Exhibit 13
 
 Raising Banking to the Power of Business
Annual Report
2010
1804 West Street
Annapolis, MD 21401
www.commerce1st.com




---



##### 




    
    The Companys net income was $1.4 million for the year ended December 31, 2010
as compared to net income of $678 thousand for the year ended December 31, 2009, a
109.6% increase, largely resulting from increased net interest income during 2010.
 
    
    Net interest income, the Companys main source of income, increased by 28.5%
from $7.3 million in 2009 to $9.4 million in 2010.
 
    
    Total assets increased by 1.4% from $200.4 million at December 31, 2009 to
$203.1 million at December 31, 2010.
 
    
    Net loans outstanding decreased by 0.8% from $183.1 million at December 31,
2009 to $181.7 million as of December 31, 2010.
 
    
    Deposits increased by 0.8% from $178.6 million at December 31, 2009 to $180.1
million at December 31, 2010.
    Milton D. Jernigan II
    
    Richard J. MorganChairman of the Board
    
    President and CEO
  1




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##### 



SELECTED CONSOLIDATED FINANCIAL DATA
  Year Ended December 31,(Dollars in thousands, except per share data.)
    
    2010
    
    
    2009
    
    
    2008
    
    
    2007
    
    
    2006Operation Statement Data:Net interest income
    
    $
    9,430
    
    
    $
    7,341
    
    
    $
    5,567
    
    
    $
    5,895
    
    
    $
    5,301Provision for loan losses
    
    $
    2,716
    
    
    $
    1,616
    
    
    $
    647
    
    
    $
    45
    
    
    $
    225Noninterest income
    
    $
    1,094
    
    
    $
    720
    
    
    $
    569
    
    
    $
    620
    
    
    $
    633Noninterest expense
    
    $
    5,434
    
    
    $
    5,315
    
    
    $
    5,028
    
    
    $
    4,688
    
    
    $
    3,652Federal and state income tax expense
    
    $
    951
    
    
    $
    452
    
    
    $
    166
    
    
    $
    694
    
    
    $
    774Net income
    
    $
    1,423
    
    
    $
    678
    
    
    $
    295
    
    
    $
    1,088
    
    
    $
    1,283Per share data and shares outstanding:Net income per share, basic
    
    $
    0.78
    
    
    $
    0.37
    
    
    $
    0.16
    
    
    $
    0.60
    
    
    $
    0.71Net income per share, diluted
    
    $
    0.78
    
    
    $
    0.37
    
    
    $
    0.16
    
    
    $
    0.59
    
    
    $
    0.69Book value at period end
    
    $
    12.28
    
    
    $
    11.50
    
    
    $
    11.16
    
    
    $
    11.02
    
    
    $
    10.36Average common shares outstanding during year
    
    
    1,820,548
    
    
    
    1,820,548
    
    
    
    1,820,548
    
    
    
    1,816,504
    
    
    
    1,803,583Diluted average common shares outstanding during year
    
    
    1,820,548
    
    
    
    1,820,548
    
    
    
    1,820,548
    
    
    
    1,848,195
    
    
    
    1,846,462Shares outstanding at period end
    
    
    1,820,548
    
    
    
    1,820,548
    
    
    
    1,820,548
    
    
    
    1,820,548
    
    
    
    1,803,583Financial Condition data:Total assets
    
    $
    203,124
    
    
    $
    200,371
    
    
    $
    166,569
    
    
    $
    148,811
    
    
    $
    141,270Loans receivable (net)
    
    $
    181,709
    
    
    $
    183,102
    
    
    $
    151,101
    
    
    $
    124,670
    
    
    $
    95,081Allowance for loan losses
    
    $
    3,174
    
    
    $
    2,380
    
    
    $
    1,860
    
    
    $
    1,665
    
    
    $
    1,614Other interest-earning assets
    
    $
    12,289
    
    
    $
    8,382
    
    
    $
    9,227
    
    
    $
    18,358
    
    
    $
    40,121Total deposits
    
    $
    180,110
    
    
    $
    178,645
    
    
    $
    145,241
    
    
    $
    123,408
    
    
    $
    112,205Borrowings
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    4,306
    
    
    $
    9,579Stockholders equity
    
    $
    22,365
    
    
    $
    20,942
    
    
    $
    20,311
    
    
    $
    20,056
    
    
    $
    18,687Selected performance ratios:Return on average earning assets
    
    
    0.94
    %
    
    
    0.51
    %
    
    
    0.25
    %
    
    
    1.07
    %
    
    
    1.23
    %Return on average equity
    
    
    8.61
    %
    
    
    4.54
    %
    
    
    1.92
    %
    
    
    7.47
    %
    
    
    7.16
    %Net interest margin
    
    
    4.69
    %
    
    
    4.00
    %
    
    
    3.59
    %
    
    
    4.38
    %
    
    
    5.06
    %Net interest spread
    
    
    4.30
    %
    
    
    3.32
    %
    
    
    2.60
    %
    
    
    3.10
    %
    
    
    3.83
    %Efficiency ratio
    
    
    51.63
    %
    
    
    65.94
    %
    
    
    81.94
    %
    
    
    72.21
    %
    
    
    61.56
    %Asset quality ratios:Nonperforming loans to gross loans
    
    
    3.94
    %
    
    
    1.47
    %
    
    
    3.80
    %
    
    
    0.89
    %
    
    
    0.65
    %Allowance for loan losses to loans
    
    
    1.72
    %
    
    
    1.28
    %
    
    
    1.22
    %
    
    
    1.32
    %
    
    
    1.67
    %Allowance for loan losses to nonperforming loans
    
    
    .44x
    
    
    
    .87x
    
    
    
    0.32x
    
    
    
    1.48x
    
    
    
    2.57xNonperforming assets to loans and other real estate
    
    
    5.64
    %
    
    
    2.76
    %
    
    
    3.80
    %
    
    
    0.89
    %
    
    
    0.65
    %Net loan charge-offs (recoveries) to average loans
    
    
    1.04
    %
    
    
    0.65
    %
    
    
    0.33
    %
    
    
    0.00
    %
    
    
    0.26
    %Capital ratios:Total risk-based capital ratio
    
    
    13.06
    %
    
    
    12.25
    %
    
    
    14.14
    %
    
    
    16.48
    %
    
    
    19.10
    %Tier I risk-based capital ratio
    
    
    11.80
    %
    
    
    10.99
    %
    
    
    12.91
    %
    
    
    15.23
    %
    
    
    17.84
    %Leverage ratio
    
    
    11.03
    %
    
    
    10.43
    %
    
    
    12.24
    %
    
    
    13.91
    %
    
    
    15.10
    %Average equity to average assets
    
    
    10.62
    %
    
    
    11.03
    %
    
    
    12.86
    %
    
    
    13.93
    %
    
    
    16.63
    %
  2




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##### 



MANAGEMENTS DISCUSSION AND ANALYSIS
   General
   Overview
  
    
    The Companys net income was $1.4 million for the year ended December 31, 2010 as
compared to net income of $678 thousand for the year ended December 31, 2009, a
109.6% increase, largely resulting from increased net interest income during 2010.
  3




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##### 




    
    Net interest income, the Companys main source of income, increased by 28.5% from
$7.3 million in 2009 to $9.4 million in 2010.
 
    
    The provision for loan losses increased by 68.1% from $1.6 million in 2009 to
$2.7 million during 2010.
 
    
    Total assets increased by 1.4% from $200.4 million at December 31, 2009 to $203.1
million at December 31, 2010.
 
    
    Net loans outstanding decreased by 0.8% from $183.1 million at December 31, 2009
to $181.7 million as of December 31, 2010.
 
    
    Deposits increased by 0.8% from $178.6 million at December 31, 2009 to $180.1
million at December 31, 2010.
 
    
    Non-interest income increased by 51.9% from $720 thousand for the year ended
December 31, 2009 to $1.1 million for the year ended December 31, 2010.
 
    
    Non-interest expenses increased by 2.2% from $5.3 million during 2009 to $5.4
million in 2010.
   Critical Accounting Policies
   Provision for Loan Losses
  4




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##### 



Financial Condition
  Loan Portfolio
    2010
    
    
    2009
    
    
    2008Percentage
    
    
    
    
    
    Percentage
    
    
    
    
    
    Percentage(In thousands)
    
    Balance
    
    
    of Loans
    
    
    Balance
    
    
    of Loans
    
    
    Balance
    
    
    of LoansCommercial and Industrial loans
    
    $
    44,645
    
    
    
    24.1
    %
    
    $
    63,959
    
    
    
    34.5
    %
    
    $
    54,195
    
    
    
    35.4
    %SBA loans
    
    
    7,742
    
    
    
    4.2
    %
    
    
    4,517
    
    
    
    2.4
    %
    
    
    4,588
    
    
    
    3.0
    %Real estate loans:Owner occupied
    
    
    85,570
    
    
    
    46.3
    %
    
    
    73,327
    
    
    
    39.5
    %
    
    
    61,417
    
    
    
    40.1
    %Non owner occupied
    
    
    47,040
    
    
    
    25.4
    %
    
    
    43,760
    
    
    
    23.6
    %
    
    
    32,790
    
    
    
    21.5
    %Total real estate loans
    
    
    132,610
    
    
    
    71.7
    %
    
    
    117,087
    
    
    
    63.1
    %
    
    
    94,207
    
    
    
    61.6
    %184,997
    
    
    
    100.0
    %
    
    
    185,563
    
    
    
    100.0
    %
    
    
    152,990
    
    
    
    100.0
    %Unearned loan fees, net
    
    
    (114
    )
    
    
    
    
    
    
    (81
    )
    
    
    
    
    
    
    (29
    )Allowance for loan losses
    
    
    (3,174
    )
    
    
    
    
    
    
    (2,380
    )
    
    
    
    
    
    
    (1,860
    )$
    181,709
    
    
    
    
    
    
    $
    183,102
    
    
    
    
    
    
    $
    151,101
  5




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##### 



2007
    
    
    2006Percentage
    
    
    
    
    
    Percentage(In thousands)
    
    Balance
    
    
    of Loans
    
    
    Balance
    
    
    of LoansCommercial and Industrial loans
    
    $
    49,596
    
    
    
