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, 1998
  
                                         OR
  
       ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                                EXCHANGE ACT OF 1934
  
  
                   For the transition period from ______ to ______
  
  
                              Commission File #0-12874
  
  
                               COMMERCE BANCORP, INC.
               (Exact name of registrant as specified in its charter)
  
  
               New Jersey                                   22-2433468
    (State or other jurisdiction of               (IRS Employer Identification
     incorporation or organization)                           Number)
  
  
       Commerce Atrium, 1701 Route 70 East, Cherry Hill, New Jersey 08034-5400
                 (Address of Principal Executive Offices) (Zip Code)
  
  
                                   (609) 751-9000
                (Registrant's telephone number, including area code)
  
  
           Indicate by check mark whether the registrant (1) has filed all reports
           required to be filed by Section 13 or 15(d) of the Securities  Exchange
           Act of 1934 during the preceding 12 months (or for such shorter  period
           that the  registrant was required to file such  report(s),  and (2) has
           been subject to such filing requirements for the past 90 days.
  
                      Yes           X                No  _________________
  <PAGE>
                        APPLICABLE ONLY TO CORPORATE ISSUERS:
  
  
  Indicate the number of shares  outstanding  of each of the  issuer's  classes of
  common stock, as of the last practical date.
  
  
  
  
           Common Stock                                  22,894,982
           (Title of Class)                     (No. of Shares Outstanding
                                                     as of  11/05/98)
  
  
  <PAGE>
                       COMMERCE BANCORP, INC. AND SUBSIDIARIES
  
  
                                        INDEX
  
                                                                              Page
  
  
  PART I.           FINANCIAL INFORMATION
  
  Item 1.           Financial Statements
  
                    Consolidated Balance Sheets (unaudited)
                             September 30, 1998 and December 31, 1997
  
                    Consolidated  Statements  of Income  (unaudited)  Three months
                             ended  September 30, 1998 and September 30, 1997, and
                             nine months ended  September  30, 1998 and  September
                             30, 1997
  
                    Consolidated Statements of Cash Flows  (unaudited) Nine months
                             ended September 30, 1998 and September 30, 1997
  
                    Notes to Consolidated Financial Statements (unaudited)
  
  Item 2.           Management's Discussion and Analysis of Financial
                             Condition and Results of Operation
  
  Item 3.           Quantitative and Qualitative Disclosures About Market Risk
  
  PART II.          OTHER INFORMATION
  
  Item 6.           Exhibits and Reports on Form 8-K
  
  
                                        -1-
  <PAGE>
                       Commerce Bancorp, Inc. and Subsidiaries
                             Consolidated Balance Sheets
                                     (unaudited)
  <TABLE>
  <CAPTION>
  --------------------------------------------------------------------------------------------------------
                                                                               September 30,  December 31,
                                                                               ---------------------------
                  (dollars in thousands)                                          1998           1997
  --------------------------------------------------------------------------------------------------------
  <S>                                                                             <C>            <C>     
  Assets          Cash and due from banks                                         $206,903       $167,900
                  Federal funds sold                                                     0              0
                                                                               ---------------------------
                                Cash and cash equivalents                          206,903        167,900
                  Mortgages held for sale                                              206          7,260
                  Trading securities                                                53,792          7,911
                  Securities available for sale                                  1,216,686      1,315,120
                  Securities held to maturity                                    1,138,265        874,032
                    (market value 1998-$1,147,150; 1997-$869,815)
                  Loans                                                          1,760,722      1,411,289
                              Less allowance for loan losses                        24,725         21,261
                                                                               ---------------------------
                                                                                 1,735,997      1,390,028
                  Bank premises and equipment, net                                 130,507        111,759
                  Other assets                                                      97,538         64,957
                                                                               ---------------------------
                                                                                $4,579,894     $3,938,967
                                                                               ===========================
  
  Liabilities     Deposits:
                              Demand:
                                Interest-bearing                                $1,373,414     $1,111,302
                                Noninterest-bearing                                878,355        762,843
                              Savings                                              834,180        705,906
                              Time                                               1,047,546        789,353
                                                                               ---------------------------
                                Total deposits                                   4,133,495      3,369,404
  
                  Other borrowed money                                              31,750        223,300
                  Other liabilities                                                 38,024         12,695
                  Obligation to Employee Stock Ownership Plan (ESOP)                 1,538          2,308
                  Trust Capital Securities - Commerce Capital Trust I               57,500         57,500
                  Long-term debt                                                    23,000         23,000
                                                                               ---------------------------
                                                                                 4,285,307      3,688,207
  
  Stockholders'   Common stock, 22,906,654 shares issued 
  Equity               (21,500,804 shares in 1997)                                  35,791         25,309
                  Series C preferred stock, 417,000 shares in 1997                                  7,506
                  Capital in excess of par or stated value                         209,511        167,529
                  Retained earnings                                                 40,208         50,592
                  Accumulated other comprehensive income                            12,239          3,756
                                                                               ---------------------------
                                                                                   297,749        254,692
                  Less commitment to ESOP                                            1,538          2,308
                  Less treasury stock, at cost, 100,159 shares in
                  1998 and 1997                                                      1,624          1,624
                                                                               ---------------------------
                                Total stockholders' equity                         294,587        250,760
                                                                               ---------------------------
  
                                                                                $4,579,894     $3,938,967
                                                                               ===========================
  </TABLE>
  
  See accompanying notes
  
                                        -2-
  <PAGE>
  
                       Commerce Bancorp, Inc. and Subsidiaries
                          Consolidated Statements of Income
                                     (unaudited)
  <TABLE>
  <CAPTION>
  ---------------------------------------------------------------------------------------------------------------------
                                                                Three Months Ended                Nine Months Ended
                                                                   September 30,                    September 30,
                                                              ------------------------         ------------------------
               (dollars in thousands, except per share amounts)  1998         1997                1998         1997
  ---------------------------------------------------------------------------------------------------------------------
  <S>         <S>                                                <C>          <C>                <C>           <C>    
  Interest     Interest and fees on loans                        $36,989      $30,798            $102,191      $88,730
  income       Interest on investments                            36,080       33,086             109,825       88,910
               Other interest                                        764          431               1,262        1,162
                                                              ------------------------         ------------------------
                    Total interest income                         73,833       64,315             213,278      178,802
                                                              ------------------------         ------------------------
  
  Interest     Interest on deposits:
  expense         Demand                                           8,256        6,337              23,792       17,646
                  Savings                                          4,680        4,247              13,525       12,125
                  Time                                            13,997       12,636              39,892       34,228
                                                              ------------------------         ------------------------
                    Total interest on deposits                    26,933       23,220              77,209       63,999
               Interest on other borrowed money                      602        1,735               3,545        3,199
               Interest on long-term debt                          1,782        1,780               5,346        3,104
                                                              ------------------------         ------------------------
                    Total interest expense                        29,317       26,735              86,100       70,302
                                                              ------------------------         ------------------------
  
               Net interest income                                44,516       37,580             127,178      108,500
               Provision for loan losses                           1,669        1,142               4,448        4,094
                                                              ------------------------         ------------------------
               Net interest income after provision for 
               loan losses                                        42,847       36,438             122,730      104,406
  
  Noninterest  Deposit charges and service fees                    8,472        6,977              24,970       19,638
  income       Other operating income                             13,950        6,685              37,132       20,544
               Net investment securities gains                       991        1,717               1,911        1,717
                                                              ------------------------         ------------------------
                    Total noninterest income                      23,413       15,379              64,013       41,899
                                                              ------------------------         ------------------------
  
  Noninterest  Salaries                                           18,908       13,673              51,904       38,244
  expense      Benefits                                            4,146        3,205              11,124        8,900
               Occupancy                                           4,264        3,767              11,912       10,361
               Furniture and equipment                             5,754        4,714              16,740       13,195
               Office                                              4,534        3,732              12,850       10,126
               Audit and regulatory fees and assessments             570          428               1,566        1,182
               Marketing                                           1,933        1,315               5,498        3,975
               Other real estate (net)                               320          407               1,145        1,368
               Other                                               6,961        4,480              18,660       12,683
                                                              ------------------------         ------------------------
                    Total noninterest expenses                    47,390       35,721             131,399      100,034
                                                              ------------------------         ------------------------
  
               Income before income taxes                         18,870       16,096              55,344       46,271
               Provision for federal and state income taxes        6,311        5,719              19,191       16,426
                                                              ------------------------         ------------------------
               Net income                                         12,559       10,377              36,153       29,845
  
               Dividends on preferred stocks                                      141                              422
                                                              ========================         ========================
               Net income applicable to common stock             $12,559      $10,236             $36,153      $29,423
                                                              ========================         ========================
  
               Net income per common and common equivalent share:
                  Basic                                            $0.55        $0.48               $1.61        $1.40
                                                              ------------------------         ------------------------
                  Diluted                                          $0.53        $0.46               $1.53        $1.32
                                                              ------------------------         ------------------------
               Average common and common equivalent shares
               outstanding:
                  Basic                                           22,689       21,105              22,405       20,988
                                                              ------------------------         ------------------------
                  Diluted                                         23,737       22,643              23,644       22,507
                                                              ------------------------         ------------------------
               Cash dividends declared, common stock               $0.19        $0.15               $0.56        $0.46
                                                              ========================         ========================
  See accompanying notes
  </TABLE>
  
                                        -3-
  <PAGE>
                       Commerce Bancorp, Inc. And Subsidiaries
                        Consolidated Statements of Cash Flows
                                     (unaudited)
  <TABLE>
  <CAPTION>
  ------------------------------------------------------------------------------------------------------------------------
                                                                                                      Nine Months Ended
                                                                                                         September 30,
                                                                                                --------------------------
                          (dollars in thousands)                                                      1998          1997
  ------------------------------------------------------------------------------------------------------------------------
  <S>                    <C>                                                                       <C>            <C>   
  Operating activities    Net income                                                                $36,153        29,845
                          Adjustments to reconcile net income to net cash
                             provided by operating activities:
                                Provision for loan losses                                             4,448         4,094
                                Provision for depreciation, amortization and accretion               17,357        12,719
                                Gains on securities available for sale                               (1,911)       (1,717)
                                Proceeds from sales of mortgages held for sale                       24,803        16,539
                                Originations of mortgages held for sale                             (17,749)      (19,150)
                                Net loan (chargeoffs)                                                  (984)       (1,135)
                                Net (increase) decrease in trading securities                       (45,881)        6,562
                                Increase in other assets                                            (37,882)       (8,958)
                                Increase in other liabilities                                        25,329         1,175
                          ------------------------------------------------------------------------------------------------
                                              Net cash provided by operating activities               3,683        39,974
  
  Investing activities    Proceeds from the sales of securities available for sale                  319,936       134,141
                          Proceeds from the maturity of securities available for sale               313,587        92,816
                          Proceeds from the maturity of securities held to maturity                 162,477        91,055
                          Purchase of securities available for sale                                (521,574)     (589,643)
                          Purchase of securities held to maturity                                  (429,551)     (238,424)
                          Net increase in loans                                                    (356,956)     (132,974)
                          Proceeds from sales of loans                                                7,523         8,441
                          Purchases of premises and equipment                                       (31,085)      (20,161)
                          ------------------------------------------------------------------------------------------------
                                              Net cash used by investing activities                (535,643)     (654,749)
  
