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 September 30, 1999
                                            ------------------
  
                                         OR
  
  ( )  TRANSITION  REPORT  PURSUANT  TO  SECTION  13 OR  15(d)  OF THE  SECURITIES
       EXCHANGE ACT OF 1934
  
                  For the transition period from _______ to _______
  
                              Commission File 333-78445
  
                         PENNSYLVANIA COMMERCE BANCORP, INC.
          -----------------------------------------------------------------
          (Exact name of small business issuer as specified in its charter)
  
           Pennsylvania                                   25-1834776
  -------------------------------                ----------------------------
  (State or other jurisdiction of                (IRS Employer Identification
   incorporation or organization)                           Number)
  
  
             100 Senate Avenue, P.O. Box 8599, Camp Hill, PA 17001-8599
             ----------------------------------------------------------
                      (Address of principal executive offices)
  
                                   (717) 975-5630
                             --------------------------
                             (Issuer's telephone number)
  
           Check whether the issuer (1) filed all reports  required to be filed by
  Section 13 or 15(d) of the  Exchange  Act during the past 12 months (or for such
  shorter period that the  registrant was required to file such reports),  and (2)
  has been subject to such filing requirements for the past 90 days.
  
                                 Yes X    No _______
  
           State the number of shares  outstanding of each of the issuer's classes
  of common equity,  as of the latest  practicable  date:  1,560,235 Common shares
  outstanding at 10/31/99
  
       Transitional Small Business Disclosure Format (check one): Yes __ No X
  
  <PAGE>
                                           PENNSYLVANIA COMMERCE BANCORP, INC.
  
  
                                                          INDEX
  
  <TABLE>
  <CAPTION>
                                                                                                                  Page
  <S>                                                                                                             <C>
  PART I.           FINANCIAL INFORMATION
  
  Item 1.           Consolidated Financial Statements
  
                    Consolidated Balance Sheets (Unaudited).........................................................3
                    September 30, 1999, and December 31, 1998
  
                    Consolidated Statements of Income (Unaudited)...................................................4
                    Three months ended September 30, 1999 and September 30, 1998
                    Nine months ended September 30, 1999 and September 30, 1998
  
                    Consolidated Statement of Stockholders' Equity  (Unaudited).....................................5
                    Nine months ended September 30, 1999 and September 30, 1998
  
                    Consolidated Statements of Cash Flows (Unaudited)...............................................6
                    Nine months ended September 30, 1999, and September 30, 1998
  
                    Notes to Consolidated Financial Statements (Unaudited)..........................................7
  
  Item 2.           Management's Discussion and Analysis of Financial Condition
                    and Results of Operations.......................................................................9
  
  Item 3.           Quantitative and Qualitative Disclosures about Market Risk.....................................20
  
  PART II.          OTHER INFORMATION
  
  Item 1.           Legal Proceedings..............................................................................20
  
  Item 6a.          Exhibits
                    Exhibit 11.....................................................................................20
                    Exhibit 27.....................................................................................20
  
  Item 6b.          Reports on Form 8-K............................................................................21
  
                    Signatures.....................................................................................22
  </TABLE>
  
  
  
                                         2
  <PAGE>
  PENNSYLVANIA COMMERCE BANCORP, INC.
  Consolidated Balance Sheets (Unaudited)
  <TABLE>
  <CAPTION>
  ============================================================================================================================
                                                                                           September 30,          December 31,
                    ( in  thousands,  except  share  amounts)                                  1999                  1998
  ----------------------------------------------------------------------------------------------------------------------------
  Assets
  <S>                                                                                        <C>                  <C>
                    Cash and due from banks                                                  $ 12,271             $ 11,975
                    Federal funds sold                                                          2,400               11,900
                    ----------------------------------------------------------------------------------------------------------
                         Cash and cash equivalents                                             14,671               23,875
                    Securities, available for sale at fair value                               87,965               96,993
                    Securities, held to maturity at cost
                      (fair value 1999: $28,777;  1998: $11,524 )                              29,597               11,493
                    Loans, held for sale
                      (fair value 1999: $4,167;  1998: $5,726 )                                 4,109                5,641
                    Loans receivable :
                      Real estate:
                         Commercial mortgage                                                  100,140               68,663
                         Construction and land development                                     17,454               13,286
                         Residential mortgage                                                  32,927               31,694
                         Tax-exempt                                                               351                  395
                      Commercial business                                                      18,970               19,614
                      Consumer                                                                 20,745               20,868
                      Lines of credit                                                          15,425               12,601
                    ----------------------------------------------------------------------------------------------------------
                                                                                              206,012              167,121
                    Less:  Allowance for loan losses                                            2,690                2,232
                    ----------------------------------------------------------------------------------------------------------
                         Net loans receivable                                                 203,322              164,889
                    Premises and equipment, net                                                13,322               13,420
                    Accrued interest receivable                                                 1,925                1,824
                    Other assets                                                                2,197                1,188
                    ----------------------------------------------------------------------------------------------------------
                            Total assets                                                     $357,108            $ 319,323
                    ==========================================================================================================
  
  ----------------------------------------------------------------------------------------------------------------------------
  Liabilities
                    Deposits :
                      Noninterest-bearing                                                    $ 65,435             $ 60,699
                      Interest-bearing                                                        268,932              237,038
                    ----------------------------------------------------------------------------------------------------------
                         Total deposits                                                       334,367              297,737
                    Accrued interest payable                                                      895                  518
                    Other liabilities                                                           1,447                  623
                    ----------------------------------------------------------------------------------------------------------
                         Total liabilities                                                    336,709              298,878
  
  ----------------------------------------------------------------------------------------------------------------------------
  Stockholders'
  Equity            Preferred stock - Series A noncumulative;
                         $10.00 par value;  1,000,000 shares authorized;
                         40,000 shares issued and outstanding                                     400                  400
                    Common stock - $1.00 par value;  10,000,000 shares authorized;
                         issued and outstanding - 1999:  1,560,235;  1998:  1,557,375           1,560                1,557
                    Surplus                                                                    16,777               16,728
                    Retained earnings                                                           3,654                1,546
                    Accumulated other comprehensive income (loss)                              (1,992)                 214
                    ----------------------------------------------------------------------------------------------------------
                         Total stockholders' equity                                            20,399               20,445
                    ----------------------------------------------------------------------------------------------------------
                            Total liabilities and stockholders' equity                       $357,108            $ 319,323
                    ==========================================================================================================
  
  </TABLE>
  
                               See accompanying notes.
  
                                         3
  <PAGE>
  PENNSYLVANIA COMMERCE  BANCORP, INC.
  Consolidated Statements of Income (Unaudited)
  <TABLE>
  <CAPTION>
  <S>                                                                    <C>           <C>         <C>            <C>
  ========================================================================================================================
                                                                            Three Months               Nine Months
                                                                           Ended Sept 30,             Ended Sept 30,
                  (in thousands, except per share amounts)                  1999          1998         1999          1998
  ------------------------------------------------------------------------------------------------------------------------
  Interest
  Income            Loans  receivable,  including  fees :
                      Taxable                                            $ 4,431       $ 3,509     $ 12,135       $ 9,979
                      Tax - exempt                                             5             5           15            17
                    Securities :
                      Taxable                                              1,917         1,539        5,442         4,027
                      Tax - exempt                                             0             0            0             7
                    Federal  funds  sold                                      71           209          336           479
                  -------------------------------------------------------------------------------------------------------
                          Total  interest  income                          6,424         5,262       17,928        14,509
  ------------------------------------------------------------------------------------------------------------------------
  Interest
  Expense           Deposits                                               2,519         2,397        7,158         6,359
                    Other                                                      9             0           14             0
                  -------------------------------------------------------------------------------------------------------
                          Total  interest  expense                         2,528         2,397        7,172         6,359
                  -------------------------------------------------------------------------------------------------------
                  Net  interest  income                                    3,896         2,865       10,756         8,150
                  Provision  for  loan  losses                               232           150          602           377
                  -------------------------------------------------------------------------------------------------------
                  Net interest income after provision for loan losses      3,664         2,715       10,154         7,773
  ------------------------------------------------------------------------------------------------------------------------
  Noninterest
  Income             Service charges and other fees                          908           726        2,555         1,982
                     Other                                                    97            70          264           202
                     Gain on sale of securities available for sale             0           128            1           386
                     Other real estate (net)                                  (2)          (15)          (5)           (5)
                     Gain on sale of loans                                   332            82          619           389
                  -------------------------------------------------------------------------------------------------------
                          Total  noninterest  income                       1,335           991        3,434         2,954
  ------------------------------------------------------------------------------------------------------------------------
  Noninterest
  Expenses           Salaries  and  employee  benefits                     1,583         1,311        4,528         3,671
                     Occupancy                                               425           374        1,246         1,069
                     Furniture  and  equipment                               244           220          698           631
                     Advertising  and  marketing                             345           255        1,035           765
                     Data  processing                                        244           208          697           574
                     Postage  and  supplies                                  120           126          378           343
                     Audits , regulatory  fees  and  assessments              33            49          138           144
                     Other                                                   602           423        1,574         1,185
                  -------------------------------------------------------------------------------------------------------
                          Total  noninterest  expenses                     3,596         2,966       10,294         8,382
                  -------------------------------------------------------------------------------------------------------
                  Income  before  income  taxes                            1,403           740        3,294         2,345
                  Provision  for  federal  income  taxes                     480           248        1,126           780
                  -------------------------------------------------------------------------------------------------------
                          Net  income                                      $ 923         $ 492       $2,168       $ 1,565
                  =======================================================================================================
                  Net  income  per  common share :  Basic                 $ 0.58        $ 0.30       $ 1.35        $ 0.97
                                                    Diluted                 0.54          0.28         1.26          0.90
  ========================================================================================================================
  </TABLE>
  
                               See accompanying notes.
  
                                         4
  <PAGE>
  
  PENNSYLVANIA COMMERCE BANCORP, INC.
  Consolidated Statement of Stockholders' Equity  (Unaudited)
  
  <TABLE>
  <CAPTION>
  <S>                                          <C>        <C>       <C>          <C>                  <C>       <C>
  =========================================================================================================================
                                                                                                   Accumulated
                                                                                                      Other
                                              Preferred    Common                Retained         Comprehensive
  ( in  thousands )                             Stock       Stock     Surplus    Earnings          Income (Loss)   Total
  -------------------------------------------------------------------------------------------------------------------------
  Balance : December 31, 1997                    $ 400      $1,475    $14,407      $1,708               $ 328     $18,318
  Comprehensive income:
  Net  income                                        -           -          -       1,565                   -       1,565
     Change in unrealized gains
       (losses) on securities, net of
       reclassification adjustment                                                                         28         28
                                                                                                                  ---------
  Total comprehensive income (loss)                                                                                 1,593
  Dividends  declared  on  preferred  stock          -           -          -         (60)                  -         (60)
  Common stock issued under stock option plans       -           7         40           -                   -          47
  -------------------------------------------------------------------------------------------------------------------------
   Balance : September 30, 1998                  $ 400      $1,482    $14,447      $3,213               $ 356     $19,898
  =========================================================================================================================
  
  
                                                                                                   Accumulated
                                                                                                      Other
                                              Preferred    Common                Retained         Comprehensive
  ( in  thousands )                             Stock       Stock     Surplus    Earnings          Income (Loss)   Total
  -------------------------------------------------------------------------------------------------------------------------
  Balance : December 31, 1998                    $ 400      $1,557    $16,728      $1,546               $ 214     $20,445
  Comprehensive income:
      Net  income                                    -           -          -       2,168                   -       2,168
     Change in unrealized gains
       (losses) on securities, net of
       reclassification adjustment                   -           -          -           -              (2,206)     (2,206)
                                                                                                                  ---------
  Total comprehensive income (loss)                  -           -          -           -                             (38)
  Dividends declared on preferred stock              -           -          -         (60)                  -         (60)
  Common stock issued under stock option plans       -           3         49           -                   -          52
  -------------------------------------------------------------------------------------------------------------------------
   Balance : September 30, 1999                  $ 400      $1,560    $16,777      $3,654            $ (1,992)    $20,399
  =========================================================================================================================
  </TABLE>
  
                               See accompanying notes.
  
  
                                         5
  
  <PAGE>
  PENNSYLVANIA COMMERCE BANCORP, INC.
  CONSOLIDATED STATEMENTS OF CASH FLOWS  (Unaudited)
  <TABLE>
  <CAPTION>
  <S>                                                                                              <C>            <C>
  ===========================================================================================================================
                                                                                                         Nine Months
                                                                                                      Ended September 30,
                    ( in  thousands )                                                                1999           1998
  ---------------------------------------------------------------------------------------------------------------------------
  Operating
  Activities        Net income                                                                     $ 2,168        $ 1,565
                    Adjustments to reconcile net income to net cash
                      provided by operating activities:
                        Provision for loan losses                                                      602            377
                        Provision for depreciation and amortization                                    853            768
                        Deferred income taxes                                                         (151)          (133)
                        Amortization of securities premiums and accretion of discounts, net            253            139
                        Net gain on sale of securities available for sale                               (1)          (386)
                        Net proceeds from sale of loans                                             36,137         43,530
                        Loans originated for sale                                                  (33,986)       (40,055)
                        Gain on sales of loans and other real estate owned                            (619)          (412)
                        (Decrease) in accrued interest receivable and other assets                     (60)          (148)
                        Increase in accrued interest payable and other liabilities                   1,201            602
                    ---------------------------------------------------------------------------------------------------------
                           Net  cash  provided  by  operating  activities                            6,397          5,847
  ---------------------------------------------------------------------------------------------------------------------------
  Investing
  Activities        Securities held to maturity :
                       Proceeds from principal repayments and maturities                             1,990          4,041
                       Purchases                                                                   (20,107)             0
                    Securities available for sale :
                       Proceeds from principal repayments and maturities                            11,564          9,813
                       Proceeds from sales                                                           5,357         22,141
                       Purchases                                                                   (11,637)       (64,581)
                    Proceeds from sale of loans receivable                                           5,418              0
                    Net increase in loans receivable                                               (44,053)       (32,504)
                    Purchases of premises and equipment                                               (755)        (2,937)
                    ---------------------------------------------------------------------------------------------------------
                           Net  cash  (used)  by  investing  activities                            (52,223)       (64,027)
  ---------------------------------------------------------------------------------------------------------------------------
  Financing
  Activities        Net increase in demand deposits, interest checking,
                       money market and savings deposits                                            23,191         21,689
                    Net increase in time deposits                                                   13,439         40,573
                    Proceeds from common stock options exercised                                        52             47
                    Cash dividends on preferred stock                                                  (60)           (60)
                    ---------------------------------------------------------------------------------------------------------
                           Net  cash  provided  by  financing  activities                           36,622         62,249
                    ---------------------------------------------------------------------------------------------------------
                    (Decrease) increase in cash and cash equivalents                                (9,204)         4,069
                    Cash and cash equivalents at beginning of year                                  23,875         25,784
                    ---------------------------------------------------------------------------------------------------------
                    Cash and cash equivalents at end of period                                    $ 14,671       $ 29,853
                    =========================================================================================================
  </TABLE>
  
  
                               See accompanying notes.
  
