**Exhibit99.1**

 

**RISKFACTORS**

 

***Our FutureDepends on the Successful Growth of the Bank and Finance Maryland***

 

Our primary businessactivity for the foreseeable future will be to act as a financial holdingcompany. Our future profitability will therefore depend on the success andgrowth of First Mariner Bank (the “Bank”) and Finance Maryland, LLC (“FinanceMaryland”). Our growth will depend, in large part, on our ability to leverageour existing infrastructure. The inability of the Bank to expand its businesswithout substantially increasing the number of branches, the inability of ourmortgage division to grow its residential mortgage business, or the inabilityof Finance Maryland to grow its consumer portfolio may prevent us fromrealizing our growth objectives.

 

***A SignificantAmount of Our Business is Concentrated in Real Estate Lending, and Most of thisLending Involves Maryland Real Estate***

 

Approximately 77% of ourloans are commercial and consumer real estate development and constructionloans, which are secured by the real estate being developed in each case. Inaddition to the risk that the market values of the real estate securing theseloans may deteriorate, these loans are also subject to the development risksthat the projects will not be completed in a timely manner, or according tooriginal specifications. Real estate development and construction projects thatare not completed in a timely manner, or according to original specifications,are generally less marketable than projects that are fully developed. The loansunderlying such projects may be subject to greater losses in the event that thereal estate collateral becomes the source of repayment.

 

In addition to the financialstrength and cash flow characteristics of the borrower in each case, the Bankoften secures its loans with real estate collateral. At December 31, 2004,approximately 85% of the Bank’s loans have real estate as a primary, secondaryor tertiary component of collateral. The real estate collateral in each caseprovides an alternate source of repayment in the event of default by theborrower, and may deteriorate in value during the time the credit is extended.If we are required to liquidate the collateral securing a loan during a periodof reduced real estate values to satisfy the debt, our earnings and capitalcould be adversely affected.

 

Additionally, because mostof our loans are concentrated in Maryland, a decline in local economicconditions could adversely affect the values of real estate in Maryland.Consequently, a decline in local economic conditions may have a greater effecton our earnings and capital than on the earnings and capital of largerfinancial institutions whose real estate loan portfolios are geographicallydiverse.

 

***Mortgage BankingActivities Generate a Significant Portion of Our Noninterest Income***

 

A significant portion of ourbusiness involves making residential mortgage loans through our mortgagedivision, which accounted for over 26% and 33% of our noninterest income forthe years ended December 31, 2004 and 2003, respectively. Real estate loanorigination activity, including refinancings, generally is greater duringperiods of low or declining interest rates, and favorable economic conditionsand has been favorably affected by relatively lower market interest ratesduring the past three years. There is no assurance that such favorableconditions will continue; any adverse change in market conditions could have anadverse impact on our earnings. Moreover, most of our residential mortgageloans are secured by Maryland real estate, therefore,a decline in local economic conditions could also adversely impact ourearnings.

 

***We May ExperienceLoan Losses in Excess of the Allowance***

 

The risk of credit losses onloans varies with, among other things, general economic conditions, the type ofloan being made, the creditworthiness of the borrower over the term of the loanand, in the case of a collateralized loan, the value and marketability of thecollateral for the loan. Management maintains an allowance for loan lossesbased upon, among other things, historical experience, an evaluation ofeconomic conditions and regular reviews of delinquencies and loan portfolioquality.

 

Based upon such factors,management makes various assumptions and judgments about the ultimate collectibilityof the loan portfolio and provides an allowance for loan losses based upon apercentage of the outstanding balances and for specific loans when theirultimate collectibility is considered questionable. If management’s assumptionsand judgments prove to be incorrect and the allowance for loan losses isinadequate to absorb future losses, or if regulatory authorities require theBank or Finance Maryland to increase the allowance for loan losses as a part oftheir examination process, our earnings and capital could be significantly andadversely affected.

 

As of December 31,2004, the allowance for loan losses was approximately $9.6 million, whichrepresented 1.28% of outstanding loans, net of unearned income. At such date,we had non-accruing loans totaling $4.6 million. Management activelyadministers its non-accruing loans in an effort to minimize credit losses.Although management believes that its allowance for loan losses is adequate,there can be no assurance that the allowance will prove sufficient to coverfuture loan losses. Further, although management uses the 

 

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best information available to make determinationswith respect to the allowance for loan losses, future adjustments may benecessary if economic conditions differ substantially from the assumptions usedor adverse developments arise with respect to non-performing or performingloans. Material additions to the allowance for loan losses would result in adecrease in net income and capital, and could have a material adverse effect onus.