  Financing activities    Net increase in demand and savings deposits                               505,898       282,660
                          Net increase in time deposits                                             258,193       122,884
                          Net (decrease) increase in other borrowed money                          (191,550)      116,711
                          Dividends paid                                                            (17,107)       (9,152)
                          Proceeds from issuance of Trust Capital Securities                                       57,500
                          Issuance of common stock                                                    8,492
                          Proceeds from issuance of common stock under
                               dividend reinvestment and other stock plans                            7,037         5,119
                          Other                                                                                     1,179
                          ------------------------------------------------------------------------------------------------
                                              Net cash provided by financing activities               570,963       576,901
  
                          Increase (decrease) in cash and cash equivalents                           39,003       (37,874)
                          Cash and cash equivalents at beginning of year                            167,900       208,833
                          ------------------------------------------------------------------------------------------------
                          Cash and cash equivalents at end of period                               $206,903      $170,959
                          ------------------------------------------------------------------------------------------------
  
                          Supplemental disclosures of cash flow information:  
                          Cash paid during the period for:
                              Interest                                                              $83,234       $70,336
                              Income taxes                                                           22,129        18,112
  </TABLE>
  
  See accompanying notes
  
                                        -4-
  <PAGE>
                       COMMERCE BANCORP, INC. AND SUBSIDIARIES
                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                     (unaudited)
  
  A.       Consolidated Financial Statements
  
                    The  consolidated  financial  statements  included herein have
           been prepared  without audit  pursuant to the rules and  regulations of
           the  Securities  and  Exchange  Commission.   Certain  information  and
           footnote disclosures normally included in financial statements prepared
           in accordance with generally accepted  accounting  principles have been
           condensed  or  omitted  pursuant  to such  rules and  regulations.  The
           accompanying  condensed  consolidated  financial statements reflect all
           adjustments  which are, in the opinion of  management,  necessary  to a
           fair statement of the results for the interim periods  presented.  Such
           adjustments are of a normal recurring nature.  Certain amounts in prior
           periods have been  reclassified  for comparative  purposes.  All common
           stock per share  information  has been  adjusted for the 5-for-4  stock
           split in the form of a 25% stock  dividend  declared on June 29,  1998,
           and payable July 24, 1998 to shareholders of record July 13, 1998.
  
                    These condensed  consolidated  financial  statements should be
           read in conjunction with the audited financial statements and the notes
           thereto  included in the  registrant's  Annual  Report on Form 10-K, as
           amended,  for the period ended  December 31, 1997.  The results for the
           three  months  ended  September  30,  1998  and the nine  months  ended
           September 30, 1998 are not  necessarily  indicative of the results that
           may be expected for the year ended December 31, 1998.
  
                    The consolidated  financial statements include the accounts of
           Commerce  Bancorp,  Inc.  (the  Company)  and all of its  subsidiaries,
           including    Commerce    Bank,    N.A.    (Commerce    NJ),    Commerce
           Bank/Pennsylvania,    N.A.,   Commerce   Bank/Shore,   N.A.,   Commerce
           Bank/North,  Commerce  Capital Trust I, and Commerce  Capital  Markets,
           Inc.  (CCMI).   All  material   intercompany   transactions  have  been
           eliminated.
  
  B.       Commitments
  
                    In  the  normal   course  of   business,   there  are  various
           outstanding commitments to extend credit, such as letters of credit and
           unadvanced   loan   commitments,   which  are  not   reflected  in  the
           accompanying  consolidated  financial  statements.  Management does not
           anticipate any material losses as a result of these transactions.
  
                                        -5-
  <PAGE>
  
  
  C.       Employee Stock Ownership Plan (ESOP) Debt Guarantee
  
                    The Company has  guaranteed a debt  obligation of its Employee
           Stock Ownership Plan (ESOP) which originated at $7,500,000 and has been
           reduced to $1,538,000 through principal  reductions.  Accordingly,  the
           loan amount is reflected in the Company's consolidated balance sheet as
           a  liability  and  an  equal  amount,  representing  deferred  employee
           benefits,  has been recorded as a deduction from stockholders'  equity.
           The ESOP  obtained  the loan in 1990 to  acquire a new class of Company
           Cumulative  Convertible Preferred Stock (Series C) at a price of $18.00
           per share. The loan was refinanced in 1994, and is payable in quarterly
           installments  with the final  payment due January  28,  2000.  The loan
           bears  interest at a variable  rate,  although the rate can be fixed at
           future repricing dates in accordance with the loan agreement. Effective
           March 1,  1998,  the  Trustees  of the ESOP  exercised  their  right to
           convert all 417,000 shares of the Series C stock into 808,630 shares of
           the Company's  common stock,  a portion of which is pledged as security
           for the loan.  As the Company makes annual  contributions  to the ESOP,
           these  contributions,  plus dividends  from the Company's  common stock
           held by the ESOP, will be used to repay the loan.
  
  D.       Recent Accounting Statements
  
                    As  of  January  1,  1998,  the  Company   adopted   Financial
           Accounting   Standards  Board  (FASB)   Statement  No.  130  "Reporting
           Comprehensive  Income" (FAS 130). FAS 130 establishes new standards for
           reporting  comprehensive  income,  which includes net income as well as
           certain  other  items  which  result in a change to equity  during  the
           period.  Prior period  financial  statements have been  reclassified to
           conform to the  requirements of FAS 130. The adoption of FAS 130 had no
           impact on the Company's  financial  position or results of  operations.
           During the third quarter of 1998 and 1997, total comprehensive  income,
           which for the  Company  included  net income and  unrealized  gains and
           losses on the  Company's  available  for sale  securities,  amounted to
           $18.1  million  and $16.3  million,  respectively.  For the nine months
           ended September 30, 1998 and 1997, total comprehensive income was $44.6
           million and $34.9 million, respectively.
  
                    In June,  1997, the FASB issued Statement No. 131 "Disclosures
           About Segments of an Enterprise and Related Information" (FAS 131). FAS
           131 requires disclosure of financial and descriptive  information about
           an  enterprise's  operating  segments  that meet  certain  quantitative
           thresholds.  This  statement  is effective  for fiscal years  beginning
           after  December 15, 1997, but is not required to be applied for interim
           reporting in the initial year of application.  The Company is currently
           evaluating  the impact of FAS 131 on the  disclosures  included  in its
           annual financial statements.
  
                    In June,  1998, the FASB issued  Statement No. 133 "Accounting
           for Derivative  Instruments and Hedging  Activities" (FAS 133). FAS 133
           is  required  to be adopted  in years  beginning  after June 15,  1999.
           Management  does not  anticipate  the  adoption  of FAS 133 will have a
           significant  effect  on  earnings  or  the  financial  position  of the
           Company.
  
                                        -6-
  <PAGE>
  
  
  
  E.       Trust Capital Securities
  
                    On June 9, 1997,  the Company  issued  $57.5  million of 8.75%
           Trust  Capital  Securities  through  Commerce  Capital Trust I, a newly
           formed  Delaware  business  trust  subsidiary  of the Company.  The net
           proceeds of the offering will be used for general  corporate  purposes,
           which may  include  contributions  to  subsidiary  banks to fund  their
           operations, the financing of one or more future acquisitions, repayment
           of indebtedness of the Company or of its subsidiary banks,  investments
           in or extensions of credit to its  subsidiaries,  or the  repurchase of
           shares of the Company's  outstanding common stock. All $57.5 million of
           the Trust Capital  Securities  qualify as Tier 1 capital for regulatory
           capital purposes.
  
   F.      Commerce Capital Markets, Inc.
  
                    In the  first  quarter  of 1998,  the  Company  completed  the
           acquisition  of A. H. Williams & Co.  (Williams),  Philadelphia,  PA, a
           public finance  investment  firm,  and combined  Williams with Commerce
           Capital,  the bank  securities  dealer division of Commerce NJ, to form
           Commerce Capital Markets,  Inc., a wholly-owned  nonbank  subsidiary of
           the Company engaging in certain securities  activities  permitted under
           Section 20 of the Glass-Steagall  Act. The acquisition was completed by
           the  issuance  of common  stock of the Company  totaling  approximately
           395,000  shares.  The  transaction  was  accounted  for as a pooling of
           interests.  However,  financial  statements of the periods prior to the
           acquisition have not been restated,  as the changes,  in the aggregate,
           would be immaterial.
  
  G.       Earnings Per Share
  
           The calculation of earnings per share follows (in thousands, except for
           per share amounts):
  <TABLE>
  <CAPTION>
                                            Three Months Ended       Nine months Ended
                                                September 30           September 30
                                              1998        1997        1998        1997
                                            -------     -------     -------     -------
  <S>                                       <C>         <C>         <C>         <C>    
  Basic:
  Net income                                $12,559     $10,377     $36,153     $29,845
  Preferred stock dividends                                 141                     422
                                            -------     -------     -------     -------
  Net income applicable to common stock     $12,559     $10,236     $36,153     $29,423
                                            =======     =======     =======     =======
  
  Average common shares outstanding          22,689      21,105      22,405      20,988
                                            =======     =======     =======     =======
  
  Net income per common share - basic       $  0.55     $  0.48     $  1.61     $  1.40
                                            =======     =======     =======     =======
  
                                        -7-
  <PAGE>
  
  
  
  Diluted:
  Net income                                   $12,559     $10,377     $36,153     $29,845
  Additional ESOP contribution under the
           if-converted method                                  11                      34
                                               -------     -------     -------     -------
  Net income applicable to common stock
           on a diluted basis                  $12,559     $10,366     $36,153     $29,811
                                               =======     =======     =======     =======
  
  Average common shares outstanding             22,689      21,105      22,405      20,988
  Additional shares considered in diluted
           computation assuming:
             Exercise of stock options           1,048         891       1,099         872
             Conversion of preferred stock                     647         140         647
                                               -------     -------     -------     -------
  Average common shares outstanding
           on a diluted basis                   23,737      22,643      23,644      22,507
                                               =======     =======     =======     =======
  
  Net income per common share - diluted        $  0.53     $  0.46     $  1.53     $  1.32
                                               =======     =======     =======     =======
  </TABLE>
  
  H.       Bank Acquisitions
  
           On August 12, 1998, the Company  reached an agreement to acquire Tinton
           Falls  State  Bank  through  the  acquisition  of its  parent  company,
           Community  First Banking  Company  (OTCBB Symbol:  CFST).  Tinton Falls
           State  Bank,  headquartered  in Tinton  Falls,  New  Jersey,  with $189
           million in assets and $174 million in deposits at  September  30, 1998,
           serves  Monmouth  County,  New Jersey  through the  operation  of seven
           branch offices. The Company will issue approximately 1.5 million shares
           to complete  the  acquisition,  which is expected to close in the first
           quarter of 1999. The transaction  will be accounted for as a pooling of
           interests.
  
           On  September  17,  1998,  the Company  reached an agreement to acquire
           Prestige  State Bank  through the  acquisition  of its parent  company,
           Prestige  Financial Corp. (NASDAQ Symbol:  PRFN).  Prestige State Bank,
           headquartered  in Raritan  Township,  New Jersey,  with $322 million in
           assets and $298  million in  deposits at  September  30,  1998,  serves
           Hunterdon County and portions of Warren County and Somerset County, New
           Jersey, through the operation of eight branch offices. The Company will
           issue  approximately  1.9 million  shares to complete the  acquisition,
           which  is  expected  to  close  in  the  first  quarter  of  1999.  The
           transaction will be accounted for as a pooling of interests.
  
           Unaudited pro forma  combined  financial  information  for the Company,
           Tinton  Falls State Bank,  and  Prestige  State Bank at or for the year
           ended December 31, 1997 includes the following (dollars in thousands):
  
                    Assets                             $4,388,000
                    Deposits                            3,784,000
                    Stockholders' equity                  282,000
                    Net interest income                   167,000
                    Net income                             45,000
  
           Diluted net income per common share will not differ materially from the
           $1.78 reported by the Company for 1997 after  adjusting for the 5-for-4
           stock  split in the form of a 25% stock  dividend  declared on June 29,
           1998.
  
