U.S. SECURITIES AND EXCHANGE
                                   COMMISSION
                              Washington, DC 20549

                                   FORM 10-KSB

[X]   Annual report under Section 13 or 15(d) of the Securities Exchange
      Act of 1934

For the fiscal year ended December 31, 2002

[ ]   Transition report under Section 13 or 15(d) of the Securities Exchange
      Act of 1934

For the transition period from  _______________ to _______________.

Commission file number: 0-25923

                           CommerceFirst Bancorp, Inc.
                 (Name of Small Business Issuer in its Charter)


           Maryland                                      52-2180744
(State or other jurisdiction                (I.R.S. Employer Identification No.)
of incorporation or organization)



                      1804 West Street, Annapolis MD 21401
           (Address of Principal Executive Offices)     (Zip Code)

Issuer's Telephone Number:  410-280-6695

Securities registered under Section 12(b) of the Act: None

Securities registered under Section 12(g) of the Act:  None

Check whether the Issuer; (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports; and (2) has been
subject to such filing requirements for the past 90 days.  Yes [X]  No [ ]

Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [X]

The issuer's revenues for the fiscal year ended December 31, 2002 were
approximately $2,244,187.

The aggregate market value of the outstanding Common Stock held by nonaffiliates
as of March 3, 2003 was approximately $5,167,000.

As of March 14, 2003, the number of outstanding shares of the Common Stock,
$0.01 par value, of CommerceFirst Bancorp, Inc. was 822,250.

Transitional Small Business Disclosure Format  Yes [ ]  No [X].


                       DOCUMENTS INCORPORATED BY REFERENCE

                                      None.


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                                     PART I

ITEM 1.  DESCRIPTION OF BUSINESS.

         CommerceFirst Bancorp, Inc. (the "Company") was incorporated under the
laws of the State of Maryland on July 9, 1999, to serve as the bank holding
company for a newly formed Maryland chartered commercial bank. The Company was
formed by a group of local businessmen and professionals 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 Federal Reserve System, commenced banking operations on
June 29, 2000. The Bank operates from one office in Annapolis, Maryland.

         The Bank operates as a community bank alternative to the superregional
financial institutions that dominate its primary market area. The cornerstone of
the Bank's philosophy is to provide superior, individualized service to its
customers. The Bank focuses on relationship banking, providing each customer
with a number of services, familiarizing itself with, and addressing itself to,
customer needs in a proactive, personalized fashion.

         In August 2000, the Company completed its initial offering of shares of
its common stock, $.01 par value ("Common Stock"), with the sale of 822,250
shares of Common Stock at a price of $10.00 per share, for total proceeds of
$8,222,500. After expenses of the offering, the Company received net proceeds of
$8,107,234. The Company initially capitalized the Bank with $6,500,000 of the
proceeds of the offering.

         Description of Services. The Bank offers full commercial banking
services to its business and professional clients. The Bank emphasizes providing
commercial banking services to sole proprietorships, small and medium-sized
businesses, partnerships, corporations, and non-profit organizations and
associations in and near the Bank's primary service area. Limited retail banking
services are offered to accommodate the individual needs of commercial customers
as well as members of the community the Bank serves.

         The Bank is developing a loan portfolio consisting primarily of
business loans with variable rates and/or short maturities where the cash flow
of the borrower is the principal source of debt service with a secondary
emphasis on collateral. Real estate loans are made generally for commercial
purposes and are structured with fixed rates that adjust in three to five years,
with maturities of five to ten years, or with variable rates tied to various
external indices and adjusting as the indices change.

         In general, the Bank offers the following credit services:

         1)       Commercial loans for business purposes including working
                  capital, equipment purchases, real estate, lines of credit,
                  and government contract financing. Asset based 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 direct lending activities in which the Bank engages each carries
the risk that the borrowers will be unable to perform on their obligations. As
such, interest rate policies of the Federal Reserve Board and general economic
conditions, nationally and in the Bank's primary market area, have a significant
impact on the Bank's and the Company's results of operations. To the extent that
economic conditions deteriorate, business and individual borrowers may be less
able to meet their obligations to the Bank in full in a timely manner, resulting
in decreased earnings or losses to the Bank. To the extent the Bank makes fixed
rate loans, general increases in interest rates will tend to reduce the Bank's
spread as the interest rates the Bank must pay for deposits increase while
interest income is flat. Economic conditions and interest rates may also
adversely affect the value of property pledged as security for loans.


