       Total stockholders' equity                                       335,105            325,728
                                                                                                 ----------------------------------
  
                                                                                                     $5,633,826         $5,424,190
                                                                                                 ==================================
  </TABLE>
  <PAGE>
                       Commerce Bancorp, Inc. and Subsidiaries
                          Consolidated Statements of Income
                                     (unaudited)
  <TABLE>
  <CAPTION>
  --------------------------------------------------------------------------------------------------------------------
                                                                                              Three Months Ended
                                                                                                   March 31,
                                                                                          ----------------------------
                  (dollars in thousands, except per share amounts)                            1999           1998
  --------------------------------------------------------------------------------------------------------------------
  <S>                                                                                          <C>            <C>    
  Interest        Interest and fees on loans                                                   $48,003        $37,428
  income          Interest on investments                                                       39,007         38,291
                  Other interest                                                                   156            527
                                                                                          ----------------------------
                       Total interest income                                                    87,166         76,246
                                                                                          ----------------------------
  
  Interest        Interest on deposits:
  expense            Demand                                                                      9,625          7,915
                     Savings                                                                     4,795          5,003
                     Time                                                                       15,007         14,906
                                                                                          ----------------------------
                       Total interest on deposits                                               29,427         27,824
                  Interest on other borrowed money                                                 775          2,002
                  Interest on long-term debt                                                     1,782          1,782
                                                                                          ----------------------------
                       Total interest expense                                                   31,984         31,608
                                                                                          ----------------------------
  
                  Net interest income                                                           55,182         44,638
                  Provision for loan losses                                                      2,184          1,437
                                                                                          ----------------------------
                  Net interest income after provision for loan losses                           52,998         43,201
  
  Noninterest     Deposit charges and service fees                                               9,740          8,486
  income          Other operating income                                                        17,128         12,997
                  Net investment securities gains                                                  865              9
                                                                                          ----------------------------
                       Total noninterest income                                                 27,733         21,492
                                                                                          ----------------------------
  
  Noninterest     Salaries                                                                      23,512         17,710
  expense         Benefits                                                                       5,056          3,787
                  Occupancy                                                                      5,093          4,371
                  Furniture and equipment                                                        6,943          5,737
                  Office                                                                         5,298          4,007
                  Audit and regulatory fees and assessments                                        572            554
                  Marketing                                                                      1,663          1,933
                  Other real estate (net)                                                          474            420
                  Other                                                                          8,866          6,402
                                                                                          ----------------------------
                       Total noninterest expenses                                               57,477         44,921
                                                                                          ----------------------------
  
                  Income before income taxes                                                    23,254         19,772
                  Provision for federal and state income taxes                                   7,773          6,989
                                                                                          ============================
                  Net income                                                                    15,481         12,783
                                                                                          ============================
  
                  Net income per common and common equivalent share:
                     Basic                                                                       $0.56          $0.49
                                                                                          ----------------------------
                     Diluted                                                                     $0.54          $0.46
                                                                                          ----------------------------
                  Average common and common equivalent shares outstanding:
                     Basic                                                                      27,401         26,264
                                                                                          ----------------------------
                     Diluted                                                                    28,661         27,826
                                                                                          ----------------------------
                  Cash dividends declared, common stock                                          $0.21          $0.17
                                                                                          ============================
  </TABLE>
  
                                        -2-
  <PAGE>
  
                       Commerce Bancorp, Inc. And Subsidiaries
                        Consolidated Statements of Cash Flows
  <TABLE>
  <CAPTION>
  --------------------------------------------------------------------------------------------------------------------
                                                                                                Three Months Ended
                          (dollars in thousands)                                                    March 31,
                                                                                             -------------------------
                                                                                                1999          1998
  --------------------------------------------------------------------------------------------------------------------
  <S>                                                                                            <C>           <C>   
  Operating activities    Net income                                                             $15,481       12,783
                          Adjustments to reconcile net income to net cash
                             provided by operating activities:
                                Provision for loan losses                                          2,184        1,437
                                Provision for depreciation, amortization and accretion             7,606        5,766
                                Gains on sales of securities available for sale                     (865)          (9)
                                Proceeds from sales of mortgages held for sale                    39,794       17,478
                                Originations of mortgages held for sale                          (27,935)     (25,712)
                                Net loan (chargeoffs)                                               (300)        (592)
                                Net decrease (increase) in trading securities                     31,123       (1,887)
                                Increase in other assets                                         (21,119)        (277)
                                (Decrease) increase in other liabilities                         (19,559)      15,087
                        ----------------------------------------------------------------------------------------------
                                         Net cash provided  by financing activities               26,410       24,074
  
  Investing activities    Proceeds from the sales of securities available for sale               185,808      104,207
                          Proceeds from the maturity of securities available for sale             96,870       64,018
                          Proceeds from the maturity of securities held to maturity               77,100       68,708
                          Purchase of securities available for sale                             (415,463)    (137,255)
                          Purchase of securities held to maturity                                (35,522)    (222,287)
                          Net increase in loans                                                 (197,854)     (74,029)
                          Proceeds from sales of loans                                             2,684        2,360
                          Purchases of premises and equipment                                    (13,217)      (8,480)
                          --------------------------------------------------------------------------------------------
                                         Net cash used by financing activities                  (299,594)    (202,758)
  
  Financing activities    Net increase (decrease) in demand and savings deposits                 (13,263)     123,249
                          Net increase in time deposits                                          126,392      276,684
                          Net increase(decrease) in other borrowed money                         106,945     (198,300)
                          Dividends paid                                                          (5,074)      (4,180)
                          Proceeds from issuance of common stock under
                               dividend reinvestment and other stock plans                         4,564        2,924
                          Purchase of treasury stock
                          Other                                                                        4        8,317
                          --------------------------------------------------------------------------------------------
                                         Net cash provided  by financing activities              219,568      208,694
  
                          (Decrease) increase in cash and cash equivalents                       (53,615)      30,010
                          Cash and cash equivalents at beginning of year                         277,615      204,776
                          --------------------------------------------------------------------------------------------
                          Cash and cash equivalents at end of period                            $224,000     $234,786
                          --------------------------------------------------------------------------------------------
  
                          Supplemental disclosures of cash flow information:  
                            Cash paid during the period for:
                              Interest                                                          $ 29,024      $29,712
                              Income taxes                                                            18          125
                            Other noncash activities:
                              Transfer of securities to securities available for sale             91,010            0
                          --------------------------------------------------------------------------------------------
  
  </TABLE>
  
                                        -3-
  <PAGE>
                       COMMERCE BANCORP, INC. AND SUBSIDIARIES
                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                     (unaudited)
  
  A.       Consolidated Financial Statements
  
           The  consolidated   financial  statements  included  herein  have  been
           prepared  without audit  pursuant to the rules and  regulations  of the
           Securities and Exchange  Commission.  Certain  information and footnote
           disclosures  normally  included  in  financial  statements  prepared in
           accordance  with generally  accepted  accounting  principles  have been
           condensed  or  omitted  pursuant  to such  rules and  regulations.  The
           accompanying  condensed  consolidated  financial statements reflect all
           adjustments  which are, in the opinion of  management,  necessary  to a
           fair statement of the results for the interim periods  presented.  Such
           adjustments  are  of  a  normal  recurring  nature.   The  accompanying
           financial  statements  include the consolidated  accounts of the former
           Community First Banking Company (CFBC),  Tinton Falls, New Jersey,  and
           the former Prestige Financial Corp. (PFC), Flemington,  New Jersey, for
           all periods  presented.  Effective January 15, 1999,  Commerce Bancorp,
           Inc.  (the  Company)  acquired  CFBC,  and  CFBC's   wholly-owned  bank
           subsidiary,  Tinton Falls State Bank, was merged with and into Commerce
           Bank/Shore,  N.A. Also effective January 15, 1999, the Company acquired
           PFC, and PFC's  wholly-owned bank subsidiary,  Prestige State Bank, was
           re-chartered as a national bank and renamed Commerce Bank/Central, N.A.
           The transactions  were accounted for as poolings of interests.  Certain
           amounts  in  prior  periods  have  been  reclassified  for  comparative
           purposes.
  
           These condensed  consolidated  financial  statements  should be read in
           conjunction with the audited financial statements and the notes thereto
           included in the registrant's  Annual Report on Form 10-K for the period
           ended  December 31, 1998.  The results for the three months ended March
           31, 1999 are not  necessarily  indicative  of the  results  that may be
           expected for the year ended December 31, 1999.
  
           The consolidated  financial statements include the accounts of Commerce
           Bancorp,  Inc. and all of its  subsidiaries,  including  Commerce Bank,
           N.A.  (Commerce  NJ),  Commerce   Bank/Pennsylvania,   N.A.,   Commerce
           Bank/Shore,  N.A., Commerce Bank/North,  Commerce  Bank/Central,  N.A.,
           Commerce Capital Trust I, and Commerce  Capital  Markets,  Inc. (CCMI).
           All material intercompany transactions have been eliminated.
  
