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 June 30, 1998
  
                                         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                                 22,592,854
           (Title of Class)                    (No. of Shares Outstanding
                                                      as of  8/07/98)
  
  <PAGE>
                       COMMERCE BANCORP, INC. AND SUBSIDIARIES
  
  
  
                                        INDEX
  
                                                                              Page
  
  
  PART I.           FINANCIAL INFORMATION
  
  Item 1.           Financial Statements
  
                    Consolidated Balance Sheets (unaudited)
                             June 30, 1998 and December 31, 1997
  
                    Consolidated  Statements  of Income  (unaudited)  
                             Three months ended June 30, 1998 and 
                             June 30, 1997, and six months ended June
                             30, 1998 and June 30, 1997
  
                    Consolidated Statements of Cash Flows  (unaudited)  
                             Six months ended June 30, 1998 and
                             June 30, 1997
  
                    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 4.           Submission of Matters to a Vote of Security Holders
  
  Item 5.           Other Information
  
  Item 6.           Exhibits and Reports on Form 8-K
  
  
                                         1
  <PAGE>
                       Commerce Bancorp, Inc. and Subsidiaries
                             Consolidated Balance Sheets
                                     (unaudited)
  <TABLE>
  <CAPTION>
  -------------------------------------------------------------------------------------------------------------
                                                                                    June 30,       December 31,
                                                                                   ----------------------------
                   (dollars in thousands)                                             1998            1997
  -------------------------------------------------------------------------------------------------------------
  <S>                                                                                 <C>             <C>
  Assets           Cash and due from banks                                            $223,172        $167,900
                   Federal funds sold                                                        0               0
                                                                                   ----------------------------
                                  Cash and cash equivalents                            223,172         167,900
                   Mortgages held for sale                                               3,348           7,260
                   Trading securities                                                   35,098           7,911
                   Securities available for sale                                     1,304,742       1,315,120
                   Securities held to maturity                                       1,039,730         874,032
                    (market value 1998-$1,037,962; 1997-$869,815)
                   Loans                                                             1,661,607       1,411,289
                                Less allowance for loan losses                          23,331          21,261
                                                                                   ----------------------------
                                                                                     1,638,276       1,390,028
                   Bank premises and equipment, net                                    127,031         111,759
                   Other assets                                                         78,300          64,957
                                                                                   ----------------------------
                                                                                    $4,449,697      $3,938,967
                                                                                   ============================
  
  Liabilities      Deposits:
                                Demand:
                                  Interest-bearing                                  $1,225,937      $1,111,302
                                  Noninterest-bearing                                  874,714         762,843
                                Savings                                                833,697         705,906
                                Time                                                   928,242         789,353
                                                                                   ----------------------------
                                  Total deposits                                     3,862,590       3,369,404
  
                   Other borrowed money                                                189,519         223,300
                   Other liabilities                                                    33,270          12,695
                   Obligation to Employee Stock Ownership Plan (ESOP)                    1,795           2,308
                   Trust Capital Securities - Commerce Capital Trust I                  57,500          57,500
                   Long-term debt                                                       23,000          23,000
                                                                                   ----------------------------
                                                                                     4,167,674       3,688,207
  
  Stockholders'    Common stock, 22,629,161 shares issued (21,500,804 shares in 1997)   28,325          25,309
  Equity           Series C preferred stock, 417,000 shares in 1997                                      7,506
                   Capital in excess of par or stated value                            213,915         167,529
                   Retained earnings                                                    36,528          50,592
                   Accumulated other comprehensive income                                6,674           3,756
                                                                                   ----------------------------
                                                                                       285,442         254,692
                   Less commitment to ESOP                                               1,795           2,308
                   Less treasury stock, at cost, 100,159 shares in 1998
                                (100,159 in 1997)                                        1,624           1,624
                                                                                   ----------------------------
                                  Total stockholders' equity                           282,023         250,760
                                                                                   ----------------------------
  
                                                                                    $4,449,697      $3,938,967
                                                                                   ============================
  </TABLE>
  See accompanying notes
  
                                         2
  <PAGE>
                       Commerce Bancorp, Inc. and Subsidiaries
                          Consolidated Statements of Income
                                     (unaudited)
  <TABLE>
  <CAPTION>
  ---------------------------------------------------------------------------------------------------------------------
                                                                Three Months Ended                Six Months Ended
                                                                      June 30,                         June 30,
                                                              ------------------------         ------------------------
               (dollars in thousands, except per share amounts)  1998         1997                1998         1997
  ---------------------------------------------------------------------------------------------------------------------
  <S>                                                            <C>          <C>                 <C>          <C>
  Interest     Interest and fees on loans                        $34,061      $29,819             $65,202      $57,932
  income       Interest on investments                            37,349       29,010              73,745       55,824
               Other interest                                        144          319                 498          731
                                                              ------------------------         ------------------------
                    Total interest income                         71,554       59,148             139,445      114,487
                                                              ------------------------         ------------------------
  
  Interest     Interest on deposits:
  expense         Demand                                           8,272        5,838              15,536       11,309
                  Savings                                          4,431        4,108               8,845        7,878
                  Time                                            13,225       10,926              25,895       21,592
                                                              ------------------------         ------------------------
                    Total interest on deposits                    25,928       20,872              50,276       40,779
               Interest on other borrowed money                      942        1,004               2,943        1,464
               Interest on long-term debt                          1,782          818               3,564        1,324
                                                              ------------------------         ------------------------
                    Total interest expense                        28,652       22,694              56,783       43,567
                                                              ------------------------         ------------------------
  
               Net interest income                                42,902       36,454              82,662       70,920
               Provision for loan losses                           1,569        1,326               2,779        2,952
                                                              ------------------------         ------------------------
               Net interest income after provision for
                  loan losses                                     41,333       35,128              79,883       67,968
  
  Noninterest  Deposit charges and service fees                    8,415        6,463              16,498       12,661
  income       Other operating income                             11,377        7,108              23,182       13,859
               Net investment securities gains                       920            0                 920            0
                                                              ------------------------         ------------------------
                    Total noninterest income                      20,712       13,571              40,600       26,520
                                                              ------------------------         ------------------------
  
  Noninterest  Salaries                                           16,985       12,669              32,996       24,571
  expense      Benefits                                            3,697        2,949               6,978        5,695
               Occupancy                                           3,726        3,260               7,648        6,594
               Furniture and equipment                             5,620        4,440              10,986        8,481
               Office                                              4,210        3,305               8,316        6,394
               Audit and regulatory fees and assessments             494          379                 996          754
               Marketing                                           1,717        1,421               3,565        2,660
               Other real estate (net)                               405          492                 825          961
               Other                                               6,460        4,192              11,699        8,203
                                                              ------------------------         ------------------------
                    Total noninterest expenses                    43,314       33,107              84,009       64,313
                                                              ------------------------         ------------------------
  
               Income before income taxes                         18,731       15,592              36,474       30,175
               Provision for federal and state income taxes        6,584        5,558              12,880       10,707
                                                              ------------------------         ------------------------
               Net income                                         12,147       10,034              23,594       19,468
  
               Dividends on preferred stocks                                      140                              281
                                                              ========================         ========================
               Net income applicable to common stock             $12,147       $9,894             $23,594      $19,187
                                                              ========================         ========================
  
               Net income per common and common equivalent share:
                  Basic                                            $0.54        $0.47               $1.06        $0.92
                                                              ------------------------         ------------------------
                  Diluted                                          $0.51        $0.44               $1.00        $0.86
                                                              ------------------------         ------------------------
               Average common and common equivalent shares outstanding:
                  Basic                                           22,508       20,992              22,260       20,929
                                                              ------------------------         ------------------------
                  Diluted                                         23,690       22,482              23,574       22,422
                                                              ------------------------         ------------------------
               Cash dividends declared, common stock               $0.19        $0.15               $0.38        $0.30
                                                              ========================         ========================
  </TABLE>
  See accompanying notes
  
                                         3
  <PAGE>
                       Commerce Bancorp, Inc. And Subsidiaries
                        Consolidated Statements of Cash Flows
                                     (unaudited)
  <TABLE>
  <CAPTION>
  ----------------------------------------------------------------------------------------------------------------------
                                                                                                    Six Months Ended
                                                                                                         June 30,
                                                                                               -------------------------
                          (dollars in thousands)                                                    1998          1997
  ----------------------------------------------------------------------------------------------------------------------
  <S>                                                                                              <C>           <C>
  Operating activities    Net income                                                               $23,594       19,468
                          Adjustments to reconcile net income to net cash
                             provided by operating activities:
                                Provision for loan losses                                            2,779        2,952
                                Provision for depreciation, amortization and accretion              11,079        8,124
                                Gains on securities available for sale                                (920)
                                Proceeds from sales of mortgages held for sale                      21,373       10,598
                                Originations of mortgages held for sale                            (17,461)     (11,959)
                                Net loan (chargeoffs)                                                 (709)        (556)
                                Net increase in trading securities                                 (27,187)     (10,350)
                                Increase in other assets                                           (15,334)     (11,145)
                                Increase in other liabilities                                       20,575        3,542
                          ----------------------------------------------------------------------------------------------
                                            Net cash provided by operating activities               17,789       10,674
  
