**U.S.SECURITIES AND EXCHANGE COMMISSION**

**Washington,DC  20549**

 

**FORM 10-KSB**

 

**x****Annualreport under Section 13 or 15(d) of the Securities Exchange Act of1934**

 

**For the fiscal year ended December 31,2007**

 

**o****Transitionreport under Section 13 or 15(d) of the Securities Exchange Act of1934**

 

**For the transition periodfrom                 to                .**

 

**Commission File No.:  000-51104**

 

**CommerceFirstBancorp, Inc.**

(Name of Small Business Issuer inits Charter)

 

| **Maryland**                              |   | **52-2180744**                        |
|-------------------------------------------|--------|---------------------------------------|
| (State or other jurisdiction              |   | (I.R.S. Employer Identification  No.) |
| of incorporation or  organization)        |   |                                  |
|                                      |   |                                  |
| **1804 West Street, Annapolis MD**        |   | **21401**                             |
| (Address of Principal Executive  Offices) |   | (Zip Code)                            |

 

Issuer’s Telephone Number:  **410-280-6695**

 

Securities registered under Section 12(b) ofthe Act:  **CommonStock, $0.01 par value**

 

Securities registered under Section 12(g) ofthe Act:  **None**

 

Indicate by check mark if the registrant is notrequired to file reports pursuant to Section 13 or Section 15(d) ofthe ActYes  o No  x.

 

Check whether the Issuer; (1) filed allreports required to be filed by Section 13 or 15(d) of the ExchangeAct during the past 12 months (or for such shorter period that the registrantwas required to file such reports; and (2) has been subject to such filingrequirements for the past 90 days.Yes  x No  o

 

Check if there is no disclosure of delinquentfilers in response to Item 405 of Regulation S-B contained in this form, and nodisclosure will be contained, to the best of registrant’s knowledge, in definitiveproxy or information statements incorporated by reference in Part III ofthis Form 10-KSB or any amendment to this Form 10-KSB

 

Indicate by check mark whether the registrant is ashell company (as defined in Rule 12b-2 of the Exchange Act).Yes  o No  x.

 

The issuer’s revenues for the fiscal year ended December 31,2007 were approximately $11.44 million.

 

The aggregate market value of the outstandingCommon Stock held by non-affiliates as of March 6, 2008 was approximately$15,593,832.

 

As of March 6, 2008, the number ofoutstanding shares of the Common Stock, $0.01 par value, of CommerceFirstBancorp, Inc. was 1,820,548.

 

Transitional Small Business Disclosure Format Yes  o No  x .

 

DOCUMENTS INCORPORATED BYREFERENCE

 

Portionsof the following documents are hereby incorporated by reference in this Form 10-KSB:  the Company’s Annual Report to Shareholdersfor the Year Ended December 31, 2007 —Part II ; the Company’s ProxyStatement for the Annual Meeting of Shareholders to be held on April 16,2008 — Part III.

 

 

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**PART I**

 

**ITEM 1.  Description of Business.**

 

CommerceFirst Bancorp, Inc.(the “Company”) was incorporated under the laws of the State of Maryland on July 9,1999, to serve as the bank holding company for a newly formed Marylandchartered commercial bank.  The Companywas formed by a group of local businessmen and professionals with significantprior experience in community banking in the Company’s market area, togetherwith an experienced community bank senior management team. The Company’s solesubsidiary, CommerceFirst Bank (the “Bank”), a Maryland chartered commercialbank and member of the Federal Reserve System, commenced banking operations on June 29,2000.

 

The Bank operates from itsheadquarters in Annapolis, Maryland, and from branch offices in Lanham (openedin September 2004), Glen Burnie (opened in June 2006), Columbia(opened in August 2006), and Severna Park (opened in June 2007)Maryland.  The Bank does not anticipateopening any additional branches during 2008. The Bank believes it is well positioned to continueto grow assets and increase shareholder value while maintaining loan qualityand individualized customer service.

 

The Bank operates as a communitybank alternative to the super-regional financial institutions that dominate itsprimary market area. The cornerstone of the Bank’s philosophy is to providesuperior, individualized service to its customers.  The Bank focuses on relationship banking,providing each customer with a number of services, familiarizing itself with,and addressing itself to, customer needs in a proactive, personalized fashion.

 

*Description ofServices. *The Bank offers fullcommercial banking services to its business and professional clients. The Bankemphasizes providing commercial banking services to sole proprietorships, smalland medium-sized businesses, partnerships, corporations, and non-profitorganizations and associations in and near the Bank’s primary serviceareas.  Limited retail banking servicesare offered to accommodate the individual needs of commercial customers as wellas members of the communities the Bank serves.

 

The Bank’s loan portfolioconsists of business and real estate loans. The business loans generally havevariable rates and/or short maturities where the cash flow of the borrower isthe principal source of debt service, with a secondary emphasis oncollateral.  Real estate loans are made generally on commercial propertyand are structured with fixed rates that adjust in three to five years,generally with maturities of five to ten years, or with variable rates tied tovarious external indices and adjusting as the indices change. The Company’sportfolio contains a small amount of acquisition and construction loans(approximately $1million) which are well secured.

 

In general, the Bank offers thefollowing credit services:

 

1)             Commercial loans forbusiness purposes including working capital, equipment purchases, real estate,lines of credit, and government contract financing.  Asset based lendingand accounts receivable financing are available on a selective basis.

2)             Real estate loans for businessand investment purposes.

3)             Commercial lines of credit.

4)             Merchant credit card services areoffered through an outside vendor.

 

The Bank hasdeveloped an expertise in making loans under the guarantee programs of the SBA.The Bank currently expects that it will sell the guaranteed portion of SBAloans to secondary market investors as soon as possible after funding, whileretaining the uninsured portion. The sale of the guaranteed portion of suchloans is expected to result in gains, and the Bank expects to receive fees forservicing the loans.  SBA guaranteedloans are subjected to the same underwriting standards applied to other loans.

 

The Bank’s lending activitiescarry the risk that the borrowers will be unable to perform on theirobligations.  As such, interest ratepolicies of the Federal Reserve Board as well as national and local economicconditions can have a significant impact on the Bank’s and the Company’sresults of operations.  To the extentthat economic conditions deteriorate, business and individual borrowers may beless able to meet their obligations to the Bank in full in a timely 

 

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manner, resulting in decreased earnings or losses to theBank.  To the extent the Bank makes fixedrate loans, general increases in interest rates will tend to reduce the Bank’sspread as the interest rates the Bank must pay for deposits increase whileinterest income is flat.  Economic conditionsand interest rates may also adversely affect the value of property pledged assecurity for loans.

 

Deposit services include businessand personal checking accounts, NOW accounts, savings accounts, and a tieredMoney Market Account basing the payment of interest on balances ondeposit.  Certificates of Deposits are offered using a tiered ratestructure and various maturities.  The acceptance of brokered deposits inlimited amounts****is utilized when deemedappropriate by management in order to have available funding sources for loansand investments.

 

Other services for businessaccounts include Internet banking services and cash management services.