  B.       Commitments
  
           In the  normal  course  of  business,  there  are  various  outstanding
           commitments to extend credit,  such as letters of credit and unadvanced
           loan   commitments,   which  are  not  reflected  in  the  accompanying
           consolidated  financial statements.  Management does not anticipate any
           material losses as a result of these transactions.
  
                                        -4-
  <PAGE>
  C.       Comprehensive Income
  
               Total  comprehensive  income,  which for the Company  included  net
           income and unrealized  gains and losses on the Company's  available for
           sale   securities,   amounted  to  $9.6  million  and  $16.1   million,
           respectively, for the three months ended March 31, 1999 and 1998.
  
  D.       Segment Information
  
           Selected segment information is as follows:
  
  <TABLE>
  <CAPTION>
  -------------------------------------------------------------------------------------------------------------------------
                                             Three Months Ended March 31, 1999          Three Months Ended March 31, 1998
                                          Community       Parent/                     Community     Parent/
                                             Banks         Other          Total         Banks        Other           Total
  -------------------------------------------------------------------------------------------------------------------------
  <S>                                       <C>           <C>            <C>           <C>           <C>            <C>    
  Net interest income                       $56,799       $(1,617)       $55,182       $46,305       $(1,667)       $44,638
  Provision for loan losses                   2,184            --          2,184         1,437            --          1,437
                                         ----------    ----------     ----------    ----------    ----------     ----------
  
  Net interest income after provision        54,615        (1,617)        52,998        44,868        (1,667)        43,201
  Noninterest income                         14,788        12,945         27,733        13,089         8,403         21,492
  Noninterest expense                        47,094        10,383         57,477        38,326         6,595         44,921
                                         ----------    ----------     ----------    ----------    ----------     ----------
  Income before income taxes                 22,309           945         23,254        19,631           141         19,772
  Income tax expense                          7,329           444          7,773         6,921            68          6,989
                                         ----------    ----------     ----------    ----------    ----------     ----------
  Net income                                $14,980          $501        $15,481       $12,710           $73        $12,783
                                         ==========    ==========     ==========    ==========    ==========     ==========
  
  Average assets (in millions)           $4,870,848      $567,219     $5,438,067    $4,076,668      $424,147     $4,500,815
                                         ==========    ==========     ==========    ==========    ==========     ==========
  
  </TABLE>
  
                                        -5-
  <PAGE>
  E.       Recent Accounting Statement
  
           In June  1998,  the FASB  issued  Statement  No.  133  "Accounting  for
           Derivative  Instruments and Hedging Activities" (FAS 133). FAS 133 will
           require the Company to recognize all  derivatives  on the balance sheet
           at fair value. Derivatives that are not hedges must be adjusted to fair
           value through  income.  If the derivative is a hedge,  depending on the
           nature of the hedge,  changes in the fair value of the derivative  will
           either be offset  against the change in fair value of the hedged  asset
           or liability  through  earnings or  recognized  in other  comprehensive
           income until the hedged item is recognized in earnings. The ineffective
           portion of a  derivative's  change in fair  value  will be  immediately
           recognized  in  earnings.  FAS 133  becomes  effective  for the Company
           beginning  January 1, 2000.  Although  early adoption is allowed in any
           quarterly period after June 1998, the Company has no plans to adopt FAS
           133 prior to the effective date. Based on the Company's  minimal use of
           derivatives  at the  current  time,  management  does  not  expect  the
           adoption  of FAS  133 to  have  a  significant  effect  on  results  of
           operations  or the  financial  position of the  Company.  However,  the
           impact from  adopting  FAS 133 will depend on the nature and purpose of
           the derivative instruments in use by the Company at that time.
  
  F.       Trust Capital Securities
  
           On June 9, 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.  The net proceeds of
           the offering  will be used for general  corporate  purposes,  which may
           include contributions to subsidiary banks to fund their operations, the
           financing of one or more future acquisitions, repayment of indebtedness
           of the Company or of its subsidiary banks, investments in or extensions
           of  credit  to its  subsidiaries,  or the  repurchase  of shares of the
           Company's  outstanding  common  stock.  All $57.5  million of the Trust
           Capital  Securities  qualify as Tier 1 capital for  regulatory  capital
           purposes.
  
                                        -6-
  <PAGE>
  G.       Earnings Per Share
  
           The calculation of earnings per share follows (in thousands, except for
            per share amounts):
  
                                                Three Months Ended
                                                     March 31   
                                                  1999        1998
                                               --------     -------
  
  Basic:
  
  Net income applicable to common stock        $ 15,481     $12,783
                                               ========     =======
  
  Average common shares outstanding              27,401      26,264
                                               ========     =======
  
  Net income per common share - basic          $   0.56     $  0.49
                                               ========     =======
  
  Diluted:
  
  Net income applicable to common stock
           on a diluted basis                  $ 15,481     $12,783
                                               ========     =======
  
  Average common shares outstanding              27,401      26,264
  Additional shares considered in diluted
           computation assuming:
             Exercise of stock options            1,260       1,138
             Conversion of preferred stock                      424
                                               --------     -------
  Average common shares outstanding
           on a diluted basis                    28,661      27,826
                                               ========     =======
  
  Net income per common share - diluted        $   0.54     $  0.46
                                               ========     =======
  
  
                                        -7-
  <PAGE>
  Item 2.  Management's Discussion and Analysis of Financial Condition and 
           Results of Operation
  
           Capital Resources
  
           At March 31, 1999, stockholders' equity totaled $335.1 million or 5.95%
           of total assets, compared to $325.7 million or 6.01% of total assets at
           December 31, 1998.
  
           The table below presents the Company's and Commerce NJ's risk-based and
           leverage ratios at March 31, 1999 and 1998:
  
  <TABLE>
  <CAPTION>
                                                                                          Per Regulatory Guidelines
                                                        Actual                        Minimum              "Well Capitalized"
                                                 Amount          Ratio        Amount           Ratio      Amount           Ratio
  <S>       <C>                                 <C>                <C>       <C>                <C>      <C>                 <C> 
  March 31, 1999
  Company
     Risk based capital ratios:
       Tier 1                                   $386,771           11.64%    $132,954           4.00%    $199,431            6.00%
       Total capital                             438,320           13.19      265,908           8.00      332,385           10.00
     Leverage ratio                              386,771            7.12      217,174           4.00      271,468            5.00
  
  Commerce NJ Risk based capital ratios:
       Tier 1                                   $200,137           10.92%    $ 73,300           4.00%    $109,950            6.00%
       Total capital                             218,152           11.90      146,600           8.00      183,250           10.00
     Leverage ratio                              200,137            6.57      121,771           4.00      152,214            5.00
  
  March 31, 1998
  Company
     Risk based capital ratios:
       Tier 1                                   $350,375           15.18%    $ 92,319           4.00%    $138,478            6.00%
       Total capital                             398,370           17.26      184,638           8.00      230,797           10.00
     Leverage ratio                              350,375            7.80      134,709           3.00      224,515            5.00
  
  Commerce NJ Risk based capital ratios:
       Tier 1                                   $177,218           13.08%    $ 54,185           4.00%    $ 81,278            6.00%
       Total capital                             191,617           14.15      108,371           8.00      135,464           10.00
     Leverage ratio                              177,218            6.50       81,760           3.00      136,267            5.00
  
  </TABLE>
  
                                        -8-
  <PAGE>
           At March 31, 1999, the Company's  consolidated  capital levels and each
           of the Company's bank  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%.  Management  believes
           that as of March 31, 1999,  the Company and its  subsidiaries  meet all
           capital adequacy requirements to which they are subject.
  
           Deposits
  
           Total deposits at March 31, 1999 were $5.04 billion, up $857.4 million,
           or 20% over total  deposits of $4.18 billion at March 31, 1998,  and up
           by $113.1 million,  or 2% from year-end 1998. Deposit growth during the
           first three  months of 1999  included  core  deposit  growth in savings
           balances  as well  as  growth  from  the  public  sector.  The  Company
           experienced "same-store core deposit growth" of 21.1% at March 31, 1999
           as  compared to  deposits a year ago for those  branches  open for more
           than two years.
  
           Interest Rate Sensitivity and Liquidity
  
           The  Company's  risk of loss arising  from adverse  changes in the fair
           market 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 these
           policies.  The  guidelines  established  by ALCO  are  reviewed  by the
           Company's Board of Directors.
  
           Management considers the simulation of net interest income in different
           interest rate  environments  to be the best  indicator of the Company's
           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 ALCO policy has  established  that interest
           income  sensitivity will be considered  acceptable if net income in the
           above  interest  rate  scenario is within 15% of net income in the flat
           rate  scenario  in the first year and within 30% over the two year time
           frame.  At March  31,  1999,  the  Company's  income  simulation  model
           indicates  net income  would  decrease  by 0.32% and 6.22% in the first
           year and over a two year time frame,  respectively,  if rates decreased
           as  described  above,  as  compared  to a decrease  of 1.31% and 4.03%,
           respectively,  at March 31, 1998. At March 31, 1999, the model projects
           that net income would decrease by 2.81% and 1.98% in the first year and
           over a two  year  time  frame,  respectively,  if  rates  increased  as
           described  above,  as  compared  to a  decrease  of  6.69%  and  9.25%,
           respectively,  at March 31, 1998.  All of these net income  projections
           are within an  acceptable  level of interest  rate risk pursuant to the
           policy established by ALCO.
  