  Investing activities    Proceeds from the sales of securities available for sale                 264,306
                          Proceeds from the maturity of securities available for sale              136,369       60,692
                          Proceeds from the maturity of securities held to maturity                103,311       53,481
                          Purchase of securities available for sale                               (385,823)    (151,963)
                          Purchase of securities held to maturity                                 (270,638)    (234,236)
                          Net increase in loans                                                   (256,580)    (101,598)
                          Proceeds from sales of loans                                               6,262        6,569
                          Purchases of premises and equipment                                      (23,367)     (12,141)
                          ----------------------------------------------------------------------------------------------
                                            Net cash used by investing activies                   (426,160)    (379,196)
  
  Financing activities    Net increase in demand and savings deposits                              354,297      216,506
                          Net increase in time deposits                                            138,889       51,103
                          Net decrease in other borrowed money                                     (33,781)      20,000
                          Dividends paid                                                            (8,228)      (5,730)
                          Proceeds from issuance of Trust Capital Securities                                     57,500
                          Issuance of common stock                                                   8,257
                          Proceeds from issuance of common stock under
                               dividend reinvestment and other stock plans                           4,209        3,103
                          Other                                                                                   1,144
                          ----------------------------------------------------------------------------------------------
                                            Net cash provided by financing activities              463,643      343,626
  
                          Increase (decrease) in cash and cash equivalents                          55,272      (24,896)
                          Cash and cash equivalents at beginning of year                           167,900      208,833
                          ----------------------------------------------------------------------------------------------
                          Cash and cash equivalents at end of period                              $223,172     $183,937
                          ----------------------------------------------------------------------------------------------
  
                          Supplemental disclosures of cash flow information:  Cash
                            paid during the period for:
                              Interest                                                             $54,996      $44,088
                              Income taxes                                                          13,789       11,547
                            Other noncash activities:
                              Transfer of securities to securities available for sale                            83,773
                          ----------------------------------------------------------------------------------------------
  </TABLE>
  See accompanying notes
  
                                         4
  <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.  Certain amounts in prior
           periods have been  reclassified  for comparative  purposes.  All common
           stock per share  information  has been  adjusted for the 5-for-4  stock
           split in the form of a 25% stock  dividend  declared on June 29,  1998,
           and payable July 24, 1998 to shareholders of record July 13, 1998.
  
                    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 for the period ended
           December 31, 1997. The results for the three months ended June 30, 1998
           and the six months ended June 30, 1998 are not  necessarily  indicative
           of the results  that may be expected  for the year ended  December  31,
           1998.
  
                    The consolidated  financial statements include the accounts of
           Commerce  Bancorp,  Inc.  (the  Company)  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  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.
  
                                         5
  <PAGE>
  C.       Employee Stock Ownership Plan (ESOP) Debt Guarantee
  
                    The Company has  guaranteed a debt  obligation of its Employee
           Stock Ownership Plan (ESOP) which originated at $7,500,000 and has been
           reduced to $1,795,000 through principal  reductions.  Accordingly,  the
           loan amount is reflected in the Company's consolidated balance sheet as
           a  liability  and  an  equal  amount,  representing  deferred  employee
           benefits,  has been recorded as a deduction from stockholders'  equity.
           The ESOP  obtained  the loan in 1990 to  acquire a new class of Company
           Cumulative  Convertible Preferred Stock (Series C) at a price of $18.00
           per share. The loan was refinanced in 1994, and is payable in quarterly
           installments  with the final  payment due January  28,  2000.  The loan
           bears  interest at a variable  rate,  although the rate can be fixed at
           future repricing dates in accordance with the loan agreement. Effective
           March 1,  1998,  the  Trustees  of the ESOP  exercised  their  right to
           convert all 417,000 shares of the Series C stock into 808,630 shares of
           the Company's  common stock,  a portion of which is pledged as security
           for the loan.  As the Company makes annual  contributions  to the ESOP,
           these  contributions,  plus dividends  from the Company's  common stock
           held by the ESOP, will be used to repay the loan.
  
  D.       Recent Accounting Statements
  
                    As  of  January  1,  1998,  the  Company   adopted   Financial
           Accounting   Standards  Board  (FASB)   Statement  No.  130  "Reporting
           Comprehensive  Income" (FAS 130). FAS 130 establishes new standards for
           reporting  comprehensive  income,  which includes net income as well as
           certain  other  items  which  result in a change to equity  during  the
           period.  Prior period  financial  statements have been  reclassified to
           conform to the  requirements of FAS 130. The adoption of FAS 130 had no
           impact on the Company's  financial  position or results of  operations.
           During the second quarter of 1998 and 1997, 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
           $11.7 million and $17.8 million, respectively. For the six months ended
           June 30, 1998 and 1997,  total  comprehensive  income was $26.5 million
           and $18.7 million, respectively.
  
                    In June,  1997, the FASB issued Statement No. 131 "Disclosures
           About Segments of an Enterprise and Related Information" (FAS 131). FAS
           131 requires disclosure of financial and descriptive  information about
           an  enterprise's  operating  segments  that meet  certain  quantitative
           thresholds.  This  statement  is effective  for fiscal years  beginning
           after  December 15, 1997, but is not required to be applied for interim
           reporting in the initial year of application.  The Company is currently
           evaluating  the impact of FAS 131 on the  disclosures  included  in its
           annual financial statements.
  
                    In June,  1998, the FASB issued  Statement No. 133 "Accounting
           for Derivative  Instruments and Hedging  Activities" (FAS 133). FAS 133
           is  required  to be adopted  in years  beginning  after June 15,  1999.
           Management  does not  anticipate  the  adoption  of FAS 133 will have a
           significant  effect  on  earnings  or  the  financial  position  of the
           Company.
  
                                         6
  <PAGE>
  
  
  
  E.       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.
  
   F.      Commerce Capital Markets, Inc.
  
                    In the  first  quarter  of 1998,  the  Company  completed  the
           acquisition  of A. H. Williams & Co.  (Williams),  Philadelphia,  PA, a
           public finance  investment  firm,  and combined  Williams with Commerce
           Capital,  the bank  securities  dealer division of Commerce NJ, to form
           Commerce Capital Markets,  Inc., a wholly-owned  nonbank  subsidiary of
           the Company engaging in certain securities  activities  permitted under
           Section 20 of the Glass-Steagall  Act. The acquisition was completed by
           the  issuance  of common  stock of the Company  totaling  approximately
           395,000  shares.  The  transaction  was  accounted  for as a pooling of
           interests.  However,  financial  statements of the periods prior to the
           acquisition have not been restated,  as the changes,  in the aggregate,
           would be immaterial.
  
  G.       Earnings Per Share
  
           The calculation of earnings per share follows (in thousands, except for
           per share amounts):
  <TABLE>
  <CAPTION>
                                                 Three Months Ended        Six Months Ended
                                                       June 30                 June 30
                                                  1998         1997        1998       1997
  <S>                                            <C>         <C>         <C>         <C>
       Basic:
       Net income                                $12,147     $10,034     $23,594     $19,468
       Preferred stock dividends                                 140                     281
                                                 -------     -------     -------     -------
  
       Net income applicable to common stock     $12,147      $9,894     $23,594     $19,187
                                                 =======     =======     =======     =======
  
       Average common shares outstanding          22,508      20,992      22,260      20,929
                                                 =======     =======     =======     =======
  
       Net income per common share - basic         $0.54       $0.47       $1.06       $0.92
                                                 =======     =======     =======     =======
  
                                         7
  <PAGE>
       Diluted:
       Net income                                   $12,147     $10,034     $23,594     $19,468
       Additional ESOP contribution under the
                if-converted method                                  12                      23
                                                    -------     -------     -------     -------
       Net income applicable to common stock
                on a diluted basis                  $12,147     $10,022     $23,594     $19,445
                                                    =======     =======     =======     =======
  
       Average common shares outstanding             22,508      20,992      22,260      20,929
       Additional shares considered in diluted
                computation assuming:
                  Exercise of stock options           1,182         843       1,103         846
                  Conversion of preferred stock                     647         211         647
                                                    -------     -------     -------     -------
  
       Average common shares outstanding
                on a diluted basis                   23,690      22,482      23,574      22,422
                                                    =======     =======     =======     =======
  
       Net income per common share - diluted          $0.51       $0.44       $1.00       $0.86
                                                    =======     =======     =======     =======
  </TABLE>
  
  H.       Subsequent Event
  
                    On August  12,  1998,  the  Company  reached an  agreement  to
           acquire  Tinton Falls State Bank through the  acquisition of its parent
           company,  Community First Banking Company (OTCBB Symbol:  CFST). Tinton
           Falls State Bank,  headquartered in Tinton Falls, New Jersey, with $192
           million in assets and $180 million in deposits, serves Monmouth County,
           New Jersey through the operation of seven branch  offices.  The Company
           will  issue   approximately   1.3  million   shares  to  complete   the
           acquisition,  which is expected to close in the fourth quarter of 1998.
           The transaction will be accounted for as a pooling of interests.
  