 

Bills have been introduced ineach of the last several Congresses that would permit banks to pay interest onchecking and demand deposit accounts established by businesses, a practicewhich is currently prohibited by regulation. If the legislation effectivelypermitting the payment of interest on business demand deposits is enacted, ofwhich there can be no assurance, it is likely that the Bank may be required topay interest on some portion of its non-interest bearing deposits in order tocompete against other banks.  As asignificant portion of its deposits are non-interest bearing demand depositsestablished by businesses, payment of interest on these deposits could have asignificant negative impact on its net income, net interest income, interestmargin, return on assets and equity, and other indices of financialperformance.  The Bank expects that otherbanks would be faced with similar negative impacts.  The Bank also expects that the primary focusof competition would continue to be based on other factors, such as quality ofservice.

 

*Source of Business. *Management believes that themarket segments which the Bank targets, small to medium sized businesses andthe professional base of the Bank’s market area, demand the convenience andpersonal service that a smaller, independent financial institution such as theBank can offer.  It is these themes of convenience and personal servicethat form the basis for the Bank’s business development strategies.  TheBank provides services from its strategically located main office in Annapolis,Maryland, and from its branch offices in Lanham, Glen Burnie, Columbia, andSeverna Park, Maryland. It believes these locations meet the needs of the Bank’sexisting and potential customers, and provide prospects for additional growthand expansion.

 

The Bank has capitalized upon theextensive business and personal contacts and relationships of its Directors andExecutive Officers to establish the Bank’s initial customer base.  To introduce new customers to the Bank,reliance is placed on aggressive officer-originated calling programs anddirector, customer and shareholder referrals.

 

The risk of nonpayment (ordeferred payment) of loans is inherent in commercial banking.  The Bank’smarketing focus on small to medium-sized businesses may result in theassumption by the Bank of certain lending risks that are different from thoseattendant to loans to larger companies.  Management of the Bank carefullyevaluates all loan applications and attempts to minimize its credit riskexposure by use of thorough loan application, approval and monitoringprocedures; however, there can be no assurance that such procedures cansignificantly reduce such lending risks.

 

**Employees**

 

At December 31, 2007 theBank employed 35 full time equivalents, two of whom are executive officers. TheChairman of the Board, an attorney in private practice, devotes considerabletime each month to the advancement of the Bank, principally in businessdevelopment activities. The Company (as distinguished from the Bank) does nothave any employees or officers who are not employees or officers of the Bank.  None of the Bank’s employees are representedby any collective bargaining group, and the Bank believes that its employeerelations are good.  The Bank provides abenefit program that includes health and dental insurance, a 401(k) plan, andlife and long-term disability insurance for substantially all full timeemployees.

 

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**Market Area and Competition**

 

*Location and Market Area. *The main office andthe headquarters are located at 1804 West Street, Annapolis, Maryland 21401.  The second office is located at 4451Parliament Place, Lanham, Maryland 20706, and opened in the third quarter of2004. The third office is located at 910 Cromwell Park Drive, Glen Burnie,Maryland 21061 and opened late in the second quarter of 2006. The fourth officeis located at 6230 Old Dobbin Lane, Columbia, Maryland 20706 and opened in thethird quarter of 2006. The Bank opened its fifth branch office located at 487Ritchie Highway, Severna Park, Maryland 21146, in June 2007.

 

The Company is located in one of the most dynamic regions in the UnitedStates. The Federal Government has a major direct and indirect influence on theeconomies, infrastructure and land use management of Washington, D.C. and theMaryland and Virginia counties surrounding Washington.  According to the State of Maryland’sDepartment of Business and Economic Development (the “Department”), the regionis the nation’s 4th largest market – with a population of 6.9million and a workforce of 3.4 million – and is the home to three majorairports, the nation’s capital and a highly educated workforce. The regionaleconomy is perennially strong and diverse, boasts consistently high job growthand low unemployment and is increasingly service sector and small businessoriented.  Information technology, themedical industry and tourism are all major growth industries for theregion.  These industries arecharacterized by small niche oriented enterprises that thrive on their abilityto tap the highly educated workforce and abundant access to the region’ssubstantial communications infrastructure.

 

TheBank’s market strategy is to grow within the Central Maryland corridor, which consistsof Anne Arundel, Prince George’s, Montgomery and Howard counties.  The Bank is currently focused on Anne Arundel,Prince George’s and Howard counties, areas which it believes have significantgrowth opportunities.

 

*Anne Arundel County* evolved from a bedroom community to Baltimore to bemore heavily influenced by Washington growth factors.  Based on data provided by the County’sEconomic Development Corporation, in the past two decades, the county hasdeveloped its own unique and diverse economy. This has occurred due to growthopportunities presented by Baltimore/Washington International Airport, whichserved over 20 million passengers in 2006 and has long been considered one ofthe State of Maryland’s prime economic engines; the National Security Agency,which has approximately 25 thousand employees; Northrop Grumman, ahigh-technology firm with over 7 thousand employees, the largest private sectoremployer in the county; the United States Naval Academy; the increasing tourismindustry in the historic City of Annapolis and recently the Arundel Mills Mall.These unique attributes create attractive opportunities for small businesses toservice both highly sophisticated enterprises and rapidly developingfirms.  The local economy is dominated bysmall and mid-sized service sector enterprises. Anne Arundel County is home to over 14 thousand businesses, 97% of whichhave fewer than 100 employees. The county’s economy has deep roots in Internetbased services; high-technology telecommunications; product distribution, aresult of proximity of goods arriving to the Port of Baltimore and BWI Airport;and technical support services.  Oncehome to large Maryland-based regional banks, financial services are nowprimarily provided by larger super-regional institutions such as Bank ofAmerica, SunTrust, Wachovia, M & T Bank and BB&T, all of whichexpanded into this highly attractive banking market over the past decade byacquisition. Based on data from the 2000 Census and in projected figures by theCounty’s Economic Development Corporation, Anne Arundel County has a populationin excess of 600 thousand and provides 285 thousand civilian labor force jobs,70% of which are in the service sector, and has a low 3.7% unemploymentrate.  The mean household income of $76thousand compares very favorably to the national average.

 

*Prince George’s County*. Relocating and expanding businesses havebeen increasingly attracted to Prince George’s County due to its competitivelypriced land and buildings, an integrated transportation system, proximity toWashington, D.C., and attractive business incentives such as the county’sRevitalization Tax Credit, a new High Technology Incentive Package, EnterpriseZone benefits and a foreign trade zone. Increasingly restrictive land use policies in Montgomery and AnneArundel counties have provided significant growth opportunities in PrinceGeorge’s.  The county closely mirrorsAnne Arundel County with respect to small business enterprises, with 97% of theover 14 thousand employers having fewer than 100 workers.  Furthermore, government is also a significantinfluence, with 75 thousand Federal, state and county employees, led by AndrewsAir Force Base, which has 17 thousand employees, and the University of Marylandwhich has over 11 thousand employees. Similar to Anne 

 

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Arundel County,large super-regional banking institutions have obtained additional market sharein the suburban Washington market from the acquisition of many of the communitybanks that once existed in this area. Prince George’s County has a populationof 805 thousand and an unemployment rate of 4.8%.  A favorable and accommodative businessclimate has helped fuel the strong housing market, with average sale pricesabove $300 thousand, and has attracted a highly educated workforce with anaverage household income of $55 thousand.

