A consent order that Pennsylvania Commerce Bancorp Inc. in Harrisburg has signed with the Office of the Comptroller of the Currency restricts insider dealings at the company, but analysts said it does not appear to be as "onerous" as the order against its bigger New Jersey namesake.
The $2 billion-asset Pennsylvania Commerce has strong ties to Commerce Bancorp Inc. in Cherry Hill, N.J. — which last summer forced out Vernon W. Hill 2nd, its founder and longtime chairman and chief executive, after the OCC challenged insider transactions there and ordered management changes. The $48 billion-asset New Jersey company agreed in October to sell itself to TD Banknorth Inc. of Portland, Maine, Toronto-Dominion Bank's U.S. subsidiary.
Pennsylvania Commerce, which revealed in August that it was under investigation by the OCC, said in a regulatory filing Friday that it must give the agency quarterly reports about transactions between the company, its directors, officers, and other related parties.
Under the order signed Feb. 5, the company also must submit a "transition plan" within 60 days, and it is prohibited from renewing or extending any contracts with insiders or related parties if the OCC objects.
The plan must evaluate whether it is in the company's best interests to keep these contracts and detail any payment made under the contracts since Jan. 1, 2007.
The order does not mention management changes.
Joseph Fenech, an analyst at Sandler O'Neill & Partners LP, said in an interview Monday that the order is "vague" but that regulators appear interested in examining more closely the relationship between the banking company and NAI/Commercial-Industrial Realty Co., which helps it identify branch sites.
Gary L. Nalbandian, Pennsylvania Commerce's chairman, president, and CEO, is also the treasurer of NAI.
Mr. Fenech said he was unsure whether Mr. Nalbandian might have to resign, as Mr. Hill did. "It's too difficult to handicap this at this point."
Mr. Nalbandian said in an e-mailed statement that the company intends to "fully cooperate" with the OCC.
But he declined to comment further. "The bank is not at liberty to elaborate beyond the SEC filing," the e-mail said.
Pennsylvania Commerce has an unusual agreement with New Jersey's Commerce, giving it exclusive rights to the Commerce brand in 34 Pennsylvania counties.
Though they are separate, the Commerce in New Jersey owns more than 10% of Pennsylvania Commerce's shares, lets Pennsylvania Commerce customers use its branches, and does back-office processing for the Pennsylvania company.
Mr. Nalbandian also is a close friend of Mr. Hill, who served on Pennsylvania Commerce's board before resigning in December 2002.
And like the larger company, Pennsylvania Commerce uses InterArch Inc., a firm owned by Mr. Hill's wife, Shirley, to design its branches — another relationship believed to have attracted regulatory scrutiny.
A consent order that the New Jersey company signed in June required it to sever ties with InterArch.
Mr. Fenech said that the OCC is aware of the two banking companies' relationship and that it was probably "kicking the tires" of the smaller company to see whether questionable insider dealings were happening there, too.
Stephen Moss, an analyst at Janney Montgomery Scott LLC, said in an interview that Pennsylvania Commerce was "tight-lipped" about the details of its OCC agreement but that its problems did not appear as acute as those at the larger company.
On Monday, Pennsylvania Commerce's stock slipped in early morning trading, but rebounded later. The shares ended up rising 2%, to close at $27.05.