    39.3
    %
    
    $
    42,127
    
    
    
    43.5
    %SBA loans
    
    
    3,841
    
    
    
    3.0
    %
    
    
    3,223
    
    
    
    3.3
    %Real estate loans:Owner occupied
    
    
    44,967
    
    
    
    35.6
    %
    
    
    **51,461
    
    
    
    **53.2
    %Non owner occupied
    
    
    27,966
    
    
    
    22.1
    %
    
    
    **
    
    
    
    **Total real estate loans
    
    
    72,933
    
    
    
    57.7
    %
    
    
    51,461
    
    
    
    53.2
    %126,370
    
    
    
    100.0
    %
    
    
    96,811
    
    
    
    100.0
    %Unearned loan fees, net
    
    
    (35
    )
    
    
    
    
    
    
    (116
    )Allowance for loan losses
    
    
    (1,665
    )
    
    
    
    
    
    
    (1,614
    )$
    124,670
    
    
    
    
    
    
    $
    95,081
 **
    
    Delineation by use of real estate is not available.Note:
    
    The loan amounts and percentages for December 31, 2010 above reflect the effect of
reclassifying approximately $9.5 million of commercial and industrial loans to real estate loans
during the second quarter of 2010. Without the reclassification, the commercial and industrial
loans would have comprised approximately 33.4% of the total loans at December 31, 2010.   LOAN MATURITIES AS OF DECEMBER 31, 20101 year
    
    
    
    
    
    
    After(In thousands)
    
    or less
    
    
    >1-5 years
    
    
    5 years
    
    
    TotalCommercial and Industrial
loans (1)
    
    $
    26,030
    
    
    $
    12,316
    
    
    $
    13,978
    
    
    $
    52,324Real estate loans
    
    
    33,698
    
    
    
    25,888
    
    
    
    73,087
    
    
    
    132,673Total loans receivable
    
    $
    59,728
    
    
    $
    38,204
    
    
    $
    87,065
    
    
    $
    184,997
 (1)
    
    Includes SBA loans LOAN RE- PRICING AS OF DECEMBER 31, 20101 year
    
    
    
    
    
    
    After(In thousands)
    
    or less
    
    
    >1-5 years
    
    
    5 years
    
    
    TotalLoans with:Fixed interest rates
    
    $
    14,399
    
    
    $
    33,556
    
    
    $
    1,068
    
    
    $
    49,023Floating and adjustable
interest rates
    
    
    63,838
    
    
    
    72,136
    
    
    
    
    
    
    
    135,974Total loans receivable
    
    $
    78,237
    
    
    $
    105,692
    
    
    $
    1,068
    
    
    $
    184,997
 Allowance for Loan Losses
   6




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##### 



7




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##### 



(In thousands)
    
    2010
    
    
    2009
    
    
    2008
    
    
    2007
    
    
    2006Allowance for loan losses:Beginning balance
    
    $
    2,380
    
    
    $
    1,860
    
    
    $
    1,665
    
    
    $
    1,614
    
    
    $
    1,615Charge-offs  Commercial and Industrial
loans
    
    
    (1,140
    )
    
    
    (500
    )
    
    
    (179
    )
    
    
    (72
    )
    
    
    (226
    )Charge-offs  SBA loans
    
    
    (447
    )
    
    
    (463
    )
    
    
    (318
    )
    
    
    
    
    
    
    Recoveries  Commercial and Industrial
loans
    
    
    26
    
    
    
    
    
    
    
    45
    
    
    
    78
    
    
    
    Recoveries  SBA loans
    
    
    25
    
    
    
    5
    
    
    
    
    
    
    
    
    
    
    
    Real estate loans:Charge-offs  Owner occupied
    
    
    
    
    
    
    (138
    )
    
    
    
    
    
    
    
    
    
    
    Charge-offs  Non owner occupied
    
    
    (386
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net recoveries (charge-offs)
    
    
    (1,922
    )
    
    
    (1,096
    )
    
    
    (452
    )
    
    
    6
    
    
    
    (226
    )Provision for loan losses
    
    
    2,716
    
    
    
    1,616
    
    
    
    647
    
    
    
    45
    
    
    
    225Ending balance
    
    $
    3,174
    
    
    $
    2,380
    
    
    $
    1,860
    
    
    $
    1,665
    
    
    $
    1,614Net recoveries (charge-offs) to average loans
    
    
    (1.04
    %)
    
    
    (0.65
    %)
    
    
    (0.33
    %)
    
    
    0.00
    %
    
    
    (0.26
    )%
   ALLOWANCE FOR LOAN LOSSES BY CATEGORY
 December 31, 2010
    
    
    December 31, 2009% of Loans in
    
    
    
    
    
    
    % of Loans inAllocated
    
    
    each Category to
    
    
    Allocated
    
    
    each Category toAllowance
    
    
    Total Loans
    
    
    Allowance
    
    
    Total Loans(In thousands)
    
    Amount
    
    
    Receivable
    
    
    Amount
    
    
    ReceivableCommercial and Industrial loans
    
    $
    1,023
    
    
    
    24.1
    %
    
    $
    1,165
    
    
    
    33.9
    %SBA loans
    
    
    627
    
    
    
    4.2
    %
    
    
    733
    
    
    
    3.1
    %Real estate loans:Owner occupied
    
    
    682
    
    
    
    46.2
    %
    
    
    199
    
    
    
    39.5
    %Non owner occupied
    
    
    715
    
    
    
    25.5
    %
    
    
    237
    
    
    
    23.5
    %Total real estate loans
    
    
    1,397
    
    
    
    71.7
    %
    
    
    436
    
    
    
    63.0
    %Unallocated to loan type
    
    
    127
    
    
    
    
    
    
    
    46
    
    
    
    $
    3,174
    
    
    
    100.0
    %
    
    $
    2,380
    
    
    
    100.0
    %
  8




---



##### 



December 31, 2008
    
    
    December 31, 2007% of Loans in
    
    
    
    
    
    
    % of Loans inAllocated
    
    
    each Category to
    
    
    Allocated
    
    
    each Category toAllowance
    
    
    Total Loans
    
    
    Allowance
    
    
    Total Loans(In thousands)
    
    Amount
    
    
    Receivable
    
    
    Amount
    
    
    ReceivableCommercial and Industrial loans
    
    $
    789
    
    
    
    35.2
    %
    
    $
    941
    
    
    
    37.9
    %SBA loans
    
    
    749
    
    
    
    3.9
    %
    
    
    343
    
    
    
    4.4
    %Real estate loans:Owner occupied
    
    
    212
    
    
    
    39.3
    %
    
    
    217
    
    
    
    44.6
    %Non owner occupied
    
    
    105
    
    
    
    21.6
    %
    
    
    56
    
    
    
    13.1
    %Total real estate loans
    
    
    317
    
    
    
    60.9
    %
    
    
    273
    
    
    
    57.7
    %Unallocated to loan type
    
    
    5
    
    
    
    
    
    
    
    108
    
    
    
    $
    1,860
    
    
    
    100.0
    %
    
    $
    1,665
    
    
    
    100.0
    %
 December 31, 2006% of Loans inAllocated
    
    
    each CategoryAllowance
    
    
    to Total Loans(In thousands)
    
    Amount
    
    
    ReceivableCommercial and Industrial loans and SBA loans*
    
    $
    642
    
    
    
    46.8
    %Real estate loans*
    
    
    972
    
    
    
    53.2
    %Unallocated to loan type
    
    
    
    
    
    
    * Delineation of loans by specific type not available
    
    $
    1,614
    
    
    
    100.0
    %
  Loan Quality
   9




---



##### 



(In thousands)
    
    2010
    
    
    2009
    
    
    2008
    
    
    2007
    
    
    2006Balance at the beginning of the year
    
    $
    2,734
    
    
    $
    5,819
    
    
    $
    1,125
    
    
    $
    628
    
    
    $
    592New loans placed on non-accrual
    
    
    7,846
    
    
    
    2,427
    
    
    
    5,046
    
    
    
    569
    
    
    
    262Less:Loan restored to interest earning status
    
    
    
    
    
    
    1,266
    
    
    
    
    
    
    
    
    
    
    
    Paid-off: sold in foreclosure
    
    
    
    
    
    
    576
    
    
    
    
    
    
    
    
    
    
    
    Other real estate owned additions
    
    
    945
    
    
    
    2,462
    
    
    
    
    
    
    
    
    
    
    
    Charge offs
    
    
    1,973
    
    
    
    1,101
    
    
    
    236
    
    
    
    72
    
    
    
    226Other including payments received
    
    
    379
    
    
    
    107
    
    
    
    116
    
    
    
    
    
    
    
    Balance at the end of the year
    
    $
    7,283
    
    
    $
    2,734
    
    
    $
    5,819
    
    
    $
    1,125
    
    
    $
    628
  (In thousands)
    
    2010
    
    
    2009Loans classified as impaired with specific reserves
    
    $
    6,438
    
    
    $
    2,519Loans classified as impaired with no specific reserves
    
    
    845
    
    
    
    215Total loans classified as impaired
    
    $
    7,283
    
    
    $
    2,734Allowance for loan losses on impaired loans
    
    $
    1,521
    
    
    $
    922Average balance of impaired loans during year
    
    $
    3,419
    
    
    $
    4,559
   December 31:In thousands
    
    2010
    
    
    2009
    
    
    2008
    
    
    2007
    
    
    2006Nonaccrual loans:Commercial and Industrial
    
    $
    963
    
    
    $
    2,280
    
    
    $
    1,676
    
    
    $
    868
    
    
    $
    628SBA
    
    
    388
    
    
    
    454
    
    
    
    542
    
    
    
    257Real estate  owner occupied
    
    
    3,956
    
    
    
    
    
    
    
    3,601
    
    
    
    
    
    
    
    Real estate  non owner occupied
    
    
    1,976
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Accrual loans past due 90 days and over
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total non-performing loans
    
    
    7,283
    
    
    
    2,734
    
    
    
    5,819
    
    
    
    1,125
    
    
    
    628Other real estate owned
    
    
    3,324
    
    
    