 

*Howard County*. Expansion into neighboring Howard County is anatural extension of the Bank’s strategic growth plan. Howard County is situated in the heart of the corridor betweenWashington, D.C. and Baltimore. Howard County’s geographic location hasresulted in the substantial growth of a wide variety of industries, includinghigh-tech and life science businesses, in addition to transportation andeducation related activities. Accessible to I-95 and I-70, the county islocated within a 20-minute drive of Baltimore/Washington International Airportand the Port of Baltimore, and serves as a bedroom community for both Baltimoreand Washington D.C. area employers, in addition to having a strong economicbase of its own. Howard County’s almost 8 thousand businesses employ about 12thousand workers; only 250 of those businesses have more than 100 workers. Likethe other counties in which the Company operates, the population and workforceof Howard County are highly educated, and income levels are favorably high.  Per capita income for 2002 in Howard Countywas in excess of $45 thousand, as compared to $36 thousand for Maryland as awhole and almost $31,000 nationally.

 

*Competition. *Deregulation of financialinstitutions and holding company acquisitions of banks across state lines hasresulted in widespread, fundamental changes in the financial servicesindustry.  This transformation, although occurring nationwide, isparticularly intense in the greater Baltimore/Washington, DC area.  In Anne Arundel, Prince George’s and HowardCounties, competition is exceptionally keen from large banking institutionsheadquartered outside of Maryland.  In addition, the Bank competes withother community banks, savings and loan associations, credit unions, mortgagecompanies, finance companies and others providing financial services. Among the advantages that many of these institutions have over the Bank aretheir abilities to finance extensive advertising campaigns, maintain extensivebranch networks and technology investments, and to directly offer certainservices, such as international banking and trust services, which the Bank doesnot directly offer.  Further, the greater capitalization of the largerinstitutions allows for substantially higher lending limits than the Bank.  Certain of these competitors have otheradvantages, such as tax exemption in the case of credit unions, and lesserregulation in the case of mortgage companies and finance companies.

 

**Regulation**

 

The following summaries ofstatutes and regulations affecting bank holding companies do not purport to becomplete discussions of all aspects of such statutes and regulations and arequalified in their entirety by reference to the full text thereof.

 

*The Company. *The Company is a bank holdingcompany registered under the Bank Holding Company Act of 1956, as amended, (the“Act”) and is subject to supervision by the Federal Reserve Board.  As abank holding company, the Company is required to file with the Federal ReserveBoard an annual report and such other additional information as the FederalReserve Board may require pursuant to the Act.  The Federal Reserve Boardmay also make examinations of the Company and each of its subsidiaries.

 

The Act requires approval of theFederal Reserve Board for, among other things, the acquisition by a proposedbank holding company of control of more than five percent (5%) of the votingshares, or substantially all the assets, of any bank or the merger orconsolidation by a bank holding company with another bank holdingcompany.  The Act also generally permits the acquisition by a bank holdingcompany of control or substantially all the assets of any bank located in astate other than the home state of the bank holding company, except where thebank has not been in existence for the minimum period of time required by statelaw, but if the bank is at least 5 years old, the Federal Reserve Board mayapprove the acquisition.

 

With certain limited exceptions,a bank holding company is prohibited from acquiring control of any votingshares of any company which is not a bank or bank holding company and fromengaging directly or indirectly in any activity other than banking or managingor controlling banks or furnishing services to or performing service for itsauthorized subsidiaries.  A bank holding company may, however, engage inor acquire an interest in, a company that

 

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engages in activities which the Federal Reserve Board hasdetermined by order or regulation to be so closely related to banking or managingor controlling banks as to be properly incident thereto.  In making such adetermination, the Federal Reserve Board is required to consider whether theperformance of such activities can reasonably be expected to produce benefitsto the public, such as convenience, increased competition or gains inefficiency, which outweigh possible adverse effects, such as undueconcentration of resources, decreased or unfair competition, conflicts ofinterest or unsound banking practices.  The Federal Reserve Board is alsoempowered to differentiate between activities commenced *de novo*and activities commenced by the acquisition, in whole or in part, of a goingconcern.  Some of the activities that the Federal Reserve Board hasdetermined by regulation to be closely related to banking include making orservicing loans, performing certain data processing services, acting as afiduciary or investment or financial advisor, and making investments incorporations or projects designed primarily to promote community welfare.

 

Subsidiary banks of a bankholding company are subject to certain restrictions imposed by the FederalReserve Act on any extensions of credit to the bank holding company or any ofits subsidiaries, or investments in the stock or other securities thereof, andon the taking of such stock or securities as collateral for loans to anyborrower.  Further, a holding company and any subsidiary bank areprohibited from engaging in certain tie-in arrangements in connection with theextension of credit.  A subsidiary bank may not extend credit, lease orsell property, or furnish any services, or fix or vary the consideration forany of the foregoing on the condition that: (i) the customer obtainor provide some additional credit, property or services from or to such bankother than a loan, discount, deposit or trust service; (ii) the customerobtain or provide some additional credit, property or service from or to theCompany or any other subsidiary of the Company; or (iii) the customer notobtain some other credit, property or service from competitors, except forreasonable requirements to assure the soundness of credit extended.

 

Effective on March 11, 2000, theGramm-Leach-Bliley Act of 1999 (the “GLB Act”) allows a bank holding company orother company to certify status as a financial holding company, which allowssuch company to engage in activities that are financial in nature, that areincidental to such activities, or are complementary to such activities. The GLBAct enumerates certain activities that are deemed financial in nature, such asunderwriting insurance or acting as an insurance principal, agent or broker,underwriting, dealing in or making markets in securities, and engaging inmerchant banking under certain restrictions. It also authorizes the Federal Reserve Board to determine by regulationwhat other activities are financial in nature, or incidental or complementarythereto. The GLB Act allows a wider array ofcompanies to own banks, which could result in companies with resourcessubstantially in excess of the Company’s entering into competition with theCompany and the Bank.

 

The GLB Act made substantialchanges in the historic restrictions on non-bank activities of bank holdingcompanies, and allows affiliations between types of companies that werepreviously prohibited.  The GLB Act alsoallows banks to engage in a wider array of non-banking activities through “financialsubsidiaries.”

 

*The Bank. *The Bank, as a Maryland charteredcommercial bank which is a member of the Federal Reserve System (a “statemember bank”) and whose accounts are insured by the Deposit Insurance Fund ofthe Federal Deposit Insurance Corporation (the “FDIC”) up to the maximum legallimits of the FDIC, is subject to regulation, supervision and regularexamination by the Maryland Department of Financial Institutions and theFederal Reserve Board.  The regulationsof these various agencies govern most aspects of the Bank’s business, includingrequired reserves against deposits, loans, investments, mergers andacquisitions, borrowing, dividends and location and number of branch offices.The laws and regulations governing the Bank generally have been promulgated toprotect depositors and the Deposit Insurance Fund, and not for the purpose ofprotecting stockholders.

 

Competition among commercialbanks, savings and loan associations, and credit unions has increased followingenactment of legislation that greatly expanded the ability of banks and bankholding companies to engage in interstate banking or acquisition activities.  As a result of federal and state legislation,banks in the Washington D.C./Maryland/Virginia area can, subject to limitedrestrictions, acquire or merge with a bank in another of the jurisdictions, andcan branch *de novo* in any of thejurisdictions.  Additionally, legislationhas been proposed which may result in non-banking companies being authorized toown banks, which could result in companies with resources substantially inexcess of the Company’s entering into competition with the Company and theBank.