                    Unaudited pro forma  combined  financial  information  for the
           Company and Tinton  Falls State Bank at or for the year ended  December
           31, 1997 includes the following (dollars in thousands):
  
            Assets                      $4,104,000
            Deposits                     3,521,000
            Stockholders' equity           263,000
            Net interest income            156,000
            Net income                      42,000
  
                    Diluted net income per common share will not differ materially
           from the $1.78 reported by the Company for 1997 after adjusting for the
           5-for-4  stock  split in the form of a 25% stock  dividend  declared on
           June 29, 1998.
  
                                         8
  <PAGE>
  
  Item 2. Management's  Discussion and Analysis of Financial Condition and Results
  of Operation
  
           Capital Resources
  
                    At June 30, 1998,  stockholders' equity totaled $282.0 million
           or 6.34% of total assets,  compared to $250.8 million or 6.37% of total
           assets at December 31, 1997.
  
                    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.
  
                    The table below  presents  the  Company's  and  Commerce  NJ's
           risk-based and leverage ratios at June 30, 1998 and 1997:
  
  <TABLE>
  <CAPTION>
                                                                                       Per Regulatory Guidelines
                                                         Actual                      Minimum                 "Well Capitalized"
                                                 Amount           Ratio       Amount           Ratio       Amount           Ratio
  <S>                                            <C>               <C>        <C>               <C>       <C>               <C>
  June 30, 1998
  Company
     Risk based capital ratios:
       Tier 1                                   $327,788           14.83%     $88,414           4.00%    $132,621            6.00%
       Total capital                             374,119           16.93      176,828           8.00      221,035           10.00
     Leverage ratio                              327,788            7.68      128,115           3.00      213,525            5.00
  
  Commerce NJ Risk based capital ratios:
       Tier 1                                   $185,102           12.86%     $57,569           4.00%     $86,353            6.00%
       Total capital                             200,314           13.92      115,137           8.00      143,922           10.00
     Leverage ratio                              185,102            6.50       85,464           3.00      142,441            5.00
  
  June 30, 1997
  Company
     Risk based capital ratios:
       Tier 1                                   $280,148           15.58%     $71,914           4.00%    $107,872            6.00%
       Total capital                             323,519           17.99      143,829           8.00      179,786           10.00
     Leverage ratio                              280,148            8.14      103,237           3.00      172,062            5.00
  
  Commerce NJ Risk based capital ratios:
       Tier 1                                   $152,428           12.70%     $48,020           4.00%     $72,030            6.00%
       Total capital                             165,604           13.79       96,040           8.00      120,051           10.00
     Leverage ratio                              152,428            6.74       67,878           3.00      113,130            5.00
  </TABLE>
  
                                         9
  <PAGE>
                  At June 30, 1998, 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 as
           of June  30,  1998,  that the  Company  and its  subsidiaries  meet all
           capital adequacy requirements to which they are subject.
  
           Deposits
  
                    Total deposits at June 30, 1998 were $3.86 billion,  up $675.3
           million,  or 21% over total deposits of $3.19 billion at June 30, 1997,
           and up by $493.2  million,  or 15% from year-end  1997.  Deposit growth
           during the first six months of 1998 included core deposit growth in all
           categories  as well as  growth  from the  public  sector.  The  Company
           experienced  "same-store core deposit growth" of 15.8% at June 30, 1998
           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  June  30,  1998,  the  Company's  income  simulation  model
           indicates  net income  would  decrease  by 2.74% and 8.06% in the first
           year and over a two year time frame,  respectively,  if rates decreased
           as described  above.  The model projects that net income would decrease
           by 2.85% and 2.81% in the  first  year and over a two year time  frame,
           respectively,  if rates increased as described  above. All of these net
           income projections are within an acceptable level of interest rate risk
           pursuant to the policy established by ALCO.
  
                                         10
  <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 June 30,
           1998, 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 are
           used to meet short term funding  needs.  At June 30,  1998,  short-term
           borrowings aggregated $189.5 million and had an average rate of 6.38%.
  
           Interest Earning Assets
  
                    For the six month period ended June 30, 1998, interest earning
           assets  increased  $428.9  million from $3.62 billion to $4.04 billion.
           This  increase was  primarily  in  investment  securities  and the loan
           portfolio as described below.
  
           Loans
  
                    During the first six months of 1998,  loans  increased  $250.3
           million from $1.41 billion to $1.66  billion.  At June 30, 1998,  loans
           represented 43% of total deposits and 37% of total assets. All segments
           of the loan  portfolio  experienced  growth in the first six  months of
           1998,  including  loans secured by commercial  real estate  properties,
           commercial loans, and consumer loans.
  
                                         11
  <PAGE>
           Investments
  
                  In total, for the first six months of 1998, securities increased
           $182.5 million from $2.20 billion to $2.38 billion.  Deposit growth and
           other funding  sources were used to increase the  Company's  investment
           portfolio.  The available for sale portfolio decreased $10.4 million to
           $1.30 billion from $1.32 billion at December 31, 1997,  the  securities
           held to maturity portfolio increased $165.7 million to $1.04 billion at
           June 30, 1998 from $874.0  million at year-end  1997, and the portfolio
           of trading  securities  increased  $27.2  million from year-end 1997 to
           $35.1 million at June 30, 1998.  At June 30, 1998,  the average life of
           the investment  portfolio was approximately 5.0 years, and the duration
           was  approximately  3.9  years.  At June  30,  1998,  total  securities
           represented 53% of total assets.
  
           Net Income
  
                  Net income for the second quarter of 1998 was $12.1 million,  an
           increase of $2.1 million or 21% over the $10.0 million recorded for the
           second quarter of 1997. Net income for the first six months of 1998 was
           $23.6  million,  an  increase  of $4.1  million  or 21% over the  $19.5
           million recorded in the first six months of 1997. On a per share basis,
           diluted  net income  for the  second  quarter of 1998 and the first six
           months of 1998 were $0.51 and $1.00 per common share  compared to $0.44
           and $0.86 per common share for the respective 1997 periods.
  
                  Return on average  assets  (ROA) and  return on  average  equity
           (ROE)  for  the  second   quarter  of  1998  were  1.13%  and   17.58%,
           respectively,  compared to 1.17% and 19.15%, respectively, for the same
           1997  period.  ROA and ROE for the first six  months of 1998 were 1.14%
           and 17.57%, respectively, compared to 1.17% and 18.71% a year ago.
  
            Net Interest Income
  
                  Net interest income totaled $42.9 million for the second quarter
           of 1998,  an increase of $6.4 million or 18% from $36.5  million in the
           second quarter of 1997. Net interest income for the first six months of
           1998 totaled $82.7 million,  up $11.7 million or 17% from the first six
           months of 1997. The improvement in net interest income for both periods
           was due  primarily  to  volume  increases  in the loan  and  investment
           portfolios.
  
           Noninterest Income
  
                  Noninterest  income totaled $20.7 million for the second quarter
           of 1998,  an increase of $7.1 million or 53% from $13.6  million in the
           second  quarter of 1997.  The increase  was due  primarily to increased
           other  operating  income,  which rose $4.3 million over the prior year,
           including  increased  revenues  of  $1.8  million  from  both  Commerce
           National Insurance Services,  Inc. (Commerce Insurance),  the Company's
           insurance brokerage subsidiary,  and CCMI. In addition, deposit charges
           and service fees increased $2.0 million from the second quarter of 1997
           primarily due to higher transaction  volumes,  and the Company recorded
           $920 thousand in net investment  securities gains in the second quarter
           of 1998.
  
                  For the first six  months of 1998,  noninterest  income  totaled
          $40.6 million, an increase of $14.1 million or 53% from $26.5 million in
          the first six months of 1997.  Other operating  income rose $9.3 million
          over the first six months of 1997,  including increased revenues of $3.3
  
                                         12
  <PAGE>
  
           million   from   Commerce   Insurance   and  $4.4  million  from  CCMI,
           respectively.  Deposit  charges and service fees rose $3.8 million over
           the prior year  primarily due to higher  transaction  volumes,  and the
           Company  recorded $920 thousand in net investment  securities  gains in
           1998.
  
           Noninterest Expense
  
                    For the second quarter of 1998,  noninterest  expense  totaled
           $43.3 million, an increase of $10.2 million or 31% over the same period
           in 1997. Contributing to this increase was new branch activity over the
           past twelve months,  with the number of branches  increasing from 69 at
           June  30,  1997 to 76 at June  30,  1998,  the  expansion  of  Commerce
           Insurance, and the formation of CCMI in the first quarter of 1998. With
           the  addition  of  these  new  offices  and  CCMI,  staff,  facilities,
           marketing,  and related expenses rose  accordingly.  Other  noninterest
           expenses  rose $2.3  million  over the  second  quarter  of 1997.  This
           increase  resulted  primarily  from  higher bank  card-related  service
           charges,   increased  business  development  expenses,   and  increased
           provisions for non-credit-related losses.
  
