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  **U.S. SECURITIES AND EXCHANGE COMMISSION****Washington, DC 20549****FORM 10-K**   þ **Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934****For the fiscal year ended December 31, 2010**   o **Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934****For the transition period from                      to                     .****Commission File No.: 000-51104****CommerceFirst Bancorp, Inc.**(Exact name of registrant as specified in its charter)   Maryland 52-2180744(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)1804West Street, Annapolis MD 21401 (Address of principal executiveoffices) (Zip Code)Registrant’s Telephone Number: 410-280-6695Securities registered pursuant to Section 12(b) of the Act   Title of class Name of each exchange on which registeredCommon Stock, $0.01 par value Nasdaq Capital MarketSecurities registered pursuant to Section 12(g) of the Act: NoneIndicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 ofthe Securities Act. Yes o No þIndicate by check mark if the registrant is not required to file reports pursuant to Section 13 orSection 15(d) of the ActYes o No þIndicate by check mark if the registrant: (1) has filed all reports required to be filed bySection 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for suchshorter period that the registrant was required to file such reports; and (2) has been subject tosuch filing requirements for the past 90 days. Yes þ No oIndicate by checkmark whether the registrant has submitted electronically and posted on itscorporate Website, if any, every Interactive Data File required to be submitted and posted pursuantto Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or forsuch shorter period that the registrant was required to submit and post such files). Yes o No oIndicate by check mark if there is no disclosure of delinquent filers pursuant to Item 405 ofRegulation S-K (§225.405 of this chapter) is not contained herein and will not be contained, to thebest of registrant’s knowledge, in definitive proxy or information statements incorporated byreference in Part III of this Form 10-K or any amendment to this Form 10-K oIndicate by check mark whether registrant is a large accelerated filer, an accelerated filer, anon-accelerated filer or a smaller reporting company. See definitions of large accelerated filer,accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.       Large accelerated filer o Accelerated filer o Non-accelerated filer o Smaller reporting company þIndicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of theExchange Act).Yes o No þThe aggregate market value of the outstanding Common Stock held by non-affiliates as of June 30,2010 was approximately $15,201,576.As of March 3, 2011, the number of outstanding shares of the Common Stock, $0.01 par value, ofCommerceFirst Bancorp, Inc. was 1,820,548.DOCUMENTS INCORPORATED BY REFERENCEPortions of the following documents are hereby incorporated by reference in this Form 10-K: theCompany’s Annual Report to Shareholders for the Year Ended December 31, 2010 — Part II; theCompany’s Proxy Statement for the Annual Meeting of Shareholders to be held on May 4, 2011 — PartIII.  
 
 

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PART IITEM 1. BusinessITEM 1A. Risk FactorsITEM 1B. Unresolved Staff CommentsITEM 2. PropertiesITEM 3. Legal ProceedingsITEM 4. [Removed and Reserved]PART IIITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity SecuritiesITEM 6. Selected Financial DataITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsITEM 7A. Quantitative and Qualitative Disclosures About Market RiskITEM 8. Financial Statements and Supplementary DataITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial DisclosureITEM 9A Controls and ProceduresITEM 9B. Other InformationPart IIIITEM 10. Directors, Executive Officers and Corporate GovernanceITEM 11. Executive CompensationITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder MattersITEM 13. Certain Relationships and Related Transactions, and Director IndependenceITEM 14 Principal Accountant Fees and ServicesITEM 15. Exhibits, Financial Statement SchedulesSIGNATURESExhibit 13Exhibit 23Exhibit 31(a)Exhibit 31(b)Exhibit 32(a)Exhibit 32(b)

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**PART I****ITEM 1.** **Business.**CommerceFirst Bancorp, Inc. (the “Company”) was incorporated under the laws of the State ofMaryland on July 9, 1999, to serve as the bank holding company for a newly formed Marylandchartered commercial bank. The Company was formed by a group of local businessmen andprofessionals with significant prior experience in community banking in the Company’s market area,together with an experienced community bank senior management team. The Company’s sole subsidiary,CommerceFirst Bank (the “Bank”), a Maryland chartered commercial bank and member of the FederalReserve System, commenced banking operations on June 29, 2000.The Company operates from its main headquarters in Annapolis, Maryland, and from branchoffices in Lanham, Maryland opened in September 2004, Glen Burnie, Maryland opened in June 2006,Columbia, Maryland opened in August 2006, and Severna Park, Maryland opened in June 2007, Maryland.The Company does not anticipate opening any additional branches during 2011, but will consideropening more branches if an advantageous opportunity presents itself.Further asset and loan growth by the Company may be limited by its levels of regulatorycapital. Increases in the loan portfolio need to be funded by increases in deposits as the Companyhas limited amounts of on-balance sheet assets deployable into loans. Growth will depend uponCompany earnings providing sufficient capital to support growth and/or the raising of additionalcapital.The Company operates as a community bank alternative to the super-regional financialinstitutions that dominate its primary market area. The cornerstone of the Company’s philosophy isto provide superior, individualized service to its customers. The Company focuses on relationshipbanking, providing each customer with a number of services, familiarizing itself with, andaddressing itself to, customer needs in a proactive, personalized fashion.*Description of Services.*The Company offers full commercial banking services to its businessand professional clients. The Company emphasizes providing commercial banking services to soleproprietorships, small and medium-sized businesses, partnerships, corporations, and non-profitorganizations and associations in and near the Company’s primary service areas. Limited retailbanking services are offered to accommodate the personal needs of commercial customers as well asmembers of the communities the Company serves.The Company’s loan portfolio consists of business and real estate loans. The business loansgenerally have variable rates and/or short maturities where the cash flow of the borrower is theprincipal source of debt service, with a secondary emphasis on collateral. Real estate loans aremade generally on commercial property as well as 1-4 family residential properties held asinvestments, and are structured with fixed rates that adjust in three to five years, generally withmaturities of five to ten years, or with variable rates tied to various indices and adjusting asthe indices change. The Company’s portfolio contains a small amount of acquisition and constructionloans (approximately $1 million), one of which in the amount of $771 thousand is on nonaccrual.In general, the Company offers the following credit services: 1) Commercial loans for business purposes including working capital, equipmentpurchases, real estate, lines of credit, and government contract financing. Assetbased lending and accounts receivable financing are available on a selective basis.  2) Real estate loans for business and investment purposes.  3) Commercial lines of credit.  4) Merchant credit card services are offered through an outside vendor.The Company has developed an expertise in making loans under the guarantee programs of theSmall Business Administration (SBA). The Company currently expects that it will sell the guaranteedportion of SBA loans to secondary market investors as soon as possible after funding, whileretaining the uninsured portion. The sale of the guaranteedportion of such loans is expected to result in gains, and the Company expects to receive fees forservicing the loans. SBA guaranteed loans are subjected to the same underwriting standards appliedto other loans.
 
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The Company’s lending activities carry the risk that the borrowers will be unable toperform on their obligations. Interest rate policies of the Board of Governors of the FederalReserve System (the “Federal Reserve Board” or the “Federal Reserve”) as well as national and localeconomic conditions can have a significant impact on the Company and the Company’s results ofoperations. To the extent that economic conditions deteriorate, business and individual borrowersmay be less able to meet their obligations to the Company in full in a timely manner, resulting indecreased earnings or losses to the Company. To the extent the Company makes fixed rate loans,general increases in interest rates will tend to reduce the Company’s spread as the interest ratesthe Company must pay for deposits increase while interest income is flat. Economic conditions andinterest rates may also adversely affect the value of property pledged as security for loans.Deposit services include business and personal checking accounts, NOW accounts, premiumsavings accounts, and a tiered Money Market Account basing the payment of interest on balances ondeposit. Certificates of deposits are offered with various maturities. The Company supplementsits local deposits with out-of-area deposits comprised of funds obtained through the use of depositlisting services, deposits obtained through the use of brokers and through the Certificates ofDeposit Account Registry Service program. The acceptance of brokered deposits is utilized whendeemed appropriate by management in order to have available funding sources for loans andinvestments especially during times when competing local deposit institutions drive up their rateoffering well beyond rates available to the Company in national markets.Other services for business accounts include remote deposit and internet Banking services.The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), enactedin July 2010, eliminated the historic prohibition on paying interest on checking and demand depositaccounts maintained by businesses. With this change, it is likely that the Company may berequired to pay interest on some portion of its non-interest bearing deposits in order to competeagainst other banks. As a significant portion of its deposits are non-interest bearing demanddeposits established by businesses, payment of interest on these deposits could have a significantnegative impact on its net income, net interest income, interest margin, return on assets andequity, and other indices of financial performance. The Company expects that other banks would befaced with similar negative impacts. The Company also expects that the primary focus ofcompetition would continue to be based on other factors, such as quality of service.*Source of Business.*Management believes that the market segments which the Company targets,small to medium sized businesses and the professional base of the Company’s market area, demand theconvenience and personal service that a smaller, independent financial institution such as theCompany can offer. It is these themes of convenience and personal service that form the basis forthe Company’s business development strategies. The Company provides services from its headquartersand main branch offices located in Annapolis, Maryland, and from its branch offices in Lanham, GlenBurnie, Columbia, and Severna Park, Maryland. It believes these locations meet the needs of theCompany’s existing and potential customers, and provide prospects for additional growth andexpansion.The Company has capitalized upon the extensive business and personal contacts andrelationships of its Directors and Executive Officers to establish the Company’s initial customerbase. To introduce new customers to the Company, reliance is placed on aggressiveofficer-originated calling programs and director, customer and shareholder referrals.The risk of nonpayment (or deferred payment) of loans is inherent in commercial banking. TheCompany’s marketing focus on small to medium sized businesses may result in the assumption by theCompany of certain lending risks that are different from those attendant to loans to largercompanies. Management of the Company carefully evaluates all loan applications and attempts tominimize its credit risk exposure by use of thorough loan application, approval and monitoringprocedures; however, there can be no assurance that such procedures can significantly reduce suchlending risks.
 