 

***We currentlyhold a significant level of Bank Owned Life Insurance***

 

We currently hold asignificant level of Bank Owned Life Insurance on key employees and executivesthat have cash surrender values of $26.3 million as of December 31,2004.  The eventual repayment of the cashsurrender value is subject to the ability of various insurance companies to paybenefits in the event of the death of an insured employee, or return the cashsurrender value to us in the event of our need for liquidity.  We continuously monitor the financialstrength of the various insurance companies with whom we carry policies.  However, there is no assurance that one ormore of these companies will not experience a decline in financial strengthwhich could impair its ability to pay benefits or return our cash surrendervalue.  Additionally, should we need toliquidate these policies for liquidity needs, we would be subject to taxationon the increase in cash surrender value as well as penalties for earlytermination of the insurance contracts. These events would have a negative impact on our earnings.

 

***Some of OurAssets are Classified as Non-Performing Assets that May Lose Further Value***

 

The Bank and FinanceMaryland have non-performing assets, which include non-accruing loans andproperty, (including real estate), on which we have foreclosed because of theborrower’s default. Although we have written down the values of thesenon-performing assets to their estimated fair market values, there is apossibility that earnings could be further reduced in the event that theeventual values of these non-performing assets are, or become less than, thevalues that we have assigned.

 

***Interest Ratesand Other Economic Conditions Will Impact Our Results of Operations***

 

Results of operations forfinancial institutions, including us, may be materially and adversely affectedby changes in prevailing economic conditions, including declines in real estatevalues, rapid changes in interest rates and the monetary and fiscal policies ofthe federal government. Our profitability is, in part a function of thespread between the interest rates earned on assets and the interest rates paidon deposits and other interest-bearing liabilities, (i.e., net interestincome), including advances from the Federal Home Loan Bank of Atlanta (the“FHLB”). Interest rate risk arises from mismatches, (i.e., the interestsensitivity gap) between the dollar amount of repricing or maturing assets andliabilities, and is measured in terms of the ratio of the interest rate sensitivitygap to total assets. More assets repricing or maturing than liabilities over agiven time period is considered asset-sensitive and is reflected as a positivegap; more liabilities repricing or maturing than assets over a given timeperiod is considered liability-sensitive and is reflected as negative gap. Anasset-sensitive position, (i.e., a positive gap) will generally enhanceearnings in a rising interest rate environment and will negatively impactearnings in a falling interest rate environment, while a liability-sensitiveposition (i.e., a negative gap), will generally enhance earnings in a fallinginterest rate environment and negatively impact earnings in a rising interestrate environment. Fluctuations in interest rates are not predictable orcontrollable. We have attempted to structure our asset and liability managementstrategies to mitigate the impact on net interest income of changes in marketinterest rates.

 

***The Market Valueof Our Investments Could Decline***

 

Our entire investment securitiesportfolio as of December 31, 2004 has been designated asavailable-for-sale pursuant to Statement of Financial Accounting StandardsNo. 115, (“SFAS 115”), relating to accounting for investments.SFAS 115 requires that unrealized gains and losses in the estimated valueof the available-for-sale portfolio be “marked to market” and reflected as aseparate item in stockholders’ equity, (net of tax), as accumulated othercomprehensive income. At December 31, 2004, we maintained$323.0 million or 26% of our total assets in securitiesavailable-for-sale.

 

Furthermore, sales of suchsecurities in the past have been one of the sources of our net income. Infiscal year 2004, income from such sales totaled $440 thousand. There can be noassurance that future market performance of our investment portfolio willcontinue to enable us to realize income from sales of securities. Stockholders’equity will continue to reflect the unrealized gains and losses (net of tax) ofthese investments. There can be no assurance that the market value of ourinvestment portfolio will not decline, causing a corresponding decline instockholders’ equity.

 

Management believes thatseveral factors will affect the market values of our investment portfolio.These include, but are not limited to, changes in interest rates orexpectations of changes, the degree of volatility in the securities markets,inflation rates or expectations of inflation, and the slope of the interestrate yield curve (the yield curve refers to the differences betweenshorter-term and longer-term interest rates; a positively sloped yield curvemeans shorter-term rates are lower than longer-term rates). Additionally, weown trust preferred securities issued by other financial institutions that havean amortized cost of $30.8 million and that were carried at an estimatedfair value of $31.5 million at December 31, 2004. Our return on thesesecurities could be limited by a number of factors, including, but not limitedto, the institutions’ default on, or deferral of, their obligations to make therequired distributions under these securities. Further, the values of thesesecurities may be adversely affected by the deterioration of the financialconditions of these financial institutions. Also, the passage of time will affectthe market values of our investment securities, in that the closer they 

 

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are to maturing, the closer the market priceshould be to par value. These and other factors may impact specific categoriesof the portfolio differently, and we cannot predict the effect these factorsmay have on any specific category.