 

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Banking is a business thatdepends on interest rate differentials.  In general, the differencesbetween the interest paid by a bank on its deposits and its other borrowingsand the interest received by a bank on loans extended to its customers andsecurities held in its investment portfolio constitute the major portion of thebank’s earnings.  Thus, the earnings and growth of the Bank will besubject to the influence of economic conditions generally, both domestic andforeign, and also to the monetary and fiscal policies of the United States andits agencies, particularly the Federal Reserve Board, which regulates thesupply of money through various means including open market dealings in UnitedStates government securities.  The nature and timing of changes in suchpolicies and their impact on the Bank cannot be predicted.

 

*Branching and InterstateBanking.*  The federalbanking agencies are authorized to approve interstate bank merger transactionswithout regard to whether such transaction is prohibited by the law of anystate, unless the home state of one of the banks has opted out of theinterstate bank merger provisions of the Riegle-Neal Interstate Banking andBranching Efficiency Act of 1994 (the “Riegle-Neal Act”) by adopting a lawafter the date of enactment of the Riegle-Neal Act and prior to June 1,1997 which applies equally to all out-of-state banks and expressly prohibitsmerger transactions involving out-of-state banks.  Interstate acquisitions of branches arepermitted only if the law of the state in which the branch is located permitssuch acquisitions.  Such interstate bankmergers and branch acquisitions are also subject to the nationwide andstatewide insured deposit concentration limitations described in theRiegle-Neal Act.

 

The Riegle-Neal Act authorizesthe federal banking agencies to approve interstate branching *de novo*by national and state banks in states thatspecifically allow for such branching. The District of Columbia, Maryland and Virginia have all enacted lawsthat permit interstate acquisitions of banks and bank branches and permitout-of-state banks to establish *de novo*branches.

 

The Bank is subject to the provisions of Section 23A and 23B ofthe Federal Reserve Act and Federal Reserve Regulation W of the Federal ReserveBank which place limits on the amount of loans or extensions of credit toaffiliates (as defined in the Federal Reserve Act), investments in or certainother transactions with affiliates and on the amount of advances to thirdparties collateralized by the securities or obligations of affiliates.  The law and regulation limit the aggregateamount of transactions with any individual affiliate to ten percent (10%) ofthe capital and surplus of the Bank and also limit the aggregate amount oftransactions with all affiliates to twenty percent (20%) of capital andsurplus.  Loans and certain otherextensions of credit to affiliates are required to be secured by collateral inan amount and of a type described in the regulation, and the purchase of lowquality assets from affiliates is generally prohibited. The law and RegulationW also, among other things, prohibit an institution from engaging in certaintransactions with certain affiliates (as defined in the Federal Reserve Act)unless the transactions are on terms substantially the same, or at least asfavorable to such institution and/or its subsidiaries, as those prevailing atthe time for comparable transactions with non-affiliated entities.  In the absence of comparable transactions,such transactions may only occur under terms and circumstances, includingcredit standards, that in good faith would be offered to or would apply tonon-affiliated companies.

 

The Bank is subject to the restrictions contained in Section 22(h) ofthe Federal Reserve Act and the Federal Reserve Board’s Regulation O thereunderon loans to executive officers, directors and principal stockholders.  Under Section 22(h), loans to adirector, an executive officer or a greater-than-10% stockholder of a bank aswell as certain affiliated interests of any of the foregoing may not exceed,together with all other outstanding loans to such person and affiliatedinterests, the loans-to-one-borrower limit applicable to national banks(generally 15% of the institution’s unimpaired capital and surplus), and allloans to all such persons in the aggregate may not exceed the institution’sunimpaired capital and unimpaired surplus. Regulation O also prohibits the making of loans in an amount greaterthan $25,000 or 5% of capital and surplus but in any event not over $500,000,to directors, executive officers and greater-than-10% stockholders of a bank,and their respective affiliates, unless such loans are approved in advance by amajority of the board of directors of the bank with any “interested” directornot participating in the voting. Furthermore, Regulation O requires that loans to directors, executiveofficers and principal stockholders of a bank be made on terms substantiallythe same as those that are offered in comparable transactions to unrelatedthird parties unless the loans are made pursuant to a benefit or compensationprogram that is widely available to all employees of the bank and does not givepreference to insiders over other employees. Regulation O also prohibits a depository institution from payingoverdrafts over $1,000 of any of its executive

 

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officers ordirectors unless they are paid pursuant to written pre-authorized extension ofcredit or transfer of funds plans.

 

All of the Bank’s loans to its and the Company’s executive officers,directors and greater-than-10% stockholders, and affiliated interests of suchpersons, comply with the requirements of Regulation W and 22(h) of theFederal Reserve Act and Regulation O.

 

*Community Reinvestment Act.*The Community Reinvestment Act (“CRA”)requires that, in connection with examinations of financial institutions withintheir respective jurisdictions, the Federal Reserve Board, the Federal DepositInsurance Corporation, the Office of the Comptroller of the Currency or theOffice of Thrift Supervision shall evaluate the record of the financialinstitutions in meeting the credit needs of their local communities, includinglow and moderate income neighborhoods, consistent with the safe and soundoperation of those institutions.  The CRAdoes not establish specific lending requirements or programs for financialinstitutions nor does it limit an institution’s discretion to develop the typesof products and services that it believes are best suited to its particularcommunity, consistent with the CRA.  Aninstitution’s CRA activities are considered in, among other things, evaluatingmergers, acquisitions and applications to open a branch or facility, as well asdetermining whether the institution will be permitted to exercise certain ofthe powers allowed by the GLBA.  The CRAalso requires all institutions to make public disclosure of their CRA ratings.The Bank was last examined for CRA compliance as of October 2005 andreceived a CRA rating of “satisfactory.”

 

*USA Patriot Act.*  Under the Uniting and Strengthening Americaby Providing Appropriate Tools Required to Intercept and Obstruct TerrorismAct, commonly referred to as the “USA Patriot Act” or the “Patriot Act”,financial institutions are subject to prohibitions against specified financialtransactions and account relationships, as well as enhanced due diligencestandards intended to detect, and prevent, the use of the United Statesfinancial system for money laundering and terrorist financing activities.  The Patriot Act requires financialinstitutions, including banks, to establish anti-money laundering programs,including employee training and independent audit requirements, meet minimumstandards specified by the act, follow minimum standards for customeridentification and maintenance of customer identification records, andregularly compare customer lists against lists of suspected terrorists,terrorist organizations and money launderers. The costs or other effects of the compliance burdens imposed by thePatriot Act or future anti-terrorist, homeland security or anti-moneylaundering legislation or regulations cannot be predicted with certainty.

 

*Capital AdequacyGuidelines.*  The FederalReserve Board and the FDIC have adopted risk based capital adequacy guidelinespursuant to which they assess the adequacy of capital in examining andsupervising banks and bank holding companies and in analyzing bank regulatoryapplications.  Risk-based capital requirementsdetermine the adequacy of capital based on the risk inherent in various classesof assets and off-balance sheet items.

 

State member banks are expectedto meet a minimum ratio of total qualifying capital (the sum of core capital(Tier 1) and supplementary capital (Tier 2)) to risk weighted assets of8%.  At least half of this amount (4%)should be in the form of core capital. These requirements apply to the Bank and will apply to the Company (abank holding company) once its total assets equal $500,000,000 or more, itengages in certain highly leveraged activities or it has publicly held debtsecurities.