    2,462
    
    
    
    
    
    
    
    
    
    
    
    Total non-performing assets
    
    $
    10,607
    
    
    $
    5,196
    
    
    $
    5,819
    
    
    $
    1,125
    
    
    $
    628Accruing Troubled Debt Restructured loans
    
    $
    3,985
    
    
    $
    1,263
    
    
    
    
    
    
    
    
    
    
    
    Allowance for loan losses to total
non-performing loans
    
    
    43.6
    %
    
    
    87.1
    %
    
    
    32.0
    %
    
    
    148.0
    %
    
    
    257.0
    %Non-performing loans to total loans
    
    
    3.94
    %
    
    
    1.47
    %
    
    
    3.80
    %
    
    
    0.89
    %
    
    
    0.65
    %Non-performing assets to total assets
    
    
    5.22
    %
    
    
    2.59
    %
    
    
    3.49
    %
    
    
    0.76
    %
    
    
    0.44
    %
    10




---



##### 



Investments
    (In thousands)
    
    2010
    
    
    2009
    
    
    2008Investment securities:U.S Treasuries
    
    $
    
    
    
    $
    
    
    
    $
    3,086Restricted stock:Federal Reserve Bank stock
    
    
    465
    
    
    
    465
    
    
    
    405Corporate equities
    
    
    62
    
    
    
    62
    
    
    
    62Total securities
    
    $
    527
    
    
    $
    527
    
    
    $
    3,553
   Deposits and Liquidity Management
   11




---



##### 



December 31,
    
    
    %
    
    
    December 31:In thousands
    
    2010
    
    
    Change
    
    
    2009
    
    
    2008
    
    
    2007Non-interest bearing deposits
    
    $
    23,760
    
    
    
    13.0
    %
    
    $
    21,024
    
    
    $
    23,599
    
    
    $
    19,246Interest bearing deposits:NOW accounts
    
    
    1,279
    
    
    
    313.9
    %
    
    $
    309
    
    
    $
    1,247
    
    
    $
    2,440Money Market accounts
    
    
    8,824
    
    
    
    12.5
    %
    
    
    7,841
    
    
    
    13,049
    
    
    
    16,268Savings accounts
    
    
    22,962
    
    
    
    121.2
    %
    
    
    10,379
    
    
    
    148
    
    
    
    36Certificates of deposit accounts:Less than $100,000
    
    
    79,209
    
    
    
    10.6
    %
    
    
    71,593
    
    
    
    37,539
    
    
    
    11,383$100,000 or more
    
    
    44,076
    
    
    
    (34.7
    %)
    
    
    67,499
    
    
    
    69,659
    
    
    
    74,035Total interest bearing
deposits
    
    
    156,350
    
    
    
    (0.8
    %)
    
    
    157,621
    
    
    
    121,642
    
    
    
    104,162Total deposits
    
    $
    180,110
    
    
    
    0.8
    %
    
    $
    178,645
    
    
    $
    145,241
    
    
    $
    123,408
  12




---



##### 



December 31, 2010CDs of $100,000In thousands
    
    or more
    
    
    All CDsThree months or less
    
    $
    9,228
    
    
    $
    21,682Over three months to six months
    
    
    15,492
    
    
    
    28,124Over six months to twelve months
    
    
    7,486
    
    
    
    29,325Over twelve months through three years
    
    
    9,058
    
    
    
    36,497Over three years
    
    
    2,812
    
    
    
    7,657Total
    
    $
    44,076
    
    
    $
    123,285
  CDs with balances
    
    
    CDs with balancesof less than
    
    
    of $100,000 orSource
    
    $100,000
    
    
    greater
    
    
    Total(thousands)Local markets
    
    $
    7,997
    
    
    $
    30,783
    
    
    $
    38,780National market
    
    
    50,990
    
    
    
    448
    
    
    
    51,438CDARS program:Customers funds
    
    
    450
    
    
    
    7,812
    
    
    
    8,262Proprietary
funding
    
    
    5,172
    
    
    
    3,830
    
    
    
    9,002Other brokered funds
    
    
    14,600
    
    
    
    1,203
    
    
    
    15,803Total
    
    $
    79,209
    
    
    $
    44,076
    
    
    $
    123,285
     Stockholders Equity
   13




---



##### 



RESULTS OF OPERATIONS
    Year Ended December 31,2010
    
    
    2009
    
    
    2008Return on Average Equity
    
    
    8.61
    %
    
    
    4.54
    %
    
    
    1.92
    %Return on Average Earning Assets
    
    
    0.94
    %
    
    
    0.51
    %
    
    
    0.25
    %Ratio of Average Equity to Average Assets
    
    
    10.62
    %
    
    
    11.03
    %
    
    
    12.86
    %
 Net Interest Income and Net Interest Margin
       14




---



##### 



AVERAGE BALANCES, RATES AND INTEREST INCOME AND EXPENSE
 Years Ended2010
    
    
    2009Average
    
    
    
    
    
    
    Yield/
    
    
    Average
    
    
    
    
    
    
    Yield/(In thousands)
    
    Balance
    
    
    Interest
    
    
    Rate
    
    
    Balance
    
    
    Interest
    
    
    RateAssets:Interest Earning Assets:Loans receivable
    
    $
    184,036
    
    
    $
    12,474
    
    
    
    6.78
    %
    
    $
    169,888
    
    
    $
    11,791
    
    
    
    6.94
    %Investment securities
    
    
    527
    
    
    
    28
    
    
    
    5.31
    %
    
    
    2,391
    
    
    
    108
    
    
    
    4.52
    %Interest bearing deposits
    
    
    16,619
    
    
    
    58
    
    
    
    0.35
    %
    
    
    10,127
    
    
    
    26
    
    
    
    0.26
    %Federal funds sold
    
    
    32
    
    
    
    
    
    
    
    0.00
    %
    
    
    949
    
    
    
    3
    
    
    
    0.32
    %Total Interest Earning Assets
    
    
    201,214
    
    
    
    12,560
    
    
    
    6.24
    %
    
    
    183,355
    
    
    
    11,928
    
    
    
    6.51
    %Less allowance for loan losses
    
    
    (2,461
    )
    
    
    
    
    
    
    
    
    
    
    (2,146
    )Non-Interest Earning Assets
    
    
    8,455
    
    
    
    
    
    
    
    
    
    
    
    5,830Total Assets
    
    $
    207,208
    
    
    
    
    
    
    
    
    
    
    $
    187,039Liabilities and Stockholders Equity:Interest Bearing Liabilities:Interest bearing demand deposits
    
    $
    746
    
    
    $
    1
    
    
    
    0.07
    %
    
    $
    1,600
    
    
    $
    1
    
    
    
    0.06
    %Money market deposit accounts
    
    
    7,946
    
    
    
    36
    
    
    
    0.45
    %
    
    
    11,942
    
    
    
    63
    
    
    
    0.53
    %Savings accounts
    
    
    17,465
    
    
    
    223
    
    
    
    1.28
    %
    
    
    3,942
    
    
    
    71
    
    
    
    1.80
    %Certificates of deposit
    
    
    135,237
    
    
    
    2,871
    
    
    
    2.12
    %
    
    
    126,451
    
    
    
    4,452
    
    
    
    3.52
    %Securities sold under agreements
to repurchase
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total Interest Bearing Liabilities
    
    
    161,394
    
    
    
    3,131
    
    
    
    1.94
    %
    
    
    143,935
    
    
    
    4,587
    
    
    
    3.19
    %Non-Interest Bearing Liabilities:Demand deposits
    
    
    22,996
    
    
    
    
    
    
    
    
    
    
    
    21,413Other
    
    
    807
    
    
    
    
    
    
    
    
    
    
    
    1,058Total Liabilities
    
    
    185,197
    
    
    
    
    
    
    
    
    
    
    
    166,406Stockholders Equity
    
    
    22,011
    
    
    
    
    
    
    
    
    
    
    
    20,633Total Liabilities and Equity
    
    $
    207,208
    
    
    
    
    
    
    
    
    
    
    $
    187,039Net Interest Income
    
    
    
    
    
    $
    9,430
    
    
    
    
    
    
    
    
    
    
    $
    7,341Net Interest Spread
    
    
    
    
    
    
    
    
    
    
    4.30
    %
    
    
    
    
    
    
    
    
    
    
    3.32
    %Net Interest Margin
    
    
    
    
    
    
    
    
    
    
    4.69
    %
    
    
    
    
    
    
    
    
    
    
    4.00
    %
 Yields on securities are calculated based on amortized cost. Loans receivable include
nonaccrual loans.
 AVERAGE BALANCES, RATES AND INTEREST INCOME AND EXPENSE
 Year Ended2008Average
    
    
    
    
    
    
    Yield/(In thousands)
    
    Balance
    
    
    Interest
    
    
    RateAssets:Interest Earning Assets:Loans receivable
    
    $
    138,166
    
    
    $
    10,130
    
    
    
    7.31
    %Investment securities
    
    
    7,718
    
    
    
    341
    
    
    
    4.41
    %Interest bearing deposits
    
    
    306
    
    
    
    8
    
    
    
    2.61
    %Federal funds sold
    
    
    8,654
    
    
    
    171
    
    
    
    1.97
    %Total Interest Earning Assets
    
    
    154,844
    
    
    
    10,650
    
    
    
    6.86
    %Less allowance for loan losses
    
    
    (1,738
    )Non-Interest Earning Assets
    
    
    5,971Total Assets
    
    $
    159,077Liabilities and Stockholders Equity:Interest Bearing Liabilities:Interest bearing demand deposits
    
    $
    1,373
    
    
    $
    3
    
    
    
    0.22
    %Money market deposit accounts
    
    
    17,852
    
    
    
    321
    
    
    
    1.79
    %Savings accounts
    
    
    91
    
    
    
    
    
    
    
    Certificates of deposit
    
    
    97,124
    
    
    
    4,729
    
    
    
    4.86
    %Securities sold under agreements
to repurchase
    
    
    2,651
    
    
    
    302
    
    
    
    1.13
    %Total Interest Bearing Liabilities
    
    
    119,091
    
    
    
    5,083
    
    
    