  
                                         6
  <PAGE>
                         PENNSYLVANIA COMMERCE BANCORP, INC.
               NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
                                 September 30, 1999
                                     (Unaudited)
  
  Note 1. BASIS OF PRESENTATION
  
  The consolidated  financial  statements include  Pennsylvania  Commerce Bancorp,
  Inc. ("the Company") and the wholly-owned  subsidiary Commerce  Bank/Harrisburg,
  N.A. ("the Bank"). All significant  intercompany  accounts and transactions have
  been eliminated.  Currently,  the only asset of the Company is its investment in
  the Bank.
  
  The accompanying  unaudited consolidated financial statements have been prepared
  in  accordance  with  generally  accepted  accounting   principles  for  interim
  financial information.  Accordingly,  they do not include all of the information
  and footnotes required by generally accepted accounting  principles for complete
  financial statements.  In the opinion of management,  all adjustments considered
  necessary  for a fair  presentation  have  been  included  and are of a  normal,
  recurring  nature.  Operating  results for the nine month period ended September
  30, 1999, are not necessarily indicative of the results that may be expected for
  the year ended December 31, 1999.
  
  In  addition  to  historical   information,   this  Form  10-Q  Report  contains
  forward-looking  statements. The forward-looking statements contained herein are
  subject to certain risks and  uncertainties  that could cause actual  results to
  differ  materially  from  those  projected  in the  forward-looking  statements.
  Important factors that might cause such differences include, but are not limited
  to,  those  discussed  in the  section  entitled  "Management's  Discussion  and
  Analysis  of  Financial  Condition  and  Results  of  Operations".  Readers  are
  cautioned not to place undue reliance on these forward-looking statements, which
  reflect management's analysis only as of the date hereof. The Company undertakes
  no obligation to publicly revise or update these  forward-looking  statements to
  reflect events or circumstances that arise after the date hereof. Readers should
  carefully review the risk factors described in other documents the Company files
  from time to time with the Securities and Exchange Commission.
  
  For further information, refer to the financial statements and footnotes thereto
  included in the Commerce Bank/Harrisburg, N.A., Annual Report for the year ended
  December 31, 1998.
  
  Note 2. SIGNIFICANT ACCOUNTING POLICIES
  
  Stock Dividends and Per Share Data
  
  On January 15,  1999,  the Board of  Directors  declared a 5% stock  dividend on
  common stock  outstanding,  paid on February 19, 1999, to stockholders of record
  on January 29, 1999.  Payment of the stock dividend  resulted in the issuance of
  73,952 additional common shares and cash of $6,974 in lieu of fractional shares.
  The effect of the 5% common stock  dividend has been recorded as of December 31,
  1998.
  
  Recently Issued FASB Statement
  
  In July 1999, the Financial Accounting Standards Board issued Statement No. 137,
  "Accounting
  
                                         7
  <PAGE>
  
  for Derivative  Instruments  and Hedging  Activities - Deferral of the Effective
  Date of FASB  Statement  No. 133 - an  amendment  of FASB  Statement  No.  133."
  Statement No. 137 delays the  effective  date required for adoption of Statement
  No. 133 by one year.  Therefore,  the Company is required to adopt the statement
  on January 1, 2001.  The  adoption of the  statement  is not  expected to have a
  significant  impact on the  financial  condition or results of operations of the
  Company.
  
  Reclassifications
  
  Certain  amounts in the 1998  financial  statements  have been  reclassified  to
  conform with the 1999 presentation. These reclassifications had no impact on the
  net income reported for the nine months ended September 30, 1999 or 1998.
  
  Note 3. COMMITMENTS AND CONTINGENCIES
  
  In July 1995, a Company borrower filed a multi-count lender liability  complaint
  against the Company seeking unspecified  damages.  The Company filed preliminary
  objections to the complaint.  The Court sustained the preliminary  objections in
  part and  denied  them in part.  An  amended  complaint  was filed and the Court
  denied the  Company's  preliminary  objections  to the  amended  complaint.  The
  Company  filed its  answer  with new  matter  and a  counterclaim.  The  Company
  believed that the complaint was without  merit.  The complaint was resolved with
  the Company  borrower,  in the second  quarter of 1999 with  nominal cost to the
  Company. In July 1999, the borrower withdrew the complaint.
  
  The Company is also subject to certain legal  proceedings  and claims arising in
  the ordinary course of business.  It is  management's  opinion that the ultimate
  resolution  of these  claims  will not have a  material  adverse  effect  on the
  Company's financial position and results of operations.
  
  
  
  Future Branch Facilities
  
  The Company has entered into an agreement to purchase the parcel of land at 1120
  Carlisle Road, Camp Hill, Pennsylvania,  and intends to construct a full-service
  branch office on this land in the year 2000.
  
  The Company has entered into a land lease for the premises located on lot #2, in
  Palmyra Shopping  Center,  on Route #422 in Palmyra,  Pennsylvania.  The Company
  intends to construct a full-service branch office on this land in the year 2000.
  The land lease commenced September 13, 1999 and has an initial term of 20 years.
  In  addition,  the  Company  has an  option  to renew  the land  lease  for four
  additional  5-year terms.  Initial annual rent payments  equal $60,000.  Rent is
  subject to change on terms set forth in the lease agreement.
  
  
                                         8
  <PAGE>
                  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                         CONDITION AND RESULTS OF OPERATIONS
  
  Management's  Discussion  and  Analysis of  Financial  Condition  and Results of
  Operations  analyzes  the major  elements of the  Company's  balance  sheets and
  statements  of  income.  This  section  should be read in  conjunction  with the
  Company's financial statements and accompanying notes.
  
  OVERVIEW
  
  Net income for the quarter increased 88% to $923,000 as compared to $492,000 for
  the third quarter of 1998.  At September 30, 1999,  the Company had total assets
  of  $357.1  million,  total  loans  (including  loans  held for  sale) of $210.1
  million, and total deposits of $334.4 million.
  
  RESULTS OF OPERATIONS
  
  Net Interest Income and Net Interest Margin
  
  The largest source of the Company's income is net interest income.  Net interest
  income is the difference  between  interest income earned on assets and interest
  expense  incurred on  liabilities  used to fund those assets.  Interest  earning
  assets primarily  include loans and securities.  The principal source of funding
  for such assets is deposits.
  
  Interest  income  increased by $1.2  million,  or 22%, over the third quarter of
  1998.  Interest  earning assets averaged $326.1 million for the third quarter of
  1999 as  compared to $264.6  million  for the same period in 1998.  The yield on
  earning  assets for the third  quarter of 1999 was 7.82%,  a decrease of 9 basis
  points from the comparable period in 1998.
  
  Interest  expense for the third  quarter of 1999  increased by $131,000,  or 5%,
  compared to the third quarter of 1998. This increase was primarily  attributable
  to an increase in the level of average interest-bearing  liabilities from $221.6
  million  during  the third  quarter of 1998 to $267.0  million  during the third
  quarter  of 1999.  The  average  rate  paid on these  liabilities  for the third
  quarter of 1999 was 3.76%,  a decrease of 53 basis  points  from the  comparable
  period in 1998. The level of average time deposit  account  balances  (excluding
  public  funds)  increased  from $94.8  million for the third  quarter of 1998 to
  $108.2  million for the quarter  ended  September  30,  1999  resulting  in a 5%
  increase in interest expense on these accounts from $1.3 million for the quarter
  ended  September 30, 1998,  to $1.4 million for the third quarter of 1999.  This
  large increase in time deposits was due to the promotional  products  offered at
  the opening of two branches,  one in the spring and one in the fall of 1998. The
  Company's  aggregate  cost of funds was 3.04% for the third  quarter of 1999,  a
  decrease of 55 basis points from the prior year.
  
  Net interest income for the third quarter of 1999 increased by $1.0 million,  or
  36%, over the same period in 1998. Changes in net interest income are frequently
  measured by two  statistics:  net interest rate spread and net interest  margin.
  Net interest  rate spread is the  difference  between the average rate earned on
  earning  assets and the average rate incurred on  interest-bearing  liabilities.
  Net interest margin represents the difference between interest income, including
  net loan fees earned, and interest expense, reflected as a percentage of average
  earning assets. The Company's net interest rate spread increased to 4.06% during
  the third  quarter of 1999 from 3.60%  during  the same  period of the  previous
  year.  The net interest  margin  increased by 44 basis points from
  
                                         9
  <PAGE>
  
  4.30% for the third quarter 1998 to 4.74% during the third quarter of 1999.
  
  For the nine months ended September 30, 1999,  interest income increased by $3.4
  million,  or 24%, over the same period in 1998. As with the third  quarter,  the
  increase for the first nine months was related to volume  increases in the level
  of interest earning assets partially offset by a decrease in the level of yields
  earned on those  assets.  Interest  earning  assets for the first nine months of
  1999 averaged $311.0 million versus $240.2 million for the comparable  period in
  1998.  The yield on those  assets  decreased  from  8.08%  during the first nine
  months of 1998, to 7.71% for the first nine months of 1999.
  
  Interest  expense for the first nine months of 1999  totaled  $7.2  million,  an
  increase of $813,000,  or 13%, over the first nine months of 1998.  The level of
  average interest-bearing liabilities increased from $197.7 million for the first
  nine months of 1998 to $316.7  million  for the first nine  months of 1999.  The
  Company's  cost of funds for the first nine  months of 1999 was  3.07%,  down 47
  basis points from 3.54% for the comparable period in the prior year.
  
  Net interest income for the first nine months of 1999 increased by $2.6 million,
  or 32%,  over the same  period  in  1998.  The  Company's  net  interest  margin
  increased  from 4.55% for the first  nine  months of 1998 to 4.60% for the first
  nine months of 1999.
  
  Noninterest Income
  
  Noninterest income for the third quarter of 1999 increased by $344,000,  or 35%,
  from the same period in 1998.  Recurring core noninterest  income increased from
  $878,000  in the third  quarter of 1998 to $1.0  million  for the same period in
  1999. The increase is  attributable  to service charges and fees associated with
  servicing a higher volume of deposit accounts.
  
  Total noninterest income for the first nine months of 1999 totaled $3.4 million,
  an increase of $480,000,  or 16%,  over the first nine months of the prior year.
  Included in noninterest income for the first nine months of 1999 is nonrecurring
  income of $502,000 as a result of a $106,000 gain on the sale of student  loans,
  net  securities  gain of $1,000,  a $5,000  loss from Other  Real  Estate  Owned
  (OREO),  and  $400,000  income  from the sale of Small  Business  Administration
  loans.  Included  in  noninterest  income for the first  nine  months of 1998 is
  nonrecurring  income of $543,000  as a result of a $162,000  gain on the sale of
  student loans,  a $386,000 gain on the sale of  investments  from the Securities
  Available for Sale portfolio,  and $5,000 loss from the sale of OREO.  Excluding
  these transactions,  recurring core noninterest income for the first nine months
  of 1999  totaled  $2.9  million as compared  to $2.4  million for the first nine
  months of 1998,  an increase of 22%.  The  increase  is mainly  attributable  to
  additional service charges and fees associated with servicing a higher volume of
  deposit and loan accounts.
  
  Noninterest Expenses
  
  For the third quarter of 1999,  noninterest  expenses increased by $630,000,  or
  21%, over the same period in 1998.  Staffing  levels,  occupancy,  furniture and
  equipment,  and  related  expenses  increased  as a result of opening two branch
  offices in 1998 (one each in April and  August)  as well as two Loan  Production
  Offices  opening in December  1998.  A  comparison  of  noninterest  expense for
  certain  categories for the three months ended September 30, 1999, and September
  30, 1998, is presented in the following paragraphs.
  
  
                                         10
  <PAGE>
  Salary expenses and employee benefits,  which represent the largest component of
  noninterest  expenses,  increased by $272,000,  or 21%, for the third quarter of
  1999 over the third quarter of 1998.  This increase is consistent with increases
  in staff  levels to handle  Company  growth  from  third  quarter  1998 to third
  quarter 1999, including the additional staff of the two branch offices opened in
  1998 and the two Loan Production Offices opened in December 1998.
  
  Occupancy  expenses  totaled  $425,000 for the three months ended  September 30,
  1999,  an increase  of  $51,000,  or 14%,  over the  comparable  period of 1998.
  Increased  occupancy  expenses  relate to the two  branch  offices  and two Loan
  Production Offices opened in 1998.
  
  Furniture and equipment  expenses of $244,000 were $24,000,  or 11%,  higher for
  the third  quarter of 1999 than for the three months ended  September  30, 1998.
  This  increase  was the  result  of  higher  levels  of  depreciation  costs for
  furniture and equipment incurred with the addition of the two branch offices and
  two Loan Production Offices opened in 1998.
  
  Advertising and marketing  expenses  totaled $345,000 for the three months ended
  September  30, 1999,  an increase of $90,000,  or 35%, over the third quarter of
  1998. This increase was primarily the result of increased advertising efforts in
  each of the  Company's  markets.  These  markets will  continue to expand as the
  branch network grows.
  