                                        -9-
  <PAGE>
           In the event  the  Company's  interest  rate risk  models  indicate  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 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 March 31, 1999, the market
           value of equity model  indicates an  acceptable  level of interest rate
           risk.
  
           Liquidity  involves  the  Company's  ability to raise  funds to support
           asset growth or decrease  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,  cash flow from its amortizing investment and loan
           portfolios, as well as the use of short-term borrowings, as required.
  
           Short-Term Borrowings
  
           Short-term  borrowings,  or other borrowed money,  consist primarily of
           securities  sold under  agreements to repurchase and overnight lines of
           credit,  and are used to meet short term  funding  needs.  At March 31,
           1999,  short-term  borrowings  aggregated  $134.8  million  and  had an
           average rate of 5.23%,  as compared to $27.8 million at an average rate
           of 4.98% at December 31, 1998.
  
           Interest Earning Assets
  
           For the three month  period  ended  March 31,  1999,  interest  earning
           assets  increased  $232.7  million from $4.91 billion to $5.15 billion.
           This  increase was  primarily  in  investment  securities  and the loan
           portfolio as described below.
  
           Loans
  
           During the first three months of 1999,  loans increased  $193.3 million
           from  $2.25  billion  to  $2.44  billion.  At  March  31,  1999,  loans
           represented 48% of total deposits and 43% of total assets. All segments
           of the loan portfolio  experienced  growth in the first three months of
           1999,  including  loans secured by commercial  real estate  properties,
           commercial loans, and consumer loans.
  
                                        -10-
  <PAGE>
           Investments
  
           In total,  for the first  three  months of 1999,  securities  increased
           $49.4 million from $2.61 billion to $2.66  billion.  Deposit growth and
           other funding  sources were used to increase the  Company's  investment
           portfolio. The available for sale portfolio increased $215.2 million to
           $1.52  billion at March 31,  1999 from $1.31  billion at  December  31,
           1998, and the securities held to maturity  portfolio  decreased  $134.7
           million  to $1.09  billion  at March 31,  1999 from  $1.22  billion  at
           year-end  1998. In connection  with the  acquisitions  of CFBC and PFC,
           management  reclassified  $91.0 million of investment  securities  from
           held to maturity  to  available  for sale  during the first  quarter of
           1999.   Unrealized   losses  on  those   securities   transferred  were
           approximately  $330  thousand.  The  portfolio  of  trading  securities
           decreased  $31.1  million from  year-end 1998 to $54.2 million at March
           31,  1999.  At March  31,  1999,  the  average  life of the  investment
           portfolio   was   approximately   4.2  years,   and  the  duration  was
           approximately   3.2  years.  At  March  31,  1999,   total   securities
           represented 47% of total assets.
  
           Net Income 
  
           Net income for the first quarter of 1999 was $15.5 million, an increase
           of $2.7  million or 21% over the $12.8  million  recorded for the first
           quarter of 1998. On a per share basis, diluted net income for the first
           quarter of 1999 was $0.54 per common share compared to $0.46 per common
           share for the first quarter of 1998.
  
           Return on average  assets (ROA) and return on average  equity (ROE) for
           the first quarter of 1999 were 1.14% and 18.76%, respectively, compared
           to 1.14% and 17.25%, respectively, for the same 1998 period.
  
           Net Interest Income
  
           Net interest  income  totaled  $55.2  million for the first  quarter of
           1999,  an  increase of $10.5  million or 24% from $44.6  million in the
           first quarter of 1998. The  improvement in net interest  income was due
           primarily to volume increases in the loan and investment portfolios.
  
           Noninterest Income
  
           Noninterest income totaled $27.7 million for the first quarter of 1999,
           an  increase  of $6.2  million or 29% from  $21.5  million in the first
           quarter of 1998.  The  increase was due  primarily  to increased  other
           operating  income,  which  rose  $4.1  million  over  the  prior  year,
           including  increased  revenues of $2.1 million from  Commerce  National
           Insurance Services, Inc. (Commerce Insurance),  the Company's insurance
           brokerage subsidiary,  and $1.5 million from CCMI. In addition, deposit
           charges and service fees  increased $1.3 million over the first quarter
           of 1998 primarily due to higher transaction  volumes.  The Company also
           recorded $865 thousand in net investment  securities gains in the first
           quarter of 1999.
  
                                        -11-
  <PAGE>
           Noninterest Expense
  
           For the  first  quarter  of 1999,  noninterest  expense  totaled  $57.5
           million,  an increase  of $12.6  million or 28% over the same period in
           1998.  Contributing  to this increase was new branch  activity over the
           past twelve months,  with the number of branches  increasing from 89 at
           March 31, 1998 to 97 at March 31, 1999,  and the  expansion of Commerce
           Insurance  and CCMI.  With the  addition of these new  offices,  staff,
           facilities,  and related expenses rose  accordingly.  Other noninterest
           expenses  rose  $2.5  million  over the  first  quarter  of 1998.  This
           increase  resulted  primarily  from  higher bank  card-related  service
           charges,   increased  business  development  expenses,   and  increased
           provisions for non-credit-related losses.
  
           The Company's operating  efficiency ratio (noninterest  expenses,  less
           other  real  estate  expense,  divided  by  net  interest  income  plus
           noninterest  income excluding  non-recurring  gains) was 69.47% for the
           first  three  months of 1999 as  compared  to 67.30%  for the same 1998
           period.  The  Company's  efficiency  ratio remains above its peer group
           primarily due to its aggressive growth expansion activities.
  
           Loan and Asset Quality
  
           Total  non-performing  assets  (non-performing  loans  and  other  real
           estate,  excluding  loans  past due 90 days or more and still  accruing
           interest)  at March 31,  1999  were  $14.5  million,  or 0.26% of total
           assets  compared to $14.7  million or 0.27% of total assets at December
           31, 1998 and $18.4 million or 0.40% of total assets at March 31, 1998.
  
           Total  non-performing  loans (non-accrual loans and restructured loans,
           excluding  loans past due 90 days or more and still accruing  interest)
           at March 31, 1999 were $8.9 million or 0.36% of total loans compared to
           $8.6  million or 0.38% of total  loans at  December  31, 1998 and $12.4
           million or 0.71% of total loans at March 31,  1998.  At March 31, 1999,
           loans past due 90 days or more and still accruing  interest amounted to
           $696  thousand  compared to $945 thousand at December 31, 1998 and $1.2
           million at March 31, 1998.  Additional  loans  considered  as potential
           problem loans by the Company's  internal loan review  department ($19.3
           million at March 31, 1999) have been  evaluated as to risk  exposure in
           determining the adequacy of the allowance for loan losses.
  
           Other real estate (ORE) at March 31, 1999 totaled $5.6 million compared
           to $6.1  million at  December  31,  1998 and $6.0  million at March 31,
           1998.  These  properties have been written down to the lower of cost or
           fair value less disposition costs.
  
           On  pages  xx  and  xx  are  tabular   presentation   showing  detailed
           information about the Company's  non-performing loans and assets and an
           analysis of the  Company's  allowance for loan losses and other related
           data for March 31, 1999, December 31, 1998, and March 31, 1998.
  
  
                                        -12-
  <PAGE>
           Year 2000
  
           The Company  began the process of preparing  its  computer  systems and
           applications   for  the  Year  2000  in  1996.  The  process   involves
           identifying and resolving date recognition problems in computer systems
           and software,  and to a lesser extent, other operating equipment,  that
           could be caused by the date change from December 31, 1999 to January 1,
           2000.
  
           The Company has completed its assessment of all business processes that
           could be  affected  by the  Year  2000  issue.  Each  business  process
           assessment  included a review of the  information  systems used in that
           process, including hardware and software, involvement of third parties,
           and any other operating equipment.  The Company licenses  substantially
           all software used in conducting  its business from third party vendors.
           All vendors have been contacted  regarding the Year 2000 issue, and the
           Company  continues  to track  the  progress  each  vendor  is making in
           reaching  Year  2000  compliance.  The  Company  is also  working  with
           significant  customers  and  counterparties  to monitor their Year 2000
           efforts.  The Company has all necessary changes in place and tested for
           all mission  critical  systems  (those  systems  defined as  absolutely
           essential   to  the  daily   business   operation   of  the   Company).
           Additionally, the Company has completed certification testing with most
           mission critical service providers.  Changes for most remaining systems
           are in place and testing should be  substantially  completed by the end
           of the second quarter of 1999.  Contingency plans will be completed and
           validated during the second quarter of 1999.
  
           The Company believes it is taking the appropriate  steps to address all
           Year 2000  issues.  Despite the  Company's  efforts to address the Year
           2000  problem and develop  contingency  plans in the event of Year 2000
           failures,  including  non-compliance  by third parties  (including loan
           customers), there can be no assurance that the Year 2000 issue will not
           materially  adversely impact the Company's financial position,  results
           of operations, or relationships with customers, vendors, or others.
  