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         Deposit services include business and personal checking accounts, NOW
accounts, savings accounts, and a tiered Money Market Account basing the payment
of interest on balances on deposit. Certificates of Deposits are offered using a
tiered rate structure and various maturities. The acceptance of brokered
deposits is not a part of the current strategy.

         Other services for business accounts include cash management services
such as sweep accounts, repurchase agreements and credit card depository. An
after hours depository is also available.

         Bills have been introduced in each of the last three Congresses that
would permit banks to pay interest on checking and demand deposit accounts
established by businesses, a practice which is currently prohibited by
regulation. If the legislation effectively permitting the payment of interest on
business demand deposits is enacted, of which there can be no assurance, it is
likely that we may be required to pay interest on some portion of our
non-interest bearing deposits in order to compete against other banks. As a
significant portion of our deposits are non-interest bearing demand deposits
established by businesses, payment of interest on these deposits could have a
significant negative impact on our net income, net interest income, interest
margin, return on assets and equity, and other indices of financial performance.
We expect that other banks would be faced with similar negative impacts. We also
expect that the primary focus of competition would continue to be based on other
factors, such as quality of service.

         Source of Business. Management believes that the market segments which
the Bank targets, small to medium sized businesses and the professional base of
the Bank's market area, demand the convenience and personal service that a
smaller, independent financial institution such as the Bank can offer. It is
these themes of convenience and personal service that form the basis for the
Bank's business development strategies. The Bank provides services from its
strategically located main office in Annapolis, Maryland. It believes this
location meets the needs of the Bank's existing and potential customers, and
provides prospects for additional growth and expansion. Subject to obtaining
necessary regulatory approvals, capital adequacy, the identification of
appropriate sites, then current business demand and other factors, the Company
plans for the Bank to consider establishment of additional branch offices at
some point in the future. There can be no assurance that the Bank will establish
any additional branches or that they will be profitable.

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

         The risk of nonpayment (or deferred payment) of loans is inherent in
commercial banking. The Bank's marketing focus on small to medium-sized
businesses may result in the assumption by the Bank of certain lending risks
that are different from those attendant to loans to larger companies. Management
of the Bank carefully evaluates all loan applications and attempts to minimize
its credit risk exposure by use of thorough loan application, approval and
monitoring procedures; however, there can be no assurance that such procedures
can significantly reduce such lending risks.

EMPLOYEES

         At December 31, 2002 the Bank employed 13 persons on a full time basis,
two of whom as senior officers. The Chairman of the Board, an attorney in
private practice, devotes considerable time each month to the advancement of the
Bank, principally in business development activities. The Company (as
distinguished from the Bank) does not have any employees or officers who are not
employees or officers of the Bank. None of the Bank's employees are represented
by any collective bargaining group, and the Bank believes that its employee
relations are good. The Bank 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 Bank's main office and the headquarters
of the Company and the Bank are located at 1804 West Street, Annapolis, Maryland
21401.


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<PAGE>

         The primary service area of the Bank is Anne Arundel County, Maryland,
with secondary effort directed toward the Baltimore/Washington vicinity. The
entire area attracts a substantial business community as well as fostering a
variety of support industries such as attorneys, lobbyists, government
contractors, real estate developers and investors, non-profit organizations,
tourism and consultants.

         Anne Arundel County, with a total population of about 485,000, has over
12,000 business establishments providing about 255,000 jobs, and an unemployment
rate below the national average. Census data from 2000 reflect average and
median household income in Anne Arundel County of approximately $72.2 thousand
and $61.6 thousand, respectively. Vibrant commercial development, with the
attendant strong job growth, characterizes the Bank's primary marketing area.

         Competition. Deregulation of financial institutions and holding company
acquisitions of banks across state lines has resulted in widespread, fundamental
changes in the financial services industry. This transformation, although
occurring nationwide, is particularly intense in the greater Baltimore/
Washington, D.C. metropolitan area because of the changes in the area's economic
base in recent years and changing state laws authorizing interstate mergers and
acquisitions of banks, and the interstate establishment or acquisition of
branches.