  Data processing expenses of $244,000 for the third quarter of 1999 were $36,000,
  or 17%,  more  than  the  third  quarter  of  1998.  The  increase  was due to a
  combination  of  increased   costs   associated   with   processing   additional
  transactions,  both  over-the-counter  and ATM (due to growth  in the  number of
  accounts),  and the costs  associated with the increased  volume of users of our
  Home  Banking  product  which is offered  to our  customers  at no charge.  Also
  contributing  to the  increased  expenses  is the cost  associated  with  higher
  volumes of customer transactions on the Visa Check Card product.
  
  Postage and supplies expense of $120,000  represented a $6,000,  or 5%, decrease
  from the third  quarter of the prior year.  This was due to  increased  usage of
  stationery and supplies,  and other office expenses  related to growth in volume
  of customers and customer  transactions  offset by a decrease in postage expense
  resulting from the efforts to obtain additional  postage discounts by presorting
  increased volumes of outgoing mail.
  
  Other noninterest  expenses  increased by $179,000,  or 42%, for the three-month
  period ended  September  30, 1999,  as compared to the same period in 1998.  The
  increase is mainly  attributable to increased  provisions for non-credit related
  losses as well as $64,000 in costs  associated with the formation of the holding
  company,  Pennsylvania Commerce Bancorp, Inc. In late December 1998, the Company
  opened  two Loan  Production  Offices,  one in Camp Hill and one in York.  Costs
  associated  with these two offices not already  detailed  above are  included in
  this category.
  
  For the first nine months of 1999, total noninterest  expenses increased by $1.9
  million, or 23%, over the comparable period in 1998. A comparison of noninterest
  expense for certain categories for these two periods is discussed below.
  
  Salary  expense and employee  benefits  increased by $857,000,  or 23%, over the
  first nine months of 1998. The increase was due to normal salary adjustments and
  additional  salary  and  benefits  costs  due to an  increase  in the  level  of
  full-time  equivalent  employees  from  205  at  September  30,  1998  to 227 at
  September 30, 1999.
  
                                         11
  <PAGE>
  Occupancy  expenses for the first nine months of 1999 increased by $177,000,  or
  17%, from the first nine months of 1998 while furniture and equipment  increased
  by $67,000, or 11%, from $631,000 to $698,000. These increases are the result of
  the increased  furniture and equipment  depreciation  and the related  occupancy
  costs  associated  with the opening of two new branches and two Loan  Processing
  Centers since the spring of 1998.
  
  Advertising  and  marketing  expenses  totaled  $1.0 million for the nine months
  ended  September 30, 1999, an increase of $270,000,  or 35%, over the first nine
  months of 1998.  This  increase  was  primarily  the  result of  advertising  in
  multiple  markets.  These markets will continue to expand as the branch  network
  grows.
  
  Data processing expenses increased  $123,000,  or 21%, for the first nine months
  of 1999 as  compared  to the first nine  months of 1998.  The  increase  in data
  processing  expenses  is  a  combination  of  increased  costs  associated  with
  processing higher volumes of automatic teller machine (ATM) transactions as well
  as the  installation  of two additional  ATM's at the new branches as previously
  mentioned.  Also  contributing to the increased  expenses is the cost associated
  with  higher  volumes of customer  transactions  on the Visa Check Card and Home
  Banking products.
  
  Postage  and office  supplies  increased  $35,000,  or 10%,  over the first nine
  months of 1998. The increase in supplies  expense is a result of increased usage
  of such items related to  additional  staff levels as well as an increase in the
  number of accounts serviced.
  
  Other  noninterest  expenses for the first nine months of 1999 were $1.6 million
  compared  to $1.2  million  for the  similar  period  in  1998.  Provisions  for
  non-credit  related  losses  increased  by  $65,000  in 1999 over the first nine
  months  in  1998.  Nonrecurring  formation  expenses  for the  holding  company,
  Pennsylvania  Commerce Bancorp,  Inc, were $64,000.  Correspondent  bank charges
  increased  from $51,000 in the first none months of 1998 to $109,000 in the same
  period in 1999. The increase was due to an increase in processing volume related
  to an increase in deposits.  The remaining  increase was  associated  with other
  general branch-related costs.
  
  One key measure used to monitor progress in controlling overhead expenses is the
  ratio of net noninterest  expenses to average assets.  Net noninterest  expenses
  equal  noninterest   expenses   (excluding  other  real  estate  expenses)  less
  noninterest income (exclusive of nonrecurring gains), divided by average assets.
  This ratio equaled 2.84% for the three months ended September 30, 1999, the same
  as the three  months  ended  September  30,  1998,  and 2.89% for the first nine
  months of 1999  compared  to 3.00% for the  comparable  period in 1998.  Another
  productivity measure is the operating efficiency ratio. This ratio expresses the
  relationship of noninterest  expenses  (excluding other real estate expenses) to
  net interest income plus noninterest income (excluding  nonrecurring gains). For
  the quarter ended September 30, 1999, the operating  efficiency ratio was 68.72%
  compared to 79.24% for the  similar  period in 1998.  For the nine months  ended
  September 30, 1999, this ratio was 73.07% compared to 79.37% for the nine months
  ended September 30, 1998.
  
  
  
                                         12
  <PAGE>
  Provision for Federal Income Taxes
  
  The  provision  for federal  income taxes was $480,000 for the third  quarter of
  1999 as compared to  $248,000  for the same period in 1998.  For the nine months
  ended  September  30, the  provision  was $1.1 million and $780,000 for 1999 and
  1998  respectively.  The  effective  tax rate,  which is the ratio of income tax
  expense to income before income taxes, was 34% for the first nine months of 1999
  and 33.3% for the same period in 1998.  The effective tax rate for 1998 was less
  than the federal  statutory  rate of 34% primarily  because of a higher level of
  tax-exempt security and loan income.
  
  Net Income
  
  Net income for the third quarter of 1999 was $923,000,  an increase of $431,000,
  or 88%, over the $492,000  recorded in the third  quarter of 1998.  The increase
  was due to an increase in net interest  income of $1.0  million,  an increase in
  noninterest  income of $344,000,  offset partially by an increase in noninterest
  expenses of $630,000,  an increase of $82,000 in the  provision for loan losses,
  and an increase of $232,000 in the provision for income taxes.
  
  Net income for the first nine  months of 1999 was $2.2  million as  compared  to
  $1.6 million  recorded in the first nine months of 1998. The increase was due to
  an increase in net interest  income of $2.6 million,  an increase in noninterest
  income  of  $480,000,  offset  partially  by an  increase  of  $1.9  million  in
  noninterest  expenses, an increase of $225,000 in the provision for loan losses,
  and an increase of $346,000 in the provision for income taxes.
  
  Basic earnings per common share,  after adjusting for a 5% common stock dividend
  paid in February 1999, increased to $0.58 per common share for the third quarter
  of 1999  compared to $0.30 for the same  period in 1998.  Diluted  earnings  per
  common  share  were  $0.54 for the third  quarter of 1999 and $0.28 for the same
  period in 1998.
  
  Basic  earnings per common share,  for the first nine months of the year,  after
  adjusting  for a 5% common stock  dividend paid in February  1999,  increased to
  $1.35 per share as compared to $0.97 per common  share for the first nine months
  of 1998.  Diluted earnings per common share were $1.26 for the first nine months
  of 1999 and $0.90 for the same period in 1998.
  
  Return on Average Assets and Average Equity
  
  Return on average  assets (ROA) measures the Company's net income in relation to
  its total average assets. The Company's  annualized ROA for the third quarter of
  1999 was 1.03% as compared to 0.67% for the third  quarter of 1998.  The ROA for
  the first nine  months of 1999 and 1998 was 0.85% and 0.78%,  respectively.  For
  purposes of calculating  ROA, average assets have been adjusted to exclude gross
  unrealized appreciation or depreciation on securities available for sale.
  
  Return on average  equity  (ROE)  indicates  how  effectively  the  Company  can
  generate  net  income  on  the  capital  invested  by its  stockholders.  ROE is
  calculated by dividing net income by average  stockholders' equity. For purposes
  of  calculating  ROE,  average  stockholders'  equity  includes  the  effect  of
  unrealized  appreciation  or  depreciation,  net of income taxes,  on securities
  available for sale. The annualized ROE for the third quarter of 1999 was 18.32%,
  as compared to 10.03% for the third quarter of 1998.  The annualized ROE for the
  first nine months of 1999 was  14.27%,  as compared to 11.01% for the first nine
  months of 1998.
  
                                         13
  <PAGE>
  
  FINANCIAL CONDITION
  
  Securities
  
  During the first nine months of 1999, securities available for sale decreased by
  $9.0 million (net of unrealized depreciation) from $97.0 million at December 31,
  1998 to $88.0  million  at  September  30,  1999  primarily  as a result  of the
  purchase  of  $11.6  million  in  U.S.  Government  agency  and  mortgage-backed
  securities, offset by the sale of $5.4 million in mortgage-backed securities and
  $11.6 million of principal  repayments and calls on  mortgage-backed  securities
  and U.S. Government agency securities and unrealized loss of $3.3 million in the
  portfolio.
  
  The securities available for sale portfolio is comprised of U.S. Treasury Notes,
  U.S. Government agency securities,  mortgage-backed securities,  trust preferred
  debt  securities,  and  equity  securities.  The  weighted  average  life of the
  securities available for sale portfolio was 4.7 years at September 30, 1999 with
  a weighted average yield of 6.62%.
  
  During the first nine months of 1999, securities held to maturity increased from
  $11.5  million to $29.6  million  primarily as a result of the purchase of $20.1
  million in U.S.  Government  agency and  mortgage-backed  securities,  offset by
  principal  repayments of $2.0 million.  The  securities  held in this  portfolio
  include U.S.  Government agency securities and mortgage-backed  securities.  The
  weighted average life of the securities held to maturity portfolio was 5.5 years
  at September 30, 1999 with a weighted average yield of 6.53%.
  
  Federal  funds sold  decreased by $9.5  million  during the first nine months of
  1999 from $11.9  million at December 31, 1998 to $2.4  million at September  30,
  1999.  Total  securities  and federal funds sold  aggregated  $120.0  million at
  September 30, 1999, and represented 34% of total assets.
  
  The average yield on the combined securities portfolio for the first nine months
  of 1999 was 6.40%,  as  compared to 6.69% for the  similar  period of 1998.  The
  average  yield earned on federal funds sold during the first nine months of 1999
  was 4.70%,  down 71 basis points from 5.41% earned  during the first nine months
  of 1998.
  
  Loans Held for Sale
  
  Loans held for sale are  comprised  of student  loans and  residential  mortgage
  loans that the Company  originates  with the intention of selling in the future.
  During the first nine  months of 1999,  total loans held for sale  decreased  by
  $1.5  million  from $5.6  million  at  December  31,  1998,  to $4.1  million at
  September 30, 1999. The decrease in loans held for sale in the first nine months
  of 1999 was the result of the sale of $7.1  million of student  loans  offset by
  originations  of $5.6  million in new loans  held for sale.  Loans held for sale
  represented  1% of total  assets at  September  30,  1999,  as compared to 2% at
  December 31, 1998.
  
  
  
  Loans Receivable
  
  During the first nine months of 1999, total loans receivable  increased by $38.9
  million from $167.1 million at December 31, 1998, to $206.0 million at September
  30, 1999. The increase in loans  receivable in the first nine months of 1999 was
  primarily in commercial  mortgage  loans.  Loans  receivable  represented 62% of
  total deposits and 58% of total assets at September 30, 1999, as compared to 56%
  and 52%, respectively, at December 31, 1998.
  
  
                                         14
  <PAGE>
  Loan and Asset Quality and Allowance for Loan Losses
  
  Total nonperforming assets (nonperforming loans and other real estate, excluding
  loans past due 90 days or more and still  accruing  interest) at  September  30,
  1999, were $686,000,  or 0.19%, of total assets as compared to $286,000 or 0.09%
  of total assets at December 31, 1998. Other real estate owned totaled $92,000 at
  September 30, 1999, and $11,000 as of December 31, 1998.
  
  The following summary presents  information  regarding  nonperforming  loans and
  assets as of September 30, 1999 and 1998 and the year ended December 31, 1998.
  <TABLE>
  <CAPTION>
  <S>                                      <C>              <C>               <C>
                           Nonperforming Loans and Assets
  =====================================================================================
  (dollars in thousands)               September 30,     December 31,    September 30,
                                           1999             1998              1998
  -------------------------------------------------------------------------------------
  Nonaccrual loans:
  Commercial                               $150             $227              $162
  Consumer                                  134               23                26
  Real estate
      Construction                            0                0                 0
      Mortgage                              310               25               139
  -------------------------------------------------------------------------------------
         Total nonaccrual loans             594              275               327
  Restructured loans                          0                0                 0
  -------------------------------------------------------------------------------------
         Total nonperforming loans          594              275               327
  Other real estate                          92               11                10
  -------------------------------------------------------------------------------------
         Total nonperforming assets         686              286               337
  -------------------------------------------------------------------------------------
  Loans past due 90 days or more              0                1                 0
  -------------------------------------------------------------------------------------
         Total nonperforming assets and
         loans past due 90 days or more    $686             $287              $337
  -------------------------------------------------------------------------------------
  Nonperforming loans to total loans       0.29%            0.16%             0.20%
  Nonperforming assets to total assets     0.19%            0.09%             0.11%
  =====================================================================================
  </TABLE>
  
  
  
  <TABLE>
  <CAPTION>
  <S>                                                      <C>              <C>
  =====================================================================================
                              Allowance for Loan Losses
  =====================================================================================
  (dollars in thousands)                                September 30,     December 31,
                                                            1999             1998
  -------------------------------------------------------------------------------------
  Balance at beginning of period                           $2,232           $1,699
  Provisions charged to operating expenses                    602              542
  -------------------------------------------------------------------------------------
                                                            2,834            2,241
  Recoveries of loans previously charged-off:
      Commercial                                                6                4
      Consumer                                                  5                3
      Real estate                                               0                0
  -------------------------------------------------------------------------------------
  Total recoveries                                             11                7
  Loans charged-off:
      Commercial                                              151                2
      Consumer                                                  3               14
      Real estate                                               1                0
  -------------------------------------------------------------------------------------
  Total charged-off                                           155               16
  -------------------------------------------------------------------------------------
  Net charge-offs (recoveries)                                144                9
  -------------------------------------------------------------------------------------
  Balance at end of period                                 $2,690           $2,232
  -------------------------------------------------------------------------------------
  Net charge-offs (recoveries) as a percentage of
     Average loans outstanding                               0.08%            0.01%
  Allowance for loan losses as a percentage of
     Period-end loans                                        1.33%            1.34%
  =====================================================================================
  </TABLE>
  
                                         15
  <PAGE>
  Deposits
  
  Total deposits at September 30, 1999, were $334.4 million,  up $36.7 million, or
  12%,  over total  deposits of $297.7  million at December 31, 1998.  The average
  balances and weighted  average  rates paid on deposits for the first nine months
  of 1999 and 1998 are presented in the following table.
  <TABLE>
  <CAPTION>
  <S>                                      <C>              <C>        <C>          <C>
  ==========================================================================================
                                                 Nine months Ended September 30,
                                                1999                       1998
  ------------------------------------------------------------------------------------------
                                         Average         Average      Average     Average
  (dollars in thousands)                 Balance           Rate       Balance       Rate
  ------------------------------------------------------------------------------------------
  Demand deposits:
      Noninterest-bearing                $ 63,245                    $ 48,128
      Interest-bearing (money market
          and checking)                    57,128           2.37%      32,521       2.45%
  Savings                                  76,064           2.80       68,788       3.52
  Time deposits                           120,386           5.06       96,421       5.48
  ------------------------------------------------------------------------------------------
  Total deposits                         $316,823                    $245,858
  ==========================================================================================
  </TABLE>
  
  
  Interest Rate Sensitivity
  
  The  management  of interest rate  sensitivity  seeks to avoid  fluctuating  net
  interest  margins and to provide  consistent net interest income through periods
  of changing interest rates.
  