           The  Company  estimates  the  total  cost of the Year  2000  compliance
           process,  including  internal and external  personnel  and any required
           hardware and software modifications, will not exceed $1.0 million.
  
           Forward-Looking Statements
  
           The Company may from time to time make written or oral "forward-looking
           statements",  including  statements  contained in the Company's filings
           with the Securities and Exchange Commission (including this Form 10-Q),
           in its  reports  to  stockholders  and in other  communications  by the
           Company,  which are made in good faith by the  Company  pursuant to the
           "safe harbor"  provisions of 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 (some of which are beyond the Company's  control).  The
           words  "may",  "could",  "should",  "would",  believe",   "anticipate",
           "estimate",  "expect",  "intend",  "plan" and similar  expressions  are
           intended to identify forward-looking statements. 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  operations;  the
           effects  of, and  changes  in,  trade,  monetary  and fiscal  policies,
           including  interest  rate  policies  of the Board of  
  
                                        -13-
  <PAGE>
           Governors  of  the  Federal  Reserve  System  (the  "FRB");  inflation;
           interest   rates,   market  and  monetary   fluctuations;   the  timely
           development of competitive new products and services by the Company 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;   unanticipated   regulatory  or  judicial
           proceedings;  changes in consumer  spending and saving habits;  and the
           success of the Company at managing the risks involved in the foregoing.
  
           The Company  cautions that the foregoing  list of important  factors is
           not   exclusive.   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.
  
                                        -14-
  <PAGE>
  The following summary presents  information  regarding  non-performing loans and
  assets as of March 31, 1999 and the preceding four quarters:  (dollar amounts in
  thousands)
  <TABLE>
  <CAPTION>
  <S>                                                    <C>              <C>             <C>              <C>              <C>   
                                                     March 31,        December 31,    September 30,     June 30,        March 31,
                                                        1999             1998            1998             1998             1998
                                                  ---------------  ---------------  --------------  ---------------  ---------------
  Non-accrual loans:
         Commercial                                      $2,821           $2,466          $2,417           $2,021           $2,638
         Consumer                                           846              831             782              851              949
         Real estate:
           Construction                                     115              189             587              603              613
           Mortgage                                       4,937            4,849           4,631            5,500            8,026
                                                 ---------------  ---------------  --------------  ---------------  ---------------
               Total non-accrual loans                    8,719            8,335           8,417            8,975           12,226
                                                 ---------------  ---------------  --------------  ---------------  ---------------
  
  Restructured loans:
         Commercial                                          16               17              17               18               19
         Consumer
         Real estate:
           Construction
           Mortgage                                         117              217             104              109              114
                                                 ---------------  ---------------  --------------  ---------------  ---------------
               Total restructured loans                     133              234             121              127              133
                                                 ---------------  ---------------  --------------  ---------------  ---------------
  
         Total non-performing loans                       8,852            8,569           8,538            9,102           12,359
                                                 ---------------  ---------------  --------------  ---------------  ---------------
  
  Other real estate                                       5,645            6,081           5,409            5,649            6,029
                                                 ---------------  ---------------  --------------  ---------------  ---------------
  
  Total non-performing assets                            14,497           14,650          13,947           14,751           18,388
                                                 ---------------  ---------------  --------------  ---------------  ---------------
  
  Loans past due 90 days or more
         and still accruing                                 696              945           2,622            1,187            1,188
                                                 ---------------  ---------------  --------------  ---------------  ---------------
  
  Total non-performing assets and
         loans past due 90 days or more                 $15,193          $15,595         $16,569          $15,938          $19,576
                                                 ===============  ===============  ==============  ===============  ===============
  
  Total non-performing loans as a
         percentage of total period-end
         loans                                            0.36%            0.38%           0.41%            0.47%            0.71%
  
  Total non-performing assets as a
         percentage of total period-end assets            0.26%            0.27%           0.27%            0.30%            0.40%
  
  Total non-performing assets and loans
         past due 90 days or more as a
         percentage of total period-end assets            0.27%            0.29%           0.33%            0.32%            0.42%
  
  Allowance for loan losses as a
         percentage of total non-performing
         loans                                             374%             365%            332%             293%             202%
  
  Allowance for loan losses as a percentage
         of total period-end loans                        1.34%            1.37%           1.36%            1.36%            1.44%
  
  Total non-performing assets and loans
         past due 90 days or more as a
         percentage of stockholders' equity and
         allowance for loan losses                           4%               4%              5%               5%               6%
  </TABLE>
  
                                        -15-
  <PAGE>
  The following  table  presents,  for the periods  indicated,  an analysis of the
  allowance for loan losses and other related data: (dollar amounts in thousands)
  <TABLE>
  <CAPTION>
                                                                                       Year
                                                    Three Months Ended                Ended
                                                ----------------------------
                                                 03/31/99         03/31/98           12/31/98
                                                -----------       ----------        -----------
  <S>                                           <C>              <C>                <C>    
  Balance at beginning of period                   $31,265          $24,150            $24,150
  Provisions charged to operating expenses           2,184            1,437              8,762
                                                -----------       ----------        -----------
                                                    33,449           25,587             32,912
  
  Recoveries on loans charged-off:
      Commercial                                       220               52                418
      Consumer                                          36               98                305
      Real estate                                        2                9                764
                                                -----------       ----------        -----------
  Total recoveries                                     258              159              1,487
  
  Loans charged-off:
      Commercial                                      (368)            (262)            (1,281)
      Consumer                                        (168)            (287)            (1,352)
      Real estate                                      (22)            (202)              (501)
                                                -----------       ----------        -----------
  Total charge-offs                                   (558)            (751)            (3,134)
                                                -----------       ----------        -----------
  Net charge-offs                                     (300)            (592)            (1,647)
                                                -----------       ----------        -----------
  
  Balance at end of period                         $33,149          $24,995            $31,265
                                                ===========       ==========        ===========
  
  
  
  Net charge-offs as a percentage of
  average loans outstanding                           0.05  %          0.14  %            0.08  %
  </TABLE>
  
  
  Item 3:  Quantitative and Qualitative Disclosures About Market Risk
  -------------------------------------------------------------------------------
  
  See Item 2 -  Management's  Discussion  and Analysis of Financial  Condition and
  Results of Operation, Interest Rate Sensitivity and Liquidity.
  
                                        -16-
  <PAGE>
                             PART II. OTHER INFORMATION
  
  
  
  
  
  
  
  Item 6. Exhibits and Reports on Form 8-K
  
  
           No reports on Form 8-K were filed during the first  quarter ended March
           31, 1999.
  
  
  
                                        -17-
  <PAGE>
  
  
                                     SIGNATURES
  
  
  
  
  
  Pursuant  to the  requirements  of the  Securities  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.
                                                   (Registrant)
  
  
  
  
  
  
  
  
  
  
  May 14, 1999                                /s/ THOMAS J. SUKAY
    (Date)                                        THOMAS J. SUKAY
                                               SENIOR VICE PRESIDENT
                                      (PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER)
  
  
  
  
                                        -18-
metadata_documents: [{"type": "10-Q", "sequence": "1", "secsgml_size_bytes": 65846}]
metadata_filer: {"company-data": {"conformed-name": "COMMERCE BANCORP INC /NJ/", "cik": "0000715096", "assigned-sic": "6021", "irs-number": "222433468", "state-of-incorporation": "NJ", "fiscal-year-end": "1231"}, "filing-values": {"form-type": "10-Q", "act": "34", "file-number": "001-12069", "film-number": "99625378"}, "business-address": {"street1": "COMMERCE ATRIUM", "street2": "1701 RTE 70 E", "city": "CHERRY HILL", "state": "NJ", "zip": "08034-5400", "phone": "6097519000"}, "mail-address": {"street1": "1701 ROUTE 70 EAST", "city": "CHERRY HILL", "state": "NJ", "zip": "08034-5400"}}
text: SECURITIES AND EXCHANGE COMMISSION
  
                               WASHINGTON, D.C. 20549
  
                                      Form 10-Q
  
       (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                                EXCHANGE ACT OF 1934
  
                        For the quarter ended March 31, 1999
  
                                         OR
  
       ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                                EXCHANGE ACT OF 1934
  
                   For the transition period from ______ to ______
  
                              Commission File #0-12874
  
                               COMMERCE BANCORP, INC.
               (Exact name of registrant as specified in its charter)
  
               New Jersey                                    22-2433468   
     (State or other jurisdiction of                (IRS Employer Identification
      incorporation or organization)                            Number)
  
       Commerce Atrium, 1701 Route 70 East, Cherry Hill, New Jersey 08034-5400
                 (Address of Principal Executive Offices) (Zip Code)
  
                                   (609) 751-9000
                (Registrant's telephone number, including area code)
  
           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  ____
  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 practical date.
  