 

Tier 1 Capital generally consistsof the sum of common stockholders’ equity and perpetual preferred stock(subject in the case of the latter to limitations on the kind and amount ofsuch stock which may be included as Tier 1 Capital), less goodwill, withoutadjustment for changes in the market value of securities classified as “availablefor sale” in accordance with FAS 115. Tier 2 Capital consists of the following: hybrid capital instruments;perpetual preferred stock which is not otherwise eligible to be included asTier 1 Capital; term subordinated debt and intermediate-term preferred stock;and, subject to limitations, general allowances for loan losses.  Assets are adjusted under the risk-basedguidelines to take into account different risk characteristics, with thecategories ranging from 0% (requiring no risk-based capital) for assets such ascash, to 100% for the bulk of assets which are typically held by a bank holdingcompany, including certain multi-family residential and commercial real estateloans, commercial business loans and consumer loans.  Residential first mortgage loans on one tofour family residential real estate and certain seasoned multi-familyresidential real estate loans, which are not 90 days or more past-due ornon-performing and which have been

 

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made in accordance with prudent underwriting standardsare assigned a 50% level in the risk-weighing system, as are certainprivately-issued mortgage-backed securities representing indirect ownership ofsuch loans.  Off-balance sheet items alsoare adjusted to take into account certain risk characteristics.

 

In addition to the risk-basedcapital requirements, the Federal Reserve Board has established a minimum 3.0%Leverage Capital Ratio (Tier 1 Capital to total adjusted assets) requirementfor the most highly-rated banks, with an additional cushion of at least 100 to200 basis points for all other banks, which effectively increases the minimumLeverage Capital Ratio for such other banks to 4.0% - 5.0% or more.  The highest-rated banks are those that arenot anticipating or experiencing significant growth and have well diversified risk,including no undue interest rate risk exposure, excellent asset quality, highliquidity, good earnings and, in general, those which are considered a strongbanking organization.  A bank having lessthan the minimum Leverage Capital Ratio requirement shall, within 60 days ofthe date as of which it fails to comply with such requirement, submit areasonable plan describing the means and timing by which the bank shall achieveits minimum Leverage Capital Ratio requirement. A bank which fails to file such plan is deemed to be operating in anunsafe and unsound manner, and could subject the bank to a cease-and-desistorder. Any insured depository institution with a Leverage Capital Ratio that isless than 2.0% is deemed to be operating in an unsafe or unsound conditionpursuant to Section 8(a) of the Federal Deposit Insurance Act (the “FDIA”)and is subject to potential termination of deposit insurance.  However, such an institution will not besubject to an enforcement proceeding solely on account of its capital ratios,if it has entered into and is in compliance with a written agreement toincrease its Leverage Capital Ratio and to take such other action as may benecessary for the institution to be operated in a safe and sound manner.  The capital regulations also provide, amongother things, for the issuance of a capital directive, which is a final orderissued to a bank that fails to maintain minimum capital or to restore itscapital to the minimum capital requirement within a specified time period.  Such directive is enforceable in the samemanner as a final cease-and-desist order.

 

Under recent guidance by the federal bankingregulators, banks which have concentrations in construction, land developmentor commercial real estate loans (other than loans for majority owner occupiedproperties) would be expected to maintain higher levels of risk management and,potentially, higher levels of capital. It is possible that we may be required to maintain higher levels of capitalthan we would otherwise be expected to maintain as a result of our levels ofconstruction, development and commercial real estate loans, which may requireus to obtain additional capital

 

*Prompt Corrective Action.*  Under Section 38 of the FDIA, eachfederal banking agency is required to implement a system of prompt correctiveaction for institutions that it regulates. The federal banking agencies have promulgated substantially similarregulations to implement the system of prompt corrective action established by Section 38of the FDIA.  Under the regulations, abank shall be deemed to be: (i) “well capitalized” if it has a Total RiskBased Capital Ratio of 10.0% or more, a Tier 1 Risk Based Capital Ratio of 6.0%or more, a Leverage Capital Ratio of 5.0% or more and is not subject to any writtencapital order or directive; (ii) “adequately capitalized” if it has aTotal Risk Based Capital Ratio of 8.0% or more, a Tier 1 Risk Based CapitalRatio of 4.0% or more and a Tier 1 Leverage Capital Ratio of 4.0% or more (3.0%under certain circumstances) and does not meet the definition of “wellcapitalized;” (iii) “undercapitalized” if it has a Total Risk BasedCapital Ratio that is less than 8.0%, a Tier 1 Risk based Capital Ratio that isless than 4.0% or a Leverage Capital Ratio that is less than 4.0% (3.0% undercertain circumstances); (iv) “significantly undercapitalized” if it has aTotal Risk Based Capital Ratio that is less than 6.0%, a Tier 1 Risk BasedCapital Ratio that is less than 3.0% or a Leverage Capital Ratio that is lessthan 3.0%; and (v) “critically undercapitalized” if it has a ratio oftangible equity to total assets that is equal to or less than 2.0%.

 

An institution generally mustfile a written capital restoration plan which meets specified requirements withan appropriate federal banking agency within 45 days of the date theinstitution receives notice or is deemed to have notice that it isundercapitalized, significantly undercapitalized or criticallyundercapitalized.  A federal banking agencymust provide the institution with written notice of approval or disapprovalwithin 60 days after receiving a capital restoration plan, subject toextensions by the applicable agency.

 

An institution that is requiredto submit a capital restoration plan must concurrently submit a performanceguaranty by each company that controls the institution.  Such guaranty shall be limited to the lesserof (i) an amount equal to 5.0% of the institution’s total assets at thetime the institution was notified or deemed to have notice that it was 

 

9

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undercapitalized or (ii) the amount necessary atsuch time to restore the relevant capital measures of the institution to thelevels required for the institution to be classified as adequatelycapitalized.  Such a guaranty shallexpire after the federal banking agency notifies the institution that it hasremained adequately capitalized for each of four consecutive calendarquarters.  An institution which fails tosubmit a written capital restoration plan within the requisite period,including any required performance guaranty, or fails in any material respectto implement a capital restoration plan, shall be subject to the restrictionsin Section 38 of the FDIA which are applicable to significantlyundercapitalized institutions.

 

A “critically undercapitalizedinstitution” is to be placed in conservatorship or receivership within 90 daysunless the FDIC formally determines that forbearance from such action wouldbetter protect the deposit insurance fund. Unless the FDIC or other appropriate federal banking regulatory agencymakes specific further findings and certifies that the institution is viableand is not expected to fail, an institution that remains criticallyundercapitalized on average during the fourth calendar quarter after the dateit becomes critically undercapitalized must be placed in receivership.  The general rule is that the FDIC willbe appointed as receiver within 90 days after a bank becomes criticallyundercapitalized unless extremely good cause is shown and the federalregulators agree to an extension.  Ingeneral, good cause is defined as capital that has been raised and isimminently available for infusion into the Bank except for certain technicalrequirements that may delay the infusion for a period of time beyond the 90 daytime period.