         In Anne Arundel County, Maryland, competition is exceptionally keen
from large banking institutions headquartered outside of Maryland. In addition,
the Bank competes with other community banks, savings and loan associations,
credit unions, mortgage companies, finance companies and others providing
financial services. Among the advantages that many of these institutions have
over the Bank are their abilities to finance extensive advertising campaigns,
maintain extensive branch networks and technology investments, and to directly
offer certain services, such as international banking and trust services, which
are not offered directly by the Bank. Further, the greater capitalization of the
larger institutions allows for substantially higher lending limits than the
Bank. Certain of these competitors have other advantages, such as tax exemption
in the case of credit unions, and lesser regulation in the case of mortgage
companies and finance companies.

REGULATION

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

         The Company. The Company is a bank holding company registered under the
Bank Holding Company Act 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 annual report and such
other additional information as the Federal Reserve Board may require pursuant
to the Act. The Federal Reserve Board may also make examinations of the Company
and each of its subsidiaries.

         The Act requires approval of the Federal Reserve Board for, among other
things, the acquisition by a proposed bank holding company of control of more
than five percent (5%) of the voting shares, or substantially all the assets, of
any bank or the merger or consolidation by a bank holding company with another
bank holding company. The Act also generally permits the acquisition by a bank
holding company of control or substantially all the assets of any bank located
in a state other than the home state of the bank holding company, except where
the bank has not been in existence for the minimum period of time required by
state law, but if the bank is at least 5 years old, the Federal Reserve Board
may approve the acquisition.

         With certain limited exceptions, a bank holding company is prohibited
from acquiring control of any voting shares of any company which is not a bank
or bank holding company and from engaging directly or indirectly in any activity
other than banking or managing or controlling banks or furnishing services to or
performing service for its authorized subsidiaries. A bank holding company may,
however, engage in or acquire an interest in, a company that engages in
activities which the Federal Reserve Board has determined by order or regulation
to be so closely related to banking or managing or controlling banks as to be
properly incident thereto. In making such a determination, the Federal Reserve
Board is required to consider whether the performance of such activities can
reasonably be expected to


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<PAGE>

produce benefits to the public, such as convenience, increased competition or
gains in efficiency, which outweigh possible adverse effects, such as undue
concentration of resources, decreased or unfair competition, conflicts of
interest or unsound banking practices. The Federal Reserve Board is also
empowered to differentiate between activities commenced de novo and activities
commenced by the acquisition, in whole or in part, of a going concern. Some of
the activities that the Federal Reserve Board has determined by regulation to be
closely related to banking include making or servicing loans, performing certain
data processing services, acting as a fiduciary or investment or financial
advisor, and making investments in corporations or projects designed primarily
to promote community welfare.

         Subsidiary banks of a bank holding company are subject to certain
restrictions imposed by the Federal Reserve Act on any extensions of credit to
the bank holding company or any of its subsidiaries, or investments in the stock
or other securities thereof, and on the taking of such stock or securities as
collateral for loans to any borrower. Further, a holding company and any
subsidiary bank are prohibited from engaging in certain tie-in arrangements in
connection with the extension of credit. A subsidiary bank may not extend
credit, lease or sell property, or furnish any 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
bank other than a loan, discount, deposit or trust service; (ii) the customer
obtain or provide some additional credit, property or service from or to the
Company or any other subsidiary of the Company; 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.

         Effective on March 11, 2000, the Gramm Leach-Bliley Act of 1999 (the
"GLB Act") allows a bank holding company or other company to certify status as a
financial holding company, which allows such company to engage in activities
that are financial in nature, that are incidental to such activities, or are
complementary to such activities. The GLB Act enumerates certain activities that
are deemed financial in nature, such as underwriting insurance or acting as an
insurance principal, agent or broker, underwriting, dealing in or making markets
in securities, and engaging in merchant banking under certain restrictions. It
also authorizes the Federal Reserve Board to determine by regulation 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 with resources substantially in excess of the Company's entering into
competition with the Company and the Bank.

         The Bank. The Bank, as a Maryland chartered commercial bank which is a
member of the Federal Reserve System (a "state member bank") and whose accounts
will be insured by the Bank Insurance Fund of the Federal Deposit Insurance
Corporation (the "FDIC") up to the maximum legal limits of the FDIC, is subject
to regulation, supervision and regular examination by the Maryland Department of
Financial Institutions and the Federal Reserve Board. The regulations of these
various agencies govern most aspects of the Bank's business, including required
reserves against deposits, loans, investments, mergers and acquisitions,
borrowing, dividends and location and number of branch offices. The laws and
regulations governing the Bank generally have been promulgated to protect
depositors and the deposit insurance funds, and not for the purpose of
protecting stockholders.