    4.26
    %
  15




---



##### 



Year Ended2008Average
    
    
    
    
    
    
    Yield/Continued (In thousands)
    
    Balance
    
    
    Interest
    
    
    RateNon-Interest Bearing Liabilities:Demand deposits
    
    
    18,608Other
    
    
    917Total Liabilities
    
    
    138,616Stockholders Equity
    
    
    20,461Total Liabilities and Equity
    
    $
    159,077Net Interest Income
    
    
    
    
    
    $
    5,567Net Interest Spread
    
    
    
    
    
    
    
    
    
    
    2.60
    %Net Interest Margin
    
    
    
    
    
    
    
    
    
    
    3.59
    %
 Yields on securities are calculated based on amortized cost. Loans receivable include
nonaccrual loans.
  Rate/Volume Analysis of Net Interest Income
  RATE/VOLUME ANALYSIS
 2010 vs. 2009
    
    
    2009 vs. 2008Increase (Decrease)
    
    
    Increase (Decrease)Due to
    
    
    Due toIn thousands)
    
    Volume
    
    
    Rate
    
    
    Total
    
    
    Volume
    
    
    Rate
    
    
    TotalInterest-Earning Assets:Federal funds sold
    
    $
    (3
    )
    
    $
    
    
    
    $
    (3
    )
    
    $
    (152
    )
    
    $
    (16
    )
    
    $
    (168
    )Interest bearing deposits
    
    
    18
    
    
    
    14
    
    
    
    32
    
    
    
    18
    
    
    
    
    
    
    
    18Investment portfolio
    
    
    (78
    )
    
    
    (2
    )
    
    
    (80
    )
    
    
    (258
    )
    
    
    24
    
    
    
    (234
    )Loans receivable
    
    
    982
    
    
    
    (299
    )
    
    
    683
    
    
    
    2,325
    
    
    
    (664
    )
    
    
    1,661Net Change in Interest Income
    
    
    919
    
    
    
    (287
    )
    
    
    632
    
    
    
    1,933
    
    
    
    (656
    )
    
    
    1,277Interest Bearing Liabilities:Interest bearing deposits
    
    
    602
    
    
    
    (2,059
    )
    
    
    (1,457
    )
    
    
    1,193
    
    
    
    (1,660
    )
    
    
    (467
    )Other borrowed funds
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Securities sold under agreements
to repurchase
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (30
    )
    
    
    
    
    
    
    (30
    )Net Change in Interest
Expense
    
    
    602
    
    
    
    (2,059
    )
    
    
    (1,457
    )
    
    
    1,163
    
    
    
    (1,660
    )
    
    
    (497
    )Change in Net Interest Income
    
    $
    317
    
    
    $
    1,772
    
    
    $
    2,089
    
    
    $
    770
    
    
    $
    1,004
    
    
    $
    1,774
 Provision for Loan Losses
   16




---



##### 



Non-interest Income
  Non-interest Expense
  Income Taxes
 Accounting for Income Taxes
 Off-Balance Sheet Arrangements
  Interest Rate Risk Management
   17




---



##### 



RATE SENSITIVITY ANALYSIS (Static GAP)
December 31, 2010
 0-3
    
    
    4-12
    
    
    >1-3
    
    
    >3<5(In thousands)
    
    Months
    
    
    Months
    
    
    Years
    
    
    Years
    
    
    5 YRS +
    
    
    TotalInterest earning assetsInterest bearing deposits
    
    $
    12,289
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    12,289Loans*
    
    
    61,060
    
    
    
    13,115
    
    
    
    56,384
    
    
    
    45,972
    
    
    
    1,069
    
    
    
    177,600Total
    
    
    73,349
    
    
    
    13,115
    
    
    
    56,384
    
    
    
    45,972
    
    
    
    1,069
    
    
    
    189,889Interest bearing
liabilitiesSavings/MoneyMarket/NOW
    
    
    33,065
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    33,065Certificates of deposit
    
    
    21,681
    
    
    
    57,450
    
    
    
    36,497
    
    
    
    7,657
    
    
    
    
    
    
    
    123,285Total
    
    
    54,746
    
    
    
    57,450
    
    
    
    36,497
    
    
    
    7,657
    
    
    
    
    
    
    
    156,350GAP:Period
    
    $
    18,603
    
    
    
    (44,335
    )
    
    
    19,887
    
    
    
    38,315
    
    
    
    1,069
    
    
    $
    33,539Cumulative
    
    
    
    
    
    $
    (25,732
    )
    
    $
    (5,845
    )
    
    $
    32,470
    
    
    $
    33,539
 *
    
    Loan amounts above exclude $7.3 million of loans on non-interest accrual. Capital Resources and Adequacy
    18




---



##### 



Minimum RatiosDecember 31,
    
    
    December 31,
    
    
    To be Adequately
    
    
    To be Well2010
    
    
    2009
    
    
    Capitalized
    
    
    CapitalizedTotal capital:Company
    
    
    13.1
    %
    
    
    12.3
    %
    
    
    8.0
    %
    
    
    N/ABank
    
    
    12.3
    %
    
    
    11.5
    %
    
    
    8.0
    %
    
    
    10.0
    %Tier I:Company
    
    
    11.8
    %
    
    
    11.0
    %
    
    
    4.0
    %
    
    
    N/ABank
    
    
    11.1
    %
    
    
    10.2
    %
    
    
    4.0
    %
    
    
    6.0
    %Leverage Total:Company
    
    
    11.0
    %
    
    
    10.4
    %
    
    
    4.0
    %
    
    
    N/ABank
    
    
    10.3
    %
    
    
    9.7
    %
    
    
    4.0
    %
    
    
    5.0
    %
  Market for Common Stock and Dividends
  2010
    
    
    2009High
    
    
    Low
    
    
    High
    
    
    LowFirst Quarter
    
    $
    7.75
    
    
    
    5.75
    
    
    $
    5.60
    
    
    
    4.05Second Quarter
    
    
    9.40
    
    
    
    7.60
    
    
    
    6.25
    
    
    
    4.50Third Quarter
    
    
    9.76
    
    
    
    8.29
    
    
    
    6.75
    
    
    
    5.26Fourth Quarter
    
    
    10.68
    
    
    
    8.50
    
    
    
    6.25
    
    
    
    5.08
  Financial Statements
   19




---



##### 



TGM GROUP LLC LETTERHEAD
 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
    
 
  20




---



##### 



CommerceFirst Bancorp, Inc. and Subsidiary
Consolidated Statements of Financial Condition
December 31, 2010 and December 31, 2009
(Dollars in thousands)
 December 31,
    
    
    December 31,2010
    
    
    2009ASSETSCash and due from banks
    
    $
    1,437
    
    
    $
    2,106Interest bearing deposits
    
    
    12,289
    
    
    
    8,228Federal funds sold
    
    
    
    
    
    
    154Cash and cash equivalents
    
    
    13,726
    
    
    
    10,488Investments in restricted stocks, at cost
    
    
    527
    
    
    
    527Loans receivable
    
    
    184,883
    
    
    
    185,482Allowance for loan losses
    
    
    (3,174
    )
    
    
    (2,380
    )Net loans receivable
    
    
    181,709
    
    
    
    183,102Premises and equipment, net
    
    
    556
    
    
    
    739Accrued interest receivable
    
    
    750
    
    
    
    681Deferred income taxes
    
    
    1,133
    
    
    
    919Other real estate owned
    
    
    3,324
    
    
    
    2,462Other assets
    
    
    1,399
    
    
    
    1,453Total Assets
    
    $
    203,124
    
    
    $
    200,371LIABILITIESNon-interest bearing deposits
    
    $
    23,760
    
    
    $
    21,024Interest bearing deposits
    
    
    156,350
    
    
    
    157,621Total deposits
    
    
    180,110
    
    
    
    178,645Accrued interest payable
    
    
    106
    
    
    
    184Other liabilities
    
    
    543
    
    
    
    600Total Liabilities
    
    
    180,759
    
    
    
    179,429STOCKHOLDERS EQUITYCommon stock  $.01 par value; authorized 4,000,000 sharesIssued and outstanding: 1,820,548 shares at December 31, 2010
and at December 31, 2009
    
    
    18
    
    
    
    18Additional paid-in capital
    
    
    17,853
    
    
    
    17,853Retained earnings
    
    
    4,494
    
    
    
    3,071Total Stockholders Equity
    
    
    22,365
    
    
    
    20,942Total Liabilities and Stockholders Equity
    
    $
    203,124
    
    
    $
    200,371
   21




---



##### 



CommerceFirst Bancorp, Inc. and Subsidiary
Consolidated Statements of Operations
For the Years Ended December 31, 2010 and 2009
(Dollars in thousands except per share data)
 December 31,
    
    
    December 31,2010
    
    
    2009Interest income:Interest and fees on loans
    
    $
    12,474
    
    
    $
    11,791U.S. Treasury securities
    
    
    
    
    
    
    82Investment in stocks
    
    
    28
    
    
    
    26Interest bearing deposits
    
    
    58
    
    
    
    26Federal funds sold
    
    
    
    
    
    
    3Total interest income
    
    
    12,560
    
    
    
    11,928Interest expense:Deposits
    
    
    3,130
    
    
    
    4,587Total interest expense
    
    
    3,130
    
    
    
    4,587Net interest income
    
    
    9,430
    
    
    
    7,341Provision for loan losses
    
    
    2,716
    
    
    
    1,616Net interest income after provision for loan losses
    
    
    6,714
    
    
    
    5,725Non-interest income:Gain on sale of SBA loans
    
    
    615
    
    
    
    257Service charges and other income
    
    
    479
    
    
    
    463Total non-interest income
    
    
    1,094
    
    
    
    720Non-interest expenses:Compensation and benefits
    
    
    2,961
    
    
    
    2,903Legal and professional
    
    
    235
    
    
    
    250Rent and occupancy
    
    
    567
    
    
    
    558Marketing and business development
    
    
    76
    
    
    
    58FDIC insurance
    
    
    321
    
    
    
    366Data processing
    
    
    147
    
    
    
    139Support services
    
    
    194
    
    
    
    185Communications
    
    
    129
    
    
    