 

***Our Ability toPay Cash Dividends is Limited***

 

Holders of shares of ourcommon stock are entitled to dividends if, when, and as declared by our boardof directors out of funds legally available for that purpose. Although theboard of directors has declared cash dividends in the past, it has discontinuedsuch payments to conserve cash and capital resources and does not intend todeclare cash dividends until current earnings are sufficient to generateadequate internal capital to support growth. Our current ability to paydividends is largely dependent upon the receipt of dividends from the Bank.Federal and state laws impose restrictions on the ability of the Bank to paydividends. Additional restrictions are placed upon us by the policies offederal regulators, including the FRB’s November 14, 1985 policystatement, which provides that bank holding companies should pay dividends onlyout of the past year’s net income, and then only if their prospective rate ofearnings retention appears consistent with their capital needs, asset quality,and overall financial condition.

 

Our ability to pay dividendsis further subject to our ability to make payments of interest under juniorsubordinated debentures due 2028 held by our statutory trusts Mariner CapitalTrust II, III, IV, V and VI (“the trusts”). These payments are necessary tofund the distributions that MCT and the trusts each must pay to holders of its trustpreferred securities (collectively, the “Mariner Trust Preferred Securities”).If we are unable to make such payments, if we determine to defer such payments,or if we default under our other obligations in connection with the MarinerTrust Preferred Securities, we will not be permitted to pay dividends toholders of our common stock until such time as we recommence making payments orare not otherwise in default.

 

In general, future dividendpolicy is subject to the discretion of the board of directors and will dependupon a number of factors, including the future earnings, capital requirements,regulatory constraints, and our financial condition as well as that of the Bankand Finance Maryland.

 

***Our ManagementControls a Significant Percentage of Our Stock***

 

At December 31, 2004,our directors and executive officers beneficially owned 26.9% shares of ourcommon stock (either directly or with options or warrants), or 17.1% of ouroutstanding shares of common stock. Edwin F. Hale, Sr., who is our Chairman,Chief Executive Officer, and largest stockholder, beneficially owns 618,651shares of common stock, or 10.6% of our outstanding shares of common stock asof December 31, 2004. Because of the large percentage of stock held by ourdirectors and executive officers, these persons could influence the outcome ofany matter submitted to a vote of our stockholders.

 

***Our Stock is NotHeavily Traded***

 

The average daily tradingvolume of our shares on The Nasdaq National Market for the previous  three months was approximately 4,200shares. Thus, our common stock is not heavily traded and can be more volatilethan stock trading in an active public market. Factors such as our financialresults, the introduction of new products and services by us or ourcompetitors, and various factors affecting the banking industry generally mayhave a significant impact on the market price of our common stock. We cannotpredict the extent to which an active public market for our common stock willdevelop or be sustained. In recent years, the stock market has experienced ahigh level of price and volume volatility, and market prices for the stock ofmany companies have experienced wide price fluctuations that have notnecessarily been related to their operating performance. Therefore, ourstockholders may not be able to trade large blocks of shares at the volumes,prices, or times that they desire.

 

***Our Stock is NotInsured***

 

Investments in the shares ofour common stock are not deposits and are not insured against loss by thegovernment.

 

***We Operate in aCompetitive Market***

 

We operate in a competitiveenvironment, competing for deposits, loans and customers with commercial banks,thrifts, finance companies, and other financial entities. Competition fordeposits comes primarily from other commercial banks, savings associations,credit unions, money market and mutual funds and other investment alternatives.Competition for loans comes primarily from other commercial banks, savingsassociations, mortgage banking firms, consumer finance companies, credit unionsand other financial intermediaries. Many of the financial intermediariesoperating in our market area offer certain services, such as trust, investmentand international banking services, which we do not offer. In addition,companies with a larger capitalization and financial intermediaries not subjectto regulatory restrictions, have larger lending limits, and are thereby able toserve the needs of larger customers. Finally, our continued growth andprofitability will depend upon our ability to attract and retain skilledmanagerial, marketing and technical personnel. Competition for qualifiedpersonnel in the banking industry is intense, and there can be no assurancethat we will be successful in attracting and retaining such personnel.