           For the first six months of 1998,  noninterest  expense  totaled  $84.0
           million,  an increase of $19.7 million or 31% over $64.3 million in the
           first six months of 1997.  Contributing to this increase was new branch
           activity,  the  expansion of Commerce  Insurance,  and the formation of
           CCMI as noted above. Other noninterest  expenses rose $3.5 million over
           the first six months of 1997.  This increase  resulted  primarily  from
           higher  bank   card-related   service   charges,   increased   business
           development  expenses,  higher legal fees, 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
           67.99% for the first six months of 1998 as  compared  to 65.02% for the
           same 1997 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 June 30, 1998 were $13.3  million,  or 0.30% of
           total  assets  compared  to $17.4  million or 0.44% of total  assets at
           December  31, 1997 and $17.3  million or 0.48% of total  assets at June
           30, 1997.
  
                    Total non-performing loans (non-accrual loans and restructured
           loans,  excluding  loans  past due 90 days or more and  still  accruing
           interest)  at June 30,  1998 were $7.6  million or 0.46% of total loans
           compared to $11.6  million or 0.82% of total loans at December 31, 1997
           and $10.3 million or 0.76% of total loans at June 30, 1997. At June 30,
           1998,  loans  past  due 90 days or more  and  still  accruing  interest
           amounted to $259  thousand  compared to $226  thousand at December  31,
           1997 and $458 thousand at June 30, 1997. Additional loans considered as
           potential   problem  loans  by  the  Company's   internal  loan  review
           department  ($12.3  million at June 30, 1998) have been evaluated as to
           risk  exposure in  determining  the adequacy of the  allowance for loan
           losses.
  
                                         13
  <PAGE>
  
                    Other real estate  (ORE) at June 30, 1998 totaled $5.6 million
           compared to $5.8  million at December 31, 1997 and $7.0 million at June
           30, 1997.  These properties have been written down to the lower of cost
           or fair value less disposition costs.
  
                    On pages 15 and 16 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 June 30, 1998, December 31, 1997, and June 30, 1997.
  
           Year 2000
  
                    The  Company  began the  process  of  preparing  its  computer
           systems  and  applications  for the  Year  2000 in  1996.  The  process
           includes   directing  its  external  service   providers  to  take  the
           appropriate  action to ensure  Year 2000  compliance,  as well as, to a
           lesser  extent,  modifying or replacing  certain  hardware and software
           maintained by the Company.  The Company  expects to have  substantially
           all of the  necessary  changes  in place  before  the end of 1998,  and
           believes  it is taking the  appropriate  steps to address all Year 2000
           issues.  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.
  
                                         14
  <PAGE>
  The following summary presents  information  regarding  non-performing loans and
  assets as of June 30, 1998 and the preceding four quarters:  (dollar  amounts in
  thousands)
  <TABLE>
  <CAPTION>
                                                June 30      March 31,   December 31, September 30,  June 30,
                                                  1998         1998         1997         1997         1997
                                                -------      -------      -------      -------      -------
  <S>                                            <C>          <C>          <C>          <C>          <C>
  Non-accrual loans:
    Commercial                                   $1,070       $1,764       $1,816       $1,920       $1,057
    Consumer                                        835          944          703          893        1,254
    Real Estate:
      Construction                                  394          393        1,345        2,006        2,155
      Mortgage                                    5,215        7,742        7,706        7,533        5,818
                                                -------      -------      -------      -------      -------
        Total non-accrual loans                   7,514       10,843       11,570       12,352       10,284
                                                -------      -------      -------      -------      -------
  
  Restructured loans
    Commercial                                       18           19           19           20           20
    Consumer
    Real Estate:
      Construction
      Mortgage                                      109          114
                                                -------      -------      -------      -------      -------
        Total restructured loans                    127          133           19           20           20
                                                -------      -------      -------      -------      -------
  
    Total non-performing loans                    7,641       10,976       11,589       12,372       10,304
                                                -------      -------      -------      -------      -------
  
  Other real estate                               5,649        6,029        5,845        6,673        7,035
                                                -------      -------      -------      -------      -------
  
  Total non-performing assets                    13,290       17,005       17,434       19,045       17,339
                                                -------      -------      -------      -------      -------
  
  Loans past due 90 days or more
    and still accruing                              259          308          226          423          458
                                                -------      -------      -------      -------      -------
  
  Total non-performing assets and
    loans past due 90 days or more              $13,549      $17,313      $17,660      $19,468      $17,797
                                                =======      =======      =======      =======      =======
  
  Total non-performing loans as a
    percentage of total period-end
    loans                                          0.46%        0.75%        0.82%        0.89%        0.76%
  
  Total non-performing assets as a
    percentage of total period-end assets          0.30%        0.41%        0.44%        0.50%        0.48%
  
  Total non-performing assets and loans
    past due 90 days or more as a
    percentage of total period-end assets          0.30%        0.42%        0.45%        0.51%        0.49%
  
  Allowance for loan losses as a
    percentage of total non-performing
    loans                                           305%         200%         183%         169%         198%
  
  Allowance for loan losses as a percentage
    of total period-end loans                      1.40%        1.50%        1.51%        1.50%        1.50%
  
  Total non-performing assets and loans
    past due 90 days or more as a
    percentage of stockholders' equity and
    allowance for loan losses                         4%           6%           6%           8%           7%
  </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
                                                                Six Months Ended                Ended
                                                          ------------------------------
                                                           06/30/98          06/30/97         12/31/97
                                                          ------------     -------------     ------------
  <S>                                                      <C>               <C>              <C>
              Balance at beginning of period                  $21,261           $17,975          $17,975
              Provisions charged to operating expenses          2,779             2,952            4,668
                                                          ------------     -------------     ------------
                                                               24,040            20,927           22,643
              Recoveries on loans charged-off:
                Commercial                                        165               104              348
                Consumer                                          182               134              406
                Real estate                                        14                42              144
                                                          ------------     -------------     ------------
              Total recoveries                                    361               280              898
  
              Loans charged-off:
                Commercial                                       (191)             (369)            (964)
                Consumer                                         (633)             (432)          (1,170)
                Real estate                                      (246)              (35)            (146)
                                                          ------------     -------------     ------------
              Total charged-off                                (1,070)             (836)          (2,280)
                                                          ------------     -------------     ------------
              Net charge-offs                                    (709)             (556)          (1,382)
                                                          ------------     -------------     ------------
  
              Balance at end of period                        $23,331           $20,371          $21,261
                                                          ============     =============     ============
  
  
              Net charge-offs as a percentage of
              average loans outstanding                          0.09%             0.08%            0.10%
  </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 4.           Submission of Matters to a Vote of Securities Holders
  
                    The Annual Meeting of the  Registrant's  Shareholders was held
                    on June 29, 1998. The only items of business acted upon at the
                    Annual  Meeting were (i) the election of 12 directors  for one
                    year terms;  and (ii) approval of the Commerce  Bancorp,  Inc.
                    1998 Stock Option Plan for Non-Employee Directors.  The number
                    of votes cast for, against, or withheld, as well as the number
                    of abstentions and broker non-votes was as follows:
  
                    (i)     Election of directors:
  
                    Name of                                 (Withhold Authority)
                    Nominee                          For           Against
                    -----------                    ------           ------
                    Vernon W. Hill II            15,617,255         94,973
                    C. Edward Jordan, Jr         15,618,944         93,284
                    David Baird, IV              15,629,483         82,745
                    Robert C. Beck               15,617,390         94,838
                    Jack R Bershad               15,565,736        146,492
                    Joseph M. Buckelew           15,611,321        100,907
                    Steven M. Lewis              15,621,542         90,686
                    Morton N. Kerr               15,607,084        105,269
                    Daniel J. Ragone             15,620,651         91,577
                    Joseph T. Tarquini, Jr       15,629,786         82,442
                    Frank C. Videon, Sr          15,619,321         92,907
                    William A. Schwartz, Jr      15,629,750         82,478
  
                    (ii) Approval of the Commerce Bancorp,  Inc. 1998 Stock Option
                    Plan for Non-Employee Directors:
  
                                                                        Broker
                           For           Against        Abstain        Non-Vote
  
                       13,949,042       1,247,049       190,849        325,288
  
  Item 5.           Other Information
  
                    Pursuant to recent amendments to the proxy rules under the
                    Securities Exchange Act of 1934, as amended, the Company's
                    stockholders are notified that the deadline for providing the
                    Company timely notice of any stockholder proposal to be
                    submitted outside of the Rule 14a-8 process for consideration
                    at the Company's 1999 Annual Meeting of Stockholders (the
                    "Annual Meeting") will be April 3, 1999. As to all such
                    matters which the Company does not have notice on or prior to
                    April 3, 1999, discretionary authority shall be granted to the
                    designated persons in the proxy solicited on behalf of the
                    Company's Board of Directors in the Company's proxy statement
                    for the Annual Meeting.
  
                    Proposals from stockholders intended to be presented at the
                    1999 Annual Meeting within the Rule 14a-8 process must still
                    be received by the Company for inclusion in the Company's
                    proxy statement by February 1, 1999.
  