         Competition among commercial banks, savings and loan associations, and
credit unions has increased following enactment of legislation that greatly
expanded the ability of banks and bank holding companies to engage in interstate
banking or acquisition activities. As a result of federal and state legislation,
banks in the Washington D.C./Maryland/Virginia area can, subject to limited
restrictions, acquire or merge with a bank in another of the jurisdictions, and
can branch de novo in any of the jurisdictions. Additionally, legislation has
been proposed which may result in non-banking companies being authorized to own
banks, which could result in companies with resources substantially in excess of
the Company's entering into competition with the Company and the Bank.

         Banking is a business that depends on interest rate differentials. In
general, the differences between the interest paid by a bank on its deposits and
its other borrowings and the interest received by a bank on loans extended to
its customers and securities held in its investment portfolio constitute the
major portion of the bank's earnings. Thus, the earnings and growth of the Bank
will be subject to the influence of economic conditions generally, both domestic
and 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 means including open market dealings in United
States government securities. The nature and timing of changes in such policies
and their impact on the Bank cannot be predicted.


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         Branching and Interstate Banking. The federal banking agencies are
authorized to approve interstate bank merger transactions without regard to
whether such transaction is prohibited by the law of any state, unless the home
state of one of the banks has opted out of the interstate bank merger 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 prior to June 1, 1997 which applies equally to all
out-of-state banks and expressly prohibits merger transactions involving
out-of-state banks. Interstate acquisitions of branches are permitted only if
the law of the state in which the branch is located permits such acquisitions.
Such interstate bank mergers and branch acquisitions are also subject to the
nationwide and statewide insured deposit concentration limitations described in
the Riegle-Neal Act.

         The Riegle-Neal Act authorizes the federal banking agencies to approve
interstate branching de novo by national and state banks in states that
specifically allow for such branching. The District of Columbia, Maryland and
Virginia have all enacted laws that permit interstate acquisitions of banks and
bank branches and permit out-of-state banks to establish de novo branches.

         The GLB Act made substantial changes in the historic restrictions on
non-bank activities of bank holding companies, and allows affiliations between
types of companies that were previously prohibited. The GLB Act also allows
banks to engage in a wider array of non-banking activities through "financial
subsidiaries."

         Capital Adequacy Guidelines. The Federal Reserve Board and the FDIC
have adopted risk based capital adequacy guidelines pursuant to which they
assess the adequacy of capital in examining and supervising 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 in various classes of assets and off-balance sheet items.

         State member banks are expected to meet a minimum ratio of total
qualifying capital (the sum of core capital (Tier 1) and supplementary capital
(Tier 2)) to risk weighted assets of 8%. At least half of this amount (4%)
should be in the form of core capital. These requirements apply to the Bank and
will apply to the Company (a bank holding company) once its total assets equal
$150,000,000 or more, it engages in certain highly leveraged activities or it
has publicly held debt securities.

         Tier 1 Capital generally consists of the sum of common stockholders'
equity and perpetual preferred stock (subject in the case of the latter to
limitations on the kind and amount of such stock which may be included as Tier 1
Capital), less goodwill, without adjustment for changes in the market value of
securities classified as "available for sale" in accordance with FAS 115. Tier 2
Capital consists of the following: hybrid capital instruments; perpetual
preferred stock which is not otherwise eligible to be included as Tier 1
Capital; term subordinated debt and intermediate-term preferred stock; and,
subject to limitations, general allowances for loan losses. Assets are adjusted
under the risk-based guidelines to take into account different risk
characteristics, with the categories ranging from 0% (requiring no risk-based
capital) for assets such 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 business loans and
consumer loans. Residential first mortgage loans on one to four family
residential real estate and certain seasoned multi-family residential real
estate loans, which are not 90 days or more past-due or non-performing and which
have been made in accordance with prudent underwriting standards are assigned a
50% level in the risk-weighing system, as are certain privately-issued
mortgage-backed securities representing indirect ownership of such loans.
Off-balance sheet items also are adjusted to take into account certain risk
characteristics.