                                        -8-
  <PAGE>
  
  
  Item 2. Management's  Discussion and Analysis of Financial Condition and Results
          of Operation
  
           Capital Resources
  
                    At September 30, 1998,  stockholders'  equity  totaled  $294.6
           million or 6.43% of total assets,  compared to $250.8  million or 6.37%
           of total assets at December 31, 1997.
  
                    On June 9, 1997,  the Company  issued  $57.5  million of 8.75%
           Trust  Capital  Securities  through  Commerce  Capital Trust I, a newly
           formed  Delaware  business  trust  subsidiary  of the Company.  The net
           proceeds of the offering will be used for general  corporate  purposes,
           which may  include  contributions  to  subsidiary  banks to fund  their
           operations, the financing of one or more future acquisitions, repayment
           of indebtedness of the Company or of its subsidiary banks,  investments
           in or extensions of credit to its  subsidiaries,  or the  repurchase of
           shares of the Company's  outstanding common stock. All $57.5 million of
           the Trust Capital  Securities  qualify as Tier 1 capital for regulatory
           capital purposes.
  
                    The table below  presents  the  Company's  and  Commerce  NJ's
           risk-based and leverage ratios at September 30, 1998 and 1997:
  
  <TABLE>
  <CAPTION>
                                                                                        Per Regulatory Guidelines
                                                        Actual                       Minimum                "Well Capitalized"
                                                 Amount           Ratio       Amount          Ratio       Amount           Ratio
  <S>                                            <C>               <C>        <C>               <C>       <C>               <C>  
  September 30, 1998
  Company
     Risk based capital ratios:
       Tier 1                                   $334,914           14.15%    $ 94,706           4.00%    $142,058            6.00%
       Total capital                             378,038           15.97      189,411           8.00      236,764           10.00
     Leverage ratio                              334,914            7.56      132,907           3.00      221,511            5.00
  
  Commerce NJ Risk based capital ratios:
       Tier 1                                   $190,741           12.74%    $ 59,903           4.00%    $ 89,854            6.00%
       Total capital                             206,842           13.81      119,805           8.00      149,756           10.00
     Leverage ratio                              190,741            6.68       85,702           3.00      142,836            5.00
  
  September 30, 1997
  Company
     Risk based capital ratios:
       Tier 1                                   $289,539           15.47%    $ 74,860           4.00%    $112,290            6.00%
       Total capital                             333,473           17.82      149,720           8.00      187,150           10.00
     Leverage ratio                              289,539            7.72      112,554           3.00      187,589            5.00
  
  Commerce NJ Risk based capital ratios:
       Tier 1                                   $156,643           12.60%    $ 49,723           4.00%    $ 74,584            6.00%
       Total capital                             170,294           13.70       99,445           8.00      124,307           10.00
     Leverage ratio                              156,643            6.29       74,742           3.00      124,570            5.00
  </TABLE>
  
                                        -9-
  <PAGE>
  
                  At September 30, 1998, the Company's consolidated capital levels
           and  each  of  the  Company's  bank  subsidiaries  met  the  regulatory
           definition  of a "well  capitalized"  financial  institution,  i.e.,  a
           leverage capital ratio exceeding 5%, a Tier 1 risk-based  capital ratio
           exceeding  6%, and a total  risk-based  capital  ratio  exceeding  10%.
           Management  believes that as of September 30, 1998, the Company and its
           subsidiaries  meet all capital adequacy  requirements to which they are
           subject.
  
           Deposits
  
                    Total  deposits at September 30, 1998 were $4.13  billion,  up
           $808.3  million,  or 24%  over  total  deposits  of  $3.33  billion  at
           September  30, 1997,  and up by $764.1  million,  or 23% from  year-end
           1997. Deposit growth during the first nine months of 1998 included core
           deposit  growth in all  categories  as well as growth  from the  public
           sector.  The Company  experienced  "same-store  core deposit growth" of
           20.1% at  September  30,  1998 as  compared  to deposits a year ago for
           those branches open for more than two years.
  
           Interest Rate Sensitivity and Liquidity
  
                    The Company's risk of loss arising from adverse changes in the
           fair market value of financial instruments, or market risk, is composed
           primarily of interest rate risk. The primary objective of the Company's
           asset/liability  management  activities  is to  maximize  net  interest
           income, while maintaining  acceptable levels of interest rate risk. The
           Company's   Asset/Liability   Committee   (ALCO)  is  responsible   for
           establishing  policies to limit  exposure to interest rate risk, and to
           ensure  procedures  are  established to monitor  compliance  with these
           policies.  The  guidelines  established  by ALCO  are  reviewed  by the
           Company's Board of Directors.
  
                    Management  considers the simulation of net interest income in
           different  interest rate  environments  to be the best indicator of the
           Company's  interest rate risk. Income simulation  analysis captures not
           only the potential of all assets and  liabilities to mature or reprice,
           but also the probability  that they will do so. Income  simulation also
           attends to the relative interest rate sensitivities of these items, and
           projects  their  behavior  over an  extended  period of time.  Finally,
           income simulation  permits management to assess the probable effects on
           the balance  sheet not only of changes in interest  rates,  but also of
           proposed strategies for responding to them.
  
                    The Company's income  simulation model analyzes  interest rate
           sensitivity  by projecting net income over the next 24 months in a flat
           rate scenario versus net income in alternative interest rate scenarios.
           Management  continually  reviews  and refines  its  interest  rate risk
           management  process  in  response  to the  changing  economic  climate.
           Currently, the Company's model projects a proportionate 200 basis point
           change  during the next  year,  with rates  remaining  constant  in the
           second year.  The Company's ALCO policy has  established  that interest
           income  sensitivity will be considered  acceptable if net income in the
           above  interest  rate  scenario is within 15% of net income in the flat
           rate  scenario  in the first year and within 30% over the two year time
           frame.  At September 30, 1998, the Company's  income  simulation  model
           indicates  net income  would  decrease by 2.40% and 10.05% in the first
           year and over a two year time frame,  respectively,  if rates decreased
           as described  above.  The model projects that net income would decrease
           by 6.13% and 5.98% in the  first  year and over a two year time  frame,
           respectively,  if rates increased as described  above. All of these net
           income projections are within an acceptable level of interest rate risk
           pursuant to the policy established by ALCO.
  
                                        -10-
  <PAGE>
  
                    In the event the Company's  interest rate risk models indicate
           an unacceptable  level of risk, the Company could undertake a number of
           actions that would reduce this risk, including the sale of a portion of
           its available for sale portfolio, the use of risk management strategies
           such  as  interest  rate  swaps  and  caps,  or  the  extension  of the
           maturities of its short-term borrowings.
  
                    Management  also  monitors  interest  rate risk by utilizing a
           market value of equity model. The model assesses the impact of a change
           in interest  rates on the market value of all the Company's  assets and
           liabilities,  as  well  as any  off  balance  sheet  items.  The  model
           calculates the market value of the Company's  assets and liabilities in
           excess of book value in the current rate  scenario,  and then  compares
           the excess of market value over book value given an immediate 200 basis
           point change in rates.  The Company's  ALCO policy  indicates  that the
           level of interest rate risk is  unacceptable if the immediate 200 basis
           point  change  would result in the loss of 60% or more of the excess of
           market value over book value in the current rate scenario. At September
           30,  1998,  the market value of equity  model  indicates an  acceptable
           level of interest rate risk.
  
                    Liquidity  involves  the  Company's  ability to raise funds to
           support asset growth or decrease assets to meet deposit withdrawals and
           other  borrowing  needs,  to  maintain  reserve   requirements  and  to
           otherwise  operate  the  Company on an  ongoing  basis.  The  Company's
           liquidity needs are primarily met by growth in core deposits,  its cash
           and  federal  funds  sold  position,  cash  flow  from  its  amortizing
           investment  and  loan  portfolios,  as well  as the  use of  short-term
           borrowings, as required.
  
           Short-Term Borrowings
  
                    Short-term  borrowings,   or  other  borrowed  money,  consist
           primarily of securities  sold under  agreements to repurchase,  and are
           used  to  meet  short  term  funding  needs.  At  September  30,  1998,
           short-term  borrowings aggregated $31.8 million and had an average rate
           of 6.63%.
  
           Interest Earning Assets
  
                    For the nine month period ended  September 30, 1998,  interest
           earning  assets  increased  $554.1  million from $3.62 billion to $4.17
           billion.  This increase was primarily in investment  securities and the
           loan portfolio as described below.
  
           Loans
  
                    During the first nine months of 1998,  loans increased  $349.4
           million from $1.41  billion to $1.76  billion.  At September  30, 1998,
           loans  represented  43% of total deposits and 38% of total assets.  All
           segments  of the loan  portfolio  experienced  growth in the first nine
           months of 1998,  including  loans  secured by  commercial  real  estate
           properties, commercial loans, and consumer loans.
  
                                        -11-
  <PAGE>
  
           Investments
  
                    In  total,  for the  first  nine  months  of 1998,  securities
           increased  $211.7 million from $2.20 billion to $2.41 billion.  Deposit
           growth and other  funding  sources were used to increase the  Company's
           investment portfolio.  The available for sale portfolio decreased $98.4
           million to $1.22 billion from $1.32  billion at December 31, 1997,  and
           the securities held to maturity  portfolio  increased $264.2 million to
           $1.14  billion at  September  30, 1998 from $874.0  million at year-end
           1997. The portfolio of trading securities  increased $45.9 million from
           year-end 1997 to $53.8 million at September 30, 1998,  primarily due to
           the formation of CCMI.  At September 30, 1998,  the average life of the
           investment  portfolio was approximately 5.1 years, and the duration was
           approximately  3.9 years.  At  September  30,  1998,  total  securities
           represented 53% of total assets.
  
           Net Income
  
                  Net income for the third quarter of 1998 was $12.6  million,  an
           increase of $2.2 million or 21% over the $10.4 million recorded for the
           third quarter of 1997. Net income for the first nine months of 1998 was
           $36.2  million,  an  increase  of $6.3  million  or 21% over the  $29.8
           million  recorded  in the first  nine  months  of 1997.  On a per share
           basis,  diluted net income for the third  quarter of 1998 and the first
           nine months of 1998 were $0.53 and $1.53 per common  share  compared to
           $0.46 and $1.32 per common share for the respective 1997 periods.
  
                  Return on average  assets  (ROA) and  return on  average  equity
           (ROE)  for  the  third   quarter  of  1998  were   1.13%  and   17.69%,
           respectively,  compared to 1.11% and 18.18%, respectively, for the same
           1997  period.  ROA and ROE for the first nine months of 1998 were 1.13%
           and 17.61%, respectively, compared to 1.14% and 18.51% a year ago.
  
            Net Interest Income
  
                  Net interest  income totaled $44.5 million for the third quarter
           of 1998,  an increase of $6.9 million or 18% from $37.6  million in the
           third quarter of 1997. Net interest income for the first nine months of
           1998 totaled  $127.2  million,  up $18.7  million or 17% from the first
           nine months of 1997. The  improvement  in net interest  income for both
           periods  was  due  primarily  to  volume  increases  in  the  loan  and
           investment portfolios.
  