  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 third 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
  September 30, 1999, the Company's  income  simulation model indicates net income
  would  increase by 14% and 19% in
  
                                         16
  <PAGE>
  the first year and over a two year time frame, respectively,  if rates decreased
  as described  above. The model projects that net income would increase by 5% and
  9% 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.
  
  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,
  or the use of risk management strategies such as interest rate swaps and caps.
  
  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 September 30, 1999, the market value of
  equity model indicates an acceptable level of interest rate risk.
  
  Liquidity
  
  Liquidity  management  involves the ability to generate cash or otherwise obtain
  funds at  reasonable  rates to support  asset  growth and reduce  assets to meet
  deposit withdrawals, to maintain reserve requirements,  and to otherwise operate
  the Company on an ongoing basis. Liquidity needs are generally met by converting
  assets into cash or obtaining  sources of additional  funding,  mainly deposits.
  Liquidity  sources  from asset  categories  are  provided  primarily by cash and
  federal funds sold,  and the cash flow from the  amortizing  securities and loan
  portfolios.  The primary source of liquidity  from  liability  categories is the
  generation of additional core deposit balances.
  
  Additionally,  the  Company  has  established  secondary  sources  of  liquidity
  consisting  of  federal  funds  lines  of  credit,  repurchase  agreements,  and
  borrowing  capacity  at the Federal  Home Loan Bank,  which can be drawn upon if
  needed. As of September 30, 1999, the total potential  liquidity for the Company
  through these  secondary  sources was $133  million.  In view of the primary and
  secondary sources as previously mentioned,  management believes that the Company
  is capable of meeting its anticipated liquidity needs.
  
  Capital Adequacy
  
  At September 30, 1999,  stockholders'  equity totaled $20.4 million, the same as
  at December 31, 1998.  Stockholders'  equity at September 30, 1999 included $2.0
  million in unrealized depreciation, net of income taxes, on securities available
  for sale.  Excluding this unrealized  depreciation,  gross stockholders'  equity
  increased  by $2.2 million  from $20.2  million at December  31, 1998,  to $22.4
  million at September 30, 1999 due principally to retained net income.
  
  Risk-based capital provides the basis for which all banks are evaluated in terms
  of capital adequacy.  The risk-based capital standards require all banks to have
  Tier 1 capital of at least 4% and total
  
                                         17
  <PAGE>
  
  capital,  including Tier 1 capital, of at least 8% of risk-adjusted assets. Tier
  1  capital  includes  common   stockholders'  equity  and  qualifying  perpetual
  preferred  stock together with related  surpluses and retained  earnings.  Total
  capital may be comprised  of total Tier 1 capital  plus  limited life  preferred
  stock, qualifying debt instruments, and the allowance for loan losses.
  
  The table below  provides a comparison of the Bank's  risk-based  capital ratios
  and  leverage  ratios to the  minimum  regulatory  requirements  for the periods
  indicated:
  
  <TABLE>
  <CAPTION>
  <S>                                <C>            <C>             <C>             <C>
  =====================================================================================================
                                   September 30,   December 31,    For Capital  To Be Well Capitalized
                                        1999          1998          Adequacy         Under Prompt
                                                                    Purposes      Corrective Action
                                                                                     Provisions
  -----------------------------------------------------------------------------------------------------
  Risk-Based Capital Ratios:
  
            Tier 1                      9.96%          10.83%          4.00%           6.00%
  
            Total                      11.15           12.02           8.00           10.00
  
            Leverage Total              6.25            6.50           4.00            5.00
  =====================================================================================================
  </TABLE>
  
  At September 30, 1999,  risk-based  capital and leverage  ratios for the Company
  did not differ from those of the Bank.  The Bank exceeds the minimum  regulatory
  requirements to be considered a "well capitalized" financial institution.
  
  Year 2000
  
  The Company formed a committee in mid-1997  consisting of members from all areas
  of the Company to develop a plan and oversee the  progress of Y2K  efforts.  The
  Company has named the Chief  Financial  Officer as the Y2K officer to direct the
  project. The Y2K officer reports to the Board on a quarterly basis.
  
  The Company has  utilized  both  internal  and  external  resources to identify,
  correct,  and test the  systems  for the Year  2000  compliance.  The  Company's
  software systems are provided by outside vendors and are not developed in-house.
  The Company has  contacted  and  continues to work closely with these vendors to
  ensure  readiness.  The  Company  utilizes  systems  that are driven by software
  created by the nation's prominent technology companies. As a result, most of the
  Company's mission critical systems were Year 2000 compliant at the time of their
  installation.  For those systems not  compliant,  the Company was able to obtain
  upgrades to enable  processing of  transactions  in the Year 2000. The Company's
  primary data  processing  vendor has certified  compliance of their software for
  Year 2000 processing.  Backup vendors have been identified for products supplied
  by vendors that have not certified their products as Y2K ready.  The Company has
  identified  noncomputer systems that may include embedded technology that may be
  affected  by Y2K  issues  and  implemented  corrective  actions.  As part of the
  planning process, the Company has developed  contingency plans that will provide
  alternative methods of doing business, should it be necessary.
  
  The IBM AS400 computer  processes the daily  transactions and interfaces with an
  IBM VSE 9260 processor at our data processing  vendor. The IBM VSE is the record
  keeping  system for our customer's  loan and deposit  accounts and the Company's
  general  ledger  system.  The  Company  has tested the  hardware,  software  and
  interfaces  of  these  mission-critical  systems  and  completed  the
  
                                         18
  <PAGE>
  
  necessary  renovations  to  enable  processing  in the  Year  2000  and  beyond.
  Throughout the past year,  the Company has been upgrading or replacing  personal
  computers that are not Y2K compliant.  The Company has experienced  considerable
  growth in recent years,  which independent of the Y2K issue has created the need
  to upgrade some  hardware and  software.  Therefore,  it is difficult to isolate
  expenditures that have been made for Y2K from normal business replacement. Costs
  to date which include capital  expenditures  are estimated at $150,000,  and are
  not  considered  material to any one fiscal period.  The Company  estimates that
  future  costs of upgrades and asset  replacements  will be  immaterial,  most of
  which will be capitalized  and amortized  over the useful life of the asset.  In
  the  unlikely  event  that the  Company  would  have to  resort  to  alternative
  operating  procedures  due to major  systems or  communication  failures  at the
  beginning of the Year 2000, the extra costs could be material.
  
  Through the use of questionnaires and officer calls,  customers with significant
  relationships  with the Company are being  evaluated for Y2K risk. No individual
  customer is significant  enough to materially  impact the financial  position of
  the  Company;  however,  one  concern is that the credit  risk  associated  with
  lending may increase to the extent that our borrowers or their suppliers may not
  adequately  address Y2K issues.  We continue to be in contact with any customers
  that we have  identified as high risk to monitor  their Y2K efforts.  Due to the
  uncertainties  involved,  it is not  possible to quantify the  potential  credit
  losses, if any, due to Y2K.
  
  The  Year  2000  plan  developed  by the  committee  consists  of  five  phases:
  awareness,  assessment,  renovation,  testing and  implementation.  Systems were
  assessed a level of importance from 1 to 4, 1 being mission-critical and 4 being
  irrelevant in relation to Y2K compliance.  Awareness, assessment, renovation and
  testing are complete for all systems. Implementation is complete for all systems
  with  the  exception  of  one,   which  is  currently  in  the  final  steps  of
  implementation.
  
  Three federal agencies share  responsibility for supervising efforts by banks in
  relation to Y2K compliance.  The Company is subject to review and examination by
  the Office of the Comptroller of the Currency (OCC). Our banking software vendor
  was also  examined by the Federal  Financial  Institutions  Examination  Council
  (FFIEC) to evaluate  their  systems for  processing in the Year 2000 and beyond.
  The results of this evaluation have been released to the Company for our review.
  The vendor was also independently evaluated and certified as Year 2000 compliant
  by the  Information  Technology  Association  of America  (ITAA).  The ITAA,  an
  organization  well  respected  by Company  examiners,  performed a thorough  and
  complete  review of the design  methods and  controls  used to provide Year 2000
  compliant software.
  
  Senior  management  has developed an outline for a  contingency  plan to provide
  operating  alternatives for continuation of services to the Company's  customers
  in the event of systems or communications  failures at the beginning of the Year
  2000.  Management  believes that the Company will be able to continue to operate
  in the Year 2000 even if some systems fail. In a worst case scenario, we believe
  that  we  would  be able to  process  all  transactions  manually  until  normal
  operations were restored. Management feels that adequate resources are available
  to fund and  address  the Y2K  issues and that the costs  associated  with these
  issues will not have a material impact on the Company's financial  statements or
  results of  operations.  However,  there is no guarantee that the efforts of the
  Company will fully prevent all failures and problems.  In addition,  the Company
  relies  on  third  party  providers,  such  as  telecommunications  and  utility
  companies, where alternative sources or arrangements are
  
                                         19
  <PAGE>
  
  limited or  unavailable.  While the Company  continues to address Y2K issues and
  work with our vendors and corporate  customers to identify,  assess, and control
  potential Y2K risks, the Company does not manage these businesses and therefore,
  potential uncertainties remain.
  
  Forward-Looking Statements
  
  The  discussion  regarding  the  Company's  interest  rate risk  position in the
  section  entitled  "Interest  Rate  Sensitivity  and  Liquidity" and the section
  entitled "Year 2000" contain statements that may be forward-looking  (as defined
  in the Private Securities  Litigation Reform Act of 1995). These forward looking
  statements  involve  risks  and  uncertainties,  including  changes  in  general
  economic  conditions and the Company's  ability (as well as third party ability)
  to effectively  address the Year 2000 issue.  Although the Company believes such
  forward-looking statements are reasonable,  actual results may differ materially
  from the results discussed in these forward-looking statements.
  
  
  Item 3. Quantitative and Qualitative Disclosures About Market Risk
  
  The  Company's  exposure  to market  risk has not  changed  significantly  since
  December 31, 1998. The market risk principally includes interest rate risk which
  is discussed in the Management's Discussion and Analysis above.
  
  
  
  PART II. OTHER INFORMATION
  
  Item 1. Legal Proceedings
  
  In July 1995, a Company borrower filed a multi-count lender liability  complaint
  against the Company seeking unspecified  damages.  The Company filed preliminary
  objections to the complaint.  The Court sustained the preliminary  objections in
  part and  denied  them in part.  An  amended  complaint  was filed and the Court
  denied the  Company's  preliminary  objections  to the  amended  complaint.  The
  Company  filed its  answer  with new  matter  and a  counterclaim.  The  Company
  believed that the complaint was without  merit.  The complaint was resolved with
  the Company  borrower,  in the second  quarter of 1999 with  nominal cost to the
  Company. In July 1999, the borrower withdrew the complaint.
  
  The Company is also subject to certain legal  proceedings  and claims arising in
  the ordinary course of business.  It is  management's  opinion that the ultimate
  resolution  of these  claims  will not have a  material  adverse  effect  on the
  Company's financial position and results of operations.
  
  
  
  Item 6.  Exhibits and Reports on Form 8-K
  
  (a.) Exhibits
  
        Computation of Net Income Per Share...........................Exhibit 11
        Financial Data Schedule.......................................Exhibit 27
  
  
                                         20
  <PAGE>
  (b.) Reports on Form 8-K
  
           On July 1, 1999,  Pennsylvania  Commerce Bancorp, Inc. filed a Reort on
  Form  8-K  announcing  the  following  information.  On July 1,  1999,  Commerce
  Bank/Harrisburg,  N.A.  ("Commerce")  consummated  the  Agreement  and  Plan  of
  Reorganization  (the "Agreement") with  Pennsylvania  Commerce Bancorp,  Inc., a
  newly  formed  Pennsylvania   business   corporation  (the  "Holding  Company"),
  reorganizing  Commerce  into  a  one-bank  holding  company.   Pursuant  to  the
  Agreement,  Commerce  merged with and into a new  nationally  chartered  banking
  association,  "Commerce  Bank/Harrisburg  Interim  National  Bank" (the "Interim
  Bank").  The Interim Bank, formed solely for the purpose of the  reorganization,
  will  operate  under  the  name  Commerce  Bank/Harrisburg,  N.A.  and will be a
  wholly-owned subsidiary of the Holding Company.
  
  The Reorganization has received regulatory approval and received the approval of
  the shareholders of Commerce at its annual meeting on June 18, 1999.
  
  
  
                                         21
  <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 be the
  undersigned thereunto duly authorized.
  