         In addition to the risk-based capital requirements, the Federal Reserve
Board has established a minimum 3.0% Leverage Capital Ratio (Tier 1 Capital to
total adjusted assets) requirement for the most highly-rated banks, with an
additional cushion of at least 100 to 200 basis points for all other banks,
which effectively increases the minimum Leverage Capital Ratio for such other
banks to 4.0% - 5.0% or more. The highest-rated banks are those that are not
anticipating or experiencing significant 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 considered a strong
banking organization. A bank having less than the minimum Leverage Capital Ratio
requirement 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 its minimum Leverage Capital Ratio requirement.
A bank which fails to file such


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plan is deemed to be operating 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 deemed to be operating
in an unsafe or unsound condition pursuant to Section 8(a) of the Federal
Deposit Insurance Act (the "FDIA") and is subject to potential termination of
deposit insurance. However, such an institution will not be subject to an
enforcement proceeding solely on account of its capital ratios, if it has
entered into and is in compliance with a written agreement to increase its
Leverage Capital Ratio and to take such other action as may be necessary for the
institution to be operated in a safe and sound manner. The capital 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 its capital to the minimum capital requirement within a specified time
period. Such directive is enforceable in the same manner as a final
cease-and-desist order.

         Prompt Corrective Action. Under Section 38 of the FDIA, each federal
banking agency is required to implement a system of prompt corrective action for
institutions that it regulates. The federal banking agencies have promulgated
substantially similar regulations to implement the system of prompt corrective
action established by Section 38 of the FDIA. Under the regulations, a bank
shall be deemed to be: (i) "well capitalized" if it has a Total Risk Based
Capital Ratio of 10.0% or more, a Tier 1 Risk Based Capital Ratio of 6.0% or
more, a Leverage Capital Ratio of 5.0% or more and is not subject to any 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 Risk Based Capital Ratio of 4.0%
or more and a Tier 1 Leverage Capital Ratio of 4.0% or more (3.0% under certain
circumstances) and does not meet the definition of "well capitalized;" (iii)
"undercapitalized" if it has a Total Risk Based Capital Ratio that is less than
8.0%, a Tier 1 Risk based 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 Based Capital Ratio that
is less than 6.0%, a Tier 1 Risk Based Capital Ratio that is less than 3.0% or a
Leverage Capital Ratio that is less than 3.0%; and (v) "critically
undercapitalized" if it has a ratio 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 specified requirements with an appropriate federal banking agency
within 45 days of the date the institution receives notice or is deemed to have
notice that it is undercapitalized, significantly undercapitalized or critically
undercapitalized. A federal banking agency must provide the institution with
written notice of approval or disapproval within 60 days after receiving a
capital restoration plan, subject to extensions by the applicable agency.

         An institution that is required to submit a capital restoration plan
must concurrently submit a performance guaranty by each company that controls
the institution. Such guaranty shall be limited to the lesser of (i) an amount
equal to 5.0% of the institution's total assets at the time the institution was
notified or deemed to have notice that it was undercapitalized or (ii) the
amount necessary at such time to restore the relevant capital measures of the
institution to the levels required for the institution to be classified as
adequately capitalized. Such a guaranty shall expire after the federal banking
agency notifies the institution that it has remained adequately capitalized for
each of four consecutive calendar quarters. An institution which fails to submit
a written capital restoration plan within the requisite period, including any
required performance 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 to significantly undercapitalized institutions.

         A "critically undercapitalized institution" is to be placed in
conservatorship or receivership within 90 days unless the FDIC formally
determines that forbearance from such action would better protect the deposit
insurance fund. Unless the FDIC or other appropriate federal banking regulatory
agency makes specific further findings and certifies that the institution is
viable and is not expected to fail, an institution that remains critically
undercapitalized on average during the fourth calendar quarter after the date it
becomes critically undercapitalized must be placed in receivership. The general
rule is that the FDIC will be appointed as receiver within 90 days after a bank
becomes critically undercapitalized unless extremely good cause is shown and the
federal regulators agree to an extension. In general, good cause is defined as
capital that has been raised and is imminently available for infusion into the
Bank except for certain technical requirements 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 the provisions of Section 38 of the FDIA, which (i) restrict payment
of capital distributions and management fees; (ii) require that the appropriate
federal banking agency monitor the condition of the institution and its efforts
to restore its capital; (iii) require


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submission of a capital restoration plan; (iv) restrict the growth of the
institution's assets; and (v) require prior approval of certain expansion
proposals. The appropriate federal banking agency for an undercapitalized
institution also may take any number of discretionary supervisory actions if the
agency determines that any of these actions is necessary to resolve the problems
of the institution at the least possible long-term cost to the deposit insurance
fund, subject in certain cases to specified procedures. These discretionary
supervisory actions include: requiring the institution to raise additional
capital; restricting transactions with affiliates; requiring divestiture of the
institution or the sale of the institution to a willing purchaser; and any other
supervisory action that the agency deems appropriate. These and additional
mandatory and permissive supervisory actions may be taken with respect to
significantly undercapitalized and critically undercapitalized institutions.