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*Economic Conditions and Concentrations.*The Company has a substantial amount of loans securedby real estate in the Annapolis, Maryland/suburban Washington D.C. metropolitan areas ascollateral, and substantially all of our loans are to borrowers in that area and contiguous marketsin Maryland. At December 31, 2010, 71.7% of the Company’s loans were commercial real estate loans(including loans to investors in residential property for rental purposes primarily secured by 1-4family properties). An additional 28.3% of loans were commercial and industrial loans which are notprimarily secured by real estate. These concentrations expose the Company to the risk that adversedevelopments in the real estate market, or in the general economic conditions in its market area,could increase the levels of nonperforming loans and charge-offs, and reduce loan demand anddeposit growth. In that event, the Company would likely experience lower earnings or losses.Additionally, if economic conditions in the area deteriorate, or there is significant volatility orweakness in the economy or any significant sector of the area’s economy, the Company’s ability todevelop our business relationships may be diminished, the quality and collectability of the loansmay be adversely affected, the value of collateral may decline and loan demand may be reduced.The financial industry experienced significant volatility and stress as economic conditionsworsened, unemployment increased and asset values declined during 2009 and 2010. While the Companydid not have direct exposure to the upheaval in the residential mortgage loan market and did notinvest in mortgage back securities or the preferred stock of Freddie Mac and Fannie Mae, theslowing economy, declines in housing construction and the related impact on contractors and othersmall and medium sized businesses, has had an adverse impact on the Company’s business. This impactincluded increased levels of nonperforming assets, loan charge-offs and increased loan lossprovisions. While the Company believes that it has taken adequate reserves for the problem assetsin its loan portfolio at December 31, 2010, there can be no assurance that the Company will not berequired to take additional charge-offs or make additional provisions for nonperforming loans, orthat currently performing loans will continue to perform. Additionally, there can be no assurancethat the steps taken to stimulate the economy and stabilize the financial system will provesuccessful, or that they will improve the financial condition of the Company’s customers or theCompany.**Employees**At December 31, 2010 the Company had 39 full time equivalent employees, two of whom areexecutive officers. The Chairman of the Board, an attorney in private practice, devotesconsiderable time each month to the advancement of the Company, principally in business developmentactivities. The Company (as distinguished from the Bank) does not have any employees or officerswho are not employees or officers of the Bank. None of the Company’s employees are represented byany collective bargaining group, and the Company believes that its employee relations are good.The Company provides a benefit program that includes health and dental insurance, a 401(k) plan,and life and long-term disability insurance for substantially all full time employees.**Market Area and Competition***Location and Market Area.*The main office and the headquarters are located at 1804 WestStreet, Annapolis, Maryland 21401. The second office is located at 4451 Parliament Place, Lanham,Maryland 20706, and opened in the third quarter of 2004. The third office is located at 910Cromwell Park Drive, Glen Burnie, Maryland 21061 and opened late in the second quarter of 2006. Thefourth office is located at 6230 Old Dobbin Lane, Columbia, Maryland and opened in the thirdquarter of 2006. The Company opened its fifth branch office located at 487 RitchieHighway, Severna Park, Maryland, in June 2007.The Company is located in one of the most dynamic regions in the United States. The FederalGovernment has a major direct and indirect influence on the economies, infrastructure and land usemanagement of Washington, D.C. and the Maryland and Virginia counties surrounding Washington.According to the State of Maryland’s Department of Business and Economic Development (the“Department”), the region is 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 major airports, the nation’scapital and a highly educated workforce. The regional economy is usually strong and diverse, boastsconsistently higher job growth and lower unemployment rates as compared to other regions and isincreasingly service sector and small business oriented. Information technology, the medicalindustry and tourism are all major growth industries for the region. These industries arecharacterized by small niche oriented enterprises that thrive ontheir ability to tap the highly educated workforce and abundant access to the region’s substantialcommunications infrastructure. Current economic conditions have negatively impacted businessactivities in the region.
 
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The Company’s market strategy is to grow within the Central Maryland corridor, which consistsof Anne Arundel, Prince George’s, Montgomery and Howard counties, areas which it believes havesignificant growth opportunities. The Company does not have a branch in Montgomery county at thistime and does not have near term plans to open a branch in the county.*Anne Arundel County.*The county is located in central Maryland on the western shore of theChesapeake Bay and lies wholly in the Atlantic Coastal Plain, east of the Appalachian mountainchain. The County is centered within the Baltimore-Washington corridor with its County Seat, TheCity of Annapolis, just 24 miles from Baltimore City and 33 miles from Washington, D.C. The landarea is 416 square miles or 266,078 acres, making Anne Arundel the tenth in size among MarylandCounties. The county evolved from a bedroom community to Baltimore to be more heavily influenced byWashington growth factors. The county has developed its own unique and diverse economy due togrowth opportunities presented by Baltimore/Washington International (BWI) Airport, which has longbeen considered one of the State of Maryland’s prime economic engines. Unemployment rates in AnneArundel County have been consistently lower than those in Maryland and the United States. Theunemployment rate in the county as of June 2010 was 6.9% (6.7% as of June 2009) as compared to theMaryland rate of 8.2% and the national unemployment rate of 9.6% as of the same date. Anne ArundelCounty’s economy has diversified in the last 25 years, trending toward more private sectoremployment but government employment still dominates because Anne Arundel County contains the StateCapital of Maryland, the United States Naval Academy, the National Security Agency (NSA)headquarters and numerous other Federal, State, County and City of Annapolis jobs. The largestprivate sector employer in the county is Northrop Grumman. Outside the government sector, the localeconomy is dominated by small and mid-sized service sector enterprises providing internet basedservices; high-technology telecommunications; product distribution, a result of proximity of goodsarriving to the Port of Baltimore and BWI Airport; and technical support services.In 2005, Congress authorized the Department of Defense to reorganize its base structure- aprocess commonly known as BRAC or Base Realignment and Closure. Maryland’s Ft. Meade was chosen toabsorb military workers from Northern Virginia in a process that will continue through 2013.Maryland, specifically Anne Arundel County, is expected to gain more jobs from military baseshuffling than any other state in the nation. There are 80 tenant organizations in Ft. Meade,including NSA, Defense Information Schools, the EPA, as well as the Department of the Defenseintelligence training facilities. Employees at Ft. Meade number approximately 36,000, which isexpected to grow to 42,000 when BRAC consolidation is completedOnce home to large Maryland-based regional banks, financial services are now primarilyprovided by larger super-regional institutions such as Bank of America, SunTrust, Wachovia (nowWells Fargo), M & T Bank, BB&T and Capital One, all of which expanded into this highly attractivebanking market over the past decade by acquisition.*Prince George’s County*. In Prince George’s County, 15,300 businesses employ over 230,000workers; an estimated 475 of these businesses have 100 or more employees. Almost 900 technologycompanies employ 33,600 highly-trained workers — the second highest number of high-techcompanies, as well as defense and aerospace companies, of any jurisdiction in the state. Majoremployers include the Computer Sciences Corporation, the University of Maryland at College Park,the Beltsville Agricultural Research Center, Safeway, SGT, and Verizon. Additionally, Andrews AirForce Base in Camp Springs is a large military facility that provides transportation for thePresident and other high-ranking government officials and foreign dignitaries. New technologycompanies are nurtured in several business incubators in the county.Relocating and expanding businesses have been increasingly attracted to Prince George’s Countydue to its competitively priced land and buildings, an integrated transportation system, proximityto Washington, D.C., and attractive business incentives. The county closely mirrors Anne ArundelCounty with respect to small business enterprises, with 97% of the over 15 thousand employershaving fewer than 100 workers, according to published data. Government is a significant economicinfluence, with 80 thousand Federal, state and county employees.Similar to Anne Arundel County, large super-regional banking institutions have obtainedadditional market share in the suburban Washington market from the acquisition of many of thecommunity banks that once existed in this area. Prince George’s County has a population of over 800thousand.
 