           Noninterest Income
  
                  Noninterest  income  totaled $23.4 million for the third quarter
           of 1998,  an increase of $8.0 million or 52% from $15.4  million in the
           third  quarter of 1997.  The  increase  was due  primarily to increased
           other  operating  income,  which rose $7.3 million over the prior year,
           including  increased  revenues of $2.5 million from  Commerce  National
           Insurance Services, Inc. (Commerce Insurance),  the Company's insurance
           brokerage subsidiary,  and $3.5 million from CCMI. In addition, deposit
           charges and service fees  increased $1.5 million from the third quarter
           of 1997  primarily  due to  higher  transaction  volumes.  The  Company
           recorded $991 thousand in net investment  securities gains in the third
           quarter of 1998,  as compared to $1.7  million in the third  quarter of
           1997.
  
                  For the first nine months of 1998,  noninterest  income  totaled
           $64.0  million,  an increase of $22.1 million or 53% from $41.9 million
           in the first nine months of 1997. Other operating
  
                                        -12-
  <PAGE>
  
           income rose $16.6 million over the first nine months of 1997, including
           increased  revenues of $5.8 million from  Commerce  Insurance  and $7.9
           million from CCMI, respectively.  Deposit charges and service fees rose
           $5.3 million over the prior year  primarily  due to higher  transaction
           volumes,  and the  Company  recorded  $1.9  million  in net  investment
           securities  gains during the first nine months of 1998,  as compared to
           $1.7 million in the first nine months of 1997.
  
           Noninterest Expense
  
                    For the third  quarter of 1998,  noninterest  expense  totaled
           $47.4 million, an increase of $11.7 million or 33% over the same period
           in 1997. Contributing to this increase was new branch activity over the
           past twelve months,  with the number of branches  increasing from 70 at
           September  30, 1997 to 80 at  September  30,  1998,  the  expansion  of
           Commerce  Insurance,  and the formation of CCMI in the first quarter of
           1998.  With  the  addition  of  these  new  offices  and  CCMI,  staff,
           facilities,  marketing,  and related expenses rose  accordingly.  Other
           noninterest  expenses rose $2.5 million over the third quarter of 1997.
           This increase resulted primarily from higher bank card-related  service
           charges,   increased  business  development  expenses,   and  increased
           provisions for non-credit-related losses.
  
           For the first nine months of 1998,  noninterest  expense totaled $131.4
           million, an increase of $31.4 million or 31% over $100.0 million in the
           first nine months of 1997. Contributing to this increase was new branch
           activity,  the  expansion of Commerce  Insurance,  and the formation of
           CCMI as noted above. Other noninterest  expenses rose $6.0 million over
           the first nine months of 1997.  This increase  resulted  primarily from
           higher  bank   card-related   service   charges,   increased   business
           development  expenses,  higher legal fees, and increased provisions for
           non-credit-related losses.
  
                    The  Company's   operating   efficiency   ratio   (noninterest
           expenses,  less  other real  estate  expense,  divided by net  interest
           income  plus  noninterest  income  excluding  non-recurring  gains) was
           68.82% for the first nine  months of 1998 as compared to 66.36% for the
           same 1997 period. The Company's efficiency ratio remains above its peer
           group primarily due to its aggressive growth expansion activities.
  
           Loan and Asset Quality
  
                    Total non-performing  assets  (non-performing  loans and other
           real  estate,  excluding  loans  past  due 90 days or  more  and  still
           accruing  interest) at September 30, 1998 were $12.3 million,  or 0.27%
           of total assets  compared to $17.4  million or 0.44% of total assets at
           December  31,  1997 and  $19.0  million  or 0.50%  of total  assets  at
           September 30, 1997.
  
                    Total non-performing loans (non-accrual loans and restructured
           loans,  excluding  loans  past due 90 days or more and  still  accruing
           interest)  at  September  30, 1998 were $6.9  million or 0.39% of total
           loans compared to $11.6 million or 0.82% of total loans at December 31,
           1997 and $12.4  million or 0.89% of total loans at September  30, 1997.
           At  September  30,  1998,  loans  past  due 90 days or more  and  still
           accruing interest amounted to $1.1 million compared to $226 thousand at
           December 31, 1997 and $423 thousand at September  30, 1997.  Additional
           loans considered as potential  problem loans by the Company's  internal
           loan review  department ($13.2 million at September 30, 1998) have been
           evaluated  as to risk  exposure  in  determining  the  adequacy  of the
           allowance for loan losses.
  
                                        -13-
  <PAGE>
                    Other real estate  (ORE) at  September  30, 1998  totaled $5.4
           million  compared to $5.8 million at December 31, 1997 and $6.7 million
           at September 30, 1997.  These  properties have been written down to the
           lower of cost or fair value less disposition costs.
  
                    On pages 15 and 16 are tabular  presentation  showing detailed
           information about the Company's  non-performing loans and assets and an
           analysis of the  Company's  allowance for loan losses and other related
           data for September 30, 1998, December 31, 1997, and September 30, 1997.
  
           Year 2000
  
                    The  Company  began the  process  of  preparing  its  computer
           systems  and  applications  for the  Year  2000 in  1996.  The  process
           involves   identifying  and  resolving  date  recognition  problems  in
           computer systems and software,  and to a lesser extent, other operating
           equipment,  that could be caused by the date change from  December  31,
           1999 to January 1, 2000.
  
                    The Company  has  completed  its  assessment  of all  business
           processes that could be affected by the Year 2000 issue.  Each business
           process assessment included a review of the information systems used in
           that process,  including  hardware and software,  involvement  of third
           parties,  and any  other  operating  equipment.  The  Company  licenses
           substantially  all software used in conducting  its business from third
           party vendors.  All vendors have been contacted regarding the Year 2000
           issue,  and the Company  continues to track the progress each vendor is
           making in reaching  Year 2000  compliance.  The Company is also working
           with  significant  customers and  counterparties  to monitor their Year
           2000  efforts.  The Company  expects to have  substantially  all of the
           necessary  changes in place and tested for all mission critical systems
           (those  systems  defined as absolutely  essential to the daily business
           operation of the Company) before the end of 1998. Additionally, changes
           for all remaining critical systems should be in place and tested by the
           end of the first quarter of 1999.
  
                    The  Company  believes it is taking the  appropriate  steps to
           address all Year 2000 issues.  Despite the Company's efforts to address
           the Year 2000  problem  and develop  contingency  plans in the event of
           Year  2000  failures,   including   non-compliance   by  third  parties
           (including  loan  customers),  there can be no assurance that Year 2000
           issues  (both  internal and  external)  will not  materially  adversely
           impact the Company's  financial  position,  results of  operations,  or
           relationships with customers, vendors, or others.
  
                    The  Company  estimates  the  total  cost  of  the  Year  2000
           compliance  process,  including internal and external personnel and any
           required  hardware  and  software  modifications,  will not exceed $1.0
           million.
  
           Forward-Looking Statements
  
                    The  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.
  
                                        -14-
  <PAGE>
  
  The following summary presents  information  regarding  non-performing loans and
  assets as of September 30, 1998 and the preceding four quarters: (dollar amounts
  in thousands)
  <TABLE>
  <CAPTION>
                                             September 30,   June 30,    March 31,   December 31, September 30,
                                                 1998          1998        1998          1997         1997
                                                -------      -------      -------      -------      -------
  <S>                                           <C>          <C>          <C>          <C>          <C>    
  Non-accrual loans:
     Commercial                                 $ 1,301      $ 1,070      $ 1,764      $ 1,816      $ 1,920
     Consumer                                       763          835          944          703          893
     Real estate:
        Construction                                393          394          393        1,345        2,006
        Mortgage                                  4,346        5,215        7,742        7,706        7,533
                                                -------      -------      -------      -------      -------
           Total non-accrual loans                6,803        7,514       10,843       11,570       12,352
                                                -------      -------      -------      -------      -------
  
  Restructured loans:
     Commercial                                      17           18           19           19           20
     Consumer
     Real estate:
        Construction
        Mortgage                                    104          109          114
                                                -------      -------      -------      -------      -------
           Total restructured loans                 121          127          133           19           20
                                                -------      -------      -------      -------      -------
  
     Total non-performing loans                   6,924        7,641       10,976       11,589       12,372
                                                -------      -------      -------      -------      -------
  
  Other real estate                               5,409        5,649        6,029        5,845        6,673
                                                -------      -------      -------      -------      -------
  
  Total non-performing assets                    12,333       13,290       17,005       17,434       19,045
                                                -------      -------      -------      -------      -------
  
  Loans past due 90 days or more
     and still accruing                           1,099          259          308          226          423
                                                -------      -------      -------      -------      -------
  
  Total non-performing assets and
     loans past due 90 days or more             $13,432      $13,549      $17,313      $17,660      $19,468
                                                =======      =======      =======      =======      =======
  
  Total non-performing loans as a
     percentage of total period-end
     loans                                         0.39%        0.46%        0.75%        0.82%        0.89%
  
  Total non-performing assets as a
     percentage of total period-end assets         0.27%        0.30%        0.41%        0.44%        0.50%
  
  Total non-performing assets and loans
     past due 90 days or more as a
     percentage of total period-end assets         0.29%        0.30%        0.42%        0.45%        0.51%
  
  Allowance for loan losses as a
     percentage of total non-performing
     loans                                          357%         305%         200%         183%         169%
  
  Allowance for loan losses as a percentage
     of total period-end loans                     1.40%        1.40%        1.50%        1.51%        1.50%
  
  Total non-performing assets and loans
     past due 90 days or more as a
     percentage of stockholders' equity and
     allowance for loan losses                        4%           4%           6%           6%           8%
  </TABLE>
  
                                        -15-
  <PAGE>
  The following  table  presents,  for the periods  indicated,  an analysis of the
  allowance for loan losses and other related data: (dollar amounts in thousands)
  <TABLE>
  <CAPTION>
                                                                                            Year
                                                         Nine Months Ended                  Ended
                                                    09/30/98          09/30/97            12/31/97
                                                   -----------       ------------        ------------
  <S>                                                 <C>                <C>                 <C>    
  Balance at beginning of period                      $21,261            $17,975             $17,975
  Provisions charged to operating expenses              4,448              4,094               4,668
                                                   -----------       ------------        ------------
                                                       25,709             22,069              22,643
  
  Recoveries on loans charged-off:
     Commercial                                           253                150                 348
     Consumer                                             223                267                 406
     Real estate                                           18                121                 144
                                                   -----------       ------------        ------------
  Total recoveries                                        494                538                 898
  
  Loans charged-off:
     Commercial                                          (280)              (783)               (964)
     Consumer                                            (901)              (846)             (1,170)
     Real estate                                         (297)               (44)               (146)
                                                   -----------       ------------        ------------
  Total charge-offs                                    (1,478)            (1,673)             (2,280)
                                                   -----------       ------------        ------------
  Net charge-offs                                        (984)            (1,135)             (1,382)
                                                   -----------       ------------        ------------
  
  Balance at end of period                            $24,725            $20,934             $21,261
                                                   ===========       ============        ============
  
  Net charge-offs as a percentage of
  average loans outstanding                              0.08%              0.11%               0.10%
  </TABLE>
  
  
  Item 3:  Quantitative and Qualitative Disclosures About Market Risk
  -------------------------------------------------------------------------------
  
  See Item 2 -  Management's  Discussion  and Analysis of Financial  Condition and
  Results of Operation, Interest Rate Sensitivity and Liquidity.
  
                                        -16-
  <PAGE>
  
                             PART II. OTHER INFORMATION
  
  
  Item 6.  Exhibits and Reports on Form 8-K
  
  
           No  reports  on Form 8-K were  filed  during  the third  quarter  ended
  September 30, 1998.
  
  
  
  
  
  
  
  
                                        -17-
  <PAGE>
  
  
                                     SIGNATURES
  
  
  
  
  
  Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
  registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
  undersigned thereunto duly authorized.
  