  
  
  
  
                        PENNSYLVANIA COMMERCE BANCORP, INC.
                                    (Registrant)
  
  
  
  
  
            11/12/99                             /s/ James T. Gibson
          -----------                          ---------------------------
            (Date)                               James T. Gibson
                                                 President/CEO
  
  
  
  
            11/12/99                             /s/ Mark A. Zody
          -----------                          ---------------------------
            (Date)                               Mark A. Zody
                                                 Executive Vice President
                                                 Chief Financial Officer
  
  
  
                                         22
metadata_documents: [{"type": "10-Q", "sequence": "1", "secsgml_size_bytes": 80873}]
metadata_filer: {"company-data": {"conformed-name": "PENNSYLVANIA COMMERCE BANCORP INC", "cik": "0001085706", "assigned-sic": "6022", "irs-number": "251834776"}, "filing-values": {"form-type": "10-Q", "act": "34", "file-number": "333-78445", "film-number": "99749600"}, "business-address": {"street1": "100 SENATE AVE", "city": "CAMP HILL", "state": "PA", "zip": "17001-8599", "phone": "7179755630"}, "mail-address": {"street1": "100 SENATE AVE", "city": "CAMP HILL", "state": "PA", "zip": "17001-8599"}}
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 September 30, 1999
                                            ------------------
  
                                         OR
  
  ( )  TRANSITION  REPORT  PURSUANT  TO  SECTION  13 OR  15(d)  OF THE  SECURITIES
       EXCHANGE ACT OF 1934
  
                  For the transition period from _______ to _______
  
                              Commission File 333-78445
  
                         PENNSYLVANIA COMMERCE BANCORP, INC.
          -----------------------------------------------------------------
          (Exact name of small business issuer as specified in its charter)
  
           Pennsylvania                                   25-1834776
  -------------------------------                ----------------------------
  (State or other jurisdiction of                (IRS Employer Identification
   incorporation or organization)                           Number)
  
             100 Senate Avenue, P.O. Box 8599, Camp Hill, PA 17001-8599
             ----------------------------------------------------------
                      (Address of principal executive offices)
  
                                   (717) 975-5630
                             --------------------------
                             (Issuer's telephone number)
  
           Check whether the issuer (1) filed all reports  required to be filed by
  Section 13 or 15(d) of the  Exchange  Act during the past 12 months (or for such
  shorter period that the  registrant was required to file such reports),  and (2)
  has been subject to such filing requirements for the past 90 days.
  
                                 Yes X    No _______
  
           State the number of shares  outstanding of each of the issuer's classes
  of common equity,  as of the latest  practicable  date:  1,560,235 Common shares
  outstanding at 10/31/99
  
       Transitional Small Business Disclosure Format (check one): Yes __ No X
  PENNSYLVANIA COMMERCE BANCORP, INC.
  
                                                          INDEX
  Page
  PART I.           FINANCIAL INFORMATION
  
  Item 1.           Consolidated Financial Statements
  
                    Consolidated Balance Sheets (Unaudited).........................................................3
                    September 30, 1999, and December 31, 1998
  
                    Consolidated Statements of Income (Unaudited)...................................................4
                    Three months ended September 30, 1999 and September 30, 1998
                    Nine months ended September 30, 1999 and September 30, 1998
  
                    Consolidated Statement of Stockholders' Equity  (Unaudited).....................................5
                    Nine months ended September 30, 1999 and September 30, 1998
  
                    Consolidated Statements of Cash Flows (Unaudited)...............................................6
                    Nine months ended September 30, 1999, and September 30, 1998
  
                    Notes to Consolidated Financial Statements (Unaudited)..........................................7
  
  Item 2.           Management's Discussion and Analysis of Financial Condition
                    and Results of Operations.......................................................................9
  
  Item 3.           Quantitative and Qualitative Disclosures about Market Risk.....................................20
  
  PART II.          OTHER INFORMATION
  
  Item 1.           Legal Proceedings..............................................................................20
  
  Item 6a.          Exhibits
                    Exhibit 11.....................................................................................20
                    Exhibit 27.....................................................................................20
  
  Item 6b.          Reports on Form 8-K............................................................................21
  
                    Signatures.....................................................................................22
  2
  PENNSYLVANIA COMMERCE BANCORP, INC.
  Consolidated Balance Sheets (Unaudited)
  ============================================================================================================================
                                                                                           September 30,          December 31,
                    ( in  thousands,  except  share  amounts)                                  1999                  1998
  ----------------------------------------------------------------------------------------------------------------------------
  Assets
  Cash and due from banks                                                  $ 12,271             $ 11,975
                    Federal funds sold                                                          2,400               11,900
                    ----------------------------------------------------------------------------------------------------------
                         Cash and cash equivalents                                             14,671               23,875
                    Securities, available for sale at fair value                               87,965               96,993
                    Securities, held to maturity at cost
                      (fair value 1999: $28,777;  1998: $11,524 )                              29,597               11,493
                    Loans, held for sale
                      (fair value 1999: $4,167;  1998: $5,726 )                                 4,109                5,641
                    Loans receivable :
                      Real estate:
                         Commercial mortgage                                                  100,140               68,663
                         Construction and land development                                     17,454               13,286
                         Residential mortgage                                                  32,927               31,694
                         Tax-exempt                                                               351                  395
                      Commercial business                                                      18,970               19,614
                      Consumer                                                                 20,745               20,868
                      Lines of credit                                                          15,425               12,601
                    ----------------------------------------------------------------------------------------------------------
                                                                                              206,012              167,121
                    Less:  Allowance for loan losses                                            2,690                2,232
                    ----------------------------------------------------------------------------------------------------------
                         Net loans receivable                                                 203,322              164,889
                    Premises and equipment, net                                                13,322               13,420
                    Accrued interest receivable                                                 1,925                1,824
                    Other assets                                                                2,197                1,188
                    ----------------------------------------------------------------------------------------------------------
                            Total assets                                                     $357,108            $ 319,323
                    ==========================================================================================================
  
  ----------------------------------------------------------------------------------------------------------------------------
  Liabilities
                    Deposits :
                      Noninterest-bearing                                                    $ 65,435             $ 60,699
                      Interest-bearing                                                        268,932              237,038
                    ----------------------------------------------------------------------------------------------------------
                         Total deposits                                                       334,367              297,737
                    Accrued interest payable                                                      895                  518
                    Other liabilities                                                           1,447                  623
                    ----------------------------------------------------------------------------------------------------------
                         Total liabilities                                                    336,709              298,878
  
  ----------------------------------------------------------------------------------------------------------------------------
  Stockholders'
  Equity            Preferred stock - Series A noncumulative;
                         $10.00 par value;  1,000,000 shares authorized;
                         40,000 shares issued and outstanding                                     400                  400
                    Common stock - $1.00 par value;  10,000,000 shares authorized;
                         issued and outstanding - 1999:  1,560,235;  1998:  1,557,375           1,560                1,557
                    Surplus                                                                    16,777               16,728
                    Retained earnings                                                           3,654                1,546
                    Accumulated other comprehensive income (loss)                              (1,992)                 214
                    ----------------------------------------------------------------------------------------------------------
                         Total stockholders' equity                                            20,399               20,445
                    ----------------------------------------------------------------------------------------------------------
                            Total liabilities and stockholders' equity                       $357,108            $ 319,323
                    ==========================================================================================================
  See accompanying notes.
  
                                         3
  PENNSYLVANIA COMMERCE  BANCORP, INC.
  Consolidated Statements of Income (Unaudited)
  ========================================================================================================================
                                                                            Three Months               Nine Months
                                                                           Ended Sept 30,             Ended Sept 30,
                  (in thousands, except per share amounts)                  1999          1998         1999          1998
  ------------------------------------------------------------------------------------------------------------------------
  Interest
  Income            Loans  receivable,  including  fees :
                      Taxable                                            $ 4,431       $ 3,509     $ 12,135       $ 9,979
                      Tax - exempt                                             5             5           15            17
                    Securities :
                      Taxable                                              1,917         1,539        5,442         4,027
                      Tax - exempt                                             0             0            0             7
                    Federal  funds  sold                                      71           209          336           479
                  -------------------------------------------------------------------------------------------------------
                          Total  interest  income                          6,424         5,262       17,928        14,509
  ------------------------------------------------------------------------------------------------------------------------
  Interest
  Expense           Deposits                                               2,519         2,397        7,158         6,359
                    Other                                                      9             0           14             0
                  -------------------------------------------------------------------------------------------------------
                          Total  interest  expense                         2,528         2,397        7,172         6,359
                  -------------------------------------------------------------------------------------------------------
                  Net  interest  income                                    3,896         2,865       10,756         8,150
                  Provision  for  loan  losses                               232           150          602           377
                  -------------------------------------------------------------------------------------------------------
                  Net interest income after provision for loan losses      3,664         2,715       10,154         7,773
  ------------------------------------------------------------------------------------------------------------------------
  Noninterest
  Income             Service charges and other fees                          908           726        2,555         1,982
                     Other                                                    97            70          264           202
                     Gain on sale of securities available for sale             0           128            1           386
                     Other real estate (net)                                  (2)          (15)          (5)           (5)
                     Gain on sale of loans                                   332            82          619           389
                  -------------------------------------------------------------------------------------------------------
                          Total  noninterest  income                       1,335           991        3,434         2,954
  ------------------------------------------------------------------------------------------------------------------------
  Noninterest
  Expenses           Salaries  and  employee  benefits                     1,583         1,311        4,528         3,671
                     Occupancy                                               425           374        1,246         1,069
                     Furniture  and  equipment                               244           220          698           631
                     Advertising  and  marketing                             345           255        1,035           765
                     Data  processing                                        244           208          697           574
                     Postage  and  supplies                                  120           126          378           343
                     Audits , regulatory  fees  and  assessments              33            49          138           144
                     Other                                                   602           423        1,574         1,185
                  -------------------------------------------------------------------------------------------------------
                          Total  noninterest  expenses                     3,596         2,966       10,294         8,382
                  -------------------------------------------------------------------------------------------------------
                  Income  before  income  taxes                            1,403           740        3,294         2,345
                  Provision  for  federal  income  taxes                     480           248        1,126           780
                  -------------------------------------------------------------------------------------------------------
                          Net  income                                      $ 923         $ 492       $2,168       $ 1,565
                  =======================================================================================================
                  Net  income  per  common share :  Basic                 $ 0.58        $ 0.30       $ 1.35        $ 0.97
                                                    Diluted                 0.54          0.28         1.26          0.90
  ========================================================================================================================
  See accompanying notes.
  
                                         4
  PENNSYLVANIA COMMERCE BANCORP, INC.
  Consolidated Statement of Stockholders' Equity  (Unaudited)
  =========================================================================================================================
                                                                                                   Accumulated
                                                                                                      Other
                                              Preferred    Common                Retained         Comprehensive
  ( in  thousands )                             Stock       Stock     Surplus    Earnings          Income (Loss)   Total
  -------------------------------------------------------------------------------------------------------------------------
  Balance : December 31, 1997                    $ 400      $1,475    $14,407      $1,708               $ 328     $18,318
  Comprehensive income:
  Net  income                                        -           -          -       1,565                   -       1,565
     Change in unrealized gains
       (losses) on securities, net of
       reclassification adjustment                                                                         28         28
                                                                                                                  ---------
  Total comprehensive income (loss)                                                                                 1,593
  Dividends  declared  on  preferred  stock          -           -          -         (60)                  -         (60)
  Common stock issued under stock option plans       -           7         40           -                   -          47
  -------------------------------------------------------------------------------------------------------------------------
   Balance : September 30, 1998                  $ 400      $1,482    $14,447      $3,213               $ 356     $19,898
  =========================================================================================================================
  
                                                                                                   Accumulated
                                                                                                      Other
                                              Preferred    Common                Retained         Comprehensive
  ( in  thousands )                             Stock       Stock     Surplus    Earnings          Income (Loss)   Total
  -------------------------------------------------------------------------------------------------------------------------
  Balance : December 31, 1998                    $ 400      $1,557    $16,728      $1,546               $ 214     $20,445
  Comprehensive income:
      Net  income                                    -           -          -       2,168                   -       2,168
     Change in unrealized gains
       (losses) on securities, net of
       reclassification adjustment                   -           -          -           -              (2,206)     (2,206)
                                                                                                                  ---------
  Total comprehensive income (loss)                  -           -          -           -                             (38)
  Dividends declared on preferred stock              -           -          -         (60)                  -         (60)
  Common stock issued under stock option plans       -           3         49           -                   -          52
  -------------------------------------------------------------------------------------------------------------------------
   Balance : September 30, 1999                  $ 400      $1,560    $16,777      $3,654            $ (1,992)    $20,399
  =========================================================================================================================
  See accompanying notes.
  