           Common Stock                               27,570,311   
         (Title of Class)                    (No. of Shares Outstanding
                                                   as of  5/07/99)
  COMMERCE BANCORP, INC. AND SUBSIDIARIES
  
                                        INDEX
  
                                                                             Page
  
  PART I.           FINANCIAL INFORMATION
  
  Item 1.           Financial Statements
  
                    Consolidated Balance Sheets (unaudited)
                             March 31, 1999 and December 31, 1998
  
                    Consolidated  Statements  of Income  (unaudited)  
                             Three months ended March 31, 1999 and 
                             March 31, 1998
  
                    Consolidated Statements of Cash Flows (unaudited) 
                             Three months ended March 31, 1999 and 
                             March 31, 1998
  
                    Notes to Consolidated Financial Statements (unaudited)
  
  Item 2.           Management's Discussion and Analysis of Financial
                             Condition and Results of Operation
  
  Item 3.           Quantitative and Qualitative Disclosures About Market Risk
  
  PART II.          OTHER INFORMATION
  
  Item 6.           Exhibits and Reports on Form 8-K
  
                                        -1-
  Commerce Bancorp, Inc. and Subsidiaries
                             Consolidated Balance Sheets
                                     (unaudited)
  ---------------------------------------------------------------------------------------------------------------------------------
                                                                                                   March 31,         December 31,
                                                                                                 ----------------------------------
                      (dollars in thousands)                                                          1999               1998
  ---------------------------------------------------------------------------------------------------------------------------------
  Assets              Cash and due from banks                                                          $206,500           $267,220
                      Federal funds sold                                                                 17,500             10,395
                                                                                                 ----------------------------------
                                       Cash and cash equivalents                                        224,000            277,615
                      Loans held for sale                                                                10,559             22,418
                      Trading securities                                                                 54,236             85,359
                      Securities available for sale                                                   1,520,192          1,305,004
                      Securities held to maturity                                                     1,086,212          1,220,874
                  (market value 03/99-$1,083,054; 12/98-$1,223,667)
                      Loans                                                                           2,475,496          2,280,326
                                     Less allowance for loan losses                                      33,149             31,265
                                                                                                 ----------------------------------
                                                                                                      2,442,347          2,249,061
                      Bank premises and equipment, net                                                  155,593            147,448
                      Other assets                                                                      140,687            116,411
                                                                                                 ----------------------------------
                                                                                                     $5,633,826         $5,424,190
                                                                                                 ==================================
  
  Liabilities         Deposits:
                                     Demand:
                                       Interest-bearing                                             $ 1,674,636        $ 1,682,958
                                       Noninterest-bearing                                            1,129,285          1,162,126
                                     Savings                                                          1,001,224            973,324
                                     Time                                                             1,236,792          1,110,400
                                                                                                 ----------------------------------
                                       Total deposits                                                 5,041,937          4,928,808
  
                      Other borrowed money                                                              134,790             27,845
                      Other liabilities                                                                  40,468             60,027
                      Obligation to Employee Stock Ownership Plan (ESOP)                                  1,026              1,282
                      Trust Capital Securities - Commerce Capital Trust I                                57,500             57,500
                      Long-term debt                                                                     23,000             23,000
                                                                                                 ----------------------------------
                                                                                                      5,298,721          5,098,462
  
  Stockholders'       Common stock, 27,578,515 shares issued (27,373,983 shares in 1998)                 43,087             40,988
  Equity              Capital in excess of par or stated value                                          291,154            236,928
                      Retained earnings                                                                   2,362             43,712
                      Accumulated other comprehensive income                                              1,152              7,006
                                                                                                 ----------------------------------
                                                                                                        337,755            328,634
                      Less commitment to ESOP                                                             1,026              1,282
  
                       Less treasury stock, at cost                                                       1,624              1,624
                                                                                                 ----------------------------------
                                       Total stockholders' equity                                       335,105            325,728
                                                                                                 ----------------------------------
  
                                                                                                     $5,633,826         $5,424,190
                                                                                                 ==================================
  Commerce Bancorp, Inc. and Subsidiaries
                          Consolidated Statements of Income
                                     (unaudited)
  --------------------------------------------------------------------------------------------------------------------
                                                                                              Three Months Ended
                                                                                                   March 31,
                                                                                          ----------------------------
                  (dollars in thousands, except per share amounts)                            1999           1998
  --------------------------------------------------------------------------------------------------------------------
  Interest        Interest and fees on loans                                                   $48,003        $37,428
  income          Interest on investments                                                       39,007         38,291
                  Other interest                                                                   156            527
                                                                                          ----------------------------
                       Total interest income                                                    87,166         76,246
                                                                                          ----------------------------
  
  Interest        Interest on deposits:
  expense            Demand                                                                      9,625          7,915
                     Savings                                                                     4,795          5,003
                     Time                                                                       15,007         14,906
                                                                                          ----------------------------
                       Total interest on deposits                                               29,427         27,824
                  Interest on other borrowed money                                                 775          2,002
                  Interest on long-term debt                                                     1,782          1,782
                                                                                          ----------------------------
                       Total interest expense                                                   31,984         31,608
                                                                                          ----------------------------
  
                  Net interest income                                                           55,182         44,638
                  Provision for loan losses                                                      2,184          1,437
                                                                                          ----------------------------
                  Net interest income after provision for loan losses                           52,998         43,201
  
  Noninterest     Deposit charges and service fees                                               9,740          8,486
  income          Other operating income                                                        17,128         12,997
                  Net investment securities gains                                                  865              9
                                                                                          ----------------------------
                       Total noninterest income                                                 27,733         21,492
                                                                                          ----------------------------
  
  Noninterest     Salaries                                                                      23,512         17,710
  expense         Benefits                                                                       5,056          3,787
                  Occupancy                                                                      5,093          4,371
                  Furniture and equipment                                                        6,943          5,737
                  Office                                                                         5,298          4,007
                  Audit and regulatory fees and assessments                                        572            554
                  Marketing                                                                      1,663          1,933
                  Other real estate (net)                                                          474            420
                  Other                                                                          8,866          6,402
                                                                                          ----------------------------
                       Total noninterest expenses                                               57,477         44,921
                                                                                          ----------------------------
  
                  Income before income taxes                                                    23,254         19,772
                  Provision for federal and state income taxes                                   7,773          6,989
                                                                                          ============================
                  Net income                                                                    15,481         12,783
                                                                                          ============================
  
                  Net income per common and common equivalent share:
                     Basic                                                                       $0.56          $0.49
                                                                                          ----------------------------
                     Diluted                                                                     $0.54          $0.46
                                                                                          ----------------------------
                  Average common and common equivalent shares outstanding:
                     Basic                                                                      27,401         26,264
                                                                                          ----------------------------
                     Diluted                                                                    28,661         27,826
                                                                                          ----------------------------
                  Cash dividends declared, common stock                                          $0.21          $0.17
                                                                                          ============================
  -2-
  Commerce Bancorp, Inc. And Subsidiaries
                        Consolidated Statements of Cash Flows
  --------------------------------------------------------------------------------------------------------------------
                                                                                                Three Months Ended
                          (dollars in thousands)                                                    March 31,
                                                                                             -------------------------
                                                                                                1999          1998
  --------------------------------------------------------------------------------------------------------------------
  Operating activities    Net income                                                             $15,481       12,783
                          Adjustments to reconcile net income to net cash
                             provided by operating activities:
                                Provision for loan losses                                          2,184        1,437
                                Provision for depreciation, amortization and accretion             7,606        5,766
                                Gains on sales of securities available for sale                     (865)          (9)
                                Proceeds from sales of mortgages held for sale                    39,794       17,478
                                Originations of mortgages held for sale                          (27,935)     (25,712)
                                Net loan (chargeoffs)                                               (300)        (592)
                                Net decrease (increase) in trading securities                     31,123       (1,887)
                                Increase in other assets                                         (21,119)        (277)
                                (Decrease) increase in other liabilities                         (19,559)      15,087
                        ----------------------------------------------------------------------------------------------
                                         Net cash provided  by financing activities               26,410       24,074
  
  Investing activities    Proceeds from the sales of securities available for sale               185,808      104,207
                          Proceeds from the maturity of securities available for sale             96,870       64,018
                          Proceeds from the maturity of securities held to maturity               77,100       68,708
                          Purchase of securities available for sale                             (415,463)    (137,255)
                          Purchase of securities held to maturity                                (35,522)    (222,287)
                          Net increase in loans                                                 (197,854)     (74,029)
                          Proceeds from sales of loans                                             2,684        2,360
                          Purchases of premises and equipment                                    (13,217)      (8,480)
                          --------------------------------------------------------------------------------------------
                                         Net cash used by financing activities                  (299,594)    (202,758)
  
  Financing activities    Net increase (decrease) in demand and savings deposits                 (13,263)     123,249
                          Net increase in time deposits                                          126,392      276,684
                          Net increase(decrease) in other borrowed money                         106,945     (198,300)
                          Dividends paid                                                          (5,074)      (4,180)
                          Proceeds from issuance of common stock under
                               dividend reinvestment and other stock plans                         4,564        2,924
                          Purchase of treasury stock
                          Other                                                                        4        8,317
                          --------------------------------------------------------------------------------------------
                                         Net cash provided  by financing activities              219,568      208,694
  