  
  
                                                 COMMERCE BANCORP, INC.
                                                      (Registrant)
  
  
  
  
  
  November 13, 1998
    (Date)                                      C. EDWARD JORDAN, JR.
                                               EXECUTIVE VICE PRESIDENT
                                             (PRINCIPAL FINANCIAL OFFICER)
  
  
  
                                        -18
metadata_documents: [{"type": "10-Q", "sequence": "1", "secsgml_size_bytes": 68567}]
metadata_filer: {"company-data": {"conformed-name": "COMMERCE BANCORP INC /NJ/", "cik": "0000715096", "assigned-sic": "6021", "irs-number": "222433468", "state-of-incorporation": "NJ", "fiscal-year-end": "1231"}, "filing-values": {"form-type": "10-Q", "act": "34", "file-number": "001-12069", "film-number": "98747096"}, "business-address": {"street1": "COMMERCE ATRIUM", "street2": "1701 RTE 70 E", "city": "CHERRY HILL", "state": "NJ", "zip": "08034-5400", "phone": "6097519000"}, "mail-address": {"street1": "1701 ROUTE 70 EAST", "city": "CHERRY HILL", "state": "NJ", "zip": "08034-5400"}}
text: SECURITIES AND EXCHANGE COMMISSION
  
                               WASHINGTON, D.C. 20549
  
                                      Form 10-Q
  
       (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                                EXCHANGE ACT OF 1934
  
                      For the quarter ended September 30, 1998
  
                                         OR
  
       ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                                EXCHANGE ACT OF 1934
  
                   For the transition period from ______ to ______
  
                              Commission File #0-12874
  
                               COMMERCE BANCORP, INC.
               (Exact name of registrant as specified in its charter)
  
               New Jersey                                   22-2433468
    (State or other jurisdiction of               (IRS Employer Identification
     incorporation or organization)                           Number)
  
       Commerce Atrium, 1701 Route 70 East, Cherry Hill, New Jersey 08034-5400
                 (Address of Principal Executive Offices) (Zip Code)
  
                                   (609) 751-9000
                (Registrant's telephone number, including area code)
  
           Indicate by check mark whether the registrant (1) has filed all reports
           required to be filed by Section 13 or 15(d) of the Securities  Exchange
           Act of 1934 during the preceding 12 months (or for such shorter  period
           that the  registrant was required to file such  report(s),  and (2) has
           been subject to such filing requirements for the past 90 days.
  
                      Yes           X                No  _________________
  APPLICABLE ONLY TO CORPORATE ISSUERS:
  
  Indicate the number of shares  outstanding  of each of the  issuer's  classes of
  common stock, as of the last practical date.
  
           Common Stock                                  22,894,982
           (Title of Class)                     (No. of Shares Outstanding
                                                     as of  11/05/98)
  COMMERCE BANCORP, INC. AND SUBSIDIARIES
  
                                        INDEX
  
                                                                              Page
  
  PART I.           FINANCIAL INFORMATION
  
  Item 1.           Financial Statements
  
                    Consolidated Balance Sheets (unaudited)
                             September 30, 1998 and December 31, 1997
  
                    Consolidated  Statements  of Income  (unaudited)  Three months
                             ended  September 30, 1998 and September 30, 1997, and
                             nine months ended  September  30, 1998 and  September
                             30, 1997
  
                    Consolidated Statements of Cash Flows  (unaudited) Nine months
                             ended September 30, 1998 and September 30, 1997
  
                    Notes to Consolidated Financial Statements (unaudited)
  
  Item 2.           Management's Discussion and Analysis of Financial
                             Condition and Results of Operation
  
  Item 3.           Quantitative and Qualitative Disclosures About Market Risk
  
  PART II.          OTHER INFORMATION
  
  Item 6.           Exhibits and Reports on Form 8-K
  
                                        -1-
  Commerce Bancorp, Inc. and Subsidiaries
                             Consolidated Balance Sheets
                                     (unaudited)
  --------------------------------------------------------------------------------------------------------
                                                                               September 30,  December 31,
                                                                               ---------------------------
                  (dollars in thousands)                                          1998           1997
  --------------------------------------------------------------------------------------------------------
  Assets          Cash and due from banks                                         $206,903       $167,900
                  Federal funds sold                                                     0              0
                                                                               ---------------------------
                                Cash and cash equivalents                          206,903        167,900
                  Mortgages held for sale                                              206          7,260
                  Trading securities                                                53,792          7,911
                  Securities available for sale                                  1,216,686      1,315,120
                  Securities held to maturity                                    1,138,265        874,032
                    (market value 1998-$1,147,150; 1997-$869,815)
                  Loans                                                          1,760,722      1,411,289
                              Less allowance for loan losses                        24,725         21,261
                                                                               ---------------------------
                                                                                 1,735,997      1,390,028
                  Bank premises and equipment, net                                 130,507        111,759
                  Other assets                                                      97,538         64,957
                                                                               ---------------------------
                                                                                $4,579,894     $3,938,967
                                                                               ===========================
  
  Liabilities     Deposits:
                              Demand:
                                Interest-bearing                                $1,373,414     $1,111,302
                                Noninterest-bearing                                878,355        762,843
                              Savings                                              834,180        705,906
                              Time                                               1,047,546        789,353
                                                                               ---------------------------
                                Total deposits                                   4,133,495      3,369,404
  
                  Other borrowed money                                              31,750        223,300
                  Other liabilities                                                 38,024         12,695
                  Obligation to Employee Stock Ownership Plan (ESOP)                 1,538          2,308
                  Trust Capital Securities - Commerce Capital Trust I               57,500         57,500
                  Long-term debt                                                    23,000         23,000
                                                                               ---------------------------
                                                                                 4,285,307      3,688,207
  
  Stockholders'   Common stock, 22,906,654 shares issued 
  Equity               (21,500,804 shares in 1997)                                  35,791         25,309
                  Series C preferred stock, 417,000 shares in 1997                                  7,506
                  Capital in excess of par or stated value                         209,511        167,529
                  Retained earnings                                                 40,208         50,592
                  Accumulated other comprehensive income                            12,239          3,756
                                                                               ---------------------------
                                                                                   297,749        254,692
                  Less commitment to ESOP                                            1,538          2,308
                  Less treasury stock, at cost, 100,159 shares in
                  1998 and 1997                                                      1,624          1,624
                                                                               ---------------------------
                                Total stockholders' equity                         294,587        250,760
                                                                               ---------------------------
  
                                                                                $4,579,894     $3,938,967
                                                                               ===========================
  See accompanying notes
  
                                        -2-
  Commerce Bancorp, Inc. and Subsidiaries
                          Consolidated Statements of Income
                                     (unaudited)
  ---------------------------------------------------------------------------------------------------------------------
                                                                Three Months Ended                Nine Months Ended
                                                                   September 30,                    September 30,
                                                              ------------------------         ------------------------
               (dollars in thousands, except per share amounts)  1998         1997                1998         1997
  ---------------------------------------------------------------------------------------------------------------------
  Interest     Interest and fees on loans                        $36,989      $30,798            $102,191      $88,730
  income       Interest on investments                            36,080       33,086             109,825       88,910
               Other interest                                        764          431               1,262        1,162
                                                              ------------------------         ------------------------
                    Total interest income                         73,833       64,315             213,278      178,802
                                                              ------------------------         ------------------------
  
  Interest     Interest on deposits:
  expense         Demand                                           8,256        6,337              23,792       17,646
                  Savings                                          4,680        4,247              13,525       12,125
                  Time                                            13,997       12,636              39,892       34,228
                                                              ------------------------         ------------------------
                    Total interest on deposits                    26,933       23,220              77,209       63,999
               Interest on other borrowed money                      602        1,735               3,545        3,199
               Interest on long-term debt                          1,782        1,780               5,346        3,104
                                                              ------------------------         ------------------------
                    Total interest expense                        29,317       26,735              86,100       70,302
                                                              ------------------------         ------------------------
  
               Net interest income                                44,516       37,580             127,178      108,500
               Provision for loan losses                           1,669        1,142               4,448        4,094
                                                              ------------------------         ------------------------
               Net interest income after provision for 
               loan losses                                        42,847       36,438             122,730      104,406
  
  Noninterest  Deposit charges and service fees                    8,472        6,977              24,970       19,638
  income       Other operating income                             13,950        6,685              37,132       20,544
               Net investment securities gains                       991        1,717               1,911        1,717
                                                              ------------------------         ------------------------
                    Total noninterest income                      23,413       15,379              64,013       41,899
                                                              ------------------------         ------------------------
  
  Noninterest  Salaries                                           18,908       13,673              51,904       38,244
  expense      Benefits                                            4,146        3,205              11,124        8,900
               Occupancy                                           4,264        3,767              11,912       10,361
               Furniture and equipment                             5,754        4,714              16,740       13,195
               Office                                              4,534        3,732              12,850       10,126
               Audit and regulatory fees and assessments             570          428               1,566        1,182
               Marketing                                           1,933        1,315               5,498        3,975
               Other real estate (net)                               320          407               1,145        1,368
               Other                                               6,961        4,480              18,660       12,683
                                                              ------------------------         ------------------------
                    Total noninterest expenses                    47,390       35,721             131,399      100,034
                                                              ------------------------         ------------------------
  
               Income before income taxes                         18,870       16,096              55,344       46,271
               Provision for federal and state income taxes        6,311        5,719              19,191       16,426
                                                              ------------------------         ------------------------
               Net income                                         12,559       10,377              36,153       29,845
  
               Dividends on preferred stocks                                      141                              422
                                                              ========================         ========================
               Net income applicable to common stock             $12,559      $10,236             $36,153      $29,423
                                                              ========================         ========================
  
               Net income per common and common equivalent share:
                  Basic                                            $0.55        $0.48               $1.61        $1.40
                                                              ------------------------         ------------------------
                  Diluted                                          $0.53        $0.46               $1.53        $1.32
                                                              ------------------------         ------------------------
               Average common and common equivalent shares
               outstanding:
                  Basic                                           22,689       21,105              22,405       20,988
                                                              ------------------------         ------------------------
                  Diluted                                         23,737       22,643              23,644       22,507
                                                              ------------------------         ------------------------
               Cash dividends declared, common stock               $0.19        $0.15               $0.56        $0.46
                                                              ========================         ========================
  See accompanying notes
  -3-
  Commerce Bancorp, Inc. And Subsidiaries
                        Consolidated Statements of Cash Flows
                                     (unaudited)
  ------------------------------------------------------------------------------------------------------------------------
                                                                                                      Nine Months Ended
                                                                                                         September 30,
                                                                                                --------------------------
                          (dollars in thousands)                                                      1998          1997
  ------------------------------------------------------------------------------------------------------------------------
  Operating activities    Net income                                                                $36,153        29,845
                          Adjustments to reconcile net income to net cash
                             provided by operating activities:
                                Provision for loan losses                                             4,448         4,094
                                Provision for depreciation, amortization and accretion               17,357        12,719
                                Gains on securities available for sale                               (1,911)       (1,717)
                                Proceeds from sales of mortgages held for sale                       24,803        16,539
                                Originations of mortgages held for sale                             (17,749)      (19,150)
                                Net loan (chargeoffs)                                                  (984)       (1,135)
                                Net (increase) decrease in trading securities                       (45,881)        6,562
                                Increase in other assets                                            (37,882)       (8,958)
                                Increase in other liabilities                                        25,329         1,175
                          ------------------------------------------------------------------------------------------------
                                              Net cash provided by operating activities               3,683        39,974
  