 

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***Our Industry isHeavily Regulated; Significant Regulatory Changes Could Adversely Affect OurOperations***

 

Our operations and those ofthe Bank are and will be affected by current and future legislation and by thepolicies established from time to time by various federal and state regulatoryauthorities. The Bank is subject to supervision and periodic examination by theFDIC and the Maryland Commissioner. We are subject to supervision by the FRB.Banking regulations, designed primarily for the safety of depositors, may limita financial institution’s growth, and the return to its investors, byrestricting such activities as the payment of dividends, mergers with oracquisitions by other institutions, investments, loans and interest rates,interest rates paid on deposits, expansion of branch offices, and the offeringof securities or trust services. The Bank is also subject to capitalizationguidelines established by federal law and could be subject to enforcementactions to the extent that the Bank is found by regulatory examiners to beundercapitalized. It is not possible to predict what changes, if any, will bemade to existing federal and state legislation and regulations or the effectthat such changes may have on our future business and earnings prospects, aswell as those of the Bank. We also cannot predict the nature or the extent ofthe effect on our business and earnings of future fiscal or monetary policies,economic controls, or new federal or state legislation. Further, the cost ofcompliance with regulatory requirements may adversely affect our ability tooperate profitably.

 

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***We May beAdversely Affected by Recent Legislation***

 

The federal Gramm-Leach-BlileyAct, (“GLBA”), was signed into law on November 12, 1999. Among otherthings, GLBA repeals restrictions on banks affiliating with securities firms.It also permits bank holding companies that become financial holding companiesto engage in additional financial activities, including insurance andsecurities underwriting and agency activities, merchant banking, and insurancecompany portfolio investment activities that are currently not permitted forbank holding companies. GLBA may have the result of increasing the competitionwe face from larger banks and other companies. It is not possible to predictthe full effect that GLBA will have on us.

 

In addition, recent changesin other federal banking laws facilitate interstate branching and mergeractivity among banks. Such changes may result in an even greater degree ofcompetition in the banking industry and we may be brought into competition withinstitutions with which we do not presently compete. From time to time otherchanges are proposed to laws affecting the banking industry, and these changescould have a material effect on our business and prospects. Our futureprofitability may be adversely affected by increased competition resulting fromthis legislation. See “Business—Competition” and “Supervision andRegulation—Interstate Banking Legislation.”

 

***We May be Unableto Keep Pace with Developments in Technology***

 

We use various technologiesin our business, including telecommunication, data processing, computers,automation, Internet-based banking, and debit cards. Technology changesrapidly. Our ability to compete successfully with other banks and non-banks maydepend on whether we can exploit technological changes. We may not be able toexploit technological changes, and any investment we do make may not make usmore profitable.

 

***Contracts With Our Officers May Discourage a Takeover or AdverselyAffect Our Takeover Value***

 

We have entered into changein control agreements with 6 of our officers. These agreements provide for apayment to each officer of a multiple (ranging from 1 to 2.99) of his or hersalary and bonus upon the occurrence of either a change in control that resultsin the loss of employment or a significant change in his or her employment.Thus, we may be required to make significant payments in the event that therights under these agreements are triggered by a change in control. As aresult, these contracts may discourage a takeover, or adversely affect theconsideration payable to stockholders in the event of a takeover.

 

***Our Articles ofIncorporation and Bylaws May Discourage a Corporate Takeover***

 

Our Amended and Restated Articles of Incorporation,(“Articles”)and Amended and Restated Bylaws(“Bylaws”), contain certain provisions designed to enhance the ability of theboard of directors to deal with attempts to acquire control of the Company.These provisions provide for the classification of our board of directors intothree classes; directors of each class serve for staggered three year periods.The Articles also provide for supermajority voting provisions for the approvalof certain business combinations. Although these provisions do not preclude atakeover, they may have the effect of discouraging a future takeover attemptwhich would not be approved by our board of directors, but pursuant to whichstockholders might receive a substantial premium for their shares overthen-current market prices. As a result, stockholders who might desire toparticipate in such a transaction might not have the opportunity to do so. Suchprovisions will also render the removal of our board of directors and ofmanagement more difficult and, therefore, may serve to perpetuate currentmanagement. Further, such provisions could potentially adversely affect themarket price of the common stock.

 

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