                                         5
  PENNSYLVANIA COMMERCE BANCORP, INC.
  CONSOLIDATED STATEMENTS OF CASH FLOWS  (Unaudited)
  ===========================================================================================================================
                                                                                                         Nine Months
                                                                                                      Ended September 30,
                    ( in  thousands )                                                                1999           1998
  ---------------------------------------------------------------------------------------------------------------------------
  Operating
  Activities        Net income                                                                     $ 2,168        $ 1,565
                    Adjustments to reconcile net income to net cash
                      provided by operating activities:
                        Provision for loan losses                                                      602            377
                        Provision for depreciation and amortization                                    853            768
                        Deferred income taxes                                                         (151)          (133)
                        Amortization of securities premiums and accretion of discounts, net            253            139
                        Net gain on sale of securities available for sale                               (1)          (386)
                        Net proceeds from sale of loans                                             36,137         43,530
                        Loans originated for sale                                                  (33,986)       (40,055)
                        Gain on sales of loans and other real estate owned                            (619)          (412)
                        (Decrease) in accrued interest receivable and other assets                     (60)          (148)
                        Increase in accrued interest payable and other liabilities                   1,201            602
                    ---------------------------------------------------------------------------------------------------------
                           Net  cash  provided  by  operating  activities                            6,397          5,847
  ---------------------------------------------------------------------------------------------------------------------------
  Investing
  Activities        Securities held to maturity :
                       Proceeds from principal repayments and maturities                             1,990          4,041
                       Purchases                                                                   (20,107)             0
                    Securities available for sale :
                       Proceeds from principal repayments and maturities                            11,564          9,813
                       Proceeds from sales                                                           5,357         22,141
                       Purchases                                                                   (11,637)       (64,581)
                    Proceeds from sale of loans receivable                                           5,418              0
                    Net increase in loans receivable                                               (44,053)       (32,504)
                    Purchases of premises and equipment                                               (755)        (2,937)
                    ---------------------------------------------------------------------------------------------------------
                           Net  cash  (used)  by  investing  activities                            (52,223)       (64,027)
  ---------------------------------------------------------------------------------------------------------------------------
  Financing
  Activities        Net increase in demand deposits, interest checking,
                       money market and savings deposits                                            23,191         21,689
                    Net increase in time deposits                                                   13,439         40,573
                    Proceeds from common stock options exercised                                        52             47
                    Cash dividends on preferred stock                                                  (60)           (60)
                    ---------------------------------------------------------------------------------------------------------
                           Net  cash  provided  by  financing  activities                           36,622         62,249
                    ---------------------------------------------------------------------------------------------------------
                    (Decrease) increase in cash and cash equivalents                                (9,204)         4,069
                    Cash and cash equivalents at beginning of year                                  23,875         25,784
                    ---------------------------------------------------------------------------------------------------------
                    Cash and cash equivalents at end of period                                    $ 14,671       $ 29,853
                    =========================================================================================================
  See accompanying notes.
  
                                         6
  PENNSYLVANIA COMMERCE BANCORP, INC.
               NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
                                 September 30, 1999
                                     (Unaudited)
  
  Note 1. BASIS OF PRESENTATION
  
  The consolidated  financial  statements include  Pennsylvania  Commerce Bancorp,
  Inc. ("the Company") and the wholly-owned  subsidiary Commerce  Bank/Harrisburg,
  N.A. ("the Bank"). All significant  intercompany  accounts and transactions have
  been eliminated.  Currently,  the only asset of the Company is its investment in
  the Bank.
  
  The accompanying  unaudited consolidated financial statements have been prepared
  in  accordance  with  generally  accepted  accounting   principles  for  interim
  financial information.  Accordingly,  they do not include all of the information
  and footnotes required by generally accepted accounting  principles for complete
  financial statements.  In the opinion of management,  all adjustments considered
  necessary  for a fair  presentation  have  been  included  and are of a  normal,
  recurring  nature.  Operating  results for the nine month period ended September
  30, 1999, are not necessarily indicative of the results that may be expected for
  the year ended December 31, 1999.
  
  In  addition  to  historical   information,   this  Form  10-Q  Report  contains
  forward-looking  statements. The forward-looking statements contained herein are
  subject to certain risks and  uncertainties  that could cause actual  results to
  differ  materially  from  those  projected  in the  forward-looking  statements.
  Important factors that might cause such differences include, but are not limited
  to,  those  discussed  in the  section  entitled  "Management's  Discussion  and
  Analysis  of  Financial  Condition  and  Results  of  Operations".  Readers  are
  cautioned not to place undue reliance on these forward-looking statements, which
  reflect management's analysis only as of the date hereof. The Company undertakes
  no obligation to publicly revise or update these  forward-looking  statements to
  reflect events or circumstances that arise after the date hereof. Readers should
  carefully review the risk factors described in other documents the Company files
  from time to time with the Securities and Exchange Commission.
  
  For further information, refer to the financial statements and footnotes thereto
  included in the Commerce Bank/Harrisburg, N.A., Annual Report for the year ended
  December 31, 1998.
  
  Note 2. SIGNIFICANT ACCOUNTING POLICIES
  
  Stock Dividends and Per Share Data
  
  On January 15,  1999,  the Board of  Directors  declared a 5% stock  dividend on
  common stock  outstanding,  paid on February 19, 1999, to stockholders of record
  on January 29, 1999.  Payment of the stock dividend  resulted in the issuance of
  73,952 additional common shares and cash of $6,974 in lieu of fractional shares.
  The effect of the 5% common stock  dividend has been recorded as of December 31,
  1998.
  
  Recently Issued FASB Statement
  
  In July 1999, the Financial Accounting Standards Board issued Statement No. 137,
  "Accounting
  
                                         7
  for Derivative  Instruments  and Hedging  Activities - Deferral of the Effective
  Date of FASB  Statement  No. 133 - an  amendment  of FASB  Statement  No.  133."
  Statement No. 137 delays the  effective  date required for adoption of Statement
  No. 133 by one year.  Therefore,  the Company is required to adopt the statement
  on January 1, 2001.  The  adoption of the  statement  is not  expected to have a
  significant  impact on the  financial  condition or results of operations of the
  Company.
  
  Reclassifications
  
  Certain  amounts in the 1998  financial  statements  have been  reclassified  to
  conform with the 1999 presentation. These reclassifications had no impact on the
  net income reported for the nine months ended September 30, 1999 or 1998.
  
  Note 3. COMMITMENTS AND CONTINGENCIES
  
  In July 1995, a Company borrower filed a multi-count lender liability  complaint
  against the Company seeking unspecified  damages.  The Company filed preliminary
  objections to the complaint.  The Court sustained the preliminary  objections in
  part and  denied  them in part.  An  amended  complaint  was filed and the Court
  denied the  Company's  preliminary  objections  to the  amended  complaint.  The
  Company  filed its  answer  with new  matter  and a  counterclaim.  The  Company
  believed that the complaint was without  merit.  The complaint was resolved with
  the Company  borrower,  in the second  quarter of 1999 with  nominal cost to the
  Company. In July 1999, the borrower withdrew the complaint.
  
  The Company is also subject to certain legal  proceedings  and claims arising in
  the ordinary course of business.  It is  management's  opinion that the ultimate
  resolution  of these  claims  will not have a  material  adverse  effect  on the
  Company's financial position and results of operations.
  
  Future Branch Facilities
  
  The Company has entered into an agreement to purchase the parcel of land at 1120
  Carlisle Road, Camp Hill, Pennsylvania,  and intends to construct a full-service
  branch office on this land in the year 2000.
  
  The Company has entered into a land lease for the premises located on lot #2, in
  Palmyra Shopping  Center,  on Route #422 in Palmyra,  Pennsylvania.  The Company
  intends to construct a full-service branch office on this land in the year 2000.
  The land lease commenced September 13, 1999 and has an initial term of 20 years.
  In  addition,  the  Company  has an  option  to renew  the land  lease  for four
  additional  5-year terms.  Initial annual rent payments  equal $60,000.  Rent is
  subject to change on terms set forth in the lease agreement.
  
                                         8
  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                         CONDITION AND RESULTS OF OPERATIONS
  
  Management's  Discussion  and  Analysis of  Financial  Condition  and Results of
  Operations  analyzes  the major  elements of the  Company's  balance  sheets and
  statements  of  income.  This  section  should be read in  conjunction  with the
  Company's financial statements and accompanying notes.
  
  OVERVIEW
  
  Net income for the quarter increased 88% to $923,000 as compared to $492,000 for
  the third quarter of 1998.  At September 30, 1999,  the Company had total assets
  of  $357.1  million,  total  loans  (including  loans  held for  sale) of $210.1
  million, and total deposits of $334.4 million.
  
  RESULTS OF OPERATIONS
  
  Net Interest Income and Net Interest Margin
  
  The largest source of the Company's income is net interest income.  Net interest
  income is the difference  between  interest income earned on assets and interest
  expense  incurred on  liabilities  used to fund those assets.  Interest  earning
  assets primarily  include loans and securities.  The principal source of funding
  for such assets is deposits.
  
  Interest  income  increased by $1.2  million,  or 22%, over the third quarter of
  1998.  Interest  earning assets averaged $326.1 million for the third quarter of
  1999 as  compared to $264.6  million  for the same period in 1998.  The yield on
  earning  assets for the third  quarter of 1999 was 7.82%,  a decrease of 9 basis
  points from the comparable period in 1998.
  
  Interest  expense for the third  quarter of 1999  increased by $131,000,  or 5%,
  compared to the third quarter of 1998. This increase was primarily  attributable
  to an increase in the level of average interest-bearing  liabilities from $221.6
  million  during  the third  quarter of 1998 to $267.0  million  during the third
  quarter  of 1999.  The  average  rate  paid on these  liabilities  for the third
  quarter of 1999 was 3.76%,  a decrease of 53 basis  points  from the  comparable
  period in 1998. The level of average time deposit  account  balances  (excluding
  public  funds)  increased  from $94.8  million for the third  quarter of 1998 to
  $108.2  million for the quarter  ended  September  30,  1999  resulting  in a 5%
  increase in interest expense on these accounts from $1.3 million for the quarter
  ended  September 30, 1998,  to $1.4 million for the third quarter of 1999.  This
  large increase in time deposits was due to the promotional  products  offered at
  the opening of two branches,  one in the spring and one in the fall of 1998. The
  Company's  aggregate  cost of funds was 3.04% for the third  quarter of 1999,  a
  decrease of 55 basis points from the prior year.
  
  Net interest income for the third quarter of 1999 increased by $1.0 million,  or
  36%, over the same period in 1998. Changes in net interest income are frequently
  measured by two  statistics:  net interest rate spread and net interest  margin.
  Net interest  rate spread is the  difference  between the average rate earned on
  earning  assets and the average rate incurred on  interest-bearing  liabilities.
  Net interest margin represents the difference between interest income, including
  net loan fees earned, and interest expense, reflected as a percentage of average
  earning assets. The Company's net interest rate spread increased to 4.06% during
  the third  quarter of 1999 from 3.60%  during  the same  period of the  previous
  year.  The net interest  margin  increased by 44 basis points from
  
                                         9
  4.30% for the third quarter 1998 to 4.74% during the third quarter of 1999.
  
  For the nine months ended September 30, 1999,  interest income increased by $3.4
  million,  or 24%, over the same period in 1998. As with the third  quarter,  the
  increase for the first nine months was related to volume  increases in the level
  of interest earning assets partially offset by a decrease in the level of yields
  earned on those  assets.  Interest  earning  assets for the first nine months of
  1999 averaged $311.0 million versus $240.2 million for the comparable  period in
  1998.  The yield on those  assets  decreased  from  8.08%  during the first nine
  months of 1998, to 7.71% for the first nine months of 1999.
  
  Interest  expense for the first nine months of 1999  totaled  $7.2  million,  an
  increase of $813,000,  or 13%, over the first nine months of 1998.  The level of
  average interest-bearing liabilities increased from $197.7 million for the first
  nine months of 1998 to $316.7  million  for the first nine  months of 1999.  The
  Company's  cost of funds for the first nine  months of 1999 was  3.07%,  down 47
  basis points from 3.54% for the comparable period in the prior year.
  
  Net interest income for the first nine months of 1999 increased by $2.6 million,
  or 32%,  over the same  period  in  1998.  The  Company's  net  interest  margin
  increased  from 4.55% for the first  nine  months of 1998 to 4.60% for the first
  nine months of 1999.
  
  Noninterest Income
  
  Noninterest income for the third quarter of 1999 increased by $344,000,  or 35%,
  from the same period in 1998.  Recurring core noninterest  income increased from
  $878,000  in the third  quarter of 1998 to $1.0  million  for the same period in
  1999. The increase is  attributable  to service charges and fees associated with
  servicing a higher volume of deposit accounts.
  
  Total noninterest income for the first nine months of 1999 totaled $3.4 million,
  an increase of $480,000,  or 16%,  over the first nine months of the prior year.
  Included in noninterest income for the first nine months of 1999 is nonrecurring
  income of $502,000 as a result of a $106,000 gain on the sale of student  loans,
  net  securities  gain of $1,000,  a $5,000  loss from Other  Real  Estate  Owned
  (OREO),  and  $400,000  income  from the sale of Small  Business  Administration
  loans.  Included  in  noninterest  income for the first  nine  months of 1998 is
  nonrecurring  income of $543,000  as a result of a $162,000  gain on the sale of
  student loans,  a $386,000 gain on the sale of  investments  from the Securities
  Available for Sale portfolio,  and $5,000 loss from the sale of OREO.  Excluding
  these transactions,  recurring core noninterest income for the first nine months
  of 1999  totaled  $2.9  million as compared  to $2.4  million for the first nine
  months of 1998,  an increase of 22%.  The  increase  is mainly  attributable  to
  additional service charges and fees associated with servicing a higher volume of
  deposit and loan accounts.
  
  Noninterest Expenses
  
  For the third quarter of 1999,  noninterest  expenses increased by $630,000,  or
  21%, over the same period in 1998.  Staffing  levels,  occupancy,  furniture and
  equipment,  and  related  expenses  increased  as a result of opening two branch
  offices in 1998 (one each in April and  August)  as well as two Loan  Production
  Offices  opening in December  1998.  A  comparison  of  noninterest  expense for
  certain  categories for the three months ended September 30, 1999, and September
  30, 1998, is presented in the following paragraphs.
  
                                         10
  Salary expenses and employee benefits,  which represent the largest component of
  noninterest  expenses,  increased by $272,000,  or 21%, for the third quarter of
  1999 over the third quarter of 1998.  This increase is consistent with increases
  in staff  levels to handle  Company  growth  from  third  quarter  1998 to third
  quarter 1999, including the additional staff of the two branch offices opened in
  1998 and the two Loan Production Offices opened in December 1998.
  
  Occupancy  expenses  totaled  $425,000 for the three months ended  September 30,
  1999,  an increase  of  $51,000,  or 14%,  over the  comparable  period of 1998.
  Increased  occupancy  expenses  relate to the two  branch  offices  and two Loan
  Production Offices opened in 1998.
  
  Furniture and equipment  expenses of $244,000 were $24,000,  or 11%,  higher for
  the third  quarter of 1999 than for the three months ended  September  30, 1998.
  This  increase  was the  result  of  higher  levels  of  depreciation  costs for
  furniture and equipment incurred with the addition of the two branch offices and
  two Loan Production Offices opened in 1998.
  
  Advertising and marketing  expenses  totaled $345,000 for the three months ended
  September  30, 1999,  an increase of $90,000,  or 35%, over the third quarter of
  1998. This increase was primarily the result of increased advertising efforts in
  each of the  Company's  markets.  These  markets will  continue to expand as the
  branch network grows.
  