  Investing activities    Proceeds from the sales of securities available for sale                  319,936       134,141
                          Proceeds from the maturity of securities available for sale               313,587        92,816
                          Proceeds from the maturity of securities held to maturity                 162,477        91,055
                          Purchase of securities available for sale                                (521,574)     (589,643)
                          Purchase of securities held to maturity                                  (429,551)     (238,424)
                          Net increase in loans                                                    (356,956)     (132,974)
                          Proceeds from sales of loans                                                7,523         8,441
                          Purchases of premises and equipment                                       (31,085)      (20,161)
                          ------------------------------------------------------------------------------------------------
                                              Net cash used by investing activities                (535,643)     (654,749)
  
  Financing activities    Net increase in demand and savings deposits                               505,898       282,660
                          Net increase in time deposits                                             258,193       122,884
                          Net (decrease) increase in other borrowed money                          (191,550)      116,711
                          Dividends paid                                                            (17,107)       (9,152)
                          Proceeds from issuance of Trust Capital Securities                                       57,500
                          Issuance of common stock                                                    8,492
                          Proceeds from issuance of common stock under
                               dividend reinvestment and other stock plans                            7,037         5,119
                          Other                                                                                     1,179
                          ------------------------------------------------------------------------------------------------
                                              Net cash provided by financing activities               570,963       576,901
  
                          Increase (decrease) in cash and cash equivalents                           39,003       (37,874)
                          Cash and cash equivalents at beginning of year                            167,900       208,833
                          ------------------------------------------------------------------------------------------------
                          Cash and cash equivalents at end of period                               $206,903      $170,959
                          ------------------------------------------------------------------------------------------------
  
                          Supplemental disclosures of cash flow information:  
                          Cash paid during the period for:
                              Interest                                                              $83,234       $70,336
                              Income taxes                                                           22,129        18,112
  See accompanying notes
  
                                        -4-
  COMMERCE BANCORP, INC. AND SUBSIDIARIES
                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                     (unaudited)
  
  A.       Consolidated Financial Statements
  
                    The  consolidated  financial  statements  included herein have
           been prepared  without audit  pursuant to the rules and  regulations of
           the  Securities  and  Exchange  Commission.   Certain  information  and
           footnote disclosures normally included in financial statements prepared
           in accordance with generally accepted  accounting  principles have been
           condensed  or  omitted  pursuant  to such  rules and  regulations.  The
           accompanying  condensed  consolidated  financial statements reflect all
           adjustments  which are, in the opinion of  management,  necessary  to a
           fair statement of the results for the interim periods  presented.  Such
           adjustments are of a normal recurring nature.  Certain amounts in prior
           periods have been  reclassified  for comparative  purposes.  All common
           stock per share  information  has been  adjusted for the 5-for-4  stock
           split in the form of a 25% stock  dividend  declared on June 29,  1998,
           and payable July 24, 1998 to shareholders of record July 13, 1998.
  
                    These condensed  consolidated  financial  statements should be
           read in conjunction with the audited financial statements and the notes
           thereto  included in the  registrant's  Annual  Report on Form 10-K, as
           amended,  for the period ended  December 31, 1997.  The results for the
           three  months  ended  September  30,  1998  and the nine  months  ended
           September 30, 1998 are not  necessarily  indicative of the results that
           may be expected for the year ended December 31, 1998.
  
                    The consolidated  financial statements include the accounts of
           Commerce  Bancorp,  Inc.  (the  Company)  and all of its  subsidiaries,
           including    Commerce    Bank,    N.A.    (Commerce    NJ),    Commerce
           Bank/Pennsylvania,    N.A.,   Commerce   Bank/Shore,   N.A.,   Commerce
           Bank/North,  Commerce  Capital Trust I, and Commerce  Capital  Markets,
           Inc.  (CCMI).   All  material   intercompany   transactions  have  been
           eliminated.
  
  B.       Commitments
  
                    In  the  normal   course  of   business,   there  are  various
           outstanding commitments to extend credit, such as letters of credit and
           unadvanced   loan   commitments,   which  are  not   reflected  in  the
           accompanying  consolidated  financial  statements.  Management does not
           anticipate any material losses as a result of these transactions.
  
                                        -5-
  C.       Employee Stock Ownership Plan (ESOP) Debt Guarantee
  
                    The Company has  guaranteed a debt  obligation of its Employee
           Stock Ownership Plan (ESOP) which originated at $7,500,000 and has been
           reduced to $1,538,000 through principal  reductions.  Accordingly,  the
           loan amount is reflected in the Company's consolidated balance sheet as
           a  liability  and  an  equal  amount,  representing  deferred  employee
           benefits,  has been recorded as a deduction from stockholders'  equity.
           The ESOP  obtained  the loan in 1990 to  acquire a new class of Company
           Cumulative  Convertible Preferred Stock (Series C) at a price of $18.00
           per share. The loan was refinanced in 1994, and is payable in quarterly
           installments  with the final  payment due January  28,  2000.  The loan
           bears  interest at a variable  rate,  although the rate can be fixed at
           future repricing dates in accordance with the loan agreement. Effective
           March 1,  1998,  the  Trustees  of the ESOP  exercised  their  right to
           convert all 417,000 shares of the Series C stock into 808,630 shares of
           the Company's  common stock,  a portion of which is pledged as security
           for the loan.  As the Company makes annual  contributions  to the ESOP,
           these  contributions,  plus dividends  from the Company's  common stock
           held by the ESOP, will be used to repay the loan.
  
  D.       Recent Accounting Statements
  
                    As  of  January  1,  1998,  the  Company   adopted   Financial
           Accounting   Standards  Board  (FASB)   Statement  No.  130  "Reporting
           Comprehensive  Income" (FAS 130). FAS 130 establishes new standards for
           reporting  comprehensive  income,  which includes net income as well as
           certain  other  items  which  result in a change to equity  during  the
           period.  Prior period  financial  statements have been  reclassified to
           conform to the  requirements of FAS 130. The adoption of FAS 130 had no
           impact on the Company's  financial  position or results of  operations.
           During the third quarter of 1998 and 1997, total comprehensive  income,
           which for the  Company  included  net income and  unrealized  gains and
           losses on the  Company's  available  for sale  securities,  amounted to
           $18.1  million  and $16.3  million,  respectively.  For the nine months
           ended September 30, 1998 and 1997, total comprehensive income was $44.6
           million and $34.9 million, respectively.
  
                    In June,  1997, the FASB issued Statement No. 131 "Disclosures
           About Segments of an Enterprise and Related Information" (FAS 131). FAS
           131 requires disclosure of financial and descriptive  information about
           an  enterprise's  operating  segments  that meet  certain  quantitative
           thresholds.  This  statement  is effective  for fiscal years  beginning
           after  December 15, 1997, but is not required to be applied for interim
           reporting in the initial year of application.  The Company is currently
           evaluating  the impact of FAS 131 on the  disclosures  included  in its
           annual financial statements.
  
                    In June,  1998, the FASB issued  Statement No. 133 "Accounting
           for Derivative  Instruments and Hedging  Activities" (FAS 133). FAS 133
           is  required  to be adopted  in years  beginning  after June 15,  1999.
           Management  does not  anticipate  the  adoption  of FAS 133 will have a
           significant  effect  on  earnings  or  the  financial  position  of the
           Company.
  
                                        -6-
  E.       Trust Capital Securities
  
                    On June 9, 1997,  the Company  issued  $57.5  million of 8.75%
           Trust  Capital  Securities  through  Commerce  Capital Trust I, a newly
           formed  Delaware  business  trust  subsidiary  of the Company.  The net
           proceeds of the offering will be used for general  corporate  purposes,
           which may  include  contributions  to  subsidiary  banks to fund  their
           operations, the financing of one or more future acquisitions, repayment
           of indebtedness of the Company or of its subsidiary banks,  investments
           in or extensions of credit to its  subsidiaries,  or the  repurchase of
           shares of the Company's  outstanding common stock. All $57.5 million of
           the Trust Capital  Securities  qualify as Tier 1 capital for regulatory
           capital purposes.
  
   F.      Commerce Capital Markets, Inc.
  
                    In the  first  quarter  of 1998,  the  Company  completed  the
           acquisition  of A. H. Williams & Co.  (Williams),  Philadelphia,  PA, a
           public finance  investment  firm,  and combined  Williams with Commerce
           Capital,  the bank  securities  dealer division of Commerce NJ, to form
           Commerce Capital Markets,  Inc., a wholly-owned  nonbank  subsidiary of
           the Company engaging in certain securities  activities  permitted under
           Section 20 of the Glass-Steagall  Act. The acquisition was completed by
           the  issuance  of common  stock of the Company  totaling  approximately
           395,000  shares.  The  transaction  was  accounted  for as a pooling of
           interests.  However,  financial  statements of the periods prior to the
           acquisition have not been restated,  as the changes,  in the aggregate,
           would be immaterial.
  
  G.       Earnings Per Share
  
           The calculation of earnings per share follows (in thousands, except for
           per share amounts):
  Three Months Ended       Nine months Ended
                                                September 30           September 30
                                              1998        1997        1998        1997
                                            -------     -------     -------     -------
  Basic:
  Net income                                $12,559     $10,377     $36,153     $29,845
  Preferred stock dividends                                 141                     422
                                            -------     -------     -------     -------
  Net income applicable to common stock     $12,559     $10,236     $36,153     $29,423
                                            =======     =======     =======     =======
  
  Average common shares outstanding          22,689      21,105      22,405      20,988
                                            =======     =======     =======     =======
  
  Net income per common share - basic       $  0.55     $  0.48     $  1.61     $  1.40
                                            =======     =======     =======     =======
  
                                        -7-
  Diluted:
  Net income                                   $12,559     $10,377     $36,153     $29,845
  Additional ESOP contribution under the
           if-converted method                                  11                      34
                                               -------     -------     -------     -------
  Net income applicable to common stock
           on a diluted basis                  $12,559     $10,366     $36,153     $29,811
                                               =======     =======     =======     =======
  
  Average common shares outstanding             22,689      21,105      22,405      20,988
  Additional shares considered in diluted
           computation assuming:
             Exercise of stock options           1,048         891       1,099         872
             Conversion of preferred stock                     647         140         647
                                               -------     -------     -------     -------
  Average common shares outstanding
           on a diluted basis                   23,737      22,643      23,644      22,507
                                               =======     =======     =======     =======
  
  Net income per common share - diluted        $  0.53     $  0.46     $  1.53     $  1.32
                                               =======     =======     =======     =======
  H.       Bank Acquisitions
  
           On August 12, 1998, the Company  reached an agreement to acquire Tinton
           Falls  State  Bank  through  the  acquisition  of its  parent  company,
           Community  First Banking  Company  (OTCBB Symbol:  CFST).  Tinton Falls
           State  Bank,  headquartered  in Tinton  Falls,  New  Jersey,  with $189
           million in assets and $174 million in deposits at  September  30, 1998,
           serves  Monmouth  County,  New Jersey  through the  operation  of seven
           branch offices. The Company will issue approximately 1.5 million shares
           to complete  the  acquisition,  which is expected to close in the first
           quarter of 1999. The transaction  will be accounted for as a pooling of
           interests.
  
           On  September  17,  1998,  the Company  reached an agreement to acquire
           Prestige  State Bank  through the  acquisition  of its parent  company,
           Prestige  Financial Corp. (NASDAQ Symbol:  PRFN).  Prestige State Bank,
           headquartered  in Raritan  Township,  New Jersey,  with $322 million in
           assets and $298  million in  deposits at  September  30,  1998,  serves
           Hunterdon County and portions of Warren County and Somerset County, New
           Jersey, through the operation of eight branch offices. The Company will
           issue  approximately  1.9 million  shares to complete the  acquisition,
           which  is  expected  to  close  in  the  first  quarter  of  1999.  The
           transaction will be accounted for as a pooling of interests.
  