         Additionally, under Section 11(c)(5) of the FDIA, a conservator or
receiver may be appointed for an institution where: (i) an institution's
obligations exceed its assets; (ii) there is substantial dissipation of the
institution's assets or earnings as a result of any violation of law or 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 to pay its obligations in the ordinary course of
business; (vi) losses or threatened losses deplete all or substantially all of
an institution'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 condition that is likely to cause insolvency or
substantial dissipation of assets or earnings, weaken the institution's
condition, or otherwise seriously prejudice the interests of depositors or the
insurance fund; (viii) an institution ceases to be insured; (ix) the institution
is undercapitalized and has no reasonable prospect that it will become
adequately capitalized, fails to become adequately capitalized when required to
do so, or fails to submit or materially implement a capital restoration plan; or
(x) the institution is critically undercapitalized or otherwise has
substantially insufficient capital.

         Regulatory Enforcement Authority. Federal banking law grants
substantial enforcement powers to federal banking regulators. This enforcement
authority includes, among other things, the ability to assess civil money
penalties, to issue cease-and-desist or removal orders and to initiate
injunctive actions against banking organizations and institution-affiliated
parties. In general, these enforcement actions may be initiated for violations
of laws and regulations and unsafe or unsound practices. Other actions or
inactions may provide the basis for enforcement action, including misleading or
untimely reports filed with regulatory authorities.

         Deposit Insurance Premiums. The FDIA establishes a risk based deposit
insurance assessment system. Under applicable regulations, deposit premium
assessments are determined based upon a matrix formed utilizing capital
categories - well capitalized, adequately capitalized and undercapitalized -
defined in the same manner as those categories are defined for purposes of
Section 38 of the FDIA. Each of these groups is then divided into three
subgroups that reflect varying levels of supervisory concern, from those that
are considered healthy to those that are considered to be of substantial
supervisory concern. The matrix so created results in nine assessment risk
classifications, with rates ranging from 0.04% of insured deposits for
well-capitalized institutions having the lowest level of supervisory concern, to
0.31% of insured deposits for undercapitalized institutions having the highest
level of supervisory concern. In general, while the Bank Insurance Fund of the
FDIC ("BIF") maintains a reserve ratio of 1.25% or greater, no deposit insurance
premiums are required. When the BIF reserve ratio falls below that level, all
insured banks would be required to pay premiums.

ITEM 2.  DESCRIPTION OF PROPERTY.

         The main office of the Bank and the executive offices of the Bank and
the Company are located at 1804 West Street, Annapolis, Maryland, in a brick and
masonry structure with ample parking. The Company leases 8,100 square feet in
the building under a five-year lease, which commenced in April 2000, at a
beginning and current annual rent of $153,900, subject to annual increases of 3%
per year. The Company has three five-year renewal options. Management believes
adequate insurance coverage is in force.

ITEM 3.  LEGAL PROCEEDINGS.

         In the ordinary course of its business, the Company may become involved
in routine legal proceedings. At December 31, 2002, there were no pending, or to
the knowledge of the Company, threatened legal proceedings.


                                       8
<PAGE>

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

         No matters were submitted to a vote of security holders during the
fourth quarter of the year ended December 31, 2002.

                                     PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

         Market for Common Stock and Dividends. The Company's Common Stock is
not traded on any organized exchange or on the Nasdaq National Market or the
Nasdaq Small Cap Market. As of December 31, 2002, three market makers made a
market in the Common Stock in the over the counter "bulletin board" market under
the symbol "CMFB". The Common Stock has traded only sporadically. No assurance
can be given that an active or established trading market will develop in the
foreseeable future. The following table sets forth the high and low bid prices
for the Common Stock during each calendar quarter since the third quarter of
2000, during which the Company's initial public offering of shares was
completed. These quotations reflect interdealer prices, without retail markup,
markdown or commission, and may not represent actual transactions. These
quotations do not necessarily reflect the intrinsic or market values of the
Common Stock.