 

Immediately upon becomingundercapitalized, an institution shall become subject to the provisions of Section 38of the FDIA, which (i) restrict payment of capital distributions andmanagement fees; (ii) require that the appropriate federal banking agencymonitor the condition of the institution and its efforts to restore itscapital; (iii) require submission of a capital restoration plan; (iv) restrictthe growth of the institution’s assets; and (v) require prior approval ofcertain expansion proposals.  Theappropriate federal banking agency for an undercapitalized institution also maytake any number of discretionary supervisory actions if the agency determinesthat any of these actions is necessary to resolve the problems of theinstitution at the least possible long-term cost to the deposit insurance fund,subject in certain cases to specified procedures.  These discretionary supervisory actionsinclude: requiring the institution to raise additional capital; restrictingtransactions with affiliates; requiring divestiture of the institution or thesale of the institution to a willing purchaser; and any other supervisoryaction that the agency deems appropriate. These and additional mandatory and permissive supervisory actions may betaken with respect to significantly undercapitalized and criticallyundercapitalized institutions.

 

Additionally, under Section 11(c)(5) ofthe FDIA, a conservator or receiver may be appointed for an institutionwhere:  (i) an institution’sobligations exceed its assets;  (ii) thereis substantial dissipation of the institution’s assets or earnings as a resultof any violation of law or any unsafe or unsound practice;  (iii) the institution is in an unsafe orunsound condition;  (iv) there is awillful violation of a cease-and-desist order; (v) the institution is unable to pay its obligations in theordinary course of business;  (vi) lossesor threatened losses deplete all or substantially all of an institution’scapital, and there is no reasonable prospect of becoming “adequatelycapitalized” without assistance;  (vii) thereis any violation of law or unsafe or unsound practice or condition that islikely to cause insolvency or substantial dissipation of assets or earnings,weaken the institution’s condition, or otherwise seriously prejudice theinterests of depositors or the insurance fund; (viii) an institution ceases to be insured;  (ix) the institution is undercapitalizedand has no reasonable prospect that it will become adequately capitalized,fails to become adequately capitalized when required to do so, or fails tosubmit or materially implement a capital restoration plan; or (x) theinstitution is critically undercapitalized or otherwise has substantiallyinsufficient capital.

 

*Regulatory EnforcementAuthority*.  Federal bankinglaw grants substantial enforcement powers to federal banking regulators. Thisenforcement authority includes, among other things, the ability to assess civilmoney penalties, to issue cease-and-desist or removal orders and to initiateinjunctive actions against banking organizations and institution-affiliatedparties.  In general, these enforcementactions may be initiated for violations of laws and regulations and unsafe orunsound practices.  Other actions orinactions may provide the basis for enforcement action, including misleading oruntimely reports filed with regulatory authorities.

 

*Deposit Insurance Premiums.*  Pursuant to deposit insurance reform legislation, in December 2006the FDIC adopted a new risk based assessment system for determining depositinsurance premiums. Under the new requirements, four risk categories (I-IV),each subject to different premium rates, are established, based upon aninstitution’s status as well capitalized, adequately capitalized orundercapitalized, and the institution’s supervisory

 

10

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rating.  Under the new rules, allinsured depository institutions will pay deposit insurance premiums, currentlyranging between 5 and 7 basis points on an institution’s assessment base forinstitution’s in risk category I (well capitalized institutions perceived asposing the least risk to the insurance fund), and 10, 28 and 40 basis pointsfor institutions in risk categories II, III and IV.  The levels of rates are subject to periodicadjustment by the FDIC.

 

**ITEM 2.  Description of Property.**

 

The main office of the Bank andthe executive offices of the Bank and the Company are located at 1804 WestStreet, Annapolis, Maryland, in a brick and masonry structure. The Companyleases 8,100 square feet in the building under a five-year lease, whichcommenced in April 2000. Rent expense was $211,553, $196,842 and $192,017for the years ended December 31, 2007, 2006 and 2005, respectively.   The Company has exercised the first of threefive-year renewal options.

 

The second office of the Bank islocated at 4451 Parliament Place, Lanham, Maryland in a masonry structure. TheBank leases 2,100 square feet in the building under a ten-year lease (with anexit option at the end of five years) which commenced in June 2004. Rentexpense was $33,109, $31,317 and $29,274 for the years ended December 31,2007, 2006 and 2005, respectively.

 

The third office of the Bank islocated at 910 Cromwell Park Drive, Glen Burnie, Maryland in a masonrystructure. The Bank leases 2,600 square feet in the building under a five-yearlease (with one five-year renewal option) which commenced in June 2006.  Rent expense was $ 80,675 and $32,833 for theyears ended December 31, 2007 and 2006 (partial year), respectively.

 

The fourth office of the Bank islocated at 6230 Old Dobbin Lane, Columbia, Maryland in a masonry structure. TheBank leases 2,400 square feet in the building under a ten-year lease (with onefive-year renewal option) which commenced in August 2006.  Rent expense was $70,006 and $20,233 for theyears ended December 31, 2007 and 2006 (partial year), respectively.

 

The fifth office of the Bank islocated at 485 Ritchie Highway, Severna Park, Maryland in a masonry structure.The Bank leases approximately 1,500 square feet in the building under afive-year lease (with two five-year renewal options) which commenced in June 2007.Rent expense was $26,761during 2007.

 

Management believes adequateinsurance coverage is in force on all of its properties.

 

**ITEM 3.  Legal Proceedings.**

 

In the ordinary course of its business, the Company may become involvedin routine legal proceedings.  At December 31,2007, the Company is a party to a lawsuit filed by a loan customer alleging,primarily, the lack of commercially reasonable efforts to collect loanrepayments from collateral liquidation by the Company. The plaintiffs areseeking release of remaining debts in the amount of $583 thousand, release ofremaining collateral related thereto and certain damages approximating $3million. The Company believes that the allegations are without merit and willvigorously defend itself against the lawsuit.

 

**ITEM 4.  Submission of Matters to a Vote of SecurityHolders.**

 

No matters were submitted to avote of security holders during the fourth quarter of the year ended December 31,2007.

 

**PART II**

 

**ITEM 5.  Market for Common Equity and RelatedStockholder Matters.**

* *

*(a) Market for Common Stock andDividends.*****The information regarding themarket for the Company’s Common Stock, the number of holders of the commonstock and dividend history required under Item 5(a) is hereby

 

11

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incorporated herein by reference from the materialunder the caption “Market for Common Stock and Dividends” in the Company’s Annual Report for the fiscal year ended December 31, 2007.  See Item 11 of this annual report for EquityCompensation Plan Information.

 

*Recent Sales of Unregistered Shares. * None.

 

*(b) Use of Proceeds:* Not applicable

 

(c) *Issuer Repurchases of Securities**during the Fourth Quarterof 2007.*  None.

 

**ITEM 6. Management’s Discussion and Analysis.**

 

The information required by this item is incorporatedby reference to the material appearing under the caption “Management Discussionand Analysis” in the Company’s Annual Report to Shareholders for the year endedDecember 31, 2007.

 

**ITEM 7. Financial Statements.**

 

The information required by this item is incorporatedby reference to the Consolidated Financial****Statementscontained in the****Company’s Annual Report toShareholders for the year ended December 31, 2007.

 

**ITEM 8. Changes in and Disagreements with Accountants on Accounting andFinancial Disclosure.**

 

None.

 

**ITEM 8A(T).  Controls and Procedures**

 

*Disclosure Controls and Procedures.* The Company’s management, under thesupervision and with the participation of the Chief Executive Officer and ChiefFinancial Officer, evaluated, as of the last day of the period covered by thisreport, the effectiveness of the design and operation of the Company’sdisclosure controls and procedures, as defined in Rule 15d-15 under theSecurities Exchange Act of 1934. Based on that evaluation, the Chief ExecutiveOfficer and Chief Financial Officer concluded that the Company’s disclosurecontrols and procedures were effective.