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*Howard County*. Expansion into neighboring Howard County is a natural extension of theCompany’s strategic growth plan. Howard County is situated in the heart of the corridor betweenWashington, D.C. and Baltimore. Howard County’s population is projected to grow to 327,000 by 2035,according to the Howard County Department of Planning and Zoning. Currently the county’s citizensare among the wealthiest in Maryland with a median 2007 household income of $101,672. HowardCounty’s geographic location has resulted in the substantial growth of a wide variety ofindustries, including high-tech and life science businesses, in addition to transportation andeducation related activities. Accessible to I-95 and I-70, the county is located within a 20-minutedrive of Baltimore/Washington International Airport and the Port of Baltimore, and serves as abedroom community for both Baltimore and Washington DC area employers. Additionally, DullesInternational and Washington National Airports are within an hour’s drive. Howard County has astrong economic base of its own with over 7,000 Howard County businesses employing more than122,000 people, including 725 high-tech businesses with a workforce of nearly 24,000 workers. Likethe other counties in which the Company operates, the population and workforce of Howard County arehighly educated, and income levels are favorably high.*Competition.*Deregulation of financial institutions and holding company acquisitions of banksacross state lines has resulted in widespread, fundamental changes in the financial servicesindustry. This transformation, although occurring nationwide, is particularly intense in thegreater Baltimore/Washington, DC area. In Anne Arundel, Prince George’s and Howard Counties,competition is exceptionally keen from large banking institutions headquartered outside ofMaryland. In addition, the Company competes with other community banks, savings and loanassociations, credit unions, mortgage companies, finance companies and others providing financialservices. Among the advantages that many of these institutions have over the Company are theirabilities to finance extensive advertising campaigns, maintain extensive branch networks andtechnology investments, and to directly offer certain services, such as international banking andtrust services, which the Company does not directly offer. Further, the greater capitalization ofthe larger institutions allows for substantially higher lending limits than the Company. Certainof these competitors have other advantages, such as tax exemption in the case of credit unions, andlesser regulation in the case of mortgage companies and finance companies. As a result of theDodd-Frank Act, almost unlimited interstate de novo branching is available to all state andfederally chartered banks. As a result, institutions which previously were ineligible to establishde novo branches in Maryland may elect to do so.**Regulation**The following summaries of statutes and regulations affecting bank holding companies do notpurport to be complete 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 holding company registered under the Bank Holding CompanyAct of 1956, as amended, (the “Act”) and is subject to supervision by the Federal Reserve Board.As a bank holding company, the Company is required to file with the Federal Reserve Board an annualreport and such other additional information as the Federal Reserve Board may require pursuant tothe Act. The Federal Reserve Board may also make examinations of the Company and each of itssubsidiaries.The Act requires approval of the Federal Reserve Board for, among other things, theacquisition by a proposed bank holding company of control of more than five percent (5%) of thevoting shares, or substantially all the assets, of any bank or the merger or consolidation by abank holding company with another bank holding company. The Act also generally permits theacquisition by a bank holding company of control or substantially all the assets of any banklocated in a state other than the home state of the bank holding company, except where the bank hasnot been in existence for the minimum period of time required by state law, but if the bank is atleast five years old, the Federal Reserve Board may approve the acquisition. A presumption ofcontrol arises under the Change in Bank Control Act where a person controls 10% or more of a classof the voting stock of a company or insured bank which is a reporting company under the SecuritiesExchange Act of 1934, such a the Company.
 
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With certain limited exceptions, a bank holding company is prohibited from acquiring controlof any voting shares of any company which is not a bank or bank holding company and from engagingdirectly or indirectly in any activity other than banking or managing or controlling banks orfurnishing services to or performing service for its authorized subsidiaries. A bank holdingcompany may, however, engage in or acquire an interest in, a company that engages in activitieswhich the Federal Reserve Board has determined by order or regulation to be so closely related tobanking or managing or controlling banks as to be properly incident thereto. In making such adetermination, the Federal Reserve Board is required to consider whether the performance of suchactivities can reasonably be expected to produce benefits to the public, such as convenience,increased competition or gains in efficiency, which outweigh possible adverse effects, such asundue concentration of resources, decreased or unfair competition, conflicts of interest or unsoundbanking practices. The Federal Reserve Board is also empowered to differentiate between activitiescommenced *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 has determined by regulation to beclosely related to banking include making or servicing loans, performing certain data processingservices, acting as a fiduciary or investment or financial advisor, and making investments incorporations or projects designed primarily to promote community welfare.Subsidiary banks of a bank holding company are subject to certain restrictions imposed by theFederal Reserve Act on any extensions of credit to the bank holding company or any of itssubsidiaries, or investments in the stock or other securities thereof, and on the taking of suchstock or securities as collateral for loans to any borrower. Further, a holding company and anysubsidiary bank are prohibited from engaging in certain tie-in arrangements in connection with theextension of credit. A subsidiary bank may not extend credit, lease or sell property, or furnishany services, or fix or vary the consideration for any of the foregoing on the condition that: (i)the customer obtain or provide some additional credit, property or services from or to such bankother than a loan, discount, deposit or trust service; (ii) the customer obtain or provide someadditional credit, property or service from or to the Company or any other subsidiary of theCompany; or (iii) the customer not obtain some other credit, property or service from competitors,except for reasonable requirements to assure the soundness of credit extended.The Gramm-Leach-Bliley Act of 1999 (the “GLB Act”) allows a bank holding company or othercompany to certify status as a financial holding company, which allows such company to engage inactivities that are financial in nature, that are incidental to such activities, or arecomplementary to such activities. The GLB Act enumerates certain activities that are deemedfinancial in nature, such as underwriting insurance or acting as an insurance principal, agent orbroker, underwriting, dealing in or making markets in securities, and engaging in merchant bankingunder certain restrictions. It also authorizes the Federal Reserve Board to determine byregulation what other activities are financial in nature, or incidental or complementary thereto.The GLB Act allows a wider array of companies to own banks, which could result in companies withresources substantially in excess of the Company’s entering into competition with the Company andthe Bank.The GLB Act made substantial changes in the historic restrictions on non-bank activities ofbank holding companies, and allows affiliations between types of companies that were previouslyprohibited. The GLB Act also allows banks to engage in a wider array of non-banking activitiesthrough “financial subsidiaries.”The Dodd-Frank Act contains various provisions designed to enhance the regulation ofdepository institutions and prevent the recurrence of a financial crisis such as occurred in2008-2009. Also included is the creation of a new federal agency to administer and enforce consumerand fair lending laws, a function that is now performed by the depository institution regulators.The full impact of the Dodd-Frank Act on the Company’s business and operations will not be knownfor years until regulations implementing the statute are written and adopted. The Dodd-Frank Actmay have a material impact on the Company’s operations, particularly through increased compliancecosts resulting from possible future consumer and fair lending regulations.*The Bank.*The Bank, as a Maryland chartered commercial bank which is a member of the FederalReserve System (a state member bank) and whose accounts are insured by the Deposit Insurance Fundof the Federal Deposit Insurance Corporation (the “FDIC”) up to the maximum legal limits of theFDIC, is subject to regulation, supervision and regular examination by the Maryland Department ofFinancial Institutions and the Federal Reserve Board. The regulations of these various agenciesgovern most aspects of the Bank’s business, including required reserves againstdeposits, loans, investments, mergers and acquisitions, borrowing, dividends and location andnumber of branch offices. The laws and regulations governing the Bank generally have beenpromulgated to protect depositors and the Deposit Insurance Fund, and not for the purpose ofprotecting stockholders.
 
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Competition among commercial banks, savings and loan associations, and credit unions hasincreased following enactment of legislation that greatly expanded the ability of banks and bankholding companies to engage in interstate banking or acquisition activities. As a result offederal and state legislation, banks in the Washington D.C./Maryland/Virginia area can, subject tolimited restrictions, acquire or merge with a bank in another of the jurisdictions, and can branch*de novo*in any of the jurisdictions.Banking is a business that depends on interest rate differentials. In general, thedifferences between the interest paid by a bank on its deposits and its other borrowings and theinterest received by a bank on loans extended to its customers and securities held in itsinvestment portfolio constitute the major portion of the bank’s earnings. Thus, the earnings andgrowth of the Bank will be subject to the influence of economic conditions generally, both domesticand foreign, and also to the monetary and fiscal policies of the United States and its agencies,particularly the Federal Reserve Board, which regulates the supply of money through various meansincluding open market dealings in United States government securities. The nature and timing ofchanges in such policies and their impact on the Bank cannot be predicted.*Branching and Interstate Banking.*The federal banking agencies are authorized to approveinterstate bank merger transactions without regard to whether such transaction is prohibited by thelaw of any state, unless the home state of one of the banks has opted out of the interstate bankmerger provisions of the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (the“Riegle-Neal Act”) by adopting a law after the date of enactment of the Riegle-Neal Act and priorto June 1, 1997 which applies equally to all out-of-state banks and expressly prohibits mergertransactions involving out-of-state banks. Interstate acquisitions of branches are permitted onlyif the law of the state in which the branch is located permits such acquisitions. Such interstatebank mergers and branch acquisitions are also subject to the nationwide and statewide insureddeposit concentration limitations described in the Riegle-Neal Act. The District of Columbia,Maryland and Virginia have each enacted laws which permit interstate acquisitions of banks and bankbranches. The Dodd-Frank Act authorizes national and state banks to establish de novo branches inother states to the same extent as a bank chartered by that state would be permitted to branch.Previously, banks could only establish branches in other states if the host state expresslypermitted out-of-state banks to establish branches in that state.Although the District of Columbia, Maryland and Virginia had all enacted laws which permittedbanks in these jurisdictions to branch freely, the branching provisions of the Dodd-Frank Act couldresult in banks from other states establishing de *novo*branches in the Bank’s market area.*Transaction with Affiliates.*The Bank is subject to the provisions of Section 23A and 23B ofthe Federal Reserve Act and Federal Reserve Regulation W of the Federal Reserve Bank which placelimits on the amount of loans or extensions of credit to affiliates (as defined in the FederalReserve Act), investments in or certain other transactions with affiliates and on the amount ofadvances to third parties collateralized by the securities or obligations of affiliates. The lawand regulation limit the aggregate amount of transactions with any individual affiliate to tenpercent (10%) of the capital and surplus of the Bank and also limit the aggregate amount oftransactions with all affiliates to twenty percent (20%) of capital and surplus. Loans and certainother extensions of credit to affiliates are required to be secured by collateral in an amount andof a type described in the regulation, and the purchase of low quality assets from affiliates isgenerally prohibited. The law and Regulation W also, among other things, prohibit an institutionfrom engaging in certain transactions with certain affiliates (as defined in the Federal ReserveAct) unless the transactions are on terms substantially the same, or at least as favorable to suchinstitution and/or its subsidiaries, as those prevailing at the time for comparable transactionswith non-affiliated entities. In the absence of comparable transactions, such transactions mayonly occur under terms and circumstances, including credit standards that in good faith would beoffered to or would apply to non-affiliated companies.
 