    121Depreciation and amortization
    
    
    231
    
    
    
    280Other
    
    
    573
    
    
    
    455Total non-interest expenses
    
    
    5,434
    
    
    
    5,315Income before income taxes
    
    
    2,374
    
    
    
    1,130Income tax expense
    
    
    951
    
    
    
    452Net income
    
    $
    1,423
    
    
    $
    678Basic earnings per share
    
    $
    0.78
    
    
    $
    0.37Diluted earnings per share
    
    $
    0.78
    
    
    $
    0.37
   22




---



##### 



CommerceFirst Bancorp, Inc. and Subsidiary
Consolidated Statements of Comprehensive Income
For the Years Ended December 31, 2010 and 2009
(Dollars in thousands)
 December 31,
    
    
    December 31,2010
    
    
    2009Net income
    
    $
    1,423
    
    
    $
    678Change in unrealized gains and
(losses) on securities available-for-sale,
net of tax
    
    
    
    
    
    
    (47
    )Other comprehensive income (loss)
    
    
    
    
    
    
    (47
    )Total comprehensive income
    
    $
    1,423
    
    
    $
    631
   23




---



##### 



CommerceFirst Bancorp, Inc. and Subsidiary
Consolidated Statements of Stockholders Equity
For the Years Ended December 31, 2010 and 2009
(Dollars in thousands)
 AccumulatedAdditional
    
    
    
    
    
    
    OtherCommon
    
    
    Paid-in
    
    
    Retained
    
    
    ComprehensiveStock
    
    
    Capital
    
    
    Earnings
    
    
    Income (Loss)
    
    
    TotalBalance December 31, 2008
    
    $
    18
    
    
    $
    17,853
    
    
    $
    2,393
    
    
    $
    47
    
    
    $
    20,311Net income in 2009
    
    
    
    
    
    
    
    
    
    
    678
    
    
    
    
    
    
    
    678Net change in unrealized gains
and (losses) on securities
available for sale
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (47
    )
    
    
    (47
    )Balance December 31, 2009
    
    
    18
    
    
    
    17,853
    
    
    
    3,071
    
    
    
    
    
    
    
    20,942Net income in 2010
    
    
    
    
    
    
    
    
    
    
    1,423
    
    
    
    
    
    
    
    1,423Balance December 31, 2010
    
    $
    18
    
    
    $
    17,853
    
    
    $
    4,494
    
    
    $
    
    
    
    $
    22,365
   24




---



##### 



CommerceFirst Bancorp, Inc. and Subsidiary
Consolidated Statements of Cash Flows
For the Years Ended December 31, 2010 and 2009
(Dollars in thousands)
 December 31,
    
    
    December 31,2010
    
    
    2009CASH FLOWS FROM OPERATING ACTIVITIESNet income
    
    $
    1,423
    
    
    $
    678Adjustments to reconcile net income to net cash
provided by operations:Depreciation and amortization
    
    
    231
    
    
    
    280Gain on sales of SBA loans
    
    
    (615
    )
    
    
    (257
    )Provision for loan losses
    
    
    2,716
    
    
    
    1,616Provision for losses on unfunded commitments
    
    
    6
    
    
    
    6Provision for losses on other real estate owned
    
    
    153
    
    
    
    Deferred income taxes
    
    
    (214
    )
    
    
    (221
    )Change in assets and liabilities:Increase in accrued interest receivable
    
    
    (69
    )
    
    
    (41
    )Decrease (increase) in other assets
    
    
    54
    
    
    
    (811
    )Decrease in accrued interest payable
    
    
    (78
    )
    
    
    (81
    )Decrease in other liabilities
    
    
    (63
    )
    
    
    (158
    )Other
    
    
    
    
    
    
    8Net cash provided by operating activities
    
    
    3,544
    
    
    
    1,019CASH FLOWS FROM INVESTING ACTIVITIESPurchase of restricted stock
    
    
    
    
    
    
    (60
    )Maturities of investment securities
    
    
    
    
    
    
    3,000Proceeds from sales of SBA loans
    
    
    8,742
    
    
    
    4,822Increase in loans, net
    
    
    (10,465
    )
    
    
    (40,643
    )Purchase of premises and equipment
    
    
    (48
    )
    
    
    (18
    )Net cash used by investing activities
    
    
    (1,771
    )
    
    
    (32,899
    )CASH FLOWS FROM FINANCING ACTIVITIESIncrease (decrease) in non-interest bearing deposits, net
    
    
    2,736
    
    
    
    (2,574
    )Net (decrease) increase in other deposits
    
    
    (1,271
    )
    
    
    35,978Net cash provided by financing activities
    
    
    1,465
    
    
    
    33,404Net increase in cash and cash equivalents
    
    
    3,238
    
    
    
    1,524Cash and cash equivalents at beginning of period
    
    
    10,488
    
    
    
    8,964Cash and cash equivalents at end of period
    
    $
    13,726
    
    
    $
    10,488SUPPLEMENTAL CASH FLOW INFORMATIONInterest paid
    
    $
    3,052
    
    
    $
    4,668Income taxes paid
    
    $
    1,490
    
    
    $
    640Transfers to other real estate owned
    
    $
    1,015
    
    
    $
    2,462Total decrease in unrealized gains on available
for sale securities
    
    $
    
    
    
    $
    (77
    )
   25




---



##### 



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 1. The Company and its Significant Accounting Policies
  Principles of Consolidation
  Use of Estimates
  Investment Securities
     26




---



##### 



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 1. The Company and its Significant Accounting Policies (continued)
 Restricted Securities
  Loans and Allowance for Loan Losses
   The FASB Accounting Standards Codification (ASC).
  Unearned Discounts and Servicing Rights of Small Business Administration (SBA) Loans Sold
   27




---



##### 



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 1. The Company and its Significant Accounting Policies (continued)
  Other Real Estate Owned (OREO)
  Premises and Equipment
  Long-Lived Assets
  Transfers of Financial Assets
  Deferred Income Taxes
   28




---



##### 



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 1. The Company and its Significant Accounting Policies (continued)
 Concentration of Credit Risk
   Comprehensive Income or Loss
  Statement of Cash Flows
  Earnings Per Share
   In thousands except per share data
    
    2010
    
    
    2009Weighted average shares outstanding
    
    
    1,820,548
    
    
    
    1,820,548Common stock equivalents
    
    
    
    
    
    
    Average common shares and equivalents
    
    
    1,820,548
    
    
    
    1,820,548Net income
    
    $
    1,423
    
    
    $
    678Basic earnings per share
    
    $
    0.78
    
    
    $
    0.37Diluted earnings per share
    
    $
    0.78
    
    
    $
    0.37
   29




---



##### 



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 1. The Company and its Significant Accounting Policies (continued)
 Stock Options
 Stock Compensation
 Reclassification
  Note 2. Fair Value
 Fair Value Measurements and Disclosure
 Level 1:
    
    Quoted prices in active exchange markets for
identical assets or liabilities; also includes
certain U.S. Treasury and other U.S. government
and agency securities actively traded in
over-the-counter markets.Level 2:
    
    Observable inputs other than Level 1 including
quoted prices for similar assets or liabilities,
quoted prices in less active markets, or other
observable inputs that can be corroborated by
observable market data; also includes derivative
contracts whose value is determined using a
pricing model with observable market inputs or
can be derived principally from or corroborated
by observable market data. This category
generally includes certain U.S. government and
agency securities, corporate debt securities,
derivative instruments, and residential mortgage
loans held for sale.Level 3:
    
    Unobservable inputs supported by little or no
market activity for financial instruments whose
value is determined using pricing models,
discounted cash flow methodologies, or similar
techniques, as well as instruments for which the
determination of fair value requires significant
management judgment or estimation; also includes
observable inputs for single dealer nonbinding
quotes not corroborated by observable market
data. This category generally includes certain
private equity investments, retained interests
from securitizations, and certain collateralized
debt obligations.
  30




---



##### 



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 2. Fair Value (continued)
  In thousands
    
    Level 1
    
    
    Level 2
    
    
    Level 3December 31, 2009:Loans
    
    $
    
    
    
    $
    1,458
    
    
    $
    1,276Other real estate owned
    
    
    
    
    
    
    2,462
    
    
    
    Total December 31, 2009
    
    
    
    
    
    
    3,920
    
    
    
    1,276Activity:Loans:New loans measured at fair value
    
    
    
    
    
    
    
    
    
    
    7,845Payments and other loan reductions
    
    
    
    
    
    
    (11
    )
    
    
    (367
    )Loans charged-off
    
    
    
    
    
    
    (502
    )
    
    
    (1,471
    )Additions to other real estate owned
    
    
    
    
    
    
    (945
    )
    
    
    Net change in loans
    
    
    
    
    
    
    (1,458
    )
    
    
    6,007Other real estate owned:Value of properties at foreclosures
    
    
    
    
    
    
    
    
    
    
    1,015Transferred to Level 3 inputs
    
    
    
    
    
    
    (2,462
    )
    
    
    2,462Provision for valuation reduction
    
    
    
    
    
    
    
    
    
    
    (153
    )
    
    
    
    
    
    
    
    3,324December 31, 2010:Loans
    
    
    
    
    
    
    
    
    
    
    7,283Other real estate owned
    
    
    
    
    
    
    
    
    
    
    3,324Total December 31, 2010
    
    $
    
    
    
    $
    
    
    
    $
    10,607
  December 31, 2010
    
    
    December 31, 2009Carrying
    
    
    Fair
    
    
    Carrying
    
    
    FairIn thousands
    
    Amount
    
    
    Value
    
    
    Amount
    
    
    ValueFinancial assets:Cash and due from banks
    
    $
    1,437
    
    
    $
    1,437
    
    
    $
    2,106
    
    
    $
    2,106Interest bearing deposits
    
    
    12,289
    
    
    
    12,289
    
    
    
    8,228
    
    
    
    8,228Federal funds sold
    
    
    
    
    
    
    
    
    
    
    154
    
    
    
    154Investments in restricted stock
    
    
    527
    
    
    
    527
    
    
    
    527
    
    
    
    527Loans, net
    
    
    181,709
    
    
    