 

*Management’s Report on Internal Control OverFinancial Reporting*

 

The management of CommerceFirst Bancorp, Inc. (the “Company”) isresponsible for the preparation, integrity and fair presentation of the consolidatedfinancial statements included in this Annual Report. The financial statementshave been prepared in conformity with accounting principles generally acceptedin the United States of America and reflect management’s judgments andestimates concerning the effects of events and transactions that are accountedfor or disclosed.

 

Management is also responsible for establishing and maintaining aneffective internal control over financial reporting.  The Company’s internal control over financialreporting includes those policies and procedures that pertain to the Company’sability to record, process, summarize and report reliable financial data. Theinternal control system contains monitoring mechanisms, and appropriate actionsare taken to correct identified deficiencies. Management believes that internalcontrols over financial reporting, which are subject to scrutiny by managementand the Company’s internal auditors, support the integrity and reliability ofthe financial statements. Management recognizes that there are inherentlimitations in the effectiveness of any internal control system, including thepossibility of human error and the circumvention or overriding of internalcontrols. Accordingly, even effective internal control over financial reportingcan provide only reasonable assurance with respect to financial statementpreparation. In addition, because of changes in conditions and circumstances,the effectiveness of internal control over financial reporting may vary overtime.

 

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Management assessed the Company’s system of internal control overfinancial reporting as of December 31, 2007. This assessment was conductedbased on the Committee of Sponsoring Organizations (“COSO”) of the TreadwayCommission “Internal Control - Integrated Framework”. Based on this assessment,management believes that the Company maintained effective internal control overfinancial reporting as of December 31, 2007. Management’s assessmentconcluded that there were no material weaknesses within the Company’s internalcontrol structure.  The 2007 end of yearconsolidated financial statements have been audited by the independentaccounting firm of Trice Geary & Myers LLC (“TGM”). Personnel from TGMwere given unrestricted access to all financial records and related data,including minutes of all meetings of the Board of Directors and Committeesthereof.  Management believes that allrepresentations made to the independent auditors were valid and appropriate.The resulting report from TGM accompanies the financial statements.

 

The Board of Directors of the Company, acting through its AuditCommittee (the “Committee”), is responsible for the oversight of the Company’saccounting policies, financial reporting and internal control. The AuditCommittee of the Board of Directors is comprised entirely of outside directorswho are independent of management. The Audit Committee is responsible for theappointment and compensation of the independent auditors and approves decisionsregarding the appointment or removal of members of the internal audit function.The Committee meets periodically with management, the independent auditors, andthe internal auditors to insure that they are carrying out theirresponsibilities. The Committee is also responsible for performing an oversightrole by reviewing and monitoring the financial, accounting, and auditingprocedures of the Company in addition to reviewing the Company’s financialreports. The independent auditors and the internal auditors have full andunlimited access to the Audit Committee, with or without the presence of themanagement of the Company, to discuss the adequacy of internal control overfinancial reporting, and any other matters which they believe should be broughtto the attention of the Audit Committee.

 

There were no changes in the Bank’s internal control over financialreporting during the quarter ended December 31, 2007 that has materiallyaffected, or is reasonably likely to materially affect, the Bank’s internalcontrol over financial reporting.

 

The annual report does not include an attestation report of the Company’sregistered public accounting firm regarding internal control over financialreporting.  Management’s report was notsubject to attestation by the Company’s registered public accounting firmpursuant to temporary rules of the Securities and Exchange Commission thatpermit the company to provide only management’s report in this annual report.

 

**ITEM 8B.  Other Information**

 

None.

 

**Part III**

 

**ITEM 9. Directors, Executive Officers, Promoter, Control Persons and CorporateGovernance of Registrant; Compliance with Section 16(a) of theExchange Act.**

 

The information required underItem 9 is hereby incorporated herein by reference from the material under thecaption “Election of Directors” contained under the caption “Compliance with Section 16(a) ofthe Securities Exchange Act of 1934” of the Company’s Proxy Statement for theAnnual Meeting of Stockholders to be held on April 16, 2008.

 

*Code ofEthics.*  The Company has adopted a Code of Ethics thatapplies to the President/Chief Executive Officer and Executive VicePresident/Chief Financial Officer.  TheCompany will provide a copy of the Code of Ethics without charge upon writtenrequest directed to Candace M. Springmann, Corporate Secretary, CommerceFirstBancorp, Inc, 1804 West Street, Annapolis, Maryland 21401.

 

There have been nomaterial changes in the procedures by which shareholders may recommend nomineesto the Company’s Board of Directors since the proxy statement for the 2007annual meeting of shareholders.

 

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**ITEM 10. Executive Compensation**

 

The information required by Item 10 is hereby incorporated herein byreference from the material under the caption “Election of Directors -Executive Compensation,” of the Company’sProxy Statement for the Annual Meeting of Stockholders to be held on April 16,2008.

 

**ITEM 11. Security Ownership of Certain BeneficialOwners and Management and Related Stockholder Matters.**

 

*Securities Authorized forIssuance under Equity Compensation Plans***The following table setsforth information regarding outstanding options and other rights to purchasecommon stock under the Company’s compensation plans.

 

**EquityCompensation Plan Information**

 
| **Plan category**                                      | ** ** | **Number of securities to be issued  upon exercise of outstanding  options, warrants and rights** | ** ** | **Weighted average exercise price of  outstanding options, warrants and  rights** | ** ** | **Number of securities  remaining available for  future issuance under equity  compensation plans  (excluding securities  reflected in column (a)** | ** ** |
|-------------------------------------------------------------|------------|----------------------------------------------------------------------------------------------------------------------------------------------------------|------------|----------------------------------------------------------------------------------------------------------------------|------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|
| ** **                                                  | ** ** | **(a)**                                                                                                                                                  | ** ** | **(b)**                                                                                                              | ** ** | **(c)**                                                                                                                                                                                                         | ** ** |
| Equity  compensation plans approved by security holders (1) |       | 0                                                                                                                                                        |       | N/A                                                                                                                  |       | 0                                                                                                                                                                                                               |       |
| Equity  compensation plans not approved by security holders |       | 126,372                                                                                                                                                  | (1)        | $                                                                                                                    | 10.00      |                                                                                                                                                                                                            | 0          |   |
| Total                                                       |       | 126,372                                                                                                                                                  |       | $                                                                                                                    | 10.00      |                                                                                                                                                                                                            | 0          |   |

 

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(1) Column (a) reflects106,372 shares of common stock subject to issuance upon the exercise ofwarrants issued to organizers of the Company and Bank under the Organizer’sAgreement and related Warrant Plan, as amended and restated, which provided forthe issuance to organizers of warrants to purchase an aggregate of 15% of thenumber of shares sold in the Company’s initial registered offering of shares ofits common stock.  The warrants are fullyvested, and have a term ending in August 2010.  The warrants are subject to call by theCompany upon the occurrence of certain events, and are subject to mandatoryexercise or forfeiture upon certain regulatory events.  Column (a) also includes options topurchase 20,000 shares of common stock at an exercise price of $10.00 per shareissuable to certain officers of the Company under the Company’s 2004Non-qualified Stock Option Plan. No additional options may be issued under theNon-qualified Stock Option Plan.