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The Company is subject to the restrictions contained in Section 22(h) of the Federal ReserveAct and the Federal Reserve Board’s Regulation O thereunder on loans to executive officers,directors and principalstockholders. Under Section 22(h), loans to a director, an executive officer or a greater-than-10%stockholder of a bank as well as certain affiliated interests of any of the foregoing may notexceed, together with all other outstanding loans to such person and affiliated interests, theloans-to-one-borrower limit applicable to national banks (generally 15% of the institution’sunimpaired capital and surplus), and all loans to all such persons in the aggregate may not exceedthe institution’s unimpaired capital and unimpaired surplus. Regulation O also prohibits themaking of loans in an amount greater than $25,000 or 5% of capital and surplus but in any event notover $500,000, to directors, executive officers and greater-than-10% stockholders of a bank, andtheir respective affiliates, unless such loans are approved in advance by a majority of the boardof directors of the bank with any “interested” director not participating in the voting.Furthermore, Regulation O requires that loans to directors, executive officers and principalstockholders of a bank be made on terms substantially the same as those that are offered incomparable transactions to unrelated third parties unless the loans are made pursuant to a benefitor compensation program 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 institutionfrom paying overdrafts over $1,000 of any of its executive officers or directors unless they arepaid pursuant to written pre-authorized extension of credit or transfer of funds plans. Violationson the insider transaction provisions of law and regulation could result in severe regulatoryconsequences for the Bank and Company, including the imposition of civil money penalties, orregulatory enforcement agreements or orders which require time consuming or expensive correctiveactions.*Community Reinvestment Act.*The Community Reinvestment Act (“CRA”) requires that, inconnection with examinations of financial institutions within their respective jurisdictions, theFederal Reserve Board, the FDIC, the Office of the Comptroller of the Currency or the Office ofThrift Supervision shall evaluate the record of the financial institutions in meeting the creditneeds of their local communities, including low and moderate income neighborhoods, consistent withthe safe and sound operation of those institutions. The CRA does not establish specific lendingrequirements or programs for financial institutions nor does it limit an institution’s discretionto develop the types of products and services that it believes are best suited to its particularcommunity, consistent with the CRA. An institution’s CRA activities are considered in, among otherthings, evaluating mergers, acquisitions and applications to open a branch or facility, as well asdetermining whether the institution will be permitted to exercise certain of the powers allowed bythe GLB Act. The CRA also requires all institutions to make public disclosure of their CRAratings. The Company was last examined for CRA compliance as of August 17, 2009 and received a CRArating of “satisfactory.”*USA Patriot Act.*Under the Uniting and Strengthening America by Providing Appropriate ToolsRequired to Intercept and Obstruct Terrorism Act, commonly referred to as the “USA Patriot Act” orthe Patriot Act, financial institutions are subject to prohibitions against specified financialtransactions and account relationships, as well as enhanced due diligence standards intended todetect, and prevent, the use of the United States financial system for money laundering andterrorist financing activities. The Patriot Act requires financial institutions, including banks,to establish anti-money laundering programs, including employee training and independent auditrequirements, meet minimum standards specified by the act, follow minimum standards for customeridentification and maintenance of customer identification records, and regularly compare customerlists against lists of suspected terrorists, terrorist organizations and money launderers. Thecosts or other effects of the compliance burdens imposed by the Patriot Act or futureanti-terrorist, homeland security or anti-money laundering legislation or regulations cannot bepredicted with certainty.*Capital Adequacy Guidelines.*The Federal Reserve Board and the FDIC have adopted risk basedcapital adequacy guidelines pursuant to which they assess the adequacy of capital in examining andsupervising banks and bank holding companies and in analyzing bank regulatory applications.Risk-based capital requirements determine the adequacy of capital based on the risk inherent invarious classes of assets and off-balance sheet items. Under the Dodd-Frank Act, the FederalReserve Board is required to apply consolidated capital requirements to depository institutionholding companies that are no less stringent than those currently applied to depositoryinstitutions. The Dodd-Frank Act additionally requires capital requirements to be countercyclicalso that the required amount of capital increases in times of economic expansion and decreases intimes of economic contraction, consistent with safety and soundness.
 
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State member banks are expected to meet a minimum ratio of total qualifying capital (the sumof core capital (Tier 1) and supplementary capital (Tier 2)) to risk weighted assets of 8%. Atleast half of this amount (4%) should bein 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, it engages in certainhighly leveraged activities or it has publicly held debt securities.Tier 1 Capital generally consists of the sum of common stockholders’ equity and perpetualpreferred stock (subject in the case of the latter to limitations on the kind and amount of suchstock which may be included as Tier 1 Capital), less goodwill, without adjustment for changes inthe market value of securities classified as available-for- sale in accordance with ASC Topic 320.Tier 2 Capital consists of the following: hybrid capital instruments; perpetual preferred stockwhich is not otherwise eligible to be included as Tier 1 Capital; term subordinated debt andintermediate-term preferred stock; and, subject to limitations, general allowances for loan losses.Assets are adjusted under the risk-based guidelines to take into account different riskcharacteristics, with the categories ranging from 0% (requiring no risk-based capital) for assetssuch as cash, to 100% for the bulk of assets which are typically held by a bank holding company,including certain multi-family residential and commercial real estate loans, commercial businessloans and consumer loans. Residential first mortgage loans on 1-4 family residential real estateand certain seasoned multi-family residential real estate loans, which are not 90 days or morepast-due or nonperforming and which have been made in accordance with prudent underwritingstandards are assigned a 50% level in the risk-weighing system, as are certain privately-issuedmortgage-backed securities representing indirect ownership of such loans. Off-balance sheet itemsalso are adjusted to take into account certain risk characteristics.In addition to the risk-based capital requirements, the Federal Reserve Board has establisheda minimum 3.0% Leverage Capital Ratio (Tier 1 Capital to total adjusted assets) requirement for themost highly-rated banks, with an additional cushion of at least 100 to 200 basis points for allother banks, which effectively increases the minimum Leverage Capital Ratio for such other banks to4.0% — 5.0% or more. The highest-rated banks are those that are not anticipating or experiencingsignificant growth and have well diversified risk, including no undue interest rate risk exposure,excellent asset quality, high liquidity, good earnings and, in general, those which are considereda strong banking organization. A bank having less than the minimum Leverage Capital Ratiorequirement shall, within 60 days of the date as of which it fails to comply with such requirement,submit a reasonable plan describing the means and timing by which the bank shall achieve itsminimum Leverage Capital Ratio requirement. A bank which fails to file such plan is deemed to beoperating in an unsafe and unsound manner, and could subject the bank to a cease-and-desist order.Any insured depository institution with a Leverage Capital Ratio that is less than 2.0% is deemedto be operating in an unsafe or unsound condition pursuant to Section 8(a) of the Federal DepositInsurance Act (the “FDIA”) and is subject to potential termination of deposit insurance. Thecapital regulations also provide, among other things, for the issuance of a capital directive,which is a final order issued 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 isenforceable in the same manner as a final cease-and-desist order.The foregoing capital requirements represent minimum requirements. Our state and federalregulators have the discretion to require us to maintain higher capital levels based upon ourconcentrations of loans, the risk of our lending or other activities, the performance of our loanand investment portfolios and other factors. Failure to maintain such higher capital expectationscould result in a lower composite regulatory rating, which would impact our deposit insurancepremiums and could affect our ability to borrow, and costs of borrowing, and could result inadditional or more severe enforcement actions.Under guidance from the federal banking regulators, banks which have concentrations inconstruction, land development or commercial real estate loans (other than loans for majority owneroccupied properties) 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 higherlevels of capital than we would otherwise be expected to maintain as a result of our levels ofconstruction, development and commercial real estate loans, which may require us to obtainadditional capital.
 