    191,353
    
    
    
    183,102
    
    
    
    192,687Accrued interest receivable
    
    
    750
    
    
    
    750
    
    
    
    681
    
    
    
    681Financial liabilities:Non-interest bearing deposits
    
    $
    23,760
    
    
    $
    23,760
    
    
    $
    21,024
    
    
    $
    21,024Interest bearing deposits
    
    
    156,350
    
    
    
    157,228
    
    
    
    157,621
    
    
    
    160,450Accrued interest payable
    
    
    106
    
    
    
    106
    
    
    
    184
    
    
    
    184Off-balance sheet commitments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
   31




---



##### 



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 2. Fair Value (continued)
   Note 3. Investment in Restricted Stocks
  December 31,In thousands
    
    2010
    
    
    2009Federal Reserve Bank of Richmond
    
    $
    465
    
    
    $
    465Atlantic Central Bankers Bank
    
    
    37
    
    
    
    37Maryland Financial Bank
    
    
    25
    
    
    
    25$
    527
    
    
    $
    527
  Note 4. Loans and Allowance for Loan Losses
  December 31, 2010
    
    
    December 31, 2009Percentage
    
    
    
    
    
    
    PercentageIn thousands
    
    Balance
    
    
    of Loans
    
    
    Balance
    
    
    of LoansCommercial & Industrial loans
    
    $
    52,324
    
    
    
    28.3
    %
    
    $
    68,476
    
    
    
    36.9
    %Real estate loans secured by:Residential real estate
    
    
    24,307
    
    
    
    13.1
    %
    
    
    22,140
    
    
    
    11.9
    %Commercial real estate
    
    
    108,366
    
    
    
    58,6
    %
    
    
    94,947
    
    
    
    51.2
    %Total real estate loans
    
    
    132,673
    
    
    
    71.7
    %
    
    
    117,087
    
    
    
    63.1
    %184,997
    
    
    
    100.0
    %
    
    
    185,563
    
    
    
    100.0
    %Unearned loan fees, net
    
    
    (114
    )
    
    
    
    
    
    
    (81
    )Allowance for loan losses
    
    
    (3,174
    )
    
    
    
    
    
    
    (2,380
    )$
    181,709
    
    
    
    
    
    
    $
    183,102
 Note:
    
    The loan amounts and percentages for December 31, 2010 above reflect the effect of
reclassifying approximately $9.5 million of commercial and industrial loans to real estate
loans during the second quarter of 2010. Without the reclassification, the commercial and
industrial loans would have comprised approximately 33.4% of the total loans at December 31,
2010.   32




---



##### 



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 4. Loans and Allowance for Loan Losses (continued)
   Year Ended December 31,In thousands
    
    2010
    
    
    2009
    
    
    2008
    
    
    2007
    
    
    2006Allowance for loan losses:Beginning balance
    
    $
    2,380
    
    
    $
    1,860
    
    
    $
    1,665
    
    
    $
    1,614
    
    
    $
    1,615Charge-offs  Commercial and Industrial loans
    
    
    (1,587
    )
    
    
    (963
    )
    
    
    (497
    )
    
    
    (72
    )
    
    
    (226
    )Recoveries  Commercial and Industrial loans
    
    
    51
    
    
    
    5
    
    
    
    45
    
    
    
    78
    
    
    
    Charge-offs- Commercial real estate loans
    
    
    (386
    )
    
    
    (138
    )
    
    
    
    
    
    
    
    
    
    
    Net recoveries (charge-offs)
    
    
    (1,922
    )
    
    
    (1,096
    )
    
    
    (452
    )
    
    
    6
    
    
    
    (226
    )Provision for loan losses
    
    
    2,716
    
    
    
    1,616
    
    
    
    647
    
    
    
    45
    
    
    
    225Ending balance
    
    $
    3,174
    
    
    $
    2,380
    
    
    $
    1,860
    
    
    $
    1,665
    
    
    $
    1,614Net recoveries (charge-offs) to average loans
    
    
    (1.04
    %)
    
    
    (0.65
    %)
    
    
    (0.33
    %)
    
    
    0.00
    %
    
    
    (0.26
    )%
  Real Estate LoansCommercial
    
    
    
    
    
    
    
    
    
    
    Non-and Industrial
    
    
    SBA
    
    
    Owner
    
    
    Owner
    
    
    NotIn thousands
    
    Loans
    
    
    Loans
    
    
    Occupied
    
    
    Occupied
    
    
    Allocated
    
    
    TotalBalance at December 31, 2009
    
    $
    1,290
    
    
    $
    576
    
    
    $
    168
    
    
    $
    242
    
    
    $
    104
    
    
    $
    2,380Loan charge offs
    
    
    1,140
    
    
    
    447
    
    
    
    
    
    
    
    386
    
    
    
    
    
    
    
    1,973Loss recoveries
    
    
    26
    
    
    
    25
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    51Provision for loan losses
    
    
    847
    
    
    
    473
    
    
    
    514
    
    
    
    859
    
    
    
    23
    
    
    
    2,716Balance at December 31, 2010
    
    $
    1,023
    
    
    $
    627
    
    
    $
    682
    
    
    $
    715
    
    
    $
    127
    
    
    $
    3,174Allowance for loans individually
evaluated for impairment
    
    $
    570
    
    
    $
    194
    
    
    $
    497
    
    
    $
    410
    
    
    
    
    
    
    $
    1,671Balance of loans at December
31, 2010
    
    $
    44,637
    
    
    $
    7,742
    
    
    $
    85,464
    
    
    $
    47,040
    
    
    
    
    
    
    $
    184,883Amount of loans individually
evaluated for impairment
    
    $
    1,622
    
    
    $
    432
    
    
    $
    9,946
    
    
    $
    3,756
    
    
    
    
    
    
    $
    15,756
   33




---



##### 



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 4. Loans and Allowance for Loan Losses (continued)
  Unpaid
    
    
    
    
    
    
    Related
    
    
    InterestPrincipal
    
    
    Recorded
    
    
    Allowance
    
    
    IncomeIn thousands
    
    Balance
    
    
    Investment
    
    
    for losses
    
    
    RecognizedNon-accrual loans:Commercial and Industrial loans:With specific reserves
    
    $
    963
    
    
    $
    963
    
    
    $
    445
    
    
    $
    25Without specific reserves
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    963
    
    
    
    963
    
    
    
    445
    
    
    
    25SBA loans:With specific reserves
    
    
    359
    
    
    
    359
    
    
    
    194
    
    
    
    8Without specific reserves
    
    
    29
    
    
    
    29
    
    
    
    
    
    
    
    388
    
    
    
    388
    
    
    
    194
    
    
    
    8Real Estate  Owner Occupied:With specific reserves
    
    
    3,140
    
    
    
    3,140
    
    
    
    483
    
    
    
    64Without specific reserves
    
    
    816
    
    
    
    816
    
    
    
    
    
    
    
    173,956
    
    
    
    3,956
    
    
    
    483
    
    
    
    81Real Estate  Non Owner Occupied:With specific reserves*
    
    
    2,082
    
    
    
    1,976
    
    
    
    399
    
    
    
    41Without specific reserves
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,082
    
    
    
    1,976
    
    
    
    399
    
    
    
    Total Non-accrual Loans:With specific reserves*
    
    $
    6,544
    
    
    $
    6,438
    
    
    $
    1,521
    
    
    $
    138Without specific reserves
    
    
    845
    
    
    
    845
    
    
    
    
    
    
    
    17Total Non-accrual loans
    
    $
    7,389
    
    
    $
    7,283
    
    
    $
    1,521
    
    
    $
    155Troubled Debt Restructured loans:Commercial and Industrial loans:With specific reserves
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Without specific reserves
    
    
    154
    
    
    
    154
    
    
    
    
    
    
    
    13$
    154
    
    
    $
    154
    
    
    
    
    
    
    
    13Number of loans
    
    
    
    
    
    
    1Real Estate  Owner Occupied:With specific reserves
    
    
    2,051
    
    
    
    2,051
    
    
    
    13
    
    
    
    125Without specific reserves
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,051
    
    
    
    2,051
    
    
    
    13
    
    
    
    125Number of loans
    
    
    
    
    
    
    1Real Estate  Non Owner Occupied:With specific reserves
    
    
    1,603
    
    
    
    1,603
    
    
    
    11
    
    
    
    82Without specific reserves
    
    
    177
    
    
    
    177
    
    
    
    
    
    
    
    121,780
    
    
    
    1,780
    
    
    
    11
    
    
    
    94Number of loans
    
    
    
    
    
    
    7
  34




---



##### 



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 4. Loans and Allowance for Loan Losses (continued)
 Unpaid
    
    
    
    
    
    
    Related
    
    
    InterestPrincipal
    
    
    Recorded
    
    
    Allowance
    
    
    Income(Continued) In thousands
    
    Balance
    
    
    Investment
    
    
    for losses
    
    
    RecognizedTotal Loans:With specific reserves
    
    $
    3,654
    
    
    $
    3,654
    
    
    $
    25
    
    
    $
    207Without specific reserves
    
    
    331
    
    
    
    331
    
    
    
    
    
    
    
    25Total Troubled Debt
Restructured
 loans
    
    $
    3,985
    
    
    $
    3,985
    
    
    $
    25
    
    
    
    232Number of loans
    
    
    
    
    
    
    9Other Impaired loans:Commercial and Industrial loans:With specific reserves
    
    $
    250
    
    
    $
    250
    
    
    $
    125
    
    
    $
    19Without specific reserves
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total Other Impaired loans
    
    $
    250
    
    
    $
    250
    
    
    $
    125
    
    
    $
    19Total Impaired Loans:With specific reserves*
    
    $
    10,448
    
    
    $
    10,342
    
    
    $
    1,671
    
    
    $
    364Without specific reserves
    
    
    1,176
    
    
    
    1,176
    
    
    
    
    
    
    
    42Total Impaired loans
    
    $
    11,624
    
    
    $
    11,518
    
    
    $
    1,671
    
    
    $
    406
 *
    
    Difference between the unpaid principal balance and the recorded investment result
from the Company charging-off a portion of the loans. The charge-offs do not affect the
total amount due from the borrowers.  Year Ended December 31,In thousands
    