                          (Decrease) increase in cash and cash equivalents                       (53,615)      30,010
                          Cash and cash equivalents at beginning of year                         277,615      204,776
                          --------------------------------------------------------------------------------------------
                          Cash and cash equivalents at end of period                            $224,000     $234,786
                          --------------------------------------------------------------------------------------------
  
                          Supplemental disclosures of cash flow information:  
                            Cash paid during the period for:
                              Interest                                                          $ 29,024      $29,712
                              Income taxes                                                            18          125
                            Other noncash activities:
                              Transfer of securities to securities available for sale             91,010            0
                          --------------------------------------------------------------------------------------------
  -3-
  COMMERCE BANCORP, INC. AND SUBSIDIARIES
                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                     (unaudited)
  
  A.       Consolidated Financial Statements
  
           The  consolidated   financial  statements  included  herein  have  been
           prepared  without audit  pursuant to the rules and  regulations  of the
           Securities and Exchange  Commission.  Certain  information and footnote
           disclosures  normally  included  in  financial  statements  prepared in
           accordance  with generally  accepted  accounting  principles  have been
           condensed  or  omitted  pursuant  to such  rules and  regulations.  The
           accompanying  condensed  consolidated  financial statements reflect all
           adjustments  which are, in the opinion of  management,  necessary  to a
           fair statement of the results for the interim periods  presented.  Such
           adjustments  are  of  a  normal  recurring  nature.   The  accompanying
           financial  statements  include the consolidated  accounts of the former
           Community First Banking Company (CFBC),  Tinton Falls, New Jersey,  and
           the former Prestige Financial Corp. (PFC), Flemington,  New Jersey, for
           all periods  presented.  Effective January 15, 1999,  Commerce Bancorp,
           Inc.  (the  Company)  acquired  CFBC,  and  CFBC's   wholly-owned  bank
           subsidiary,  Tinton Falls State Bank, was merged with and into Commerce
           Bank/Shore,  N.A. Also effective January 15, 1999, the Company acquired
           PFC, and PFC's  wholly-owned bank subsidiary,  Prestige State Bank, was
           re-chartered as a national bank and renamed Commerce Bank/Central, N.A.
           The transactions  were accounted for as poolings of interests.  Certain
           amounts  in  prior  periods  have  been  reclassified  for  comparative
           purposes.
  
           These condensed  consolidated  financial  statements  should be read in
           conjunction with the audited financial statements and the notes thereto
           included in the registrant's  Annual Report on Form 10-K for the period
           ended  December 31, 1998.  The results for the three months ended March
           31, 1999 are not  necessarily  indicative  of the  results  that may be
           expected for the year ended December 31, 1999.
  
           The consolidated  financial statements include the accounts of Commerce
           Bancorp,  Inc. and all of its  subsidiaries,  including  Commerce Bank,
           N.A.  (Commerce  NJ),  Commerce   Bank/Pennsylvania,   N.A.,   Commerce
           Bank/Shore,  N.A., Commerce Bank/North,  Commerce  Bank/Central,  N.A.,
           Commerce Capital Trust I, and Commerce  Capital  Markets,  Inc. (CCMI).
           All material intercompany transactions have been eliminated.
  
  B.       Commitments
  
           In the  normal  course  of  business,  there  are  various  outstanding
           commitments to extend credit,  such as letters of credit and unadvanced
           loan   commitments,   which  are  not  reflected  in  the  accompanying
           consolidated  financial statements.  Management does not anticipate any
           material losses as a result of these transactions.
  
                                        -4-
  C.       Comprehensive Income
  
               Total  comprehensive  income,  which for the Company  included  net
           income and unrealized  gains and losses on the Company's  available for
           sale   securities,   amounted  to  $9.6  million  and  $16.1   million,
           respectively, for the three months ended March 31, 1999 and 1998.
  
  D.       Segment Information
  
           Selected segment information is as follows:
  -------------------------------------------------------------------------------------------------------------------------
                                             Three Months Ended March 31, 1999          Three Months Ended March 31, 1998
                                          Community       Parent/                     Community     Parent/
                                             Banks         Other          Total         Banks        Other           Total
  -------------------------------------------------------------------------------------------------------------------------
  Net interest income                       $56,799       $(1,617)       $55,182       $46,305       $(1,667)       $44,638
  Provision for loan losses                   2,184            --          2,184         1,437            --          1,437
                                         ----------    ----------     ----------    ----------    ----------     ----------
  
  Net interest income after provision        54,615        (1,617)        52,998        44,868        (1,667)        43,201
  Noninterest income                         14,788        12,945         27,733        13,089         8,403         21,492
  Noninterest expense                        47,094        10,383         57,477        38,326         6,595         44,921
                                         ----------    ----------     ----------    ----------    ----------     ----------
  Income before income taxes                 22,309           945         23,254        19,631           141         19,772
  Income tax expense                          7,329           444          7,773         6,921            68          6,989
                                         ----------    ----------     ----------    ----------    ----------     ----------
  Net income                                $14,980          $501        $15,481       $12,710           $73        $12,783
                                         ==========    ==========     ==========    ==========    ==========     ==========
  
  Average assets (in millions)           $4,870,848      $567,219     $5,438,067    $4,076,668      $424,147     $4,500,815
                                         ==========    ==========     ==========    ==========    ==========     ==========
  -5-
  E.       Recent Accounting Statement
  
           In June  1998,  the FASB  issued  Statement  No.  133  "Accounting  for
           Derivative  Instruments and Hedging Activities" (FAS 133). FAS 133 will
           require the Company to recognize all  derivatives  on the balance sheet
           at fair value. Derivatives that are not hedges must be adjusted to fair
           value through  income.  If the derivative is a hedge,  depending on the
           nature of the hedge,  changes in the fair value of the derivative  will
           either be offset  against the change in fair value of the hedged  asset
           or liability  through  earnings or  recognized  in other  comprehensive
           income until the hedged item is recognized in earnings. The ineffective
           portion of a  derivative's  change in fair  value  will be  immediately
           recognized  in  earnings.  FAS 133  becomes  effective  for the Company
           beginning  January 1, 2000.  Although  early adoption is allowed in any
           quarterly period after June 1998, the Company has no plans to adopt FAS
           133 prior to the effective date. Based on the Company's  minimal use of
           derivatives  at the  current  time,  management  does  not  expect  the
           adoption  of FAS  133 to  have  a  significant  effect  on  results  of
           operations  or the  financial  position of the  Company.  However,  the
           impact from  adopting  FAS 133 will depend on the nature and purpose of
           the derivative instruments in use by the Company at that time.
  
  F.       Trust Capital Securities
  
           On June 9, 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.  The net proceeds of
           the offering  will be used for general  corporate  purposes,  which may
           include contributions to subsidiary banks to fund their operations, the
           financing of one or more future acquisitions, repayment of indebtedness
           of the Company or of its subsidiary banks, investments in or extensions
           of  credit  to its  subsidiaries,  or the  repurchase  of shares of the
           Company's  outstanding  common  stock.  All $57.5  million of the Trust
           Capital  Securities  qualify as Tier 1 capital for  regulatory  capital
           purposes.
  
                                        -6-
  G.       Earnings Per Share
  
           The calculation of earnings per share follows (in thousands, except for
            per share amounts):
  
                                                Three Months Ended
                                                     March 31   
                                                  1999        1998
                                               --------     -------
  
  Basic:
  
  Net income applicable to common stock        $ 15,481     $12,783
                                               ========     =======
  
  Average common shares outstanding              27,401      26,264
                                               ========     =======
  
  Net income per common share - basic          $   0.56     $  0.49
                                               ========     =======
  
  Diluted:
  
  Net income applicable to common stock
           on a diluted basis                  $ 15,481     $12,783
                                               ========     =======
  
  Average common shares outstanding              27,401      26,264
  Additional shares considered in diluted
           computation assuming:
             Exercise of stock options            1,260       1,138
             Conversion of preferred stock                      424
                                               --------     -------
  Average common shares outstanding
           on a diluted basis                    28,661      27,826
                                               ========     =======
  
  Net income per common share - diluted        $   0.54     $  0.46
                                               ========     =======
  
                                        -7-
  Item 2.  Management's Discussion and Analysis of Financial Condition and 
           Results of Operation
  
           Capital Resources
  
           At March 31, 1999, stockholders' equity totaled $335.1 million or 5.95%
           of total assets, compared to $325.7 million or 6.01% of total assets at
           December 31, 1998.
  