  Item 6.           Exhibits and Reports on Form 8-K
  
  
                    No reports on Form 8-K were  filed  during the second  quarter
                    ended June 30, 1998.
  
                                         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)
  
  
  
  
  
  
  
  
  
  
   August 13, 1998
       (Date)                                    C. EDWARD JORDAN, JR.
                                               EXECUTIVE VICE PRESIDENT
                                             (PRINCIPAL FINANCIAL OFFICER)
metadata_documents: [{"type": "10-Q", "sequence": "1", "secsgml_size_bytes": 68553}]
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": "98686150"}, "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 June 30, 1998
  
                                         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                                 22,592,854
           (Title of Class)                    (No. of Shares Outstanding
                                                      as of  8/07/98)
  COMMERCE BANCORP, INC. AND SUBSIDIARIES
  
                                        INDEX
  
                                                                              Page
  
  PART I.           FINANCIAL INFORMATION
  
  Item 1.           Financial Statements
  
                    Consolidated Balance Sheets (unaudited)
                             June 30, 1998 and December 31, 1997
  
                    Consolidated  Statements  of Income  (unaudited)  
                             Three months ended June 30, 1998 and 
                             June 30, 1997, and six months ended June
                             30, 1998 and June 30, 1997
  
                    Consolidated Statements of Cash Flows  (unaudited)  
                             Six months ended June 30, 1998 and
                             June 30, 1997
  
                    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 4.           Submission of Matters to a Vote of Security Holders
  
  Item 5.           Other Information
  
  Item 6.           Exhibits and Reports on Form 8-K
  
                                         1
  Commerce Bancorp, Inc. and Subsidiaries
                             Consolidated Balance Sheets
                                     (unaudited)
  -------------------------------------------------------------------------------------------------------------
                                                                                    June 30,       December 31,
                                                                                   ----------------------------
                   (dollars in thousands)                                             1998            1997
  -------------------------------------------------------------------------------------------------------------
  Assets           Cash and due from banks                                            $223,172        $167,900
                   Federal funds sold                                                        0               0
                                                                                   ----------------------------
                                  Cash and cash equivalents                            223,172         167,900
                   Mortgages held for sale                                               3,348           7,260
                   Trading securities                                                   35,098           7,911
                   Securities available for sale                                     1,304,742       1,315,120
                   Securities held to maturity                                       1,039,730         874,032
                    (market value 1998-$1,037,962; 1997-$869,815)
                   Loans                                                             1,661,607       1,411,289
                                Less allowance for loan losses                          23,331          21,261
                                                                                   ----------------------------
                                                                                     1,638,276       1,390,028
                   Bank premises and equipment, net                                    127,031         111,759
                   Other assets                                                         78,300          64,957
                                                                                   ----------------------------
                                                                                    $4,449,697      $3,938,967
                                                                                   ============================
  
  Liabilities      Deposits:
                                Demand:
                                  Interest-bearing                                  $1,225,937      $1,111,302
                                  Noninterest-bearing                                  874,714         762,843
                                Savings                                                833,697         705,906
                                Time                                                   928,242         789,353
                                                                                   ----------------------------
                                  Total deposits                                     3,862,590       3,369,404
  
                   Other borrowed money                                                189,519         223,300
                   Other liabilities                                                    33,270          12,695
                   Obligation to Employee Stock Ownership Plan (ESOP)                    1,795           2,308
                   Trust Capital Securities - Commerce Capital Trust I                  57,500          57,500
                   Long-term debt                                                       23,000          23,000
                                                                                   ----------------------------
                                                                                     4,167,674       3,688,207
  
  Stockholders'    Common stock, 22,629,161 shares issued (21,500,804 shares in 1997)   28,325          25,309
  Equity           Series C preferred stock, 417,000 shares in 1997                                      7,506
                   Capital in excess of par or stated value                            213,915         167,529
                   Retained earnings                                                    36,528          50,592
                   Accumulated other comprehensive income                                6,674           3,756
                                                                                   ----------------------------
                                                                                       285,442         254,692
                   Less commitment to ESOP                                               1,795           2,308
                   Less treasury stock, at cost, 100,159 shares in 1998
                                (100,159 in 1997)                                        1,624           1,624
                                                                                   ----------------------------
                                  Total stockholders' equity                           282,023         250,760
                                                                                   ----------------------------
  
                                                                                    $4,449,697      $3,938,967
                                                                                   ============================
  See accompanying notes
  
                                         2
  Commerce Bancorp, Inc. and Subsidiaries
                          Consolidated Statements of Income
                                     (unaudited)
  ---------------------------------------------------------------------------------------------------------------------
                                                                Three Months Ended                Six Months Ended
                                                                      June 30,                         June 30,
                                                              ------------------------         ------------------------
               (dollars in thousands, except per share amounts)  1998         1997                1998         1997
  ---------------------------------------------------------------------------------------------------------------------
  Interest     Interest and fees on loans                        $34,061      $29,819             $65,202      $57,932
  income       Interest on investments                            37,349       29,010              73,745       55,824
               Other interest                                        144          319                 498          731
                                                              ------------------------         ------------------------
                    Total interest income                         71,554       59,148             139,445      114,487
                                                              ------------------------         ------------------------
  
  Interest     Interest on deposits:
  expense         Demand                                           8,272        5,838              15,536       11,309
                  Savings                                          4,431        4,108               8,845        7,878
                  Time                                            13,225       10,926              25,895       21,592
                                                              ------------------------         ------------------------
                    Total interest on deposits                    25,928       20,872              50,276       40,779
               Interest on other borrowed money                      942        1,004               2,943        1,464
               Interest on long-term debt                          1,782          818               3,564        1,324
                                                              ------------------------         ------------------------
                    Total interest expense                        28,652       22,694              56,783       43,567
                                                              ------------------------         ------------------------
  
               Net interest income                                42,902       36,454              82,662       70,920
               Provision for loan losses                           1,569        1,326               2,779        2,952
                                                              ------------------------         ------------------------
               Net interest income after provision for
                  loan losses                                     41,333       35,128              79,883       67,968
  
  Noninterest  Deposit charges and service fees                    8,415        6,463              16,498       12,661
  income       Other operating income                             11,377        7,108              23,182       13,859
               Net investment securities gains                       920            0                 920            0
                                                              ------------------------         ------------------------
                    Total noninterest income                      20,712       13,571              40,600       26,520
                                                              ------------------------         ------------------------
  
  Noninterest  Salaries                                           16,985       12,669              32,996       24,571
  expense      Benefits                                            3,697        2,949               6,978        5,695
               Occupancy                                           3,726        3,260               7,648        6,594
               Furniture and equipment                             5,620        4,440              10,986        8,481
               Office                                              4,210        3,305               8,316        6,394
               Audit and regulatory fees and assessments             494          379                 996          754
               Marketing                                           1,717        1,421               3,565        2,660
               Other real estate (net)                               405          492                 825          961
               Other                                               6,460        4,192              11,699        8,203
                                                              ------------------------         ------------------------
                    Total noninterest expenses                    43,314       33,107              84,009       64,313
                                                              ------------------------         ------------------------
  
               Income before income taxes                         18,731       15,592              36,474       30,175
               Provision for federal and state income taxes        6,584        5,558              12,880       10,707
                                                              ------------------------         ------------------------
               Net income                                         12,147       10,034              23,594       19,468
  
               Dividends on preferred stocks                                      140                              281
                                                              ========================         ========================
               Net income applicable to common stock             $12,147       $9,894             $23,594      $19,187
                                                              ========================         ========================
  
               Net income per common and common equivalent share:
                  Basic                                            $0.54        $0.47               $1.06        $0.92
                                                              ------------------------         ------------------------
                  Diluted                                          $0.51        $0.44               $1.00        $0.86
                                                              ------------------------         ------------------------
               Average common and common equivalent shares outstanding:
                  Basic                                           22,508       20,992              22,260       20,929
                                                              ------------------------         ------------------------
                  Diluted                                         23,690       22,482              23,574       22,422
                                                              ------------------------         ------------------------
               Cash dividends declared, common stock               $0.19        $0.15               $0.38        $0.30
                                                              ========================         ========================
  See accompanying notes
  
                                         3
  Commerce Bancorp, Inc. And Subsidiaries
                        Consolidated Statements of Cash Flows
                                     (unaudited)
  ----------------------------------------------------------------------------------------------------------------------
                                                                                                    Six Months Ended
                                                                                                         June 30,
                                                                                               -------------------------
                          (dollars in thousands)                                                    1998          1997
  ----------------------------------------------------------------------------------------------------------------------
  Operating activities    Net income                                                               $23,594       19,468
                          Adjustments to reconcile net income to net cash
                             provided by operating activities:
                                Provision for loan losses                                            2,779        2,952
                                Provision for depreciation, amortization and accretion              11,079        8,124
                                Gains on securities available for sale                                (920)
                                Proceeds from sales of mortgages held for sale                      21,373       10,598
                                Originations of mortgages held for sale                            (17,461)     (11,959)
                                Net loan (chargeoffs)                                                 (709)        (556)
                                Net increase in trading securities                                 (27,187)     (10,350)
                                Increase in other assets                                           (15,334)     (11,145)
                                Increase in other liabilities                                       20,575        3,542
                          ----------------------------------------------------------------------------------------------
                                            Net cash provided by operating activities               17,789       10,674
  