                                     STOCK PRICE TABLE
                                     -----------------

                               2002                2001               2000
                       ---------------------------------------------------------
                         HIGH       LOW      High       Low      High      Low

First Quarter          $ 10.25   $ 10.00   $ 10.00   $ 10.00   $    --   $   --

Second Quarter         $ 10.50   $ 10.15   $ 10.00   $ 10.00   $    --   $   --

Third Quarter          $ 10.75   $  8.56   $ 10.00   $ 10.00   $ 10.50   $ 8.50

Fourth Quarter         $  8.75   $  8.75   $ 10.00   $ 10.00   $ 10.00   $ 7.00

         As of December 31, 2002, there were 822,250 shares of Common Stock
outstanding, held by approximately 325 shareholders of record. Additionally,
warrants to purchase 123,337 shares of common stock, at an exercise price of
$10.00 per share, were granted to the organizers of the Company in connection
with the Company's initial offering of shares but have not yet been issued. For
additional information regarding the warrants, see Note 12 to the Consolidated
Financial Statements.

         Dividends. The Company has not paid any dividends to date. The payment
of dividends by the Company will depend largely upon the ability of the Bank,
its sole operating business, to declare and pay dividends to the Company, as the
principal source of the Company's revenue will initially be from dividends paid
by the Bank. Dividends will depend primarily upon the Bank's earnings, financial
condition and need for funds, as well as governmental policies and regulations
applicable to the Company and the Bank. As anticipated, the Bank has incurred
losses during its initial phase of operations, and therefore it is not
anticipated that the Bank will pay any dividends to the Company for at least
three years. Even if the Bank and the Company have earnings in an amount
sufficient to pay dividends, the Board of Directors may determine to retain
earnings for the purpose of funding the growth of the Company and the Bank.

         Regulations of the Federal Reserve Board and Maryland law place limits
on the amount of dividends the Bank may pay to the Company without prior
approval. Prior regulatory approval is required to pay dividends which exceed
the Bank's net profits for the current year plus its retained net profits for
the preceding two calendar years, less required transfers to surplus. State and
federal bank regulatory agencies also have authority to prohibit a bank from
paying dividends if such payment is deemed to be an unsafe or unsound practice,
and the Federal Reserve Board has the same authority over bank holding
companies.

         The Federal Reserve Board has established guidelines with respect to
the maintenance of appropriate levels of capital by registered bank holding
companies. Compliance with such standards, as presently in effect, or as they
may be


                                       9
<PAGE>

amended from time to time, could possibly limit the amount of dividends that the
Company may pay in the future. In 1985, the Federal Reserve Board issued a
policy statement on the payment of cash dividends by bank holding companies. In
the statement, the Federal Reserve Board expressed its view that a holding
company experiencing earnings weaknesses should not pay cash dividends exceeding
its net income, or which could only be funded in ways that weaken the holding
company's financial health, such as by borrowing. As a depository institution,
the deposits of which are insured by the FDIC, the Bank may not pay dividends or
distribute any of its capital assets while it remains in default on any
assessment due the FDIC. The Bank currently is not in default under any of its
obligations to the FDIC.

         Recent Sales of Unregistered Shares. Between July 14, 1999 and May 17,
2000, the Company issued an aggregate of 650 shares of Common Stock to
organizers of the Company and the Bank at a price of $1,000 per share in private
placement transactions exempted pursuant to Section 4(2) of the Securities Act
of 1933, pursuant to the terms of Organizer Agreements between CommerceFirst and
the organizers. Each of such organizer shares was used as consideration for the
purchase of 100 share of common stock in the Company's registered offering. None
of the organizer shares remains outstanding.