           Unaudited pro forma  combined  financial  information  for the Company,
           Tinton  Falls State Bank,  and  Prestige  State Bank at or for the year
           ended December 31, 1997 includes the following (dollars in thousands):
  
                    Assets                             $4,388,000
                    Deposits                            3,784,000
                    Stockholders' equity                  282,000
                    Net interest income                   167,000
                    Net income                             45,000
  
           Diluted net income per common share will not differ materially from the
           $1.78 reported by the Company for 1997 after  adjusting for the 5-for-4
           stock  split in the form of a 25% stock  dividend  declared on June 29,
           1998.
  
                                        -8-
  Item 2. Management's  Discussion and Analysis of Financial Condition and Results
          of Operation
  
           Capital Resources
  
                    At September 30, 1998,  stockholders'  equity  totaled  $294.6
           million or 6.43% of total assets,  compared to $250.8  million or 6.37%
           of total assets at December 31, 1997.
  
                    On June 9, 1997,  the Company  issued  $57.5  million of 8.75%
           Trust  Capital  Securities  through  Commerce  Capital Trust I, a newly
           formed  Delaware  business  trust  subsidiary  of the Company.  The net
           proceeds of the offering will be used for general  corporate  purposes,
           which may  include  contributions  to  subsidiary  banks to fund  their
           operations, the financing of one or more future acquisitions, repayment
           of indebtedness of the Company or of its subsidiary banks,  investments
           in or extensions of credit to its  subsidiaries,  or the  repurchase of
           shares of the Company's  outstanding common stock. All $57.5 million of
           the Trust Capital  Securities  qualify as Tier 1 capital for regulatory
           capital purposes.
  
                    The table below  presents  the  Company's  and  Commerce  NJ's
           risk-based and leverage ratios at September 30, 1998 and 1997:
  Per Regulatory Guidelines
                                                        Actual                       Minimum                "Well Capitalized"
                                                 Amount           Ratio       Amount          Ratio       Amount           Ratio
  September 30, 1998
  Company
     Risk based capital ratios:
       Tier 1                                   $334,914           14.15%    $ 94,706           4.00%    $142,058            6.00%
       Total capital                             378,038           15.97      189,411           8.00      236,764           10.00
     Leverage ratio                              334,914            7.56      132,907           3.00      221,511            5.00
  
  Commerce NJ Risk based capital ratios:
       Tier 1                                   $190,741           12.74%    $ 59,903           4.00%    $ 89,854            6.00%
       Total capital                             206,842           13.81      119,805           8.00      149,756           10.00
     Leverage ratio                              190,741            6.68       85,702           3.00      142,836            5.00
  
  September 30, 1997
  Company
     Risk based capital ratios:
       Tier 1                                   $289,539           15.47%    $ 74,860           4.00%    $112,290            6.00%
       Total capital                             333,473           17.82      149,720           8.00      187,150           10.00
     Leverage ratio                              289,539            7.72      112,554           3.00      187,589            5.00
  
  Commerce NJ Risk based capital ratios:
       Tier 1                                   $156,643           12.60%    $ 49,723           4.00%    $ 74,584            6.00%
       Total capital                             170,294           13.70       99,445           8.00      124,307           10.00
     Leverage ratio                              156,643            6.29       74,742           3.00      124,570            5.00
  -9-
  At September 30, 1998, the Company's consolidated capital levels
           and  each  of  the  Company's  bank  subsidiaries  met  the  regulatory
           definition  of a "well  capitalized"  financial  institution,  i.e.,  a
           leverage capital ratio exceeding 5%, a Tier 1 risk-based  capital ratio
           exceeding  6%, and a total  risk-based  capital  ratio  exceeding  10%.
           Management  believes that as of September 30, 1998, the Company and its
           subsidiaries  meet all capital adequacy  requirements to which they are
           subject.
  
           Deposits
  
                    Total  deposits at September 30, 1998 were $4.13  billion,  up
           $808.3  million,  or 24%  over  total  deposits  of  $3.33  billion  at
           September  30, 1997,  and up by $764.1  million,  or 23% from  year-end
           1997. Deposit growth during the first nine months of 1998 included core
           deposit  growth in all  categories  as well as growth  from the  public
           sector.  The Company  experienced  "same-store  core deposit growth" of
           20.1% at  September  30,  1998 as  compared  to deposits a year ago for
           those branches open for more than two years.
  
           Interest Rate Sensitivity and Liquidity
  
                    The Company's risk of loss arising from adverse changes in the
           fair market value of financial instruments, or market risk, is composed
           primarily of interest rate risk. The primary objective of the Company's
           asset/liability  management  activities  is to  maximize  net  interest
           income, while maintaining  acceptable levels of interest rate risk. The
           Company's   Asset/Liability   Committee   (ALCO)  is  responsible   for
           establishing  policies to limit  exposure to interest rate risk, and to
           ensure  procedures  are  established to monitor  compliance  with these
           policies.  The  guidelines  established  by ALCO  are  reviewed  by the
           Company's Board of Directors.
  
                    Management  considers the simulation of net interest income in
           different  interest rate  environments  to be the best indicator of the
           Company's  interest rate risk. Income simulation  analysis captures not
           only the potential of all assets and  liabilities to mature or reprice,
           but also the probability  that they will do so. Income  simulation also
           attends to the relative interest rate sensitivities of these items, and
           projects  their  behavior  over an  extended  period of time.  Finally,
           income simulation  permits management to assess the probable effects on
           the balance  sheet not only of changes in interest  rates,  but also of
           proposed strategies for responding to them.
  
                    The Company's income  simulation model analyzes  interest rate
           sensitivity  by projecting net income over the next 24 months in a flat
           rate scenario versus net income in alternative interest rate scenarios.
           Management  continually  reviews  and refines  its  interest  rate risk
           management  process  in  response  to the  changing  economic  climate.
           Currently, the Company's model projects a proportionate 200 basis point
           change  during the next  year,  with rates  remaining  constant  in the
           second year.  The Company's ALCO policy has  established  that interest
           income  sensitivity will be considered  acceptable if net income in the
           above  interest  rate  scenario is within 15% of net income in the flat
           rate  scenario  in the first year and within 30% over the two year time
           frame.  At September 30, 1998, the Company's  income  simulation  model
           indicates  net income  would  decrease by 2.40% and 10.05% in the first
           year and over a two year time frame,  respectively,  if rates decreased
           as described  above.  The model projects that net income would decrease
           by 6.13% and 5.98% in the  first  year and over a two year time  frame,
           respectively,  if rates increased as described  above. All of these net
           income projections are within an acceptable level of interest rate risk
           pursuant to the policy established by ALCO.
  
                                        -10-
  In the event the Company's  interest rate risk models indicate
           an unacceptable  level of risk, the Company could undertake a number of
           actions that would reduce this risk, including the sale of a portion of
           its available for sale portfolio, the use of risk management strategies
           such  as  interest  rate  swaps  and  caps,  or  the  extension  of the
           maturities of its short-term borrowings.
  
                    Management  also  monitors  interest  rate risk by utilizing a
           market value of equity model. The model assesses the impact of a change
           in interest  rates on the market value of all the Company's  assets and
           liabilities,  as  well  as any  off  balance  sheet  items.  The  model
           calculates the market value of the Company's  assets and liabilities in
           excess of book value in the current rate  scenario,  and then  compares
           the excess of market value over book value given an immediate 200 basis
           point change in rates.  The Company's  ALCO policy  indicates  that the
           level of interest rate risk is  unacceptable if the immediate 200 basis
           point  change  would result in the loss of 60% or more of the excess of
           market value over book value in the current rate scenario. At September
           30,  1998,  the market value of equity  model  indicates an  acceptable
           level of interest rate risk.
  
                    Liquidity  involves  the  Company's  ability to raise funds to
           support asset growth or decrease assets to meet deposit withdrawals and
           other  borrowing  needs,  to  maintain  reserve   requirements  and  to
           otherwise  operate  the  Company on an  ongoing  basis.  The  Company's
           liquidity needs are primarily met by growth in core deposits,  its cash
           and  federal  funds  sold  position,  cash  flow  from  its  amortizing
           investment  and  loan  portfolios,  as well  as the  use of  short-term
           borrowings, as required.
  
           Short-Term Borrowings
  
                    Short-term  borrowings,   or  other  borrowed  money,  consist
           primarily of securities  sold under  agreements to repurchase,  and are
           used  to  meet  short  term  funding  needs.  At  September  30,  1998,
           short-term  borrowings aggregated $31.8 million and had an average rate
           of 6.63%.
  
           Interest Earning Assets
  
                    For the nine month period ended  September 30, 1998,  interest
           earning  assets  increased  $554.1  million from $3.62 billion to $4.17
           billion.  This increase was primarily in investment  securities and the
           loan portfolio as described below.
  
           Loans
  
                    During the first nine months of 1998,  loans increased  $349.4
           million from $1.41  billion to $1.76  billion.  At September  30, 1998,
           loans  represented  43% of total deposits and 38% of total assets.  All
           segments  of the loan  portfolio  experienced  growth in the first nine
           months of 1998,  including  loans  secured by  commercial  real  estate
           properties, commercial loans, and consumer loans.
  
                                        -11-
  Investments
  
                    In  total,  for the  first  nine  months  of 1998,  securities
           increased  $211.7 million from $2.20 billion to $2.41 billion.  Deposit
           growth and other  funding  sources were used to increase the  Company's
           investment portfolio.  The available for sale portfolio decreased $98.4
           million to $1.22 billion from $1.32  billion at December 31, 1997,  and
           the securities held to maturity  portfolio  increased $264.2 million to
           $1.14  billion at  September  30, 1998 from $874.0  million at year-end
           1997. The portfolio of trading securities  increased $45.9 million from
           year-end 1997 to $53.8 million at September 30, 1998,  primarily due to
           the formation of CCMI.  At September 30, 1998,  the average life of the
           investment  portfolio was approximately 5.1 years, and the duration was
           approximately  3.9 years.  At  September  30,  1998,  total  securities
           represented 53% of total assets.
  
           Net Income
  
                  Net income for the third quarter of 1998 was $12.6  million,  an
           increase of $2.2 million or 21% over the $10.4 million recorded for the
           third quarter of 1997. Net income for the first nine months of 1998 was
           $36.2  million,  an  increase  of $6.3  million  or 21% over the  $29.8
           million  recorded  in the first  nine  months  of 1997.  On a per share
           basis,  diluted net income for the third  quarter of 1998 and the first
           nine months of 1998 were $0.53 and $1.53 per common  share  compared to
           $0.46 and $1.32 per common share for the respective 1997 periods.
  
                  Return on average  assets  (ROA) and  return on  average  equity
           (ROE)  for  the  third   quarter  of  1998  were   1.13%  and   17.69%,
           respectively,  compared to 1.11% and 18.18%, respectively, for the same
           1997  period.  ROA and ROE for the first nine months of 1998 were 1.13%
           and 17.61%, respectively, compared to 1.14% and 18.51% a year ago.
  
            Net Interest Income
  
                  Net interest  income totaled $44.5 million for the third quarter
           of 1998,  an increase of $6.9 million or 18% from $37.6  million in the
           third quarter of 1997. Net interest income for the first nine months of
           1998 totaled  $127.2  million,  up $18.7  million or 17% from the first
           nine months of 1997. The  improvement  in net interest  income for both
           periods  was  due  primarily  to  volume  increases  in  the  loan  and
           investment portfolios.
  