  Investing activities    Proceeds from the sales of securities available for sale                 264,306
                          Proceeds from the maturity of securities available for sale              136,369       60,692
                          Proceeds from the maturity of securities held to maturity                103,311       53,481
                          Purchase of securities available for sale                               (385,823)    (151,963)
                          Purchase of securities held to maturity                                 (270,638)    (234,236)
                          Net increase in loans                                                   (256,580)    (101,598)
                          Proceeds from sales of loans                                               6,262        6,569
                          Purchases of premises and equipment                                      (23,367)     (12,141)
                          ----------------------------------------------------------------------------------------------
                                            Net cash used by investing activies                   (426,160)    (379,196)
  
  Financing activities    Net increase in demand and savings deposits                              354,297      216,506
                          Net increase in time deposits                                            138,889       51,103
                          Net decrease in other borrowed money                                     (33,781)      20,000
                          Dividends paid                                                            (8,228)      (5,730)
                          Proceeds from issuance of Trust Capital Securities                                     57,500
                          Issuance of common stock                                                   8,257
                          Proceeds from issuance of common stock under
                               dividend reinvestment and other stock plans                           4,209        3,103
                          Other                                                                                   1,144
                          ----------------------------------------------------------------------------------------------
                                            Net cash provided by financing activities              463,643      343,626
  
                          Increase (decrease) in cash and cash equivalents                          55,272      (24,896)
                          Cash and cash equivalents at beginning of year                           167,900      208,833
                          ----------------------------------------------------------------------------------------------
                          Cash and cash equivalents at end of period                              $223,172     $183,937
                          ----------------------------------------------------------------------------------------------
  
                          Supplemental disclosures of cash flow information:  Cash
                            paid during the period for:
                              Interest                                                             $54,996      $44,088
                              Income taxes                                                          13,789       11,547
                            Other noncash activities:
                              Transfer of securities to securities available for sale                            83,773
                          ----------------------------------------------------------------------------------------------
  See accompanying notes
  
                                         4
  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.  Certain amounts in prior
           periods have been  reclassified  for comparative  purposes.  All common
           stock per share  information  has been  adjusted for the 5-for-4  stock
           split in the form of a 25% stock  dividend  declared on June 29,  1998,
           and payable July 24, 1998 to shareholders of record July 13, 1998.
  
                    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 for the period ended
           December 31, 1997. The results for the three months ended June 30, 1998
           and the six months ended June 30, 1998 are not  necessarily  indicative
           of the results  that may be expected  for the year ended  December  31,
           1998.
  
                    The consolidated  financial statements include the accounts of
           Commerce  Bancorp,  Inc.  (the  Company)  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  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.
  
                                         5
  C.       Employee Stock Ownership Plan (ESOP) Debt Guarantee
  
                    The Company has  guaranteed a debt  obligation of its Employee
           Stock Ownership Plan (ESOP) which originated at $7,500,000 and has been
           reduced to $1,795,000 through principal  reductions.  Accordingly,  the
           loan amount is reflected in the Company's consolidated balance sheet as
           a  liability  and  an  equal  amount,  representing  deferred  employee
           benefits,  has been recorded as a deduction from stockholders'  equity.
           The ESOP  obtained  the loan in 1990 to  acquire a new class of Company
           Cumulative  Convertible Preferred Stock (Series C) at a price of $18.00
           per share. The loan was refinanced in 1994, and is payable in quarterly
           installments  with the final  payment due January  28,  2000.  The loan
           bears  interest at a variable  rate,  although the rate can be fixed at
           future repricing dates in accordance with the loan agreement. Effective
           March 1,  1998,  the  Trustees  of the ESOP  exercised  their  right to
           convert all 417,000 shares of the Series C stock into 808,630 shares of
           the Company's  common stock,  a portion of which is pledged as security
           for the loan.  As the Company makes annual  contributions  to the ESOP,
           these  contributions,  plus dividends  from the Company's  common stock
           held by the ESOP, will be used to repay the loan.
  
  D.       Recent Accounting Statements
  
                    As  of  January  1,  1998,  the  Company   adopted   Financial
           Accounting   Standards  Board  (FASB)   Statement  No.  130  "Reporting
           Comprehensive  Income" (FAS 130). FAS 130 establishes new standards for
           reporting  comprehensive  income,  which includes net income as well as
           certain  other  items  which  result in a change to equity  during  the
           period.  Prior period  financial  statements have been  reclassified to
           conform to the  requirements of FAS 130. The adoption of FAS 130 had no
           impact on the Company's  financial  position or results of  operations.
           During the second quarter of 1998 and 1997, 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
           $11.7 million and $17.8 million, respectively. For the six months ended
           June 30, 1998 and 1997,  total  comprehensive  income was $26.5 million
           and $18.7 million, respectively.
  
                    In June,  1997, the FASB issued Statement No. 131 "Disclosures
           About Segments of an Enterprise and Related Information" (FAS 131). FAS
           131 requires disclosure of financial and descriptive  information about
           an  enterprise's  operating  segments  that meet  certain  quantitative
           thresholds.  This  statement  is effective  for fiscal years  beginning
           after  December 15, 1997, but is not required to be applied for interim
           reporting in the initial year of application.  The Company is currently
           evaluating  the impact of FAS 131 on the  disclosures  included  in its
           annual financial statements.
  
                    In June,  1998, the FASB issued  Statement No. 133 "Accounting
           for Derivative  Instruments and Hedging  Activities" (FAS 133). FAS 133
           is  required  to be adopted  in years  beginning  after June 15,  1999.
           Management  does not  anticipate  the  adoption  of FAS 133 will have a
           significant  effect  on  earnings  or  the  financial  position  of the
           Company.
  
                                         6
  E.       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.
  
   F.      Commerce Capital Markets, Inc.
  
                    In the  first  quarter  of 1998,  the  Company  completed  the
           acquisition  of A. H. Williams & Co.  (Williams),  Philadelphia,  PA, a
           public finance  investment  firm,  and combined  Williams with Commerce
           Capital,  the bank  securities  dealer division of Commerce NJ, to form
           Commerce Capital Markets,  Inc., a wholly-owned  nonbank  subsidiary of
           the Company engaging in certain securities  activities  permitted under
           Section 20 of the Glass-Steagall  Act. The acquisition was completed by
           the  issuance  of common  stock of the Company  totaling  approximately
           395,000  shares.  The  transaction  was  accounted  for as a pooling of
           interests.  However,  financial  statements of the periods prior to the
           acquisition have not been restated,  as the changes,  in the aggregate,
           would be immaterial.
  
  G.       Earnings Per Share
  
           The calculation of earnings per share follows (in thousands, except for
           per share amounts):
  Three Months Ended        Six Months Ended
                                                       June 30                 June 30
                                                  1998         1997        1998       1997
  Basic:
       Net income                                $12,147     $10,034     $23,594     $19,468
       Preferred stock dividends                                 140                     281
                                                 -------     -------     -------     -------
  
       Net income applicable to common stock     $12,147      $9,894     $23,594     $19,187
                                                 =======     =======     =======     =======
  
       Average common shares outstanding          22,508      20,992      22,260      20,929
                                                 =======     =======     =======     =======
  
       Net income per common share - basic         $0.54       $0.47       $1.06       $0.92
                                                 =======     =======     =======     =======
  
                                         7
  Diluted:
       Net income                                   $12,147     $10,034     $23,594     $19,468
       Additional ESOP contribution under the
                if-converted method                                  12                      23
                                                    -------     -------     -------     -------
       Net income applicable to common stock
                on a diluted basis                  $12,147     $10,022     $23,594     $19,445
                                                    =======     =======     =======     =======
  
       Average common shares outstanding             22,508      20,992      22,260      20,929
       Additional shares considered in diluted
                computation assuming:
                  Exercise of stock options           1,182         843       1,103         846
                  Conversion of preferred stock                     647         211         647
                                                    -------     -------     -------     -------
  
       Average common shares outstanding
                on a diluted basis                   23,690      22,482      23,574      22,422
                                                    =======     =======     =======     =======
  
       Net income per common share - diluted          $0.51       $0.44       $1.00       $0.86
                                                    =======     =======     =======     =======
  H.       Subsequent Event
  
                    On August  12,  1998,  the  Company  reached an  agreement  to
           acquire  Tinton Falls State Bank through the  acquisition of its parent
           company,  Community First Banking Company (OTCBB Symbol:  CFST). Tinton
           Falls State Bank,  headquartered in Tinton Falls, New Jersey, with $192
           million in assets and $180 million in deposits, serves Monmouth County,
           New Jersey through the operation of seven branch  offices.  The Company
           will  issue   approximately   1.3  million   shares  to  complete   the
           acquisition,  which is expected to close in the fourth quarter of 1998.
           The transaction will be accounted for as a pooling of interests.
  