         Use of Proceeds: On February 22, 2000, the Company's registration
statement on Form SB-2 (No. 333-91817) relating to its initial offering of
common stock, $.01 par value, was declared effective by the Securities and
Exchange Commission, and the offering commenced. On July 22, 2000, the Company's
post-effective amendment no. 1 to the Company's registration statement was
declared effective by the Securities and Exchange Commission, and the offering
was extended to August 18, 2000. On June 29, 2000, subscriptions for 648,450
shares (not including 65,000 shares purchased by organizers in exchange for
organizer shares previously issued for an aggregate of $650,000) were accepted
and a closing was held with respect to those shares, resulting in net proceeds
of $6,484,500. On August 18, 2000, escrow was broken with respect to an
additional 99,150 shares, for additional gross proceeds of $991,150. Total
proceeds of the offering, including organizer share purchases, were $8,222,500.
No person or entity underwrote the Company's offering, which was made through
the efforts of the Company's organizing directors and executive officers, with
the limited assistance of Koonce Securities, Inc., in order to comply with the
securities laws of certain of the states in which the shares were offered.
Koonce receive a fee of $15,000 for its services in connection with the
offering, and reimbursement of $1,026 for deposit delivery services. A total of
$6,500,000 has been contributed through December 31, 2000 to the capital of the
Bank for use in its lending and investment activities. An aggregate of $452,354
has been expended by the Bank in renovation and equipping of its main office. Of
the remaining proceeds of the offering retained by the Company, $1,000,000 is
held in a demand deposit in the Bank and the balance, approximately $230,000, is
held in temporary investments in another financial institution.


                                       10
<PAGE>


ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS.

         This discussion and analysis provides an overview of the financial
condition and results of operations of CommerceFirst Bancorp, Inc. (the
"Company") and CommerceFirst Bank (the "Bank") for the years 2002 and 2001.

         Forward Looking Statements. Certain information contained in this
discussion may include "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. These forward-looking statements
are generally identified by phrases such as "the Company expects," "the Company
believes" or words of similar import. Such forward-looking statements involve
known and unknown risks including, but not limited to, changes in general
economic and business conditions, interest rate fluctuations, competition within
and from outside the banking industry, new products and services in the banking
industry, risk inherent in making loans such as repayment risks and fluctuating
collateral values, problems with technology utilized by the Company, changing
trends in customer profiles and changes in laws and regulations applicable to
the Company. Although the Company believes that its expectations with respect to
the forward-looking statements are based upon reliable assumptions within the
bounds of its knowledge of its business and operations, there can be no
assurance that actual results, performance or achievements of the Company will
not differ materially from any future results, performance or achievements
expressed or implied by such forward-looking statements. Readers are cautioned
against placing undue reliance on any such forward-looking statements. The
Company does not undertake to update any forward-looking statements to reflect
occurrences or events that may not have been anticipated as of the date of such
statements.

         It is intended that this discussion and analysis help the readers in
their analysis of the accompanying audited Consolidated Financial Statements.

GENERAL

         CommerceFirst Bancorp, Inc. was incorporated under the general
corporation laws of the State of Maryland on July 9, 1999, and is headquartered
in Annapolis, Maryland. The Company was formed to be the bank holding company
for the Bank.

         On June 29, 2000, having received the required approvals from the State
of Maryland and Federal Reserve System and been accepted for deposit insurance
by the FDIC, CommerceFirst Bank opened its first office in Annapolis, Maryland.
On that date the Company became a bank holding company by capitalizing the Bank
with $6.5 million. The Bank's main office also serves as the headquarters for
the Company.

         On August 18, 2000 the Company completed its initial offering of shares
of the Company's common stock, having received subscriptions for 822,250 shares.
Gross proceeds of the offering amounted to $8.2 million.

         CommerceFirst Bank was formed to serve the business community of Anne
Arundel County, Maryland, and contiguous areas. The accompanying financial
information shows total assets of the Company stood at $46.3 million at December
31, 2002.

                              RESULTS OF OPERATIONS

         The Company reported a net loss of $643,298 for the year ended December
31, 2002, as compared to a net loss of $816,645 for the year ended December 31,
2001, and a net loss of $887,851 for the year ended December 31, 2000. The 2002
loss includes an additional provision of $250,000 to the allowance for credit
losses recorded as of December 31, 2002 with respect to a single credit;
additional details are contained in Provision for Credit Losses and Asset
Quality. The losses, excluding the additional provision, were incurred during
the organizational and initial operating phases of the Company, and are in line
with management's expectations for anticipated losses for a new financial
institution. It was expected that the Bank, and as a result the Company, would
sustain losses during the development stage period and not show an operating
profit for any month for at least twenty-four months after opening for business.


                                       11
<PAGE>

         Total loans outstanding at December 31, 2002 totaled $30.5 million, in
comparison to $20.7 million in total loans outstanding at December 31, 2001. The
Company ended the year 2002 with deposits and repurchase agreements - all of
which