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*Prompt Corrective Action.*Under Section 38 of the FDIA, each federal banking agency isrequired to implement a system of prompt corrective action for institutions that it regulates. Thefederal banking agencies have promulgated substantially similar regulations to implement the systemof prompt corrective action established by Section 38 of the FDIA. Under the regulations, a bankshall be deemed to be: (i) “well capitalized” if it has a Total Risk BasedCapital Ratio of 10.0% or more, a Tier 1 Risk Based Capital Ratio of 6.0% or more, a LeverageCapital Ratio of 5.0% or more and is not subject to any written capital order or directive; (ii)“adequately capitalized” if it has a Total Risk Based Capital Ratio of 8.0% or more, a Tier 1 RiskBased Capital Ratio of 4.0% or more and a Tier 1 Leverage Capital Ratio of 4.0% or more (3.0% undercertain circumstances) and does not meet the definition of “well capitalized;” (iii)“undercapitalized” if it has a Total Risk Based Capital Ratio that is less than 8.0%, a Tier 1 Riskbased Capital Ratio that is less than 4.0% or a Leverage Capital Ratio that is less than 4.0% (3.0%under certain circumstances); (iv) “significantly undercapitalized” if it has a Total Risk BasedCapital Ratio that is less than 6.0%, a Tier 1 Risk Based Capital Ratio that is less than 3.0% or aLeverage Capital Ratio that is less than 3.0%; and (v) “critically undercapitalized” if it has aratio of tangible equity to total assets that is equal to or less than 2.0%.An institution generally must file a written capital restoration plan which meets specifiedrequirements with an appropriate federal banking agency within 45 days of the date the institutionreceives notice or is deemed to have notice that it is undercapitalized, significantlyundercapitalized or critically undercapitalized. A federal banking agency must provide theinstitution with written notice of approval or disapproval within 60 days after receiving a capitalrestoration plan, subject to extensions by the applicable agency.An institution that is required to submit a capital restoration plan must concurrently submita performance guaranty by each company that controls the institution. Such guaranty shall belimited to the lesser of (i) an amount equal to 5.0% of the institution’s total assets at the timethe institution was notified or deemed to have notice that it was undercapitalized or (ii) theamount necessary at such time to restore the relevant capital measures of the institution to thelevels required for the institution to be classified as adequately capitalized. Such a guarantyshall expire after the federal banking agency notifies the institution that it has remainedadequately capitalized for each of four consecutive calendar quarters. An institution which failsto submit a written capital restoration plan within the requisite period, including any requiredperformance guaranty, or fails in any material respect to implement a capital restoration plan,shall be subject to the restrictions in Section 38 of the FDIA which are applicable tosignificantly undercapitalized institutions.A “critically undercapitalized institution” is to be placed in conservatorship or receivershipwithin 90 days unless the FDIC formally determines that forbearance from such action would betterprotect the deposit insurance fund. Unless the FDIC or other appropriate federal bankingregulatory agency makes specific further findings and certifies that the institution is viable andis not expected to fail, an institution that remains critically undercapitalized on average duringthe fourth calendar quarter after the date it becomes critically undercapitalized must be placed inreceivership. The general rule is that the FDIC will be appointed as receiver within 90 days aftera bank becomes critically undercapitalized unless extremely good cause is shown and the federalregulators agree to an extension. In general, good cause is defined as capital that has beenraised and is imminently available for infusion into the Bank except for certain technicalrequirements that may delay the infusion for a period of time beyond the 90 day time period.Immediately upon becoming undercapitalized, an institution shall become subject to theprovisions of Section 38 of the FDIA, which (i) restrict payment of capital distributions andmanagement fees; (ii) require that the appropriate federal banking agency monitor the condition ofthe institution and its efforts to restore its capital; (iii) require submission of a capitalrestoration plan; (iv) restrict the growth of the institution’s assets; and (v) require priorapproval of certain expansion proposals. The appropriate federal banking agency for anundercapitalized institution also may take any number of discretionary supervisory actions if theagency determines that any of these actions is necessary to resolve the problems of the institutionat the least possible long-term cost to the deposit insurance fund, subject in certain cases tospecified procedures. These discretionary supervisory actions include: requiring the institutionto raise additional capital; restricting transactions with affiliates; requiring divestiture of theinstitution or the sale of the institution to a willing purchaser; and any other supervisory actionthat the agency deems appropriate. These and additional mandatory and permissive supervisoryactions may be taken with respect to significantly undercapitalized and critically undercapitalizedinstitutions.
 
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Additionally, under Section 11(c)(5) of the FDIA, a conservator or receiver may be appointedfor an institution where: (i) an institution’s obligations exceed its assets; (ii) there issubstantial dissipation of the institution’s assets or earnings as a result of any violation of lawor any unsafe or unsound practice; (iii) the institution is in an unsafe or unsound condition;(iv) there is a willful violation of a cease-and-desist order; (v) the institution is unable topay its obligations in the ordinary course of business; (vi) losses or threatened losses depleteall or substantially all of aninstitution’s capital, and there is no reasonable prospect of becoming “adequately capitalized”without assistance; (vii) there is any violation of law or unsafe or unsound practice or conditionthat is likely to cause insolvency or substantial dissipation of assets or earnings, weaken theinstitution’s condition, or otherwise seriously prejudice the interests of depositors or theinsurance fund; (viii) an institution ceases to be insured; (ix) the institution isundercapitalized and has no reasonable prospect that it will become adequately capitalized, failsto become adequately capitalized when required to do so, or fails to submit or materially implementa capital restoration plan; or (x) the institution is critically undercapitalized or otherwise hassubstantially insufficient capital.*Regulatory Enforcement Authority*. Federal banking law grants substantial enforcement powersto federal banking regulators. This enforcement authority includes, among other things, theability to assess civil money penalties, to issue cease-and-desist or removal orders and toinitiate injunctive actions against banking organizations and institution-affiliated parties. Ingeneral, these enforcement actions may be initiated for violations of laws and regulations andunsafe or unsound practices. Other actions or inactions may provide the basis for enforcementaction, including misleading or untimely reports filed with regulatory authorities.As a result of the volatility and instability in the financial system during 2008, 2009 and2010, the Congress, the bank regulatory authorities and other government agencies have called foror proposed additional regulation and restrictions on the activities, practices and operations ofbanks and their holding companies. While many of these proposals relate to institutions that haveaccepted investments from, or sold troubled assets to, the Department of the Treasury or othergovernment agencies, or otherwise participate in government programs intended to promote financialstabilization, the Congress and the federal banking agencies have broad authority to require allbanks and holding companies to adhere to more rigorous or costly operating procedures, corporategovernance procedures, or to engage in activities or practices which they would not otherwiseelect. Any such requirement could adversely affect the Company’s business and results ofoperations. The Company did not accept an investment by the Treasury Department in its preferredstock or warrants to purchase common stock, and except for the temporary increases in depositinsurance for customer accounts, has not participated in any of the programs adopted by theTreasury Department, FDIC or Federal Reserve.*FDIC Insurance Premiums.*The FDIC maintains a risk-based assessment system for determiningdeposit insurance premiums. Four risk categories (I-IV), each subject to different premium rates,are established, based upon an institution’s status as well capitalized, adequately capitalized orundercapitalized, and the institution’s supervisory rating. The levels of rates are subject toperiodic adjustment by the FDIC. Depository institutions will also pay premiums for the increasedcoverage provided by the FDIC.Commencing in 2009, the premium rates increased by 7 basis points in each category for thefirst quarter of 2009. For the second quarter of 2009 and beyond, the FDIC established furtherchanges in rates, and introduced three adjustments that can be made to an institution’s initialbase assessment rate: (1) a potential decrease for long-term unsecured debt, including senior andsubordinated debt and, for small institutions, a portion of Tier 1 capital; (2) a potentialincrease for secured liabilities above a threshold amount; and (3) for non-Risk Category Iinstitutions, a potential increase for brokered deposits above a threshold amount. The schedulefor base assessment rates and potential adjustment is set forth in the following table.                   Risk  Risk  Risk  Risk   Category I  Category II  Category III  Category IV Initial Base Assessment Rate  12 –16   22   32   45 Unsecured Debt Adjustment (added) (5) to 0 (5) to 0 (5) to 0 (5) to 0Secured Liability Adjustment (added)  0 to 8   0 to 11   0 to 16   0 to 22.5 Brokered Deposit Adjustment (added)  N/A   0 to 10   0 to 10   0 to 10 Total Base Assessment Rate  7 to 24   17 to 43   27 to 58   43 to 77.5 
 
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The FDIC also imposed a special FDIC insurance assessment of 5 basis points implemented a fivebasis point special assessment of each insured depository institution’s assets minus Tier 1 capitalas of June 30, 2009, butno more than 10 basis points times the institution’s assessment base for the second quarter of2009, which was collected on September 30, 2009. While no subsequent special assessments have beenmade since 2009, additional special assessments may be imposed by the FDIC in the future.In order to increase its liquidity, the FDIC required banks to prepay three years of estimatedinsurance premiums in December 2009. The Company paid the FDIC approximately $1.1 million inDecember 2009 for its estimated premiums for the subsequent three years. The prepaid premiumpayment is being applied to required calculated quarterly insurance assessments.The Dodd-Frank Act permanently increases the maximum deposit insurance amount for banks,savings institutions and credit unions to $250,000 per depositor, and extends unlimited depositinsurance to non-interest bearing transaction accounts through December 31, 2012. The Dodd-FrankAct requires the FDIC to increase the reserve ratio of the Deposit Insurance Fund from 1.15% to1.35% of insured deposits by 2020 and eliminates the requirement that the FDIC pay dividends toinsured depository institutions when the reserve ratio exceeds certain thresholds. Effective oneyear from the date of enactment, Dodd-Frank eliminates the federal statutory prohibition againstthe payment of interest on business checking accounts.The Dodd-Frank Act also broadens the base for FDIC insurance assessments. Assessments will nowbe based on the average consolidated total assets less tangible equity capital of a financialinstitution. Effective April 1, 2011, the new schedule for base assessment rates and potentialadjustments is as set forth in the following table.                                       Large and Highly   Risk  Risk  Risk  Risk  Complex   Category I  Category II  Category III  Category IV  Institutions Initial Base Assessment Rate  5 to 9   14   23   35   5 to 35 Unsecured Debt Adjustment (added) (4.5) to 0 (5) to 0 (5) to 0 (5) to 0 (5) to 0Brokered Deposit Adjustment (added)  N/A   0 to 10   0 to 10   0 to 10   0 to 10 Total Base Assessment Rate  2.5 to 9   9 to 24   18 to 33   30 to 45   2.5 to 45 *Consumer Financial Protection Bureau*. The Dodd-Frank Act creates a new, independent federalagency called the Consumer Financial Protection Bureau (“CFPB”) which is granted broad rulemaking,supervisory and enforcement powers under various federal consumer financial protection laws,including the Equal Credit Opportunity Act, Truth in Lending Act, Real Estate Settlement ProceduresAct, Fair Credit Reporting Act, Fair Debt Collection Act, the Consumer Financial Privacy provisionsof the Gramm-Leach-Bliley Act and certain other statutes. The CFPB will have examination andprimary enforcement authority with respect to depository institutions with $10 billion or more inassets. Smaller institutions will be subject to rules promulgated by the CFPB but will continue tobe examined and supervised by federal banking regulators for consumer compliance purposes. The CFPBwill have authority to prevent unfair, deceptive or abusive practices in connection with theoffering of consumer financial products. The Dodd-Frank Act authorizes the CFPB to establishcertain minimum standards for the origination of residential mortgages including a determination ofthe borrower’s ability to repay. In addition, Dodd-Frank will allow borrowers to raise certaindefenses to foreclosure if they receive any loan other than a “qualified mortgage” as defined bythe CFPB. The Dodd-Frank Act permits states to adopt consumer protection laws and standards thatare more stringent than those adopted at the federal level and, in certain circumstances, permitsstate attorneys general to enforce compliance with both the state and federal laws and regulations.It is difficult to predict at this time what specific impact the Dodd-Frank Act and the yet tobe written implementing rules and regulations will have on community banks. However, it is expectedthat at a minimum they will increase our operating and compliance costs and could increase ourinterest expense.
 