           Noninterest Income
  
                  Noninterest  income  totaled $23.4 million for the third quarter
           of 1998,  an increase of $8.0 million or 52% from $15.4  million in the
           third  quarter of 1997.  The  increase  was due  primarily to increased
           other  operating  income,  which rose $7.3 million over the prior year,
           including  increased  revenues of $2.5 million from  Commerce  National
           Insurance Services, Inc. (Commerce Insurance),  the Company's insurance
           brokerage subsidiary,  and $3.5 million from CCMI. In addition, deposit
           charges and service fees  increased $1.5 million from the third quarter
           of 1997  primarily  due to  higher  transaction  volumes.  The  Company
           recorded $991 thousand in net investment  securities gains in the third
           quarter of 1998,  as compared to $1.7  million in the third  quarter of
           1997.
  
                  For the first nine months of 1998,  noninterest  income  totaled
           $64.0  million,  an increase of $22.1 million or 53% from $41.9 million
           in the first nine months of 1997. Other operating
  
                                        -12-
  income rose $16.6 million over the first nine months of 1997, including
           increased  revenues of $5.8 million from  Commerce  Insurance  and $7.9
           million from CCMI, respectively.  Deposit charges and service fees rose
           $5.3 million over the prior year  primarily  due to higher  transaction
           volumes,  and the  Company  recorded  $1.9  million  in net  investment
           securities  gains during the first nine months of 1998,  as compared to
           $1.7 million in the first nine months of 1997.
  
           Noninterest Expense
  
                    For the third  quarter of 1998,  noninterest  expense  totaled
           $47.4 million, an increase of $11.7 million or 33% over the same period
           in 1997. Contributing to this increase was new branch activity over the
           past twelve months,  with the number of branches  increasing from 70 at
           September  30, 1997 to 80 at  September  30,  1998,  the  expansion  of
           Commerce  Insurance,  and the formation of CCMI in the first quarter of
           1998.  With  the  addition  of  these  new  offices  and  CCMI,  staff,
           facilities,  marketing,  and related expenses rose  accordingly.  Other
           noninterest  expenses rose $2.5 million over the third quarter of 1997.
           This increase resulted primarily from higher bank card-related  service
           charges,   increased  business  development  expenses,   and  increased
           provisions for non-credit-related losses.
  
           For the first nine months of 1998,  noninterest  expense totaled $131.4
           million, an increase of $31.4 million or 31% over $100.0 million in the
           first nine months of 1997. Contributing to this increase was new branch
           activity,  the  expansion of Commerce  Insurance,  and the formation of
           CCMI as noted above. Other noninterest  expenses rose $6.0 million over
           the first nine months of 1997.  This increase  resulted  primarily from
           higher  bank   card-related   service   charges,   increased   business
           development  expenses,  higher legal fees, and increased provisions for
           non-credit-related losses.
  
                    The  Company's   operating   efficiency   ratio   (noninterest
           expenses,  less  other real  estate  expense,  divided by net  interest
           income  plus  noninterest  income  excluding  non-recurring  gains) was
           68.82% for the first nine  months of 1998 as compared to 66.36% for the
           same 1997 period. The Company's efficiency ratio remains above its peer
           group primarily due to its aggressive growth expansion activities.
  
           Loan and Asset Quality
  
                    Total non-performing  assets  (non-performing  loans and other
           real  estate,  excluding  loans  past  due 90 days or  more  and  still
           accruing  interest) at September 30, 1998 were $12.3 million,  or 0.27%
           of total assets  compared to $17.4  million or 0.44% of total assets at
           December  31,  1997 and  $19.0  million  or 0.50%  of total  assets  at
           September 30, 1997.
  
                    Total non-performing loans (non-accrual loans and restructured
           loans,  excluding  loans  past due 90 days or more and  still  accruing
           interest)  at  September  30, 1998 were $6.9  million or 0.39% of total
           loans compared to $11.6 million or 0.82% of total loans at December 31,
           1997 and $12.4  million or 0.89% of total loans at September  30, 1997.
           At  September  30,  1998,  loans  past  due 90 days or more  and  still
           accruing interest amounted to $1.1 million compared to $226 thousand at
           December 31, 1997 and $423 thousand at September  30, 1997.  Additional
           loans considered as potential  problem loans by the Company's  internal
           loan review  department ($13.2 million at September 30, 1998) have been
           evaluated  as to risk  exposure  in  determining  the  adequacy  of the
           allowance for loan losses.
  
                                        -13-
  Other real estate  (ORE) at  September  30, 1998  totaled $5.4
           million  compared to $5.8 million at December 31, 1997 and $6.7 million
           at September 30, 1997.  These  properties have been written down to the
           lower of cost or fair value less disposition costs.
  
                    On pages 15 and 16 are tabular  presentation  showing detailed
           information about the Company's  non-performing loans and assets and an
           analysis of the  Company's  allowance for loan losses and other related
           data for September 30, 1998, December 31, 1997, and September 30, 1997.
  
           Year 2000
  
                    The  Company  began the  process  of  preparing  its  computer
           systems  and  applications  for the  Year  2000 in  1996.  The  process
           involves   identifying  and  resolving  date  recognition  problems  in
           computer systems and software,  and to a lesser extent, other operating
           equipment,  that could be caused by the date change from  December  31,
           1999 to January 1, 2000.
  
                    The Company  has  completed  its  assessment  of all  business
           processes that could be affected by the Year 2000 issue.  Each business
           process assessment included a review of the information systems used in
           that process,  including  hardware and software,  involvement  of third
           parties,  and any  other  operating  equipment.  The  Company  licenses
           substantially  all software used in conducting  its business from third
           party vendors.  All vendors have been contacted regarding the Year 2000
           issue,  and the Company  continues to track the progress each vendor is
           making in reaching  Year 2000  compliance.  The Company is also working
           with  significant  customers and  counterparties  to monitor their Year
           2000  efforts.  The Company  expects to have  substantially  all of the
           necessary  changes in place and tested for all mission critical systems
           (those  systems  defined as absolutely  essential to the daily business
           operation of the Company) before the end of 1998. Additionally, changes
           for all remaining critical systems should be in place and tested by the
           end of the first quarter of 1999.
  
                    The  Company  believes it is taking the  appropriate  steps to
           address all Year 2000 issues.  Despite the Company's efforts to address
           the Year 2000  problem  and develop  contingency  plans in the event of
           Year  2000  failures,   including   non-compliance   by  third  parties
           (including  loan  customers),  there can be no assurance that Year 2000
           issues  (both  internal and  external)  will not  materially  adversely
           impact the Company's  financial  position,  results of  operations,  or
           relationships with customers, vendors, or others.
  
                    The  Company  estimates  the  total  cost  of  the  Year  2000
           compliance  process,  including internal and external personnel and any
           required  hardware  and  software  modifications,  will not exceed $1.0
           million.
  
           Forward-Looking Statements
  
                    The  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.
  
                                        -14-
  The following summary presents  information  regarding  non-performing loans and
  assets as of September 30, 1998 and the preceding four quarters: (dollar amounts
  in thousands)
  September 30,   June 30,    March 31,   December 31, September 30,
                                                 1998          1998        1998          1997         1997
                                                -------      -------      -------      -------      -------
  Non-accrual loans:
     Commercial                                 $ 1,301      $ 1,070      $ 1,764      $ 1,816      $ 1,920
     Consumer                                       763          835          944          703          893
     Real estate:
        Construction                                393          394          393        1,345        2,006
        Mortgage                                  4,346        5,215        7,742        7,706        7,533
                                                -------      -------      -------      -------      -------
           Total non-accrual loans                6,803        7,514       10,843       11,570       12,352
                                                -------      -------      -------      -------      -------
  
  Restructured loans:
     Commercial                                      17           18           19           19           20
     Consumer
     Real estate:
        Construction
        Mortgage                                    104          109          114
                                                -------      -------      -------      -------      -------
           Total restructured loans                 121          127          133           19           20
                                                -------      -------      -------      -------      -------
  
     Total non-performing loans                   6,924        7,641       10,976       11,589       12,372
                                                -------      -------      -------      -------      -------
  
  Other real estate                               5,409        5,649        6,029        5,845        6,673
                                                -------      -------      -------      -------      -------
  
  Total non-performing assets                    12,333       13,290       17,005       17,434       19,045
                                                -------      -------      -------      -------      -------
  
  Loans past due 90 days or more
     and still accruing                           1,099          259          308          226          423
                                                -------      -------      -------      -------      -------
  
  Total non-performing assets and
     loans past due 90 days or more             $13,432      $13,549      $17,313      $17,660      $19,468
                                                =======      =======      =======      =======      =======
  
  Total non-performing loans as a
     percentage of total period-end
     loans                                         0.39%        0.46%        0.75%        0.82%        0.89%
  
  Total non-performing assets as a
     percentage of total period-end assets         0.27%        0.30%        0.41%        0.44%        0.50%
  
  Total non-performing assets and loans
     past due 90 days or more as a
     percentage of total period-end assets         0.29%        0.30%        0.42%        0.45%        0.51%
  
  Allowance for loan losses as a
     percentage of total non-performing
     loans                                          357%         305%         200%         183%         169%
  
  Allowance for loan losses as a percentage
     of total period-end loans                     1.40%        1.40%        1.50%        1.51%        1.50%
  
  Total non-performing assets and loans
     past due 90 days or more as a
     percentage of stockholders' equity and
     allowance for loan losses                        4%           4%           6%           6%           8%
  -15-
  The following  table  presents,  for the periods  indicated,  an analysis of the
  allowance for loan losses and other related data: (dollar amounts in thousands)
  Year
                                                         Nine Months Ended                  Ended
                                                    09/30/98          09/30/97            12/31/97
                                                   -----------       ------------        ------------
  Balance at beginning of period                      $21,261            $17,975             $17,975
  Provisions charged to operating expenses              4,448              4,094               4,668
                                                   -----------       ------------        ------------
                                                       25,709             22,069              22,643
  
  Recoveries on loans charged-off:
     Commercial                                           253                150                 348
     Consumer                                             223                267                 406
     Real estate                                           18                121                 144
                                                   -----------       ------------        ------------
  Total recoveries                                        494                538                 898
  
  Loans charged-off:
     Commercial                                          (280)              (783)               (964)
     Consumer                                            (901)              (846)             (1,170)
     Real estate                                         (297)               (44)               (146)
                                                   -----------       ------------        ------------
  Total charge-offs                                    (1,478)            (1,673)             (2,280)
                                                   -----------       ------------        ------------
  Net charge-offs                                        (984)            (1,135)             (1,382)
                                                   -----------       ------------        ------------
  
  Balance at end of period                            $24,725            $20,934             $21,261
                                                   ===========       ============        ============
  
  Net charge-offs as a percentage of
  average loans outstanding                              0.08%              0.11%               0.10%
  Item 3:  Quantitative and Qualitative Disclosures About Market Risk
  -------------------------------------------------------------------------------
  
  See Item 2 -  Management's  Discussion  and Analysis of Financial  Condition and
  Results of Operation, Interest Rate Sensitivity and Liquidity.
  
                                        -16-
  PART II. OTHER INFORMATION
  
  Item 6.  Exhibits and Reports on Form 8-K
  
           No  reports  on Form 8-K were  filed  during  the third  quarter  ended
  September 30, 1998.
  
                                        -17-
  SIGNATURES
  
  Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
  registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
  undersigned thereunto duly authorized.
  
                                                 COMMERCE BANCORP, INC.
                                                      (Registrant)
  
  November 13, 1998
    (Date)                                      C. EDWARD JORDAN, JR.
                                               EXECUTIVE VICE PRESIDENT
                                             (PRINCIPAL FINANCIAL OFFICER)
  
                                        -18