  Data processing expenses of $244,000 for the third quarter of 1999 were $36,000,
  or 17%,  more  than  the  third  quarter  of  1998.  The  increase  was due to a
  combination  of  increased   costs   associated   with   processing   additional
  transactions,  both  over-the-counter  and ATM (due to growth  in the  number of
  accounts),  and the costs  associated with the increased  volume of users of our
  Home  Banking  product  which is offered  to our  customers  at no charge.  Also
  contributing  to the  increased  expenses  is the cost  associated  with  higher
  volumes of customer transactions on the Visa Check Card product.
  
  Postage and supplies expense of $120,000  represented a $6,000,  or 5%, decrease
  from the third  quarter of the prior year.  This was due to  increased  usage of
  stationery and supplies,  and other office expenses  related to growth in volume
  of customers and customer  transactions  offset by a decrease in postage expense
  resulting from the efforts to obtain additional  postage discounts by presorting
  increased volumes of outgoing mail.
  
  Other noninterest  expenses  increased by $179,000,  or 42%, for the three-month
  period ended  September  30, 1999,  as compared to the same period in 1998.  The
  increase is mainly  attributable to increased  provisions for non-credit related
  losses as well as $64,000 in costs  associated with the formation of the holding
  company,  Pennsylvania Commerce Bancorp, Inc. In late December 1998, the Company
  opened  two Loan  Production  Offices,  one in Camp Hill and one in York.  Costs
  associated  with these two offices not already  detailed  above are  included in
  this category.
  
  For the first nine months of 1999, total noninterest  expenses increased by $1.9
  million, or 23%, over the comparable period in 1998. A comparison of noninterest
  expense for certain categories for these two periods is discussed below.
  
  Salary  expense and employee  benefits  increased by $857,000,  or 23%, over the
  first nine months of 1998. The increase was due to normal salary adjustments and
  additional  salary  and  benefits  costs  due to an  increase  in the  level  of
  full-time  equivalent  employees  from  205  at  September  30,  1998  to 227 at
  September 30, 1999.
  
                                         11
  Occupancy  expenses for the first nine months of 1999 increased by $177,000,  or
  17%, from the first nine months of 1998 while furniture and equipment  increased
  by $67,000, or 11%, from $631,000 to $698,000. These increases are the result of
  the increased  furniture and equipment  depreciation  and the related  occupancy
  costs  associated  with the opening of two new branches and two Loan  Processing
  Centers since the spring of 1998.
  
  Advertising  and  marketing  expenses  totaled  $1.0 million for the nine months
  ended  September 30, 1999, an increase of $270,000,  or 35%, over the first nine
  months of 1998.  This  increase  was  primarily  the  result of  advertising  in
  multiple  markets.  These markets will continue to expand as the branch  network
  grows.
  
  Data processing expenses increased  $123,000,  or 21%, for the first nine months
  of 1999 as  compared  to the first nine  months of 1998.  The  increase  in data
  processing  expenses  is  a  combination  of  increased  costs  associated  with
  processing higher volumes of automatic teller machine (ATM) transactions as well
  as the  installation  of two additional  ATM's at the new branches as previously
  mentioned.  Also  contributing to the increased  expenses is the cost associated
  with  higher  volumes of customer  transactions  on the Visa Check Card and Home
  Banking products.
  
  Postage  and office  supplies  increased  $35,000,  or 10%,  over the first nine
  months of 1998. The increase in supplies  expense is a result of increased usage
  of such items related to  additional  staff levels as well as an increase in the
  number of accounts serviced.
  
  Other  noninterest  expenses for the first nine months of 1999 were $1.6 million
  compared  to $1.2  million  for the  similar  period  in  1998.  Provisions  for
  non-credit  related  losses  increased  by  $65,000  in 1999 over the first nine
  months  in  1998.  Nonrecurring  formation  expenses  for the  holding  company,
  Pennsylvania  Commerce Bancorp,  Inc, were $64,000.  Correspondent  bank charges
  increased  from $51,000 in the first none months of 1998 to $109,000 in the same
  period in 1999. The increase was due to an increase in processing volume related
  to an increase in deposits.  The remaining  increase was  associated  with other
  general branch-related costs.
  
  One key measure used to monitor progress in controlling overhead expenses is the
  ratio of net noninterest  expenses to average assets.  Net noninterest  expenses
  equal  noninterest   expenses   (excluding  other  real  estate  expenses)  less
  noninterest income (exclusive of nonrecurring gains), divided by average assets.
  This ratio equaled 2.84% for the three months ended September 30, 1999, the same
  as the three  months  ended  September  30,  1998,  and 2.89% for the first nine
  months of 1999  compared  to 3.00% for the  comparable  period in 1998.  Another
  productivity measure is the operating efficiency ratio. This ratio expresses the
  relationship of noninterest  expenses  (excluding other real estate expenses) to
  net interest income plus noninterest income (excluding  nonrecurring gains). For
  the quarter ended September 30, 1999, the operating  efficiency ratio was 68.72%
  compared to 79.24% for the  similar  period in 1998.  For the nine months  ended
  September 30, 1999, this ratio was 73.07% compared to 79.37% for the nine months
  ended September 30, 1998.
  
                                         12
  Provision for Federal Income Taxes
  
  The  provision  for federal  income taxes was $480,000 for the third  quarter of
  1999 as compared to  $248,000  for the same period in 1998.  For the nine months
  ended  September  30, the  provision  was $1.1 million and $780,000 for 1999 and
  1998  respectively.  The  effective  tax rate,  which is the ratio of income tax
  expense to income before income taxes, was 34% for the first nine months of 1999
  and 33.3% for the same period in 1998.  The effective tax rate for 1998 was less
  than the federal  statutory  rate of 34% primarily  because of a higher level of
  tax-exempt security and loan income.
  
  Net Income
  
  Net income for the third quarter of 1999 was $923,000,  an increase of $431,000,
  or 88%, over the $492,000  recorded in the third  quarter of 1998.  The increase
  was due to an increase in net interest  income of $1.0  million,  an increase in
  noninterest  income of $344,000,  offset partially by an increase in noninterest
  expenses of $630,000,  an increase of $82,000 in the  provision for loan losses,
  and an increase of $232,000 in the provision for income taxes.
  
  Net income for the first nine  months of 1999 was $2.2  million as  compared  to
  $1.6 million  recorded in the first nine months of 1998. The increase was due to
  an increase in net interest  income of $2.6 million,  an increase in noninterest
  income  of  $480,000,  offset  partially  by an  increase  of  $1.9  million  in
  noninterest  expenses, an increase of $225,000 in the provision for loan losses,
  and an increase of $346,000 in the provision for income taxes.
  
  Basic earnings per common share,  after adjusting for a 5% common stock dividend
  paid in February 1999, increased to $0.58 per common share for the third quarter
  of 1999  compared to $0.30 for the same  period in 1998.  Diluted  earnings  per
  common  share  were  $0.54 for the third  quarter of 1999 and $0.28 for the same
  period in 1998.
  
  Basic  earnings per common share,  for the first nine months of the year,  after
  adjusting  for a 5% common stock  dividend paid in February  1999,  increased to
  $1.35 per share as compared to $0.97 per common  share for the first nine months
  of 1998.  Diluted earnings per common share were $1.26 for the first nine months
  of 1999 and $0.90 for the same period in 1998.
  
  Return on Average Assets and Average Equity
  
  Return on average  assets (ROA) measures the Company's net income in relation to
  its total average assets. The Company's  annualized ROA for the third quarter of
  1999 was 1.03% as compared to 0.67% for the third  quarter of 1998.  The ROA for
  the first nine  months of 1999 and 1998 was 0.85% and 0.78%,  respectively.  For
  purposes of calculating  ROA, average assets have been adjusted to exclude gross
  unrealized appreciation or depreciation on securities available for sale.
  
  Return on average  equity  (ROE)  indicates  how  effectively  the  Company  can
  generate  net  income  on  the  capital  invested  by its  stockholders.  ROE is
  calculated by dividing net income by average  stockholders' equity. For purposes
  of  calculating  ROE,  average  stockholders'  equity  includes  the  effect  of
  unrealized  appreciation  or  depreciation,  net of income taxes,  on securities
  available for sale. The annualized ROE for the third quarter of 1999 was 18.32%,
  as compared to 10.03% for the third quarter of 1998.  The annualized ROE for the
  first nine months of 1999 was  14.27%,  as compared to 11.01% for the first nine
  months of 1998.
  
                                         13
  FINANCIAL CONDITION
  
  Securities
  
  During the first nine months of 1999, securities available for sale decreased by
  $9.0 million (net of unrealized depreciation) from $97.0 million at December 31,
  1998 to $88.0  million  at  September  30,  1999  primarily  as a result  of the
  purchase  of  $11.6  million  in  U.S.  Government  agency  and  mortgage-backed
  securities, offset by the sale of $5.4 million in mortgage-backed securities and
  $11.6 million of principal  repayments and calls on  mortgage-backed  securities
  and U.S. Government agency securities and unrealized loss of $3.3 million in the
  portfolio.
  
  The securities available for sale portfolio is comprised of U.S. Treasury Notes,
  U.S. Government agency securities,  mortgage-backed securities,  trust preferred
  debt  securities,  and  equity  securities.  The  weighted  average  life of the
  securities available for sale portfolio was 4.7 years at September 30, 1999 with
  a weighted average yield of 6.62%.
  
  During the first nine months of 1999, securities held to maturity increased from
  $11.5  million to $29.6  million  primarily as a result of the purchase of $20.1
  million in U.S.  Government  agency and  mortgage-backed  securities,  offset by
  principal  repayments of $2.0 million.  The  securities  held in this  portfolio
  include U.S.  Government agency securities and mortgage-backed  securities.  The
  weighted average life of the securities held to maturity portfolio was 5.5 years
  at September 30, 1999 with a weighted average yield of 6.53%.
  
  Federal  funds sold  decreased by $9.5  million  during the first nine months of
  1999 from $11.9  million at December 31, 1998 to $2.4  million at September  30,
  1999.  Total  securities  and federal funds sold  aggregated  $120.0  million at
  September 30, 1999, and represented 34% of total assets.
  
  The average yield on the combined securities portfolio for the first nine months
  of 1999 was 6.40%,  as  compared to 6.69% for the  similar  period of 1998.  The
  average  yield earned on federal funds sold during the first nine months of 1999
  was 4.70%,  down 71 basis points from 5.41% earned  during the first nine months
  of 1998.
  
  Loans Held for Sale
  
  Loans held for sale are  comprised  of student  loans and  residential  mortgage
  loans that the Company  originates  with the intention of selling in the future.
  During the first nine  months of 1999,  total loans held for sale  decreased  by
  $1.5  million  from $5.6  million  at  December  31,  1998,  to $4.1  million at
  September 30, 1999. The decrease in loans held for sale in the first nine months
  of 1999 was the result of the sale of $7.1  million of student  loans  offset by
  originations  of $5.6  million in new loans  held for sale.  Loans held for sale
  represented  1% of total  assets at  September  30,  1999,  as compared to 2% at
  December 31, 1998.
  
  Loans Receivable
  
  During the first nine months of 1999, total loans receivable  increased by $38.9
  million from $167.1 million at December 31, 1998, to $206.0 million at September
  30, 1999. The increase in loans  receivable in the first nine months of 1999 was
  primarily in commercial  mortgage  loans.  Loans  receivable  represented 62% of
  total deposits and 58% of total assets at September 30, 1999, as compared to 56%
  and 52%, respectively, at December 31, 1998.
  
                                         14
  Loan and Asset Quality and Allowance for Loan Losses
  
  Total nonperforming assets (nonperforming loans and other real estate, excluding
  loans past due 90 days or more and still  accruing  interest) at  September  30,
  1999, were $686,000,  or 0.19%, of total assets as compared to $286,000 or 0.09%
  of total assets at December 31, 1998. Other real estate owned totaled $92,000 at
  September 30, 1999, and $11,000 as of December 31, 1998.
  
  The following summary presents  information  regarding  nonperforming  loans and
  assets as of September 30, 1999 and 1998 and the year ended December 31, 1998.
  Nonperforming Loans and Assets
  =====================================================================================
  (dollars in thousands)               September 30,     December 31,    September 30,
                                           1999             1998              1998
  -------------------------------------------------------------------------------------
  Nonaccrual loans:
  Commercial                               $150             $227              $162
  Consumer                                  134               23                26
  Real estate
      Construction                            0                0                 0
      Mortgage                              310               25               139
  -------------------------------------------------------------------------------------
         Total nonaccrual loans             594              275               327
  Restructured loans                          0                0                 0
  -------------------------------------------------------------------------------------
         Total nonperforming loans          594              275               327
  Other real estate                          92               11                10
  -------------------------------------------------------------------------------------
         Total nonperforming assets         686              286               337
  -------------------------------------------------------------------------------------
  Loans past due 90 days or more              0                1                 0
  -------------------------------------------------------------------------------------
         Total nonperforming assets and
         loans past due 90 days or more    $686             $287              $337
  -------------------------------------------------------------------------------------
  Nonperforming loans to total loans       0.29%            0.16%             0.20%
  Nonperforming assets to total assets     0.19%            0.09%             0.11%
  =====================================================================================
  =====================================================================================
                              Allowance for Loan Losses
  =====================================================================================
  (dollars in thousands)                                September 30,     December 31,
                                                            1999             1998
  -------------------------------------------------------------------------------------
  Balance at beginning of period                           $2,232           $1,699
  Provisions charged to operating expenses                    602              542
  -------------------------------------------------------------------------------------
                                                            2,834            2,241
  Recoveries of loans previously charged-off:
      Commercial                                                6                4
      Consumer                                                  5                3
      Real estate                                               0                0
  -------------------------------------------------------------------------------------
  Total recoveries                                             11                7
  Loans charged-off:
      Commercial                                              151                2
      Consumer                                                  3               14
      Real estate                                               1                0
  -------------------------------------------------------------------------------------
  Total charged-off                                           155               16
  -------------------------------------------------------------------------------------
  Net charge-offs (recoveries)                                144                9
  -------------------------------------------------------------------------------------
  Balance at end of period                                 $2,690           $2,232
  -------------------------------------------------------------------------------------
  Net charge-offs (recoveries) as a percentage of
     Average loans outstanding                               0.08%            0.01%
  Allowance for loan losses as a percentage of
     Period-end loans                                        1.33%            1.34%
  =====================================================================================
  15
  Deposits
  
  Total deposits at September 30, 1999, were $334.4 million,  up $36.7 million, or
  12%,  over total  deposits of $297.7  million at December 31, 1998.  The average
  balances and weighted  average  rates paid on deposits for the first nine months
  of 1999 and 1998 are presented in the following table.
  ==========================================================================================
                                                 Nine months Ended September 30,
                                                1999                       1998
  ------------------------------------------------------------------------------------------
                                         Average         Average      Average     Average
  (dollars in thousands)                 Balance           Rate       Balance       Rate
  ------------------------------------------------------------------------------------------
  Demand deposits:
      Noninterest-bearing                $ 63,245                    $ 48,128
      Interest-bearing (money market
          and checking)                    57,128           2.37%      32,521       2.45%
  Savings                                  76,064           2.80       68,788       3.52
  Time deposits                           120,386           5.06       96,421       5.48
  ------------------------------------------------------------------------------------------
  Total deposits                         $316,823                    $245,858
  ==========================================================================================
  Interest Rate Sensitivity
  
  The  management  of interest rate  sensitivity  seeks to avoid  fluctuating  net
  interest  margins and to provide  consistent net interest income through periods
  of changing interest rates.
  