    2010
    
    
    2009
    
    
    2008
    
    
    2007
    
    
    2006Balance at the beginning of the period
    
    $
    2,734
    
    
    $
    5,819
    
    
    $
    1,125
    
    
    $
    628
    
    
    $
    592New loans placed on non-accrual
    
    
    7,846
    
    
    
    2,427
    
    
    
    5,046
    
    
    
    569
    
    
    
    262Less:Loan restored to interest earning status
    
    
    
    
    
    
    1,266
    
    
    
    
    
    
    
    
    
    
    
    Paid-off: sold in foreclosure
    
    
    
    
    
    
    576
    
    
    
    
    
    
    
    
    
    
    
    Other real estate owned additions
    
    
    945
    
    
    
    2,462
    
    
    
    
    
    
    
    
    
    
    
    Charge offs
    
    
    1,973
    
    
    
    1,101
    
    
    
    236
    
    
    
    72
    
    
    
    226Other including payments received
    
    
    379
    
    
    
    107
    
    
    
    116
    
    
    
    
    
    
    
    Balance at the end of the period
    
    $
    7,283
    
    
    $
    2,734
    
    
    $
    5,819
    
    
    $
    1,125
    
    
    $
    628
  Commercial
    
    
    
    
    
    
    Real Estate
    
    
    Real Estateand
    
    
    
    
    
    
    Owner
    
    
    Non OwnerIn thousands
    
    Total
    
    
    Industrial
    
    
    SBA
    
    
    Occupied
    
    
    OccupiedBalance at the beginning of the period
    
    $
    2,734
    
    
    $
    2,280
    
    
    $
    454
    
    
    $
    
    
    
    $
    New loans placed on non-accrual
    
    
    7,846
    
    
    
    926
    
    
    
    548
    
    
    
    3,956
    
    
    
    2,416Less:Loan restored to interest earning
status
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Paid-off: sold in foreclosure
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other real estate owned additions
    
    
    945
    
    
    
    945
    
    
    
    
    
    
    
    
    
    
    
    Charge offs
    
    
    1,973
    
    
    
    1,139
    
    
    
    447
    
    
    
    
    
    
    
    387Other including payments received
    
    
    379
    
    
    
    159
    
    
    
    167
    
    
    
    
    
    
    
    53Balance at the end of the period
    
    $
    7,283
    
    
    $
    963
    
    
    $
    388
    
    
    $
    3,956
    
    
    $
    1,976
  35




---



##### 



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 4. Loans and Allowance for Loan Losses (continued)
  In thousands
    
    December 31, 2010
    
    
    December 31, 2009Loans classified non-accrual with specific reserves
    
    $
    6,438
    
    
    $
    2,519Loans classified non-accrual with no specific reserves
    
    
    845
    
    
    
    215Total non-accrual loans
    
    $
    7,283
    
    
    $
    2,734Allowance for loan losses on non-accrual loans
    
    $
    1,521
    
    
    $
    922Average balance non-accrual loans during period
    
    $
    3,419
    
    
    $
    4,559
      December 31:In thousands
    
    2010
    
    
    2009
    
    
    2008
    
    
    2007
    
    
    2006Nonaccrual loans:Commercial and Industrial and SBA
    
    $
    1,351
    
    
    $
    2,734
    
    
    $
    2,218
    
    
    $
    1,125
    
    
    $
    628Real estate
    
    
    5,932
    
    
    
    
    
    
    
    3,601
    
    
    
    
    
    
    
    Accrual loans past due 90 days and over
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total non-performing loans
    
    
    7,283
    
    
    
    2,734
    
    
    
    5,819
    
    
    
    1,125
    
    
    
    628Other real estate owned
    
    
    3,324
    
    
    
    2,462
    
    
    
    
    
    
    
    
    
    
    
    Total non-performing assets
    
    $
    10,607
    
    
    $
    5,196
    
    
    $
    5,819
    
    
    $
    1,125
    
    
    $
    628Allowance for loan losses to total non-performing loans
    
    
    43.6
    %
    
    
    87.1
    %
    
    
    32.0
    %
    
    
    148.0
    %
    
    
    257.0
    %Non-performing loans to total loans
    
    
    3.94
    %
    
    
    1.47
    %
    
    
    3.80
    %
    
    
    0.89
    %
    
    
    0.65
    %Non-performing assets to total assets
    
    
    5.22
    %
    
    
    2.59
    %
    
    
    3.49
    %
    
    
    0.76
    %
    
    
    0.44
    %
  36




---



##### 



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 4. Loans and Allowance for Loan Losses (continued)
  Commercial
    
    
    
    
    
    
    Real Estate
    
    
    Real Estateand
    
    
    
    
    
    
    Owner
    
    
    Non OwnerIn thousands
    
    Total
    
    
    Industrial
    
    
    SBA
    
    
    Occupied
    
    
    OccupiedCurrent accrual loans
    
    $
    174,891
    
    
    $
    42,724
    
    
    $
    7,354
    
    
    $
    81,335
    
    
    $
    43,478Current non-accrual loans
    
    
    486
    
    
    
    486
    
    
    
    
    
    
    
    
    
    
    
    Past due loans:30 to 89 days past due
    
    
    2,823
    
    
    
    958
    
    
    
    
    
    
    
    279
    
    
    
    1,58690 days plus past due and accruing
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Non-accrual loans, non current
    
    
    6,797
    
    
    
    477
    
    
    
    388
    
    
    
    3,956
    
    
    
    1,976Total past due loans
    
    
    9,620
    
    
    
    1,435
    
    
    
    388
    
    
    
    4,235
    
    
    
    3,562Total loans at the end of the period
    
    $
    184,997
    
    
    $
    44,645
    
    
    $
    7,742
    
    
    $
    85,570
    
    
    $
    47,040
  Commercial
    
    
    
    
    
    
    Real Estate
    
    
    Real Estateand
    
    
    
    
    
    
    Owner
    
    
    Non OwnerIn thousands
    
    Total
    
    
    Industrial
    
    
    SBA
    
    
    Occupied
    
    
    OccupiedRisk rated  pass
    
    $
    171,021
    
    
    $
    43,023
    
    
    $
    7,310
    
    
    $
    75,624
    
    
    $
    45,064Risk rated  special mention (loan
weaknesses noted which could lead
to loan loss)
    
    
    4,319
    
    
    
    336
    
    
    
    44
    
    
    
    3,939
    
    
    
    Risk rated- substandard or doubtful
(loans with significant weaknesses
that could, or has, result in loan
losses)
    
    
    9,657
    
    
    
    1,286
    
    
    
    388
    
    
    
    6,007
    
    
    
    1,976Total loans at the end of the period
    
    $
    184,997
    
    
    $
    44,645
    
    
    $
    7,742
    
    
    $
    85,570
    
    
    $
    47,040
    37




---



##### 



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 5. Premises and Equipment
  UsefulIn thousands
    
    Lives
    
    
    2010
    
    
    2009Equipment
    
    3-10 years
    
    $
    540
    
    
    $
    653Furniture and fixtures
    
    3-5 years
    
    
    538
    
    
    
    646Leasehold improvements
    
    4-10 years
    
    
    344
    
    
    
    343Software
    
    3 years
    
    
    20
    
    
    
    171,442
    
    
    
    1,659Accumulated depreciation
and amortization
    
    
    
    
    
    
    886
    
    
    
    920Net
    
    
    
    
    
    $
    556
    
    
    $
    739
 Note 6. Deposits
  In thousands
    
    2010
    
    
    2009NOW accounts
    
    $
    1,279
    
    
    $
    309Money Market accounts
    
    
    8,824
    
    
    
    7,841Savings accounts
    
    
    22,962
    
    
    
    10,379Certificates of deposit accounts:Less than $100,000
    
    
    79,209
    
    
    
    71,593$100,000 or more
    
    
    44,076
    
    
    
    67,499$
    156,350
    
    
    $
    157,621
   In thousands
    
    2010
    
    
    2009NOW accounts
    
    $
    1
    
    
    $
    1Money Market accounts
    
    
    35
    
    
    
    63Savings accounts
    
    
    222
    
    
    
    71Certificates of deposit, $100,000 or more
    
    
    1,217
    
    
    
    2,920Certificates of deposit, less than $100,00
    
    
    1,655
    
    
    
    1,532$
    3,130
    
    
    $
    4,587
    38




---



##### 



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 7. Short-term borrowings
  Note 8. Income Taxes
  In thousands
    
    2010
    
    
    2009Current:Federal
    
    $
    914
    
    
    $
    532State
    
    
    251
    
    
    
    1411,165
    
    
    
    673Deferred:Federal
    
    
    (171
    )
    
    
    (178
    )State
    
    
    (43
    )
    
    
    (43
    )(214
    )
    
    
    (221
    )$
    951
    
    
    $
    452
  In thousands
    
    2010
    
    
    2009Federal tax at statutory rates
    
    $
    807
    
    
    $
    384State income taxes net of
federal tax benefit
    
    
    138
    
    
    
    64Other
    
    
    6
    
    
    
    4$
    951
    
    
    $
    452
  In thousands
    
    2010
    
    
    2009Deferred tax assets:Allowance for loan losses
    
    $
    921
    
    
    $
    787Deferred unpaid leave
    
    
    80
    
    
    
    87Non-accrued interest income
    
    
    89
    
    
    
    82Valuation allowance for ORE
    
    
    60
    
    
    
    Other
    
    
    24
    
    
    
    211,174
    
    
    
    977Deferred tax liabilities:Accumulated depreciation
    
    
    41
    
    
    
    5841
    
    
    
    58Net deferred tax assets
    
    $
    1,133
    
    
    $
    919
   39




---



##### 



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 9. Commitments and Contingencies
  In thousands
    
    2010Loan commitments:Commercial
    
    $
    1,591Commercial real estate
    
    
    2,732$
    4,323Un-advanced loan funds:Commercial
    
    $
    27,705Commercial real estate
    
    
    9,584$
    37,289Standby letters of credit
    
    $
    1,268
      In thousandsDecember 31,2011
    
    $
    3962012
    
    
    3162013
    
    
    3212014
    
    
    3212015
    
    
    1352016
    
    
    59
  40




---



##### 



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 9. Commitments and Contingencies (continued)
  Note
 10. Regulatory Matters
    For Capital
    