                    Unaudited pro forma  combined  financial  information  for the
           Company and Tinton  Falls State Bank at or for the year ended  December
           31, 1997 includes the following (dollars in thousands):
  
            Assets                      $4,104,000
            Deposits                     3,521,000
            Stockholders' equity           263,000
            Net interest income            156,000
            Net income                      42,000
  
                    Diluted net income per common share will not differ materially
           from the $1.78 reported by the Company for 1997 after adjusting for the
           5-for-4  stock  split in the form of a 25% stock  dividend  declared on
           June 29, 1998.
  
                                         8
  Item 2. Management's  Discussion and Analysis of Financial Condition and Results
  of Operation
  
           Capital Resources
  
                    At June 30, 1998,  stockholders' equity totaled $282.0 million
           or 6.34% of total assets,  compared to $250.8 million or 6.37% of total
           assets at December 31, 1997.
  
                    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.
  
                    The table below  presents  the  Company's  and  Commerce  NJ's
           risk-based and leverage ratios at June 30, 1998 and 1997:
  Per Regulatory Guidelines
                                                         Actual                      Minimum                 "Well Capitalized"
                                                 Amount           Ratio       Amount           Ratio       Amount           Ratio
  June 30, 1998
  Company
     Risk based capital ratios:
       Tier 1                                   $327,788           14.83%     $88,414           4.00%    $132,621            6.00%
       Total capital                             374,119           16.93      176,828           8.00      221,035           10.00
     Leverage ratio                              327,788            7.68      128,115           3.00      213,525            5.00
  
  Commerce NJ Risk based capital ratios:
       Tier 1                                   $185,102           12.86%     $57,569           4.00%     $86,353            6.00%
       Total capital                             200,314           13.92      115,137           8.00      143,922           10.00
     Leverage ratio                              185,102            6.50       85,464           3.00      142,441            5.00
  
  June 30, 1997
  Company
     Risk based capital ratios:
       Tier 1                                   $280,148           15.58%     $71,914           4.00%    $107,872            6.00%
       Total capital                             323,519           17.99      143,829           8.00      179,786           10.00
     Leverage ratio                              280,148            8.14      103,237           3.00      172,062            5.00
  
  Commerce NJ Risk based capital ratios:
       Tier 1                                   $152,428           12.70%     $48,020           4.00%     $72,030            6.00%
       Total capital                             165,604           13.79       96,040           8.00      120,051           10.00
     Leverage ratio                              152,428            6.74       67,878           3.00      113,130            5.00
  9
  At June 30, 1998, 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 as
           of June  30,  1998,  that the  Company  and its  subsidiaries  meet all
           capital adequacy requirements to which they are subject.
  
           Deposits
  
                    Total deposits at June 30, 1998 were $3.86 billion,  up $675.3
           million,  or 21% over total deposits of $3.19 billion at June 30, 1997,
           and up by $493.2  million,  or 15% from year-end  1997.  Deposit growth
           during the first six months of 1998 included core deposit growth in all
           categories  as well as  growth  from the  public  sector.  The  Company
           experienced  "same-store core deposit growth" of 15.8% at June 30, 1998
           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  June  30,  1998,  the  Company's  income  simulation  model
           indicates  net income  would  decrease  by 2.74% and 8.06% in the first
           year and over a two year time frame,  respectively,  if rates decreased
           as described  above.  The model projects that net income would decrease
           by 2.85% and 2.81% in the  first  year and over a two year time  frame,
           respectively,  if rates increased as described  above. All of these net
           income projections are within an acceptable level of interest rate risk
           pursuant to the policy established by ALCO.
  
                                         10
  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 June 30,
           1998, 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 are
           used to meet short term funding  needs.  At June 30,  1998,  short-term
           borrowings aggregated $189.5 million and had an average rate of 6.38%.
  
           Interest Earning Assets
  
                    For the six month period ended June 30, 1998, interest earning
           assets  increased  $428.9  million from $3.62 billion to $4.04 billion.
           This  increase was  primarily  in  investment  securities  and the loan
           portfolio as described below.
  
           Loans
  
                    During the first six months of 1998,  loans  increased  $250.3
           million from $1.41 billion to $1.66  billion.  At June 30, 1998,  loans
           represented 43% of total deposits and 37% of total assets. All segments
           of the loan  portfolio  experienced  growth in the first six  months of
           1998,  including  loans secured by commercial  real estate  properties,
           commercial loans, and consumer loans.
  
                                         11
  Investments
  
                  In total, for the first six months of 1998, securities increased
           $182.5 million from $2.20 billion to $2.38 billion.  Deposit growth and
           other funding  sources were used to increase the  Company's  investment
           portfolio.  The available for sale portfolio decreased $10.4 million to
           $1.30 billion from $1.32 billion at December 31, 1997,  the  securities
           held to maturity portfolio increased $165.7 million to $1.04 billion at
           June 30, 1998 from $874.0  million at year-end  1997, and the portfolio
           of trading  securities  increased  $27.2  million from year-end 1997 to
           $35.1 million at June 30, 1998.  At June 30, 1998,  the average life of
           the investment  portfolio was approximately 5.0 years, and the duration
           was  approximately  3.9  years.  At June  30,  1998,  total  securities
           represented 53% of total assets.
  
           Net Income
  
                  Net income for the second quarter of 1998 was $12.1 million,  an
           increase of $2.1 million or 21% over the $10.0 million recorded for the
           second quarter of 1997. Net income for the first six months of 1998 was
           $23.6  million,  an  increase  of $4.1  million  or 21% over the  $19.5
           million recorded in the first six months of 1997. On a per share basis,
           diluted  net income  for the  second  quarter of 1998 and the first six
           months of 1998 were $0.51 and $1.00 per common share  compared to $0.44
           and $0.86 per common share for the respective 1997 periods.
  
                  Return on average  assets  (ROA) and  return on  average  equity
           (ROE)  for  the  second   quarter  of  1998  were  1.13%  and   17.58%,
           respectively,  compared to 1.17% and 19.15%, respectively, for the same
           1997  period.  ROA and ROE for the first six  months of 1998 were 1.14%
           and 17.57%, respectively, compared to 1.17% and 18.71% a year ago.
  
            Net Interest Income
  
                  Net interest income totaled $42.9 million for the second quarter
           of 1998,  an increase of $6.4 million or 18% from $36.5  million in the
           second quarter of 1997. Net interest income for the first six months of
           1998 totaled $82.7 million,  up $11.7 million or 17% from the first six
           months of 1997. The improvement in net interest income for both periods
           was due  primarily  to  volume  increases  in the loan  and  investment
           portfolios.
  
           Noninterest Income
  
                  Noninterest  income totaled $20.7 million for the second quarter
           of 1998,  an increase of $7.1 million or 53% from $13.6  million in the
           second  quarter of 1997.  The increase  was due  primarily to increased
           other  operating  income,  which rose $4.3 million over the prior year,
           including  increased  revenues  of  $1.8  million  from  both  Commerce
           National Insurance Services,  Inc. (Commerce Insurance),  the Company's
           insurance brokerage subsidiary,  and CCMI. In addition, deposit charges
           and service fees increased $2.0 million from the second quarter of 1997
           primarily due to higher transaction  volumes,  and the Company recorded
           $920 thousand in net investment  securities gains in the second quarter
           of 1998.
  
                  For the first six  months of 1998,  noninterest  income  totaled
          $40.6 million, an increase of $14.1 million or 53% from $26.5 million in
          the first six months of 1997.  Other operating  income rose $9.3 million
          over the first six months of 1997,  including increased revenues of $3.3
  
                                         12
  million   from   Commerce   Insurance   and  $4.4  million  from  CCMI,
           respectively.  Deposit  charges and service fees rose $3.8 million over
           the prior year  primarily due to higher  transaction  volumes,  and the
           Company  recorded $920 thousand in net investment  securities  gains in
           1998.
  
           Noninterest Expense
  
                    For the second quarter of 1998,  noninterest  expense  totaled
           $43.3 million, an increase of $10.2 million or 31% over the same period
           in 1997. Contributing to this increase was new branch activity over the
           past twelve months,  with the number of branches  increasing from 69 at
           June  30,  1997 to 76 at June  30,  1998,  the  expansion  of  Commerce
           Insurance, and the formation of CCMI in the first quarter of 1998. With
           the  addition  of  these  new  offices  and  CCMI,  staff,  facilities,
           marketing,  and related expenses rose  accordingly.  Other  noninterest
           expenses  rose $2.3  million  over the  second  quarter  of 1997.  This
           increase  resulted  primarily  from  higher bank  card-related  service
           charges,   increased  business  development  expenses,   and  increased
           provisions for non-credit-related losses.
  