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The FDIC is experiencing significant demands on its financial resources resulting in capitaland liquidity issues at the FDIC. To address these challenges, the FDIC may need to obtainadditional funding from banks. The form of such funding, if needed, is not now known.As a result of competitive pressures for deposits, the Company may not be able to adjustdeposit rates to offset the cost of increased deposit insurance premiums.**ITEM 1A.** **Risk Factors.**An investment in the Company’s common stock involves various risks. The Company has identifiedthe following material risks affecting its business. These risk factors may cause our futureearnings to be lower or our financial condition to be less favorable than the Company expects. Inaddition, other risks of which the Company is not aware, which relate to the banking and financialservices industries in general, or which it does not believe are material, may cause earnings to belower, or hurt the Company’s future financial condition.*The Company may not be able to successfully manage continued growth***.**The Company intends to seek further growth in the level of assets and deposits and mayconsider expanding the branch network in the future. The Company may not be able to manageincreased levels of assets and liabilities, and an expanded branch system, without increasedexpenses and higher levels of nonperforming assets. The Company may be required to make additionalinvestments in equipment and personnel to manage higher asset levels and loan balances and a largerbranch network, which may adversely impact earnings, shareholder returns and efficiency ratio.Increases in operating expenses or nonperforming assets may have an adverse impact on the value ofthe Company’s common stock. There can be no assurance that the Company will establish anyadditional branches, or if established, that they can be operated profitably.*The Company has a lower level of “core deposits” and a higher level of wholesale funding, relativeto peer institutions.*Over the past several years, the Company has achieved significant growth in our loanportfolio. Because the Company’s deposits have not grown at similar rates, the Company has had tosupplement our funding sources to include the use of the national market to attract funds. Duringan environment when interest rates are rising and the related U.S. Treasury interest rate curve isflattening, the use of this funding source may result in an increase in interest costsdisproportionate to loan yields. This results in less net interest income, which could adverselyimpact earnings, the stock price and shareholder returns.*The Company’s concentrations of loans may create a greater risk of loan defaults and losses.*A substantial portion of the Company’s loans are secured by real estate in the Company’smarket areas in Maryland. It also has a significant amount of commercial real estate loans. WhileManagement believes that the commercial real estate concentration risk is mitigated bydiversification among the types and characteristics of real estate collateral properties, soundunderwriting practices, and ongoing portfolio monitoring and market analysis, the repayments ofthese loans usually depends on the successful operation of a business or the sale of the underlyingproperty. As a result, these loans are more likely to be adversely affected by adverse conditionsin the real estate market or the economy in general. The remaining loans in the loan portfolio arecommercial or industrial loans. These loans are collateralized by various business assets the valueof which may decline during adverse market conditions. These loans are also susceptible to adverseeconomic conditions. Adverse conditions in the real estate market and the economy may result inincreasing levels of loan charge-offs and nonperforming assets and the reduction of earnings.Commercial and commercial real estate loans tend to have larger balances than residentialmortgage loans. Because the loan portfolio contains a significant number of commercial andcommercial real estate with relatively large balances, the deterioration of one or a few of theseloans may cause a significant increase in nonperforming assets. An increase in nonperforming loanscould result in: a loss of earnings from these loans, an increase in the provision for loan losses,or an increase in loan charge-offs, which could have an adverse impact on the Company’s results ofoperations and financial condition.
 
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Further, under guidance adopted by the federal banking regulators, banks which haveconcentrations in construction, land development or commercial real estate loans (other than loansfor majority owner occupiedproperties) would be expected to maintain higher levels of risk management and, potentially, higherlevels of capital. It is possible that the Bank may be required to maintain higher levels ofcapital than it would otherwise be expected to maintain as a result of the Bank’s levels ofcommercial real estate loans, which may require the Company to obtain additional capital soonerthan it would otherwise seek it, which may reduce shareholder returns.*The Company’s financial condition and results of operations would be adversely affected if itsallowance for loan losses is not sufficient to absorb actual losses or if it is required toincrease the allowance for loan losses.*Although the Company believes that the allowance for loan losses is maintained at a leveladequate to absorb any inherent losses in the loan portfolio, these estimates of loan losses arenecessarily subjective and their accuracy depends on the outcome of future events. If the Companyneeds to make significant and unanticipated increases in the loss allowance in the future, itsresults of operations and financial condition would be materially adversely affected at that time.While the Company strives to carefully monitor credit quality and to identify loans that maybecome nonperforming, at any time there are loans included in the portfolio that will result inlosses, but that have not been identified as nonperforming, impaired or potential problem loans.The Company cannot be sure that it will be able to identify deteriorating loans before they becomenonperforming assets, or that it will be able to limit losses on those loans that are identified.As a result, future additions to the allowance may be necessary.*The Company’s continued growth depends on our ability to meet minimum regulatory capital levels.Growth and shareholder returns may be adversely affected if sources of capital are not available tohelp the Company meet them.*The Company is required to maintain its regulatory capital levels at or above the requiredminimum levels. If earnings do not meet current estimates, if it incurs unanticipated losses orexpenses, or if it grows faster than expected, the Company may need to obtain additional capitalsooner than expected, through borrowing, additional issuances of debt or equity securities, orotherwise. If it does not have continued access to sufficient capital, it may be required to reduceits level of assets or reduce its rate of growth in order to maintain regulatory compliance. Underthose circumstances net income and the rate of growth of net income may be adversely affected.Additional issuances of equity securities could have a dilutive effect on existing shareholders.The Company cannot be certain that it will be able to acquire additional capital when it isrequired, or that the terms upon which it is available will not be disadvantageous to existingshareholders.*The Company may not be able to successfully compete with others for business.*The Company competes for loans and deposits with numerous regional and national banks, onlinedivisions of out-of-market banks, and other community banking institutions, as well as other kindsof financial institutions and enterprises, such as securities firms, insurance companies, savingsassociations, credit unions, mortgage brokers, and private lenders. As a result of the Dodd-FrankAct, additional competitors who have not previously been able to establish de novo branches inMaryland, may elect to do so. Many competitors have substantially greater resources than theCompany, and operate under less stringent regulatory environments. The differences in resources andregulations may make it harder for the Company to compete profitably, reduce the rates that it canearn on loans and investments, increase the rates it must offer on deposits, and adversely affectthe Company’s overall financial condition and earnings.*Liquidity challenges may increase due to turmoil in the financial markets.*The turmoil in the financial markets over the last several years has resulted in sharpdeclines in real estate values and financial instruments. These declines have resulted in largelosses at many financial institutions detrimentally affecting depositors’ confidence in allfinancial institutions. This lack of confidence has resulted in rapid withdrawals by depositors inseveral institutions causing the institutions to fail and/or require federal assistance.
 
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The Company positions itself in the marketplace as a business bank. It does not (and did not)originate or acquire home loans or securities dependent upon home loans for repayment.Nevertheless, the turmoil in thefinancial markets has caused many depositors to seek safety in government securities, resulting inliquidity challenges for all banks. Should turmoil in the markets continue, the Company may beforced to pay higher interest rates to obtain deposits to meet the needs of its depositors andborrowers, resulting in reduced net interest income. If conditions worsen significantly, it ispossible that banks such as the Bank may be unable to meet the needs of their depositors andborrowers, which could, in the worst case, result in the Company being placed into receivership.*The current economic environment poses significant challenges for the Company and could adverselyaffect its financial condition and results of operations.*The Company is operating in a challenging and uncertain economic environment. Financialinstitutions continue to be affected by sharp declines in the real estate market and constrainedfinancial markets. Dramatic declines in the housing market over the past years, with falling homeprices and high levels of foreclosures and unemployment, have resulted in significant write-downsof asset values by financial institutions. Continued declines in real estate values, home salesvolumes, and financial stress on borrowers as a result of the uncertain economic environment couldhave an adverse effect on the Company’s borrowers or their customers, which could adversely affectthe Company’s financial condition and results of operations. A worsening of these conditions wouldlikely exacerbate the adverse effects on the Company and others in the financial institutionsindustry. For example, further deterioration in local economic conditions in the Company’s marketcould drive losses beyond that which is provided for in its allowance for loan losses. The Companymay also face the following risks in connection with these events: **•** Economic conditions that negatively affect housing prices and the job market haveresulted, and may continue to result, in a deterioration in credit quality of the loanportfolios, and such deterioration in credit quality has had, and could continue tohave, a negative impact on the Company’s business;  **•** The methodologies the Company uses to establish our allowance for loan losses may nolonger be reliable because they rely on complex judgments, including forecasts ofeconomic conditions, which may no longer be capable of accurate estimation;  **•** Continued turmoil in the market, and loss of confidence in the banking system, couldrequire the Company to pay higher interest rates to obtain deposits to meet the needsof its depositors and borrowers, resulting in reduced margin and net interest income.If conditions worsen significantly, it is possible that banks such as the Company maybe unable to meet the needs of their depositors and borrowers, which could, in theworst case, result in the Company being placed into receivership; and  **•** Compliance with increased regulation of the banking industry may increase our costs,limit our ability to pursue business opportunities, and divert management efforts.As these conditions or similar ones continue to exist or worsen, the Company could experiencecontinuing or increased adverse effects on its financial condition.*Higher deposit insurance premiums and assessments could adversely affect our financial condition.*Deposit insurance premiums charged by the FDIC increased substantially in 2009 and 2010 andthe Company may face increased FDIC premiums in the future. A large number of bank failures hassignificantly depleted the Deposit Insurance Fund and reduced the ratio of reserves to insureddeposits. During 2009, the FDIC adopted a revised risk-based deposit insurance assessment schedule,which raised deposit insurance premiums and it implemented a five basis point special assessmentwhich was collected on September 30, 2009. Additional special assessments may be imposed by theFDIC in the future. The Dodd-Frank Act requires the FDIC to increase the reserve ratio of theDeposit Insurance Fund from 1.15% to 1.35% of insured deposits by 2020 and eliminates therequirement that the FDIC pay dividends to insured depository institutions when the reserve ratioexceeds certain thresholds. These actions could significantly increase the Company’s noninterestexpense for the foreseeable future. There is no assurance that the Company will be able to reflectall or any portion of these premium costs in the rates it pays depositors.
 