           The table below presents the Company's and Commerce NJ's risk-based and
           leverage ratios at March 31, 1999 and 1998:
  Per Regulatory Guidelines
                                                        Actual                        Minimum              "Well Capitalized"
                                                 Amount          Ratio        Amount           Ratio      Amount           Ratio
  March 31, 1999
  Company
     Risk based capital ratios:
       Tier 1                                   $386,771           11.64%    $132,954           4.00%    $199,431            6.00%
       Total capital                             438,320           13.19      265,908           8.00      332,385           10.00
     Leverage ratio                              386,771            7.12      217,174           4.00      271,468            5.00
  
  Commerce NJ Risk based capital ratios:
       Tier 1                                   $200,137           10.92%    $ 73,300           4.00%    $109,950            6.00%
       Total capital                             218,152           11.90      146,600           8.00      183,250           10.00
     Leverage ratio                              200,137            6.57      121,771           4.00      152,214            5.00
  
  March 31, 1998
  Company
     Risk based capital ratios:
       Tier 1                                   $350,375           15.18%    $ 92,319           4.00%    $138,478            6.00%
       Total capital                             398,370           17.26      184,638           8.00      230,797           10.00
     Leverage ratio                              350,375            7.80      134,709           3.00      224,515            5.00
  
  Commerce NJ Risk based capital ratios:
       Tier 1                                   $177,218           13.08%    $ 54,185           4.00%    $ 81,278            6.00%
       Total capital                             191,617           14.15      108,371           8.00      135,464           10.00
     Leverage ratio                              177,218            6.50       81,760           3.00      136,267            5.00
  -8-
  At March 31, 1999, the Company's  consolidated  capital levels and each
           of the Company's bank  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%.  Management  believes
           that as of March 31, 1999,  the Company and its  subsidiaries  meet all
           capital adequacy requirements to which they are subject.
  
           Deposits
  
           Total deposits at March 31, 1999 were $5.04 billion, up $857.4 million,
           or 20% over total  deposits of $4.18 billion at March 31, 1998,  and up
           by $113.1 million,  or 2% from year-end 1998. Deposit growth during the
           first three  months of 1999  included  core  deposit  growth in savings
           balances  as well  as  growth  from  the  public  sector.  The  Company
           experienced "same-store core deposit growth" of 21.1% at March 31, 1999
           as  compared to  deposits a year ago for those  branches  open for more
           than two years.
  
           Interest Rate Sensitivity and Liquidity
  
           The  Company's  risk of loss arising  from adverse  changes in the fair
           market 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 these
           policies.  The  guidelines  established  by ALCO  are  reviewed  by the
           Company's Board of Directors.
  
           Management considers the simulation of net interest income in different
           interest rate  environments  to be the best  indicator of the Company's
           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 ALCO policy has  established  that interest
           income  sensitivity will be considered  acceptable if net income in the
           above  interest  rate  scenario is within 15% of net income in the flat
           rate  scenario  in the first year and within 30% over the two year time
           frame.  At March  31,  1999,  the  Company's  income  simulation  model
           indicates  net income  would  decrease  by 0.32% and 6.22% in the first
           year and over a two year time frame,  respectively,  if rates decreased
           as  described  above,  as  compared  to a decrease  of 1.31% and 4.03%,
           respectively,  at March 31, 1998. At March 31, 1999, the model projects
           that net income would decrease by 2.81% and 1.98% in the first year and
           over a two  year  time  frame,  respectively,  if  rates  increased  as
           described  above,  as  compared  to a  decrease  of  6.69%  and  9.25%,
           respectively,  at March 31, 1998.  All of these net income  projections
           are within an  acceptable  level of interest  rate risk pursuant to the
           policy established by ALCO.
  
                                        -9-
  In the event  the  Company's  interest  rate risk  models  indicate  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 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 March 31, 1999, the market
           value of equity model  indicates an  acceptable  level of interest rate
           risk.
  
           Liquidity  involves  the  Company's  ability to raise  funds to support
           asset growth or decrease  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,  cash flow from its amortizing investment and loan
           portfolios, as well as the use of short-term borrowings, as required.
  
           Short-Term Borrowings
  
           Short-term  borrowings,  or other borrowed money,  consist primarily of
           securities  sold under  agreements to repurchase and overnight lines of
           credit,  and are used to meet short term  funding  needs.  At March 31,
           1999,  short-term  borrowings  aggregated  $134.8  million  and  had an
           average rate of 5.23%,  as compared to $27.8 million at an average rate
           of 4.98% at December 31, 1998.
  
           Interest Earning Assets
  
           For the three month  period  ended  March 31,  1999,  interest  earning
           assets  increased  $232.7  million from $4.91 billion to $5.15 billion.
           This  increase was  primarily  in  investment  securities  and the loan
           portfolio as described below.
  
           Loans
  
           During the first three months of 1999,  loans increased  $193.3 million
           from  $2.25  billion  to  $2.44  billion.  At  March  31,  1999,  loans
           represented 48% of total deposits and 43% of total assets. All segments
           of the loan portfolio  experienced  growth in the first three months of
           1999,  including  loans secured by commercial  real estate  properties,
           commercial loans, and consumer loans.
  
                                        -10-
  Investments
  
           In total,  for the first  three  months of 1999,  securities  increased
           $49.4 million from $2.61 billion to $2.66  billion.  Deposit growth and
           other funding  sources were used to increase the  Company's  investment
           portfolio. The available for sale portfolio increased $215.2 million to
           $1.52  billion at March 31,  1999 from $1.31  billion at  December  31,
           1998, and the securities held to maturity  portfolio  decreased  $134.7
           million  to $1.09  billion  at March 31,  1999 from  $1.22  billion  at
           year-end  1998. In connection  with the  acquisitions  of CFBC and PFC,
           management  reclassified  $91.0 million of investment  securities  from
           held to maturity  to  available  for sale  during the first  quarter of
           1999.   Unrealized   losses  on  those   securities   transferred  were
           approximately  $330  thousand.  The  portfolio  of  trading  securities
           decreased  $31.1  million from  year-end 1998 to $54.2 million at March
           31,  1999.  At March  31,  1999,  the  average  life of the  investment
           portfolio   was   approximately   4.2  years,   and  the  duration  was
           approximately   3.2  years.  At  March  31,  1999,   total   securities
           represented 47% of total assets.
  
           Net Income 
  
           Net income for the first quarter of 1999 was $15.5 million, an increase
           of $2.7  million or 21% over the $12.8  million  recorded for the first
           quarter of 1998. On a per share basis, diluted net income for the first
           quarter of 1999 was $0.54 per common share compared to $0.46 per common
           share for the first quarter of 1998.
  
           Return on average  assets (ROA) and return on average  equity (ROE) for
           the first quarter of 1999 were 1.14% and 18.76%, respectively, compared
           to 1.14% and 17.25%, respectively, for the same 1998 period.
  
           Net Interest Income
  
           Net interest  income  totaled  $55.2  million for the first  quarter of
           1999,  an  increase of $10.5  million or 24% from $44.6  million in the
           first quarter of 1998. The  improvement in net interest  income was due
           primarily to volume increases in the loan and investment portfolios.
  
           Noninterest Income
  
           Noninterest income totaled $27.7 million for the first quarter of 1999,
           an  increase  of $6.2  million or 29% from  $21.5  million in the first
           quarter of 1998.  The  increase was due  primarily  to increased  other
           operating  income,  which  rose  $4.1  million  over  the  prior  year,
           including  increased  revenues of $2.1 million from  Commerce  National
           Insurance Services, Inc. (Commerce Insurance),  the Company's insurance
           brokerage subsidiary,  and $1.5 million from CCMI. In addition, deposit
           charges and service fees  increased $1.3 million over the first quarter
           of 1998 primarily due to higher transaction  volumes.  The Company also
           recorded $865 thousand in net investment  securities gains in the first
           quarter of 1999.
  
                                        -11-
  Noninterest Expense
  
           For the  first  quarter  of 1999,  noninterest  expense  totaled  $57.5
           million,  an increase  of $12.6  million or 28% over the same period in
           1998.  Contributing  to this increase was new branch  activity over the
           past twelve months,  with the number of branches  increasing from 89 at
           March 31, 1998 to 97 at March 31, 1999,  and the  expansion of Commerce
           Insurance  and CCMI.  With the  addition of these new  offices,  staff,
           facilities,  and related expenses rose  accordingly.  Other noninterest
           expenses  rose  $2.5  million  over the  first  quarter  of 1998.  This
           increase  resulted  primarily  from  higher bank  card-related  service
           charges,   increased  business  development  expenses,   and  increased
           provisions for non-credit-related losses.
  
           The Company's operating  efficiency ratio (noninterest  expenses,  less
           other  real  estate  expense,  divided  by  net  interest  income  plus
           noninterest  income excluding  non-recurring  gains) was 69.47% for the
           first  three  months of 1999 as  compared  to 67.30%  for the same 1998
           period.  The  Company's  efficiency  ratio remains above its peer group
           primarily due to its aggressive growth expansion activities.
  
           Loan and Asset Quality
  
           Total  non-performing  assets  (non-performing  loans  and  other  real
           estate,  excluding  loans  past due 90 days or more and still  accruing
           interest)  at March 31,  1999  were  $14.5  million,  or 0.26% of total
           assets  compared to $14.7  million or 0.27% of total assets at December
           31, 1998 and $18.4 million or 0.40% of total assets at March 31, 1998.
  
           Total  non-performing  loans (non-accrual loans and restructured loans,
           excluding  loans past due 90 days or more and still accruing  interest)
           at March 31, 1999 were $8.9 million or 0.36% of total loans compared to
           $8.6  million or 0.38% of total  loans at  December  31, 1998 and $12.4
           million or 0.71% of total loans at March 31,  1998.  At March 31, 1999,
           loans past due 90 days or more and still accruing  interest amounted to
           $696  thousand  compared to $945 thousand at December 31, 1998 and $1.2
           million at March 31, 1998.  Additional  loans  considered  as potential
           problem loans by the Company's  internal loan review  department ($19.3
           million at March 31, 1999) have been  evaluated as to risk  exposure in
           determining the adequacy of the allowance for loan losses.
  