  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 third 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
  September 30, 1999, the Company's  income  simulation model indicates net income
  would  increase by 14% and 19% in
  
                                         16
  the first year and over a two year time frame, respectively,  if rates decreased
  as described  above. The model projects that net income would increase by 5% and
  9% 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.
  
  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,
  or the use of risk management strategies such as interest rate swaps and caps.
  
  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 September 30, 1999, the market value of
  equity model indicates an acceptable level of interest rate risk.
  
  Liquidity
  
  Liquidity  management  involves the ability to generate cash or otherwise obtain
  funds at  reasonable  rates to support  asset  growth and reduce  assets to meet
  deposit withdrawals, to maintain reserve requirements,  and to otherwise operate
  the Company on an ongoing basis. Liquidity needs are generally met by converting
  assets into cash or obtaining  sources of additional  funding,  mainly deposits.
  Liquidity  sources  from asset  categories  are  provided  primarily by cash and
  federal funds sold,  and the cash flow from the  amortizing  securities and loan
  portfolios.  The primary source of liquidity  from  liability  categories is the
  generation of additional core deposit balances.
  
  Additionally,  the  Company  has  established  secondary  sources  of  liquidity
  consisting  of  federal  funds  lines  of  credit,  repurchase  agreements,  and
  borrowing  capacity  at the Federal  Home Loan Bank,  which can be drawn upon if
  needed. As of September 30, 1999, the total potential  liquidity for the Company
  through these  secondary  sources was $133  million.  In view of the primary and
  secondary sources as previously mentioned,  management believes that the Company
  is capable of meeting its anticipated liquidity needs.
  
  Capital Adequacy
  
  At September 30, 1999,  stockholders'  equity totaled $20.4 million, the same as
  at December 31, 1998.  Stockholders'  equity at September 30, 1999 included $2.0
  million in unrealized depreciation, net of income taxes, on securities available
  for sale.  Excluding this unrealized  depreciation,  gross stockholders'  equity
  increased  by $2.2 million  from $20.2  million at December  31, 1998,  to $22.4
  million at September 30, 1999 due principally to retained net income.
  
  Risk-based capital provides the basis for which all banks are evaluated in terms
  of capital adequacy.  The risk-based capital standards require all banks to have
  Tier 1 capital of at least 4% and total
  
                                         17
  capital,  including Tier 1 capital, of at least 8% of risk-adjusted assets. Tier
  1  capital  includes  common   stockholders'  equity  and  qualifying  perpetual
  preferred  stock together with related  surpluses and retained  earnings.  Total
  capital may be comprised  of total Tier 1 capital  plus  limited life  preferred
  stock, qualifying debt instruments, and the allowance for loan losses.
  
  The table below  provides a comparison of the Bank's  risk-based  capital ratios
  and  leverage  ratios to the  minimum  regulatory  requirements  for the periods
  indicated:
  =====================================================================================================
                                   September 30,   December 31,    For Capital  To Be Well Capitalized
                                        1999          1998          Adequacy         Under Prompt
                                                                    Purposes      Corrective Action
                                                                                     Provisions
  -----------------------------------------------------------------------------------------------------
  Risk-Based Capital Ratios:
  
            Tier 1                      9.96%          10.83%          4.00%           6.00%
  
            Total                      11.15           12.02           8.00           10.00
  
            Leverage Total              6.25            6.50           4.00            5.00
  =====================================================================================================
  At September 30, 1999,  risk-based  capital and leverage  ratios for the Company
  did not differ from those of the Bank.  The Bank exceeds the minimum  regulatory
  requirements to be considered a "well capitalized" financial institution.
  
  Year 2000
  
  The Company formed a committee in mid-1997  consisting of members from all areas
  of the Company to develop a plan and oversee the  progress of Y2K  efforts.  The
  Company has named the Chief  Financial  Officer as the Y2K officer to direct the
  project. The Y2K officer reports to the Board on a quarterly basis.
  
  The Company has  utilized  both  internal  and  external  resources to identify,
  correct,  and test the  systems  for the Year  2000  compliance.  The  Company's
  software systems are provided by outside vendors and are not developed in-house.
  The Company has  contacted  and  continues to work closely with these vendors to
  ensure  readiness.  The  Company  utilizes  systems  that are driven by software
  created by the nation's prominent technology companies. As a result, most of the
  Company's mission critical systems were Year 2000 compliant at the time of their
  installation.  For those systems not  compliant,  the Company was able to obtain
  upgrades to enable  processing of  transactions  in the Year 2000. The Company's
  primary data  processing  vendor has certified  compliance of their software for
  Year 2000 processing.  Backup vendors have been identified for products supplied
  by vendors that have not certified their products as Y2K ready.  The Company has
  identified  noncomputer systems that may include embedded technology that may be
  affected  by Y2K  issues  and  implemented  corrective  actions.  As part of the
  planning process, the Company has developed  contingency plans that will provide
  alternative methods of doing business, should it be necessary.
  
  The IBM AS400 computer  processes the daily  transactions and interfaces with an
  IBM VSE 9260 processor at our data processing  vendor. The IBM VSE is the record
  keeping  system for our customer's  loan and deposit  accounts and the Company's
  general  ledger  system.  The  Company  has tested the  hardware,  software  and
  interfaces  of  these  mission-critical  systems  and  completed  the
  
                                         18
  necessary  renovations  to  enable  processing  in the  Year  2000  and  beyond.
  Throughout the past year,  the Company has been upgrading or replacing  personal
  computers that are not Y2K compliant.  The Company has experienced  considerable
  growth in recent years,  which independent of the Y2K issue has created the need
  to upgrade some  hardware and  software.  Therefore,  it is difficult to isolate
  expenditures that have been made for Y2K from normal business replacement. Costs
  to date which include capital  expenditures  are estimated at $150,000,  and are
  not  considered  material to any one fiscal period.  The Company  estimates that
  future  costs of upgrades and asset  replacements  will be  immaterial,  most of
  which will be capitalized  and amortized  over the useful life of the asset.  In
  the  unlikely  event  that the  Company  would  have to  resort  to  alternative
  operating  procedures  due to major  systems or  communication  failures  at the
  beginning of the Year 2000, the extra costs could be material.
  
  Through the use of questionnaires and officer calls,  customers with significant
  relationships  with the Company are being  evaluated for Y2K risk. No individual
  customer is significant  enough to materially  impact the financial  position of
  the  Company;  however,  one  concern is that the credit  risk  associated  with
  lending may increase to the extent that our borrowers or their suppliers may not
  adequately  address Y2K issues.  We continue to be in contact with any customers
  that we have  identified as high risk to monitor  their Y2K efforts.  Due to the
  uncertainties  involved,  it is not  possible to quantify the  potential  credit
  losses, if any, due to Y2K.
  
  The  Year  2000  plan  developed  by the  committee  consists  of  five  phases:
  awareness,  assessment,  renovation,  testing and  implementation.  Systems were
  assessed a level of importance from 1 to 4, 1 being mission-critical and 4 being
  irrelevant in relation to Y2K compliance.  Awareness, assessment, renovation and
  testing are complete for all systems. Implementation is complete for all systems
  with  the  exception  of  one,   which  is  currently  in  the  final  steps  of
  implementation.
  
  Three federal agencies share  responsibility for supervising efforts by banks in
  relation to Y2K compliance.  The Company is subject to review and examination by
  the Office of the Comptroller of the Currency (OCC). Our banking software vendor
  was also  examined by the Federal  Financial  Institutions  Examination  Council
  (FFIEC) to evaluate  their  systems for  processing in the Year 2000 and beyond.
  The results of this evaluation have been released to the Company for our review.
  The vendor was also independently evaluated and certified as Year 2000 compliant
  by the  Information  Technology  Association  of America  (ITAA).  The ITAA,  an
  organization  well  respected  by Company  examiners,  performed a thorough  and
  complete  review of the design  methods and  controls  used to provide Year 2000
  compliant software.
  
  Senior  management  has developed an outline for a  contingency  plan to provide
  operating  alternatives for continuation of services to the Company's  customers
  in the event of systems or communications  failures at the beginning of the Year
  2000.  Management  believes that the Company will be able to continue to operate
  in the Year 2000 even if some systems fail. In a worst case scenario, we believe
  that  we  would  be able to  process  all  transactions  manually  until  normal
  operations were restored. Management feels that adequate resources are available
  to fund and  address  the Y2K  issues and that the costs  associated  with these
  issues will not have a material impact on the Company's financial  statements or
  results of  operations.  However,  there is no guarantee that the efforts of the
  Company will fully prevent all failures and problems.  In addition,  the Company
  relies  on  third  party  providers,  such  as  telecommunications  and  utility
  companies, where alternative sources or arrangements are
  
                                         19
  limited or  unavailable.  While the Company  continues to address Y2K issues and
  work with our vendors and corporate  customers to identify,  assess, and control
  potential Y2K risks, the Company does not manage these businesses and therefore,
  potential uncertainties remain.
  
  Forward-Looking Statements
  
  The  discussion  regarding  the  Company's  interest  rate risk  position in the
  section  entitled  "Interest  Rate  Sensitivity  and  Liquidity" and the section
  entitled "Year 2000" contain statements that may be forward-looking  (as defined
  in the Private Securities  Litigation Reform Act of 1995). These forward looking
  statements  involve  risks  and  uncertainties,  including  changes  in  general
  economic  conditions and the Company's  ability (as well as third party ability)
  to effectively  address the Year 2000 issue.  Although the Company believes such
  forward-looking statements are reasonable,  actual results may differ materially
  from the results discussed in these forward-looking statements.
  
  Item 3. Quantitative and Qualitative Disclosures About Market Risk
  
  The  Company's  exposure  to market  risk has not  changed  significantly  since
  December 31, 1998. The market risk principally includes interest rate risk which
  is discussed in the Management's Discussion and Analysis above.
  
  PART II. OTHER INFORMATION
  
  Item 1. Legal Proceedings
  
  In July 1995, a Company borrower filed a multi-count lender liability  complaint
  against the Company seeking unspecified  damages.  The Company filed preliminary
  objections to the complaint.  The Court sustained the preliminary  objections in
  part and  denied  them in part.  An  amended  complaint  was filed and the Court
  denied the  Company's  preliminary  objections  to the  amended  complaint.  The
  Company  filed its  answer  with new  matter  and a  counterclaim.  The  Company
  believed that the complaint was without  merit.  The complaint was resolved with
  the Company  borrower,  in the second  quarter of 1999 with  nominal cost to the
  Company. In July 1999, the borrower withdrew the complaint.
  
  The Company is also subject to certain legal  proceedings  and claims arising in
  the ordinary course of business.  It is  management's  opinion that the ultimate
  resolution  of these  claims  will not have a  material  adverse  effect  on the
  Company's financial position and results of operations.
  
  Item 6.  Exhibits and Reports on Form 8-K
  
  (a.) Exhibits
  
        Computation of Net Income Per Share...........................Exhibit 11
        Financial Data Schedule.......................................Exhibit 27
  
                                         20
  (b.) Reports on Form 8-K
  
           On July 1, 1999,  Pennsylvania  Commerce Bancorp, Inc. filed a Reort on
  Form  8-K  announcing  the  following  information.  On July 1,  1999,  Commerce
  Bank/Harrisburg,  N.A.  ("Commerce")  consummated  the  Agreement  and  Plan  of
  Reorganization  (the "Agreement") with  Pennsylvania  Commerce Bancorp,  Inc., a
  newly  formed  Pennsylvania   business   corporation  (the  "Holding  Company"),
  reorganizing  Commerce  into  a  one-bank  holding  company.   Pursuant  to  the
  Agreement,  Commerce  merged with and into a new  nationally  chartered  banking
  association,  "Commerce  Bank/Harrisburg  Interim  National  Bank" (the "Interim
  Bank").  The Interim Bank, formed solely for the purpose of the  reorganization,
  will  operate  under  the  name  Commerce  Bank/Harrisburg,  N.A.  and will be a
  wholly-owned subsidiary of the Holding Company.
  
  The Reorganization has received regulatory approval and received the approval of
  the shareholders of Commerce at its annual meeting on June 18, 1999.
  
                                         21
  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 be the
  undersigned thereunto duly authorized.
  
                        PENNSYLVANIA COMMERCE BANCORP, INC.
                                    (Registrant)
  
            11/12/99                             /s/ James T. Gibson
          -----------                          ---------------------------
            (Date)                               James T. Gibson
                                                 President/CEO
  
            11/12/99                             /s/ Mark A. Zody
          -----------                          ---------------------------
            (Date)                               Mark A. Zody
                                                 Executive Vice President
                                                 Chief Financial Officer
  
                                         22