SEC Company Response from PENNSYLVANIA COMMERCE BANCORP INC (CIK 0001085706) — Oct 1, 2004
PENNSYLVANIA COMMERCE BANCORP INC (CIK 0001085706)
Date: Oct. 1, 2004 · CIK: 0001085706 · Accession: 0000950159-04-000881
AI Filing Summary & Sentiment
File numbers found in text: 333-118236
Referenced dates: September 13, 2004
Letter
October 1, 2004 VIA EDGAR AND FEDERAL EXPRESS U.S. Securities and Exchange Commission 450 Fifth Street, N.W. Washington, DC 20549 Attention: Mr. Barry McCarty, Senior Counsel
Re: Pennsylvania Commerce Bancorp, Inc. (the "Company") Amendment No. 1 to Registration Statement on Form S-1 File No. 333-118236 -----------------------------------------------------
Dear Mr. McCarty:
On behalf of the Company, please find the Company's response to the comment letter of the staff (the "Staff") of the SEC dated September 13, 2004 (the "Comment Letter") to the Company's Registration Statement on Form S-1 filed on August 13, 2004 (File No. 333-118236) (the "S-1"). We are submitting this response to the Staff on behalf of the Company at the same time the Company is filing Amendment No. 1 to the S-1 ("Amendment No. 1").
Via federal express, we are providing you with a clean copy of Amendment No. 1 and a copy of Amendment No. 1 that has been marked against the S-1 to show the changes from the S-1 as originally filed. We have numbered the responses contained herein to correspond to the comments contained in the Comment Letter. Please note that page references cited in this letter, other than those cited in your comments, are to the page numbers of the enclosed blacklined document.
Form S-1 -------- Prospectus Cover Page ---------------------
1. COMMENT: Highlight the risk factor sentences by using boldface type to distinguish such disclosure from the rest of the narrative.
ANSWER: The cross-reference to the risk factor section on the Prospectus Cover Page is highlighted in boldface type.
<PAGE>
U.S. Securities and Exchange Commission October 1, 2004 Page 2
Table of Contents ----------------- 2. COMMENT: Revise to include a line item for "Dilution" and add the section required by Item 506 of Regulation S-K.
ANSWER: The Company notes the Staff's comment but has not added disclosure regarding dilution. The Company believes that since (i) the Company was subject to the reporting requirements of Section 13(a) or 15(d) of the Exchange Act immediately prior to the filing of the S-1 and (ii) the Company has not had losses in each of its last three years, no additional disclosure is required by Item 506 of Regulation S-K.
3. COMMENT: Delete the paragraph, which follows the Table of Contents, and revise the entire document to make clear by context that you are referring to in each instance.
ANSWER: The Company has deleted the paragraph which followed the Table of Contents.
Summary ------- Our Strategy ------------ 4. COMMENT: Revise the first bullet to disclose the anticipated cost of each new branch, the anticipated 5 year capital expenditures for branches and the number expected to be opened, and, the cost for the new headquarters. Additionally, disclose the expected source of the funds to pay for these programs.
ANSWER: The Company has added disclosure in the first bullet on pages 3 and 56 to disclose the anticipated cost of a new branch office and the new headquarters. The disclosure in such bullet point also explains that the Company is targeting to open approximately two to six new stores in each of the next five years. The Company has not added disclosure regarding the expected source of the funds to pay for this expansion as the Company does not want to give the misimpression that the proceeds of this offering will be used to build its new stores and headquarters. Rather, the Company expects to use the proceeds of the offering to provide capital support for continued expansion.
5. COMMENT: Revise the second and third bullets to add support for the statements that the bank has gained from consolidation or otherwise indicate that management believes these had assisted growth, e.g., add disclosure of how many new customers previously banked with a company that was consolidated.
ANSWER: The Company has revised disclosure in the second and third bullets on pages 3 and 56 to clarify that management believes that industry consolidation has assisted the Company's growth.