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*There can be no assurance that recent legislation and regulatory actions taken by the federalgovernment will help stabilize the financial system in the United States.*Several pieces of federal legislation have been enacted, and the United States Department ofthe Treasury, the Federal Reserve, the FDIC, and other federal agencies have enacted numerousprograms, policies and regulations to address the current liquidity and credit crises. Thesemeasures include the Emergency Economic Stimulus Act of 2008 (“EESA”), the American Reinvestmentand Recovery Act of 2009 (“ARRA”), and the numerous programs, including the TARP Capital PurchaseProgram, in which the Company did not participate, and expanded deposit insurance coverage, enactedthereunder.On July 21, 2010, the President signed into law The Dodd-Frank Wall Street Reform and ConsumerProtection Act (the “Dodd-Frank Act”). The Dodd-Frank Act contains various provisions designed toenhance the regulation of depository institutions and prevent the recurrence of a financial crisissuch as occurred in 2007-2009. Also included is the creation of a new federal agency to administerand enforce consumer and fair lending laws, a function that is now performed by the depositoryinstitution regulators. The full impact of the Dodd-Frank Act on the Company’s business andoperations will not be known for years until regulations implementing the statute are written andadopted. The Dodd-Frank Act may have a material impact on the Company’s operations, particularlythrough increased compliance costs.The Company cannot predict the actual effects of EESA, ARRA, the regulatory reform measuresand various governmental, regulatory, monetary and fiscal initiatives which have been and may beenacted on the financial markets, on the Company and the Bank. The terms and costs of theseactivities, or the failure of these actions to help stabilize the financial markets, asset prices,market liquidity and a continuation or worsening of current financial market and economicconditions could materially and adversely affect the Company’s business, financial condition,results of operations, and the trading prices of its securities.The Company expects to face increased regulation of our industry, including as a result ofEESA, the ARRA and the Dodd-Frank Act and related initiatives by the federal government. Compliancewith such regulations may increase costs and limit the Company’s ability to pursue businessopportunities.*Trading in the common stock has been light. As a result, shareholders may not be able to quicklyand easily sell their common stock.*Although the Company’s common stock is listed for trading on the NASDAQ Capital Market and anumber of brokers offer to make a market in the common stock on a regular basis, trading volume todate has been limited. A more liquid market for the Company’s common stock may not develop (or ifone develops, it may not be sustainable). As a result, shareholders may find it difficult to sell asignificant number of shares at the prevailing market price.*Directors and officers of CommerceFirst Bancorp own approximately 22% of the outstanding commonstock. As a result of their combined ownership, they could make it more difficult to obtainapproval for some matters submitted to shareholder vote, including acquisition of the Company. Theresults of the vote may be contrary to the desires or interests of the public shareholders.*Directors and executive officers own approximately 22% of the outstanding shares of commonstock. By voting against a proposal submitted to shareholders, the directors and officers, as agroup, may be able to make approval more difficult for proposals requiring the vote ofshareholders, such as some mergers, share exchanges, asset sales, and amendments to the Articles ofIncorporation.
 
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*Changes in interest rates and other factors beyond the Company’s control could have an adverseimpact on its financial performance and results.*The Company’s operating income and net income depend to a great extent on its net interestmargin, i.e., the difference between the interest yields it receive on loans, securities and otherinterest bearing assets and the interest rates it pay on interest bearing deposits and otherliabilities. Net interest margin is affected by changes in market interest rates, because differenttypes of assets and liabilities may react differently, and at different times, to market interestrate changes. When interest bearing liabilities mature or reprice more quickly than interestearningassets in a period, an increase in market rates of interest could reduce net interest income.Similarly, when interest earning assets mature or reprice more quickly than interest bearingliabilities, falling interest rates could reduce net interest income These rates are highlysensitive to many factors beyond our control, including competition, general economic conditionsand monetary and fiscal policies of various governmental and regulatory authorities, including theFederal Reserve Board.The Company attempts to manage our risk from changes in market interest rates by adjusting therates, maturity, re-pricing, and balances of the different types of interest earning assets andinterest bearing liabilities, but interest rate risk management techniques are not exact. As aresult, a rapid increase or decrease in interest rates could have an adverse effect on theCompany’s net interest margin and results of operations. The results of the interest ratesensitivity simulation model depend upon a number of assumptions which may not prove to beaccurate. There can be no assurance that the Company will be able to successfully manage ourinterest rate risk. Increases in market rates and adverse changes in the local residential realestate market, the general economy or consumer confidence would likely have a significant adverseimpact on noninterest income, as a result of reduced demand for SBA guaranteed loans, the majorityof which the Company sells.Changes in laws, including that which permit banks to pay interest on checking and demanddeposit accounts established by businesses in July 2011, could have a significant negative effecton net interest income, net income, net interest margin, return on assets and return on equity.Usually, more than 10% of the Company’s deposits were noninterest bearing demand deposits.*Substantial regulatory limitations on changes of control and anti-takeover provisions of Marylandlaw may make it more difficult for shareholders to receive a change in control premium.*With certain limited exceptions, federal regulations prohibit a person or company or a groupof persons deemed to be “acting in concert” from, directly or indirectly, acquiring more than 10%(5% if the acquiror is a bank holding company) of any class of the Company’s voting stock orobtaining the ability to control in any manner the election of a majority of its directors orotherwise direct the management or policies of the Company without prior notice or application toand the approval of the Federal Reserve. There are comparable prior approval requirements forchanges in control under Maryland law. Also, Maryland corporate law contains several provisionsthat may make it more difficult for a third party to acquire control of the Company without theapproval of its Board of Directors, and may make it more difficult or expensive for a third partyto acquire a majority of its outstanding common stock.*Government regulation will significantly affect the Company’s business, and may result in highercosts and lower shareholder returns.*The banking industry is heavily regulated. Banking regulations are primarily intended toprotect the federal deposit insurance funds and depositors, not shareholders. The Company and Bankare regulated and supervised by the Maryland Department of Financial Regulation, the FederalReserve Board and the FDIC. The burden imposed by federal and state regulations puts banks at acompetitive disadvantage compared to less regulated competitors such as finance companies, mortgagebanking companies and leasing companies. Changes in the laws, regulations and regulatory practicesaffecting the banking industry may increase the costs of doing business or otherwise adverselyaffect the Company and create competitive advantages for others. Regulations affecting banks andfinancial services companies undergo continuous change, and the Company cannot predict the ultimateeffect of these changes, which could have a material adverse effect on its profitability orfinancial condition. Federal economic and monetary policy may also affect the Company’s ability toattract deposits and other funding sources, make loans and investments, and achieve satisfactoryinterest spreads.
 
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*The loss of the services of any key employees could adversely affect investor returns.*Our business is service oriented, and our success depends to a large extent upon the servicesof Richard J. Morgan, our President and the Bank’s Market Leaders. The loss of the services of anyof these officers could adversely affect the Company’s business.**ITEM 1B.** **Unresolved Staff Comments**None.**ITEM 2.** **Properties.**The main branch office and the executive offices of the Bank and the Company are located at1804 West Street, Annapolis, Maryland, in a brick and masonry structure. The Company leases 8,100square feet in the building under a lease, which commenced in April 2000. Rent expense was $224,219and $222,524 for the years ended December 31, 2010 and 2009, respectively. The Company hasexercised the second of three five-year renewal options.The second office of the Company is located at 4451 Parliament Place, Lanham, Maryland in amasonry structure. The Company leases 2,100 square feet in the building under a ten-year leasewhich commenced in June 2004. Rent expense was $35,848 and $33,519 for the years ended December 31,2010 and 2009, respectively.The third office of the Company is located at 910 Cromwell Park Drive, Glen Burnie, Marylandin a masonry structure. The Company 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 $73,602and $73,158 for the years ended December 31, 2010 and 2009, respectively.The fourth office of the Company is located at 6230 Old Dobbin Lane, Columbia, Maryland in amasonry structure. The Company leases 2,400 square feet in the building under a ten-year lease(with one five-year renewal option) which commenced in August 2006. Rent expense was $85,230 and$81,251 for the years ended December 31, 2010 and 2009, respectively.The fifth office of the Company is located at 485 Ritchie Highway, Severna Park, Maryland in amasonry structure. The Company 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$57,169 in 2010 and $56,441 during 2009.Management believes adequate insurance coverage is in force on all of its properties.**ITEM 3.** **Legal Proceedings.**In the normal course of its business, the Company is involved in litigation arising frombanking, financial, and other activities it conducts. Management, after consultation with legalcounsel, does not anticipate that the ultimate liability, if any, arising out of these matters willhave a material effect on the Company’s financial condition, operating results or liquidity.**ITEM 4.** **[Removed and Reserved]**
 