           Other real estate (ORE) at March 31, 1999 totaled $5.6 million compared
           to $6.1  million at  December  31,  1998 and $6.0  million at March 31,
           1998.  These  properties have been written down to the lower of cost or
           fair value less disposition costs.
  
           On  pages  xx  and  xx  are  tabular   presentation   showing  detailed
           information about the Company's  non-performing loans and assets and an
           analysis of the  Company's  allowance for loan losses and other related
           data for March 31, 1999, December 31, 1998, and March 31, 1998.
  
                                        -12-
  Year 2000
  
           The Company  began the process of preparing  its  computer  systems and
           applications   for  the  Year  2000  in  1996.  The  process   involves
           identifying and resolving date recognition problems in computer systems
           and software,  and to a lesser extent, other operating equipment,  that
           could be caused by the date change from December 31, 1999 to January 1,
           2000.
  
           The Company has completed its assessment of all business processes that
           could be  affected  by the  Year  2000  issue.  Each  business  process
           assessment  included a review of the  information  systems used in that
           process, including hardware and software, involvement of third parties,
           and any other operating equipment.  The Company licenses  substantially
           all software used in conducting  its business from third party vendors.
           All vendors have been contacted  regarding the Year 2000 issue, and the
           Company  continues  to track  the  progress  each  vendor  is making in
           reaching  Year  2000  compliance.  The  Company  is also  working  with
           significant  customers  and  counterparties  to monitor their Year 2000
           efforts.  The Company has all necessary changes in place and tested for
           all mission  critical  systems  (those  systems  defined as  absolutely
           essential   to  the  daily   business   operation   of  the   Company).
           Additionally, the Company has completed certification testing with most
           mission critical service providers.  Changes for most remaining systems
           are in place and testing should be  substantially  completed by the end
           of the second quarter of 1999.  Contingency plans will be completed and
           validated during the second quarter of 1999.
  
           The Company believes it is taking the appropriate  steps to address all
           Year 2000  issues.  Despite the  Company's  efforts to address the Year
           2000  problem and develop  contingency  plans in the event of Year 2000
           failures,  including  non-compliance  by third parties  (including loan
           customers), there can be no assurance that the Year 2000 issue will not
           materially  adversely impact the Company's financial position,  results
           of operations, or relationships with customers, vendors, or others.
  
           The  Company  estimates  the  total  cost of the Year  2000  compliance
           process,  including  internal and external  personnel  and any required
           hardware and software modifications, will not exceed $1.0 million.
  
           Forward-Looking Statements
  
           The Company may from time to time make written or oral "forward-looking
           statements",  including  statements  contained in the Company's filings
           with the Securities and Exchange Commission (including this Form 10-Q),
           in its  reports  to  stockholders  and in other  communications  by the
           Company,  which are made in good faith by the  Company  pursuant to the
           "safe harbor"  provisions of 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 (some of which are beyond the Company's  control).  The
           words  "may",  "could",  "should",  "would",  believe",   "anticipate",
           "estimate",  "expect",  "intend",  "plan" and similar  expressions  are
           intended to identify forward-looking statements. 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  operations;  the
           effects  of, and  changes  in,  trade,  monetary  and fiscal  policies,
           including  interest  rate  policies  of the Board of  
  
                                        -13-
  Governors  of  the  Federal  Reserve  System  (the  "FRB");  inflation;
           interest   rates,   market  and  monetary   fluctuations;   the  timely
           development of competitive new products and services by the Company 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;   unanticipated   regulatory  or  judicial
           proceedings;  changes in consumer  spending and saving habits;  and the
           success of the Company at managing the risks involved in the foregoing.
  
           The Company  cautions that the foregoing  list of important  factors is
           not   exclusive.   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.
  
                                        -14-
  The following summary presents  information  regarding  non-performing loans and
  assets as of March 31, 1999 and the preceding four quarters:  (dollar amounts in
  thousands)
  March 31,        December 31,    September 30,     June 30,        March 31,
                                                        1999             1998            1998             1998             1998
                                                  ---------------  ---------------  --------------  ---------------  ---------------
  Non-accrual loans:
         Commercial                                      $2,821           $2,466          $2,417           $2,021           $2,638
         Consumer                                           846              831             782              851              949
         Real estate:
           Construction                                     115              189             587              603              613
           Mortgage                                       4,937            4,849           4,631            5,500            8,026
                                                 ---------------  ---------------  --------------  ---------------  ---------------
               Total non-accrual loans                    8,719            8,335           8,417            8,975           12,226
                                                 ---------------  ---------------  --------------  ---------------  ---------------
  
  Restructured loans:
         Commercial                                          16               17              17               18               19
         Consumer
         Real estate:
           Construction
           Mortgage                                         117              217             104              109              114
                                                 ---------------  ---------------  --------------  ---------------  ---------------
               Total restructured loans                     133              234             121              127              133
                                                 ---------------  ---------------  --------------  ---------------  ---------------
  
         Total non-performing loans                       8,852            8,569           8,538            9,102           12,359
                                                 ---------------  ---------------  --------------  ---------------  ---------------
  
  Other real estate                                       5,645            6,081           5,409            5,649            6,029
                                                 ---------------  ---------------  --------------  ---------------  ---------------
  
  Total non-performing assets                            14,497           14,650          13,947           14,751           18,388
                                                 ---------------  ---------------  --------------  ---------------  ---------------
  
  Loans past due 90 days or more
         and still accruing                                 696              945           2,622            1,187            1,188
                                                 ---------------  ---------------  --------------  ---------------  ---------------
  
  Total non-performing assets and
         loans past due 90 days or more                 $15,193          $15,595         $16,569          $15,938          $19,576
                                                 ===============  ===============  ==============  ===============  ===============
  
  Total non-performing loans as a
         percentage of total period-end
         loans                                            0.36%            0.38%           0.41%            0.47%            0.71%
  
  Total non-performing assets as a
         percentage of total period-end assets            0.26%            0.27%           0.27%            0.30%            0.40%
  
  Total non-performing assets and loans
         past due 90 days or more as a
         percentage of total period-end assets            0.27%            0.29%           0.33%            0.32%            0.42%
  
  Allowance for loan losses as a
         percentage of total non-performing
         loans                                             374%             365%            332%             293%             202%
  
  Allowance for loan losses as a percentage
         of total period-end loans                        1.34%            1.37%           1.36%            1.36%            1.44%
  
  Total non-performing assets and loans
         past due 90 days or more as a
         percentage of stockholders' equity and
         allowance for loan losses                           4%               4%              5%               5%               6%
  -15-
  The following  table  presents,  for the periods  indicated,  an analysis of the
  allowance for loan losses and other related data: (dollar amounts in thousands)
  Year
                                                    Three Months Ended                Ended
                                                ----------------------------
                                                 03/31/99         03/31/98           12/31/98
                                                -----------       ----------        -----------
  Balance at beginning of period                   $31,265          $24,150            $24,150
  Provisions charged to operating expenses           2,184            1,437              8,762
                                                -----------       ----------        -----------
                                                    33,449           25,587             32,912
  
  Recoveries on loans charged-off:
      Commercial                                       220               52                418
      Consumer                                          36               98                305
      Real estate                                        2                9                764
                                                -----------       ----------        -----------
  Total recoveries                                     258              159              1,487
  
  Loans charged-off:
      Commercial                                      (368)            (262)            (1,281)
      Consumer                                        (168)            (287)            (1,352)
      Real estate                                      (22)            (202)              (501)
                                                -----------       ----------        -----------
  Total charge-offs                                   (558)            (751)            (3,134)
                                                -----------       ----------        -----------
  Net charge-offs                                     (300)            (592)            (1,647)
                                                -----------       ----------        -----------
  
  Balance at end of period                         $33,149          $24,995            $31,265
                                                ===========       ==========        ===========
  
  Net charge-offs as a percentage of
  average loans outstanding                           0.05  %          0.14  %            0.08  %
  Item 3:  Quantitative and Qualitative Disclosures About Market Risk
  -------------------------------------------------------------------------------
  
  See Item 2 -  Management's  Discussion  and Analysis of Financial  Condition and
  Results of Operation, Interest Rate Sensitivity and Liquidity.
  
                                        -16-
  PART II. OTHER INFORMATION
  
  Item 6. Exhibits and Reports on Form 8-K
  
           No reports on Form 8-K were filed during the first  quarter ended March
           31, 1999.
  
                                        -17-
  SIGNATURES
  
  Pursuant  to the  requirements  of the  Securities  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.
                                                   (Registrant)
  
  May 14, 1999                                /s/ THOMAS J. SUKAY
    (Date)                                        THOMAS J. SUKAY
                                               SENIOR VICE PRESIDENT
                                      (PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER)
  
                                        -18-