 

The other information required by Item 11 is hereby incorporated hereinby reference from the material under the caption “Voting Securities andPrincipal Shareholders” in the Company’sProxy Statement for the Annual Meeting of Stockholders to be held on April 16,2008.

 

**ITEM 12. Certain Relationships and Related Transactions, and DirectorIndependence.**

 

The information required by Item 12 is hereby incorporated herein byreference from the material under the caption “Election of Directors” of the Company’s Proxy Statement for the AnnualMeeting of Stockholders to be held on April 16, 2008.

 

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**ITEM 13. Exhibits**

 
| **Exhibit No.** | ** **                                                                                           | **Description of Exhibits**                                                                                                                        |
|----------------------|------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------|
|                 |                                                                                                 |                                                                                                                                               |
| 3(a)                 |                                                                                                 | Certificate of  Incorporation of the Company, as amended (1)                                                                                       |
| 3(b)                 |                                                                                                 | Bylaws  of the Company (1)                                                                                                                         |
| 10(a)                |                                                                                                 | Employment  Agreement between Richard J. Morgan and the Company (2)                                                                                |
| 10(b)                |                                                                                                 | Employment  Agreement between Lamont Thomas and the Company (3)                                                                                    |
| 10(c)                |                                                                                                 | 2004 Non  Incentive Option Plan (4)                                                                                                                |
| 10(d)                |                                                                                                 | First Amendment  to Employment Agreement between Lamont Thomas and the Company (5)                                                                 |
| 10(e)                |                                                                                                 | Employment  Agreement between Michael T. Storm and CommerceFirst Bank (6)                                                                          |
| 11                   |                                                                                                 | Statement  regarding Computation of Per Share Income – Refer to Note 1 to the  Consolidated Financial Statements included in Exhibit 13. |
| 13                   |                                                                                                 | Annual Report to  Shareholders                                                                                                                     |
| 21                   |                                                                                                 | Subsidiaries of  the Registrant                                                                                                                    |
|                 |                                                                                                 |                                                                                                                                               |
|                 | The sole  subsidiary of the Registrant is CommerceFirst Bank, a Maryland chartered  commercial bank. |
|                 |                                                                                                 |                                                                                                                                               |
| 23                   |                                                                                                 | Consent of Trice  Geary & Myers, LLC                                                                                                      |
| 31(a)                |                                                                                                 | Certification of Richard J. Morgan, President and CEO                                                                                              |
| 31(b)                |                                                                                                 | Certification of Michael T. Storm, Executive Vice President and Chief  Financial Officer                                                           |
| 32(a)                |                                                                                                 | Certification of Richard J. Morgan, President and Chief Executive  Officer                                                                         |
| 32(b)                |                                                                                                 | Certification of Michael T. Storm, Executive Vice President and Chief  Financial Officer                                                           |
| 99(a)                |                                                                                                 | Amended and Restated Organizers Agreement (7)                                                                                                      |

 

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(1)           Incorporated by reference to exhibit of the samenumber filed with the Company’s Registration Statement on Form SB-2, asamended, (File No. 333-91817)

(2)           Incorporated by reference to exhibit 10(b) to theCompany’s to Registration Statement on Form SB-2, as amended) (File No. 333-91817)

(3)           Incorporated by reference to exhibits 10(c) tothe Company’s to Registration Statement on Form SB-2, as amended) (File No. 333-91817)

(4)           Incorporated by reference to Exhibit 4 to theCompany’s Registration Statement on Form S-8 (File No. 333-119988).Incorporated by reference to Exhibit 4 to the Company’s toRegistration Statement on Form S-8 (File No. 333-109138)

(5)           Incorporated by reference to Exhibit 10(d) tothe Company’s Quarterly Report on Form 10-QSB for the period ended March 31,2007.

(6)           Incorporated by reference to Exhibit 10(e) tothe Company’s Quarterly Report on Form 10-QSB for the period ended September 30,2007.

(7)           Incorporated by reference to exhibit s 99(b) and 99(d) tothe Company’s Registration Statement on Form SB-2, as amended (File No. 333-91817)

 

**ITEM 14****               ****Principal Accountant Fees and Services**

 

The information required by Item 14 is hereby incorporated herein byreference from the material under the caption “Independent Registered PublicAccounting Firm” of the Company’s ProxyStatement for the Annual Meeting of Stockholders to be held on April 16,2008.

 

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**SIGNATURES**

 

In accordance with Section 13 of the SecuritiesExchange Act of 1934, the registrant caused this report to be signed on itsbehalf by the undersigned, thereunto duly authorized.

 
|                | COMMERCEFIRST  BANCORP, INC |
|---------------------|-----------------------------|
|                |                        |   |
|                |                        |   |
| March 6,  2008 | By:                         | /s/ Richard J.  Morgan, |
|                |                        | Richard J.  Morgan, President and CEO |

 

In accordance with the Exchange Act, this report hasbeen signed below by the following persons on behalf of the registrant and inthe capacities and on the dates indicated.

 
| **Name**                           | ** ** | **Position**                                 | ** ** | **Date**                      |
|------------------------------------|------------|----------------------------------------------|------------|-------------------------------|
| ** **                         | ** ** | ** **                                   | ** ** | ** **                    |
| s/ Milton D. Jernigan II           |       | Chairman of the Board of Directors           |       | March 6, 2008            |
| Milton D. Jernigan II              |       | of the Company and the Bank                  |       |                          |
|                               |       |                                         |       |                          |
| s/ Richard J. Morgan               |       | Director, President and CEO of the           |       | March 6, 2008            |
| Richard J. Morgan                  |       | Company and the Bank                         |       |                          |
|                               |       | (Principal Executive Officer)                |       |                          |
|                               |       |                                         |       |                          |
| s/ Edward B. Howlin, Jr.      |       | Director of the Company and the Bank         |       | March 6, 2008            |
| Edward B. Howlin, Jr.         |       |                                         |       |                          |
|                               |       |                                         |       |                          |
| s/ Charles L. Hurtt, Jr., CPA |       | Director of the Company and the Bank         |       | March 6, 2008            |
| Charles L. Hurtt, Jr., CPA    |       |                                         |       |                          |
|                               |       |                                         |       |                          |
| s/ Lamont Thomas                   |       | Director of Company and the Bank             |       | March 6, 2008            |
| Lamont Thomas                      |       |                                         |       |                          |
|                               |       |                                         |       |                          |
| s/ Robert R. Mitchell              |       | Director of the Company and the Bank         |       | March 6, 2008            |
| Robert R. Mitchell                 |       |                                         |       |                          |
|                               |       |                                         |       |                          |
| s/ John A. Richardson, Sr.    |       | Director of the Company and the Bank         |       | March 6, 2008            |
| John A. Richardson, Sr.       |       |                                         |       |                          |
|                               |       |                                         |       |                          |
| s/ George C. Shenk, Jr.       |       | Director of the Company and the Bank         |       | March 6, 2008            |
| George C. Shenk, Jr.          |       |                                         |       |                          |
|                               |       |                                         |       |                          |
|                               |       | Director of the Company and the Bank         |       | March   , 2008 |
| Jerome A. Watts                    |       |                                         |       |                          |
|                               |       |                                         |       |                          |
| s/ Michael T. Storm                |       | Executive Vice President/Chief Financial     |       | March 6, 2008            |
| Michael T. Storm                   |       | Officer of the Company and the Bank          |       |                          |
|                               |       | (Principal Financial and Accounting Officer) |       |                          |

 

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