    
    To be Well CapitalizedAdequacy
    
    
    For Purposes of PromptIn thousands
    
    Actual
    
    
    Purposes
    
    
    Corrective ActionDecember 31, 2010
    
    Amount
    
    
    Ratio
    
    
    Amount
    
    
    
    
    
    
    Ratio
    
    
    Amount
    
    
    
    
    
    
    RatioTotal Capital (1):Company
    
    $
    24,745
    
    
    
    13.1
    %
    
    $
    15,162
    
    
    
    >
    
    
    
    8.0
    %
    
    
    N/ABank
    
    
    23,337
    
    
    
    12.3
    %
    
    
    15,162
    
    
    
    >
    
    
    
    8.0
    %
    
    $
    18,952
    
    
    
    >
    
    
    
    10.0
    %Tier I Capital (1):Company
    
    
    22,365
    
    
    
    11.8
    %
    
    
    7,581
    
    
    
    >
    
    
    
    4.0
    %
    
    
    N/ABank
    
    
    20,957
    
    
    
    11.1
    %
    
    
    7,581
    
    
    
    >
    
    
    
    4.0
    %
    
    
    11,371
    
    
    
    >
    
    
    
    6.0
    %Tier I Capital (2):Company
    
    
    22,365
    
    
    
    11.0
    %
    
    
    8,110
    
    
    
    >
    
    
    
    4.0
    %
    
    
    N/ABank
    
    
    20,957
    
    
    
    10.3
    %
    
    
    8,110
    
    
    
    >
    
    
    
    4.0
    %
    
    
    10,138
    
    
    
    >
    
    
    
    5.0
    %
 December 31, 2009
    
    Amount
    
    
    Ratio
    
    
    Amount
    
    
    
    
    
    
    Ratio
    
    
    Amount
    
    
    
    
    
    
    RatioTotal Capital (1):Company
    
    $
    23,357
    
    
    
    12.3
    %
    
    $
    15,238
    
    
    
    >
    
    
    
    8.0
    %
    
    
    N/ABank
    
    
    21,835
    
    
    
    11.5
    %
    
    
    15,238
    
    
    
    >
    
    
    
    8.0
    %
    
    $
    19,047
    
    
    
    >
    
    
    
    10.0
    %Tier I Capital (1):Company
    
    
    20,966
    
    
    
    11.0
    %
    
    
    7,619
    
    
    
    >
    
    
    
    4.0
    %
    
    
    N/ABank
    
    
    19,444
    
    
    
    10.2
    %
    
    
    7,619
    
    
    
    >
    
    
    
    4.0
    %
    
    
    11,428
    
    
    
    >
    
    
    
    6.0
    %Tier I Capital (2):Company
    
    
    20,966
    
    
    
    10.4
    %
    
    
    8,034
    
    
    
    >
    
    
    
    4.0
    %
    
    
    N/ABank
    
    
    19,444
    
    
    
    9.7
    %
    
    
    8,034
    
    
    
    >
    
    
    
    4.0
    %
    
    
    10,042
    
    
    
    >
    
    
    
    5.0
    %
 (1)
    
    to risk weighted assets(2)
    
    to average assets  41




---



##### 



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 11. Warrant and Option Plans
   Note 12. Employee Benefit Plans
  Note 13. Related Party Transactions
   In thousands
    
    2010
    
    
    2009Total loans at beginning of year
    
    $
    3,594
    
    
    $
    3,604New loans and funding during the year
    
    
    492
    
    
    
    353Director status change to non-Director
    
    
    (1,182
    )
    
    
    Repayments during the year
    
    
    (251
    )
    
    
    (363
    )Total loans at end of year
    
    $
    2,653
    
    
    $
    3,594
 Note 14. Recently Issued Accounting Pronouncements
 Fair Value Measurements and Disclosures
   42




---



##### 



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 14. Recently Issued Accounting Pronouncements (continued)
 Receivables (Topic 310), Disclosures about the
Credit Quality of Financing Receivables and the Allowance for Credit Losses.
  Note 15. Litigation
  Note 16. Parent Company Financial Information
  In thousands
    
    December 31,
    
    
    December 31,Statements of Financial Condition
    
    2010
    
    
    2009AssetsCash in CommerceFirst Bank
    
    $
    1,448
    
    
    $
    1,536Investment in subsidiary
    
    
    20,957
    
    
    
    19,444Other assets
    
    
    
    
    
    
    $
    22,405
    
    
    $
    20,980Liabilities and Stockholders
EquityAccrued expenses
    
    $
    40
    
    
    $
    38Stockholders equity
    
    
    22,365
    
    
    
    20,942$
    22,405
    
    
    $
    20,980
  43




---



##### 



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 16. Parent Company Financial Information (continued)
 Year ended
    
    
    Year endedIn thousands
    
    December 31,
    
    
    December 31,Statements of Operations
    
    2010
    
    
    2009Interest income from deposit in CommerceFirst Bank
    
    $
    9
    
    
    $
    17Administrative expenses
    
    
    145
    
    
    
    144Loss before equity in undistributed net income
of bank subsidiary and income tax benefit
    
    
    (136
    )
    
    
    (127
    )Income tax benefit
    
    
    46
    
    
    
    43Loss before equity in undistributed net income
of bank subsidiary
    
    
    (90
    )
    
    
    (84
    )Equity in undistributed net income of bank subsidiary
    
    
    1,513
    
    
    
    762Net income
    
    $
    1,423
    
    
    $
    678
 Year ended
    
    
    Year endedIn thousands
    
    December 31,
    
    
    December 31,Statements of Cash Flows
    
    2010
    
    
    2009Cash flows from operating activities:Net income
    
    $
    1,423
    
    
    $
    678Equity in undistributed earnings of bank subsidiary
    
    
    (1,513
    )
    
    
    (762
    )Decrease in other assets
    
    
    
    
    
    
    2Increase in payables
    
    
    2
    
    
    
    3Net cash used in operating activities
    
    
    (88
    )
    
    
    (79
    )Cash flows used by investing activities:Investment in CommerceFirst Bank
    
    
    
    
    
    
    (2,000
    )Net cash used by investing activities
    
    
    
    
    
    
    (2,000
    )(Decrease) in cash and cash equivalents
    
    
    (88
    )
    
    
    (2,079
    )Cash and cash equivalents at beginning of period
    
    
    1,536
    
    
    
    3,615Cash and cash equivalents at end of period
    
    $
    1,448
    
    
    $
    1,536
  44




---



##### 



Directors & Officers of
CommerceFirst Bancorp, Inc. and CommerceFirst Bank
 Milton D. Jernigan II, Esquire *  Chairman of the Board
Managing Partner
McNamee, Hosea, Jernigan, Kim, Greenan & Lynch, P.A.
 Richard J. Morgan*President & Chief Executive Officer
    
    John A. Richardson, Sr.*
President, Crofton Bowling Center, Former
President, Branch Electric Supply Co., Inc.William F. Chesley 
President, W. F. Chesley Real Estate, Inc.
    
    Don E. Riddle, Jr.
Chairman & Chief Executive Officer,
Homestead Gardens, Inc.Charles F. Delavan, Esquire 
Principal, Blumenthal, Delavan &
Williams, P.A.
    
    Stephen C. Samaras
Owner, Zymotic, Inc. (Zacharys Jewelers)Edward B. Howlin, Jr.*
President, Howlin Realty Management, Inc.
    
    George C. Shenk, Jr.*
President, Whitmore Group, Inc.Charles L. Hurtt, Jr., CPA*
President, Charles L. Hurtt, Jr., PA
    
    Lamont Thomas*Former Executive Vice President & Chief
Operating Officer, CommerceFirst Bancorp,
Inc.Nicholas J. Marino President, Marino Transportation
Services, LLC
    
    Dale R. Watson
President, Alpha Engineering Associates, Inc.Michael J. Miller
Vice President, Concrete General, Inc. &
Tri M Leasing Corp
    
    Jerome A. Watts*
Private Investor and Former Owner, Plan
ManagementRobert R. Mitchell* 
Private Investor and Former President,
Mitchell Business Equipment, Inc.
    
    J. Scott Wimbrow
Senior Vice President, MacKenzie Commercial
Real Estate Services LLC
 
 *
    
    Director of CommerceFirst Bancorp, Inc.




---



##### 



Officers of
CommerceFirst Bank
 Michael T. Storm Executive Vice President &
Chief Operating Officer and Chief
Financial Officer
    
    Thomas L. Bolander
Senior Vice PresidentJames R. Baldwin
Senior Vice President
    
    Penny L. Cantwell
Senior Vice PresidentGeorge Kapusta
Senior Vice President
    
    Candace M. Springmann
Vice President & Corporate SecretaryJean J. Barnes
Vice President
    
    Melonee Fleming, CCE
Vice PresidentDavid Steinhoff
Vice President
    
    Susan M. Liebenthal
Assistant Vice PresidentIrma Russell
Assistant Vice President
    
    Robert W. Smith IV
Assistant Vice PresidentMeghan T. Stumpf 
Assistant Vice President
    
    Autumn B. Clark
Loan OfficerGregory N. Krum
Credit Officer
 Locations of
CommerceFirst Bank
 Annapolis 
1804 West Street, Suite 200
Annapolis MD 21401
    
    Lanham
4451 Parliament Place
Lanham MD 20706BWI 
910 Cromwell Park Drive 
Glen Burnie MD 21061
    
    Columbia
6230 Old Dobbin Lane
Columbia MD 21045Severna Park 
485 Ritchie Highway 
Severna Park, MD 21146
 The Company will provide, without charge, to any shareholder of
record or any beneficial owner of Common Stock, a copy of its 2010
Annual Report on Form 10-K filed with the Securities and Exchange
Commission, upon the written request. Requests should be directed to
Candace M. Springmann, Corporate Secretary, at the Companys executive
offices at 1804 West Street, Suite 200, Annapolis MD 21401.