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**PART II****ITEM 5.** **Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases ofEquity Securities.***(a) Market for Common Stock and Dividends.*The information regarding the market for theCompany’s Common Stock, the number of holders of the common stock and dividend history requiredunder Item 5(a) is hereby incorporated herein by reference from the material under the caption“Market for Common Stock and Dividends” in the Company’s Annual Report for the fiscal year endedDecember 31, 2010. See Item 12 of this annual report for Equity Compensation Plan Information.*Recent Sales of Unregistered Shares.*None.*(b) Use of Proceeds:*Not applicable(c) *Issuer Repurchases of Securities during the Fourth Quarter of 2010.*None.**ITEM 6.** **Selected Financial Data.**The information required under Item 6 is hereby incorporated herein by reference to thematerial appearing under the caption “Selected Consolidated Financial Data” in the Company’s AnnualReport to Shareholders for the fiscal year ended December 31, 2010.**ITEM 7.** **Management’sDiscussion and Analysis of Financial Condition and Results of Operations.**The information required by this item is incorporated by reference to the material appearingunder the caption “Management Discussion and Analysis” in the Company’s Annual Report toShareholders for the year ended December 31, 2010.**ITEM 7A.** **Quantitative and Qualitative Disclosures About Market Risk.**As the Company is a smaller reporting company, this item is not applicable.**ITEM 8.** **Financial Statements and Supplementary Data**The information required by this item is incorporated by reference to the ConsolidatedFinancial Statements and Notes thereto contained in the Company’s Annual Report to Shareholders forthe year ended December 31, 2010.**ITEM 9.** **Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.**None.**ITEM 9A** **Controls and Procedures***Disclosure Controls and Procedures.*The Company’s management, under the supervision and withthe participation of the Chief Executive Officer and Chief Financial Officer, evaluated, as of thelast day of the period covered by this report, the effectiveness of the design and operation of theCompany’s disclosure controls and procedures, as defined in Rule 15d-15 under the SecuritiesExchange Act of 1934. Based on that evaluation, the Chief Executive Officer and Chief FinancialOfficer concluded that the Company’s disclosure controls and procedures were effective.
 
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*Management’s Report on Internal Control Over Financial Reporting*The management of CommerceFirst Bancorp, Inc. (the “Company”) is responsible for thepreparation, integrity and fair presentation of the Consolidated Financial Statements incorporatedby reference in this Annual Report. The financial statements have been prepared in conformity withaccounting principles generally accepted in the United States of America and reflect management’sjudgments and estimates concerning the effects of events and transactions that are accounted for ordisclosed.Management is also responsible for establishing and maintaining an effective internal controlover financial reporting. The Company’s internal control over financial reporting includes thosepolicies and procedures that pertain to the Company’s ability to record, process, summarize andreport reliable financial data. The internal control system contains monitoring mechanisms, andappropriate actions are taken to correct identified deficiencies. Management believes that internalcontrols over financial reporting, which are subject to scrutiny by management and the Company’sinternal auditors, support the integrity and reliability of the financial statements. Managementrecognizes that there are inherent limitations in the effectiveness of any internal control system,including the possibility of human error and the circumvention or overriding of internal controls.Accordingly, even effective internal control over financial reporting can provide only reasonableassurance with respect to financial statement preparation. In addition, because of changes inconditions and circumstances, the effectiveness of internal control over financial reporting mayvary over time.Management assessed the Company’s system of internal control over financial reporting as ofDecember 31, 2010. This assessment was conducted based on the Committee of Sponsoring Organizations(“COSO”) of the Treadway Commission “Internal Control — Integrated Framework.” Based on thisassessment, management believes that the Company maintained effective internal control overfinancial reporting as of December 31, 2010. Management’s assessment concluded that there were nomaterial weaknesses within the Company’s internal control structure. The 2010 end of yearconsolidated financial statements have been audited by the independent accounting firm of TGM GroupLLC (“TGM”). Personnel from TGM were given unrestricted access to all financial records and relateddata, including minutes of all meetings of the Board of Directors and Committees thereof.Management believes that all representations made to the independent auditors were valid andappropriate. The resulting report from TGM accompanies the financial statements.The Board of Directors of the Company, acting through its Audit Committee (the “Committee”),is responsible for the oversight of the Company’s accounting policies, financial reporting andinternal control. The Audit Committee of the Board of Directors is comprised entirely of outsidedirectors who are independent of management. The Audit Committee is responsible for the appointmentand compensation of the independent auditors and approves decisions regarding the appointment orremoval of members of the internal audit function. The Committee meets periodically withmanagement, the independent auditors, and the internal auditors to insure that they are carryingout their responsibilities. The Committee is also responsible for performing an oversight role byreviewing and monitoring the financial, accounting, and auditing procedures of the Company inaddition to reviewing the Company’s financial reports. The independent auditors and the internalauditors have full and unlimited access to the Audit Committee, with or without the presence of themanagement of the Company, to discuss the adequacy of internal control over financial reporting,and any other matters which they believe should be brought to the attention of the Audit Committee.There were no changes in the Company’s internal control over financial reporting during thequarter ended December 31, 2010 that has materially affected, or is reasonably likely to materiallyaffect, the Company’s internal control over financial reporting.The annual report does not include an attestation report of the Company’s registered publicaccounting firm regarding internal control over financial reporting. Management’s report was notsubject to attestation by the Company’s registered public accounting firm pursuant to rules of theSecurities and Exchange Commission that permit the company to provide only management’s report inthis annual report.
 
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**ITEM 9B.** **Other Information.**None.**Part III****ITEM 10.** **Directors, Executive Officers and Corporate Governance.**The information required under Item 10 is hereby incorporated herein by reference from thematerial under the captions “Election of Directors” and “Compliance with Section 16(a) of theSecurities Exchange Act of 1934” in the Company’s Proxy Statement for the Annual Meeting ofStockholders to be held on May 4, 2011.*Code of Ethics.*The Company has adopted a Code of Ethics that applies to all Directors,officers and employees of the Company and the Bank. The Company will provide a copy of the Code ofEthics without charge upon written request directed to Candace M. Springmann, Corporate Secretary,CommerceFirst Bancorp, Inc, 1804 West Street, Annapolis, Maryland 21401.There have been no material changes in the procedures by which shareholders may recommendnominees to the Company’s Board of Directors since the proxy statement for the 2010 annual meetingof shareholders.**ITEM 11.** **Executive Compensation**The information required by Item 11 is hereby incorporated herein by reference to the materialunder the captions “Election of Directors — Executive Compensation,” and “Directors’ Compensation”in the Company’s Proxy Statement for the Annual Meeting of Stockholders to be held on May 4, 2011.**ITEM 12.** **Security Ownership of Certain Beneficial Owners and Management and Related StockholderMatters.***Securities Authorized for Issuance under Equity Compensation Plans*None. All of the warrants and options previously issued expired in August 2010. No warrants oroptions were exercised during 2010. At December 31, 2010 there are no active equity compensationplans maintained by the Company under which options, warrants or other equity based compensationmay be issued.The other information required by Item 12 is hereby incorporated herein by reference to thematerial under the caption “Voting Securities and Principal Shareholders” in the Company’s ProxyStatement for the Annual Meeting of Stockholders to be held on May 4, 2011.**ITEM 13.** **Certain Relationships and Related Transactions, and Director Independence.**The information required by Item 13 is hereby incorporated herein by reference to the materialunder the caption “Election of Directors” in the Company’s Proxy Statement for the Annual Meetingof Stockholders to be held on May 4, 2011.**ITEM 14** **Principal Accountant Fees and Services**The information required by Item 14 is hereby incorporated herein by reference to the materialunder the caption “Ratification of Appointment of Independent Registered Public Accounting Firm —Fees paid to Independent Accounting Firm” in the Company’s Proxy Statement for the Annual Meetingof Stockholders to be held on May 4, 2011.
 
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The following financial statements are incorporated in this report under Item 8:Reports of Independent Registered Public Accounting FirmConsolidated Statements of Financial Condition at December 31, 2010 and 2009Consolidated Statements of Operations for the years ended December 31, 2010 and 2009Consolidated Statements of Comprehensive Income for the years ended December 31, 2010 and 2009Consolidated Statements of Shareholders’ Equity for the years ended December 31, 2010 and 2009Consolidated Statements of Cash Flows for the years ended December 31, 2010 and 2009Notes to Consolidated Financial Statements**ITEM 15.** **Exhibits, Financial Statement Schedules**     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) First Amendment to Employment Agreement between Lamont Thomas and the Company (4) 10(d) Employment Agreement between Michael T. Storm and CommerceFirst Bank (5) 10(e) Extension of Employment Agreement between Richard J. Morgan and the Company (6) 11  Statement regarding Computation of Per Share Income — Refer to Note 1 to the ConsolidatedFinancial 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 TGM Group 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    (1) Incorporated by reference to exhibit of the same number filed with the Company’sRegistration Statement on Form SB-2, as amended, (File No. 333-91817) (2) Incorporated by reference to exhibit 10(b) to the Company’s to Registration Statement on FormSB-2, as amended) (File No. 333-91817) (3) Incorporated by reference to exhibits 10(c) to the Company’s to Registration Statement onForm SB-2, as amended) (File No. 333-91817) (4) Incorporated by reference to Exhibit 10(d) to the Company’s Quarterly Report on Form 10-QSBfor the period ended March 31, 2007. (5) Incorporated by reference to Exhibit 10(e) to the Company’s Quarterly Report on Form 10-QSBfor the period ended September 30, 2007. (6) Incorporated by reference to Exhibit 99 to the Company’s Current Report on Form 8-K filed onJanuary 30, 2009.
 
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**SIGNATURES**Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934,the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.      COMMERCEFIRST BANCORP, INC