           For the first six months of 1998,  noninterest  expense  totaled  $84.0
           million,  an increase of $19.7 million or 31% over $64.3 million in the
           first six months of 1997.  Contributing to this increase was new branch
           activity,  the  expansion of Commerce  Insurance,  and the formation of
           CCMI as noted above. Other noninterest  expenses rose $3.5 million over
           the first six months of 1997.  This increase  resulted  primarily  from
           higher  bank   card-related   service   charges,   increased   business
           development  expenses,  higher legal fees, 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
           67.99% for the first six months of 1998 as  compared  to 65.02% for the
           same 1997 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 June 30, 1998 were $13.3  million,  or 0.30% of
           total  assets  compared  to $17.4  million or 0.44% of total  assets at
           December  31, 1997 and $17.3  million or 0.48% of total  assets at June
           30, 1997.
  
                    Total non-performing loans (non-accrual loans and restructured
           loans,  excluding  loans  past due 90 days or more and  still  accruing
           interest)  at June 30,  1998 were $7.6  million or 0.46% of total loans
           compared to $11.6  million or 0.82% of total loans at December 31, 1997
           and $10.3 million or 0.76% of total loans at June 30, 1997. At June 30,
           1998,  loans  past  due 90 days or more  and  still  accruing  interest
           amounted to $259  thousand  compared to $226  thousand at December  31,
           1997 and $458 thousand at June 30, 1997. Additional loans considered as
           potential   problem  loans  by  the  Company's   internal  loan  review
           department  ($12.3  million at June 30, 1998) have been evaluated as to
           risk  exposure in  determining  the adequacy of the  allowance for loan
           losses.
  
                                         13
  Other real estate  (ORE) at June 30, 1998 totaled $5.6 million
           compared to $5.8  million at December 31, 1997 and $7.0 million at June
           30, 1997.  These properties have been written down to the lower of cost
           or fair value less disposition costs.
  
                    On pages 15 and 16 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 June 30, 1998, December 31, 1997, and June 30, 1997.
  
           Year 2000
  
                    The  Company  began the  process  of  preparing  its  computer
           systems  and  applications  for the  Year  2000 in  1996.  The  process
           includes   directing  its  external  service   providers  to  take  the
           appropriate  action to ensure  Year 2000  compliance,  as well as, to a
           lesser  extent,  modifying or replacing  certain  hardware and software
           maintained by the Company.  The Company  expects to have  substantially
           all of the  necessary  changes  in place  before  the end of 1998,  and
           believes  it is taking the  appropriate  steps to address all Year 2000
           issues.  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.
  
                                         14
  The following summary presents  information  regarding  non-performing loans and
  assets as of June 30, 1998 and the preceding four quarters:  (dollar  amounts in
  thousands)
  June 30      March 31,   December 31, September 30,  June 30,
                                                  1998         1998         1997         1997         1997
                                                -------      -------      -------      -------      -------
  Non-accrual loans:
    Commercial                                   $1,070       $1,764       $1,816       $1,920       $1,057
    Consumer                                        835          944          703          893        1,254
    Real Estate:
      Construction                                  394          393        1,345        2,006        2,155
      Mortgage                                    5,215        7,742        7,706        7,533        5,818
                                                -------      -------      -------      -------      -------
        Total non-accrual loans                   7,514       10,843       11,570       12,352       10,284
                                                -------      -------      -------      -------      -------
  
  Restructured loans
    Commercial                                       18           19           19           20           20
    Consumer
    Real Estate:
      Construction
      Mortgage                                      109          114
                                                -------      -------      -------      -------      -------
        Total restructured loans                    127          133           19           20           20
                                                -------      -------      -------      -------      -------
  
    Total non-performing loans                    7,641       10,976       11,589       12,372       10,304
                                                -------      -------      -------      -------      -------
  
  Other real estate                               5,649        6,029        5,845        6,673        7,035
                                                -------      -------      -------      -------      -------
  
  Total non-performing assets                    13,290       17,005       17,434       19,045       17,339
                                                -------      -------      -------      -------      -------
  
  Loans past due 90 days or more
    and still accruing                              259          308          226          423          458
                                                -------      -------      -------      -------      -------
  
  Total non-performing assets and
    loans past due 90 days or more              $13,549      $17,313      $17,660      $19,468      $17,797
                                                =======      =======      =======      =======      =======
  
  Total non-performing loans as a
    percentage of total period-end
    loans                                          0.46%        0.75%        0.82%        0.89%        0.76%
  
  Total non-performing assets as a
    percentage of total period-end assets          0.30%        0.41%        0.44%        0.50%        0.48%
  
  Total non-performing assets and loans
    past due 90 days or more as a
    percentage of total period-end assets          0.30%        0.42%        0.45%        0.51%        0.49%
  
  Allowance for loan losses as a
    percentage of total non-performing
    loans                                           305%         200%         183%         169%         198%
  
  Allowance for loan losses as a percentage
    of total period-end loans                      1.40%        1.50%        1.51%        1.50%        1.50%
  
  Total non-performing assets and loans
    past due 90 days or more as a
    percentage of stockholders' equity and
    allowance for loan losses                         4%           6%           6%           8%           7%
  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
                                                                Six Months Ended                Ended
                                                          ------------------------------
                                                           06/30/98          06/30/97         12/31/97
                                                          ------------     -------------     ------------
  Balance at beginning of period                  $21,261           $17,975          $17,975
              Provisions charged to operating expenses          2,779             2,952            4,668
                                                          ------------     -------------     ------------
                                                               24,040            20,927           22,643
              Recoveries on loans charged-off:
                Commercial                                        165               104              348
                Consumer                                          182               134              406
                Real estate                                        14                42              144
                                                          ------------     -------------     ------------
              Total recoveries                                    361               280              898
  
              Loans charged-off:
                Commercial                                       (191)             (369)            (964)
                Consumer                                         (633)             (432)          (1,170)
                Real estate                                      (246)              (35)            (146)
                                                          ------------     -------------     ------------
              Total charged-off                                (1,070)             (836)          (2,280)
                                                          ------------     -------------     ------------
              Net charge-offs                                    (709)             (556)          (1,382)
                                                          ------------     -------------     ------------
  
              Balance at end of period                        $23,331           $20,371          $21,261
                                                          ============     =============     ============
  
              Net charge-offs as a percentage of
              average loans outstanding                          0.09%             0.08%            0.10%
  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 4.           Submission of Matters to a Vote of Securities Holders
  
                    The Annual Meeting of the  Registrant's  Shareholders was held
                    on June 29, 1998. The only items of business acted upon at the
                    Annual  Meeting were (i) the election of 12 directors  for one
                    year terms;  and (ii) approval of the Commerce  Bancorp,  Inc.
                    1998 Stock Option Plan for Non-Employee Directors.  The number
                    of votes cast for, against, or withheld, as well as the number
                    of abstentions and broker non-votes was as follows:
  
                    (i)     Election of directors:
  
                    Name of                                 (Withhold Authority)
                    Nominee                          For           Against
                    -----------                    ------           ------
                    Vernon W. Hill II            15,617,255         94,973
                    C. Edward Jordan, Jr         15,618,944         93,284
                    David Baird, IV              15,629,483         82,745
                    Robert C. Beck               15,617,390         94,838
                    Jack R Bershad               15,565,736        146,492
                    Joseph M. Buckelew           15,611,321        100,907
                    Steven M. Lewis              15,621,542         90,686
                    Morton N. Kerr               15,607,084        105,269
                    Daniel J. Ragone             15,620,651         91,577
                    Joseph T. Tarquini, Jr       15,629,786         82,442
                    Frank C. Videon, Sr          15,619,321         92,907
                    William A. Schwartz, Jr      15,629,750         82,478
  
                    (ii) Approval of the Commerce Bancorp,  Inc. 1998 Stock Option
                    Plan for Non-Employee Directors:
  
                                                                        Broker
                           For           Against        Abstain        Non-Vote
  
                       13,949,042       1,247,049       190,849        325,288
  
  Item 5.           Other Information
  
                    Pursuant to recent amendments to the proxy rules under the
                    Securities Exchange Act of 1934, as amended, the Company's
                    stockholders are notified that the deadline for providing the
                    Company timely notice of any stockholder proposal to be
                    submitted outside of the Rule 14a-8 process for consideration
                    at the Company's 1999 Annual Meeting of Stockholders (the
                    "Annual Meeting") will be April 3, 1999. As to all such
                    matters which the Company does not have notice on or prior to
                    April 3, 1999, discretionary authority shall be granted to the
                    designated persons in the proxy solicited on behalf of the
                    Company's Board of Directors in the Company's proxy statement
                    for the Annual Meeting.
  
                    Proposals from stockholders intended to be presented at the
                    1999 Annual Meeting within the Rule 14a-8 process must still
                    be received by the Company for inclusion in the Company's
                    proxy statement by February 1, 1999.
  
  Item 6.           Exhibits and Reports on Form 8-K
  
                    No reports on Form 8-K were  filed  during the second  quarter
                    ended June 30, 1998.
  
                                         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)
  
   August 13, 1998
       (Date)                                    C. EDWARD JORDAN, JR.
                                               EXECUTIVE VICE PRESIDENT
                                             (PRINCIPAL FINANCIAL OFFICER)