<PAGE>
U.S. Securities and Exchange Commission October 1, 2004 Page 3
The Offering ------------ Use of Proceeds --------------- 6. COMMENT: Revise herein and in the "Use of Proceeds" section on page 15 to disclose the costs of the branch expansion and the new headquarters and indicate what other corporate purposes, such as, salaries, etc., will use the remaining proceeds.
ANSWER: The Company has revised the disclosure on pages 4 and 15 to add a cross-reference to the disclosure related to the costs of the Company's branch expansion and new headquarters. The Company believes it would be misleading to discuss these costs in the "Use of Proceeds" sections since the money raised in this offering has not been specifically earmarked for such purposes. While the Company notes your request regarding expanding the disclosure to indicate what other corporate purposes will use the remaining proceeds, the Company believes that the current disclosure is complete and accurate since none of the proceeds have been or will be specifically designated as set aside for any specific purpose.
7. COMMENT: Revise to add a subsection entitled, "Offering Price and Valuation Information". Such subsection should detail recent stock trading, price, P/E and P/B trading multiples, dilution information, and comparable company P/E and P/B multiples.
ANSWER: The Company's common stock is a publicly traded security. On the cover page of the Prospectus, the Company has disclosed recent stock trading prices of its common stock and on page 16 has disclosed the market price of its common stock for each quarterly period within the two most recent fiscal years. The Company believes that such disclosure is complete, accurate and fair. The Company has not added disclosure regarding P/E and P/B Trading Multiples and dilution information as the Company believes that such information is not required and could be misleading to investors. In addition, in accordance with a conversation between Company's counsel and Michael Clampitt of the Staff, the Company has not added disclosure regarding comparable company multiples.
Selected Consolidated Financial Data ------------------------------------ 8. COMMENT: Include a footnote detailing how you determine the efficiency ratio that you present on page 6.
ANSWER: The Company has added a footnote on page 7 to address this comment.
Risk Factors ------------ General ------- 9. COMMENT: Revise to add additional paragraph for declining capital and possible regulatory impact on capital related to trusts, increased
<PAGE> U.S. Securities and Exchange Commission October 1, 2004 Page 4
short-term borrowings and long-term debt, recent significant securities losses and possible future losses, and, substantial dilution may result from exercise of outstanding derivative securities.
ANSWER: The Company has added a risk factor on pages 10-11 to address many of the items the Staff proposed. The Company believes that the items not added in the new risk factor are either addressed in other risk factors or are not relevant to the Company.
Significant Growth ------------------ 10. COMMENT: Revise to disclose the costs for each branch, the five-year costs for the branch expansion program and the cost of the new headquarters as well as the source of the funds for these expenditures.
ANSWER: The Company has revised the risk factor related to growing rapidly on page 8 to disclose the number of stores the Company intends to open during each of the next five years and the Company's plan to open a new headquarters, operations and training center in 2005. In addition, the Company has added a cross-reference to the disclosure related to the costs of its branch expansion and new headquarters. See response to Comments #4 and #6.
Dependence of Commerce of New Jersey ------------------------------------ 11. COMMENT: Revise to disclose if the warrants are exercisable if no change of controls event occurs.
ANSWER: The Company has revised the risk factor on page 8 to address this comment.
Our executive officers, directors and five percent shareholders --------------------------------------------------------------- 12. COMMENT: Revise to disclose the present intention of the officers and directors to purchase in the offering and indicate the amount they intend to purchase.
ANSWER: The Company has revised the risk factor on page 13 to address this comment.
Management's Discussion and Analysis of Financial Condition and Results of -------------------------------------------------------------------------- Operations ---------- Application of Critical Accounting Policies ------------------------------------------- 13. COMMENT: We are aware of your reference made to the Notes to the Consolidated Financial Statements for more fully described accounting policies. Please expand the current disclosures to provide greater insight into the impact of these policies on your financial condition and operating performance. We remind you that such disclosure should supplement, not reiterate the accounting policies disclosed in the Notes to the Consolidated Financial Statements. Refer to the Commission's recent interpretive release regarding Management's Discussion and Analysis (Release No. 33-8350) for additional guidance.
ANSWER: The Company has added disclosure on pages 18-20 to address this comment.
<PAGE> U.S. Securities and Exchange Commission October 1, 2004 Page 5
14. COMMENT: Revise the last paragraph to indicate the expense that would have been reported or will be reported upon the adoption of the new standard.
ANSWER: The Company revised the last paragraph in the Stock-Based Compensation section on page 20 to address this comment.
Financial Condition - June 30, 2004 Compared to December 31, 2003 ----------------------------------------------------------------- Loans Held for Sale ------------------- 15. COMMENT: Please enhance your current loans held for sale discussion by including quantitative and qualitative analysis, which will explain how you determine classification, carrying value, and the strategy you employ with each of these loan products. As a related matter, please disclose how and when you determine which loans are participated with Commerce Bank N.A., which you refer to in Note 19. Additionally, refer to Industry Guide 3 III.D for disclosure requirements, if applicable.
ANSWER: The Company has revised the disclosure on page 26 to address this comment. As described in Note 19 to our notes to consolidated financial statements and on page 54 of the Business section, the Company occasionally participates in loans with Commerce Bank, N.A. and other financial institutions when the amount of a loan exceeds the Company's board's comfort level or the Company's legal lending limit to any one borrower. The Company does not sell its loans held for sale to Commerce Bank, N.A.
Loan and Asset Quality and Allowance for Loan Losses - page 26 -------------------------------------------------------------- 16. COMMENT: We note that you quantify the interest income recognized and foregone on nonperforming loans from 1999 to 2003 on page 41. Please disclose these amounts for the period ended June 30, 2004.
ANSWER: The Company has added disclosure on page 27 to address this comment.
Stockholders' Equity and Capital Adequacy ----------------------------------------- 17. COMMENT: Revise to add an explanation for the loss of $3.2 million on the portfolio of securities available for sale by disclosing what type of securities suffered the losses and whether the portfolio and other Company portfolios contain similar securities.
ANSWER: The Company has added disclosure on page 29 to address this comment.
Liquidity -- June 30, 2004 -------------------------- 18. COMMENT: We note your discussions concerning liquidity as of December 31, 2003 on page 45. Please revise to include additional disclosures regarding the following: o Historical information on sources and uses of cash, including material changes in operating, investing and financing cash flows and the supporting reasons; o Amounts and certainty of cash flows;
<PAGE>
U.S. Securities and Exchange Commission October 1, 2004 Page 6
o Discussions of known trends and uncertainties affecting liquidity.
Refer to the Commission's recent interpretative release regarding Management's Discussion and Analysis (Release No. 33-8350) for additional guidance.
ANSWER: The Company has added disclosure on pages 31-33 to address this comment. In addition, the Company has added a cross-reference in Liquidity - December 31, 2003 to the discussion on pages 31-33.
Loan Portfolio -------------- 19. COMMENT: We note reference made to your loan portfolio as non-homogeneous, due to changes in collateral requirements, among other reasons. Please provide expanded discussion of your loan origination policies and procedures for each loan type in your loan portfolio to provide enhanced understanding.
ANSWER: The Company has revised the disclosure on page 42 to address this comment.
20. COMMENT: We note reference made to your 2003 Strategic Plan. Please expand your disclosure to provide further analysis of how the plan may impact your lending opportunities, addressing inherent risk and rewards.
ANSWER: The Company has revised the disclosure on page 42 to address this comment.
Concentrations of Credit Risk -- page 40 ---------------------------------------- 21. COMMENT: Please expand your concentrations of credit risk disclosures. This may include but not be limited to, focusing on loan types that are not secured by real estate, significant loans to one borrower or within one industry, or any other risks inherent in the portfolio and how you have policies and procedures in place to monitor risk.
ANSWER: The Company has added disclosure on pages 43-44 to address this comment.
Allowance for Loan Losses ------------------------- 22. COMMENT: Please revise to provide additional discussion of how the allowance was determined, how accurate estimat
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<TEXT>
Phone: (215) 569-5549
Fax: (215) 832-5549
Email: wiseman@blankrome.com
October 1, 2004
VIA EDGAR AND FEDERAL EXPRESS
U.S. Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC 20549
Attention: Mr. Barry McCarty, Senior Counsel
Re: Pennsylvania Commerce Bancorp, Inc. (the "Company")
Amendment No. 1 to Registration Statement on Form S-1
File No. 333-118236
-----------------------------------------------------
Dear Mr. McCarty:
On behalf of the Company, please find the Company's response to the
comment letter of the staff (the "Staff") of the SEC dated September 13, 2004
(the "Comment Letter") to the Company's Registration Statement on Form S-1 filed
on August 13, 2004 (File No. 333-118236) (the "S-1"). We are submitting this
response to the Staff on behalf of the Company at the same time the Company is
filing Amendment No. 1 to the S-1 ("Amendment No. 1").
Via federal express, we are providing you with a clean copy of
Amendment No. 1 and a copy of Amendment No. 1 that has been marked against the
S-1 to show the changes from the S-1 as originally filed. We have numbered the
responses contained herein to correspond to the comments contained in the
Comment Letter. Please note that page references cited in this letter, other
than those cited in your comments, are to the page numbers of the enclosed
blacklined document.
Form S-1
--------
Prospectus Cover Page
---------------------
1. COMMENT: Highlight the risk factor sentences by using boldface type to
distinguish such disclosure from the rest of the narrative.
ANSWER: The cross-reference to the risk factor section on the
Prospectus Cover Page is highlighted in boldface type.
<PAGE>
U.S. Securities and Exchange Commission
October 1, 2004
Page 2
Table of Contents
-----------------
2. COMMENT: Revise to include a line item for "Dilution" and add the
section required by Item 506 of Regulation S-K.
ANSWER: The Company notes the Staff's comment but has not added
disclosure regarding dilution. The Company believes that since (i) the
Company was subject to the reporting requirements of Section 13(a) or
15(d) of the Exchange Act immediately prior to the filing of the S-1
and (ii) the Company has not had losses in each of its last three
years, no additional disclosure is required by Item 506 of Regulation
S-K.
3. COMMENT: Delete the paragraph, which follows the Table of Contents, and
revise the entire document to make clear by context that you are
referring to in each instance.
ANSWER: The Company has deleted the paragraph which followed the Table
of Contents.
Summary
-------
Our Strategy
------------
4. COMMENT: Revise the first bullet to disclose the anticipated cost of
each new branch, the anticipated 5 year capital expenditures for
branches and the number expected to be opened, and, the cost for the
new headquarters. Additionally, disclose the expected source of the
funds to pay for these programs.
ANSWER: The Company has added disclosure in the first bullet on pages 3
and 56 to disclose the anticipated cost of a new branch office and the
new headquarters. The disclosure in such bullet point also explains
that the Company is targeting to open approximately two to six new
stores in each of the next five years. The Company has not added
disclosure regarding the expected source of the funds to pay for this
expansion as the Company does not want to give the misimpression that
the proceeds of this offering will be used to build its new stores and
headquarters. Rather, the Company expects to use the proceeds of the
offering to provide capital support for continued expansion.
5. COMMENT: Revise the second and third bullets to add support for the
statements that the bank has gained from consolidation or otherwise
indicate that management believes these had assisted growth, e.g., add
disclosure of how many new customers previously banked with a company
that was consolidated.
ANSWER: The Company has revised disclosure in the second and third
bullets on pages 3 and 56 to clarify that management believes that
industry consolidation has assisted the Company's growth.
<PAGE>
U.S. Securities and Exchange Commission
October 1, 2004
Page 3
The Offering
------------
Use of Proceeds
---------------
6. COMMENT: Revise herein and in the "Use of Proceeds" section on page 15
to disclose the costs of the branch expansion and the new headquarters
and indicate what other corporate purposes, such as, salaries, etc.,
will use the remaining proceeds.
ANSWER: The Company has revised the disclosure on pages 4 and 15 to add
a cross-reference to the disclosure related to the costs of the
Company's branch expansion and new headquarters. The Company believes
it would be misleading to discuss these costs in the "Use of Proceeds"
sections since the money raised in this offering has not been
specifically earmarked for such purposes. While the Company notes your
request regarding expanding the disclosure to indicate what other
corporate purposes will use the remaining proceeds, the Company
believes that the current disclosure is complete and accurate since
none of the proceeds have been or will be specifically designated as
set aside for any specific purpose.
7. COMMENT: Revise to add a subsection entitled, "Offering Price and
Valuation Information". Such subsection should detail recent stock
trading, price, P/E and P/B trading multiples, dilution information,
and comparable company P/E and P/B multiples.
ANSWER: The Company's common stock is a publicly traded security. On
the cover page of the Prospectus, the Company has disclosed recent
stock trading prices of its common stock and on page 16 has disclosed
the market price of its common stock for each quarterly period within
the two most recent fiscal years. The Company believes that such
disclosure is complete, accurate and fair. The Company has not added
disclosure regarding P/E and P/B Trading Multiples and dilution
information as the Company believes that such information is not
required and could be misleading to investors. In addition, in
accordance with a conversation between Company's counsel and Michael
Clampitt of the Staff, the Company has not added disclosure regarding
comparable company multiples.
Selected Consolidated Financial Data
------------------------------------
8. COMMENT: Include a footnote detailing how you determine the efficiency
ratio that you present on page 6.
ANSWER: The Company has added a footnote on page 7 to address this
comment.
Risk Factors
------------
General
-------
9. COMMENT: Revise to add additional paragraph for declining capital and
possible regulatory impact on capital related to trusts, increased
<PAGE>
U.S. Securities and Exchange Commission
October 1, 2004
Page 4
short-term borrowings and long-term debt, recent significant securities
losses and possible future losses, and, substantial dilution may result
from exercise of outstanding derivative securities.
ANSWER: The Company has added a risk factor on pages 10-11 to address
many of the items the Staff proposed. The Company believes that the
items not added in the new risk factor are either addressed in other
risk factors or are not relevant to the Company.
Significant Growth
------------------
10. COMMENT: Revise to disclose the costs for each branch, the five-year
costs for the branch expansion program and the cost of the new
headquarters as well as the source of the funds for these expenditures.
ANSWER: The Company has revised the risk factor related to growing
rapidly on page 8 to disclose the number of stores the Company intends
to open during each of the next five years and the Company's plan to
open a new headquarters, operations and training center in 2005. In
addition, the Company has added a cross-reference to the disclosure
related to the costs of its branch expansion and new headquarters. See
response to Comments #4 and #6.
Dependence of Commerce of New Jersey
------------------------------------
11. COMMENT: Revise to disclose if the warrants are exercisable if no
change of controls event occurs.
ANSWER: The Company has revised the risk factor on page 8 to address
this comment.
Our executive officers, directors and five percent shareholders
---------------------------------------------------------------
12. COMMENT: Revise to disclose the present intention of the officers and
directors to purchase in the offering and indicate the amount they
intend to purchase.
ANSWER: The Company has revised the risk factor on page 13 to address
this comment.
Management's Discussion and Analysis of Financial Condition and Results of
--------------------------------------------------------------------------
Operations
----------
Application of Critical Accounting Policies
-------------------------------------------
13. COMMENT: We are aware of your reference made to the Notes to the
Consolidated Financial Statements for more fully described accounting
policies. Please expand the current disclosures to provide greater
insight into the impact of these policies on your financial condition
and operating performance. We remind you that such disclosure should
supplement, not reiterate the accounting policies disclosed in the
Notes to the Consolidated Financial Statements. Refer to the
Commission's recent interpretive release regarding Management's
Discussion and Analysis (Release No. 33-8350) for additional guidance.
ANSWER: The Company has added disclosure on pages 18-20 to address this
comment.
<PAGE>
U.S. Securities and Exchange Commission
October 1, 2004
Page 5
14. COMMENT: Revise the last paragraph to indicate the expense that would
have been reported or will be reported upon the adoption of the new
standard.
ANSWER: The Company revised the last paragraph in the Stock-Based
Compensation section on page 20 to address this comment.
Financial Condition - June 30, 2004 Compared to December 31, 2003
-----------------------------------------------------------------
Loans Held for Sale
-------------------
15. COMMENT: Please enhance your current loans held for sale discussion by
including quantitative and qualitative analysis, which will explain how
you determine classification, carrying value, and the strategy you
employ with each of these loan products. As a related matter, please
disclose how and when you determine which loans are participated with
Commerce Bank N.A., which you refer to in Note 19. Additionally, refer
to Industry Guide 3 III.D for disclosure requirements, if applicable.
ANSWER: The Company has revised the disclosure on page 26 to address
this comment. As described in Note 19 to our notes to consolidated
financial statements and on page 54 of the Business section, the
Company occasionally participates in loans with Commerce Bank, N.A. and
other financial institutions when the amount of a loan exceeds the
Company's board's comfort level or the Company's legal lending limit to
any one borrower. The Company does not sell its loans held for sale to
Commerce Bank, N.A.
Loan and Asset Quality and Allowance for Loan Losses - page 26
--------------------------------------------------------------
16. COMMENT: We note that you quantify the interest income recognized and
foregone on nonperforming loans from 1999 to 2003 on page 41. Please
disclose these amounts for the period ended June 30, 2004.
ANSWER: The Company has added disclosure on page 27 to address this
comment.
Stockholders' Equity and Capital Adequacy
-----------------------------------------
17. COMMENT: Revise to add an explanation for the loss of $3.2 million on
the portfolio of securities available for sale by disclosing what type
of securities suffered the losses and whether the portfolio and other
Company portfolios contain similar securities.
ANSWER: The Company has added disclosure on page 29 to address this
comment.
Liquidity -- June 30, 2004
--------------------------
18. COMMENT: We note your discussions concerning liquidity as of December
31, 2003 on page 45. Please revise to include additional disclosures
regarding the following:
o Historical information on sources and uses of cash,
including material changes in operating, investing and
financing cash flows and the supporting reasons;
o Amounts and certainty of cash flows;
<PAGE>
U.S. Securities and Exchange Commission
October 1, 2004
Page 6
o Discussions of known trends and uncertainties affecting
liquidity.
Refer to the Commission's recent interpretative release regarding
Management's Discussion and Analysis (Release No. 33-8350) for
additional guidance.
ANSWER: The Company has added disclosure on pages 31-33 to address this
comment. In addition, the Company has added a cross-reference in
Liquidity - December 31, 2003 to the discussion on pages 31-33.
Loan Portfolio
--------------
19. COMMENT: We note reference made to your loan portfolio as
non-homogeneous, due to changes in collateral requirements, among other
reasons. Please provide expanded discussion of your loan origination
policies and procedures for each loan type in your loan portfolio to
provide enhanced understanding.
ANSWER: The Company has revised the disclosure on page 42 to address
this comment.
20. COMMENT: We note reference made to your 2003 Strategic Plan. Please
expand your disclosure to provide further analysis of how the plan may
impact your lending opportunities, addressing inherent risk and
rewards.
ANSWER: The Company has revised the disclosure on page 42 to address
this comment.
Concentrations of Credit Risk -- page 40
----------------------------------------
21. COMMENT: Please expand your concentrations of credit risk disclosures.
This may include but not be limited to, focusing on loan types that are
not secured by real estate, significant loans to one borrower or within
one industry, or any other risks inherent in the portfolio and how you
have policies and procedures in place to monitor risk.
ANSWER: The Company has added disclosure on pages 43-44 to address this
comment.
Allowance for Loan Losses
-------------------------
22. COMMENT: Please revise to provide additional discussion of how the
allowance was determined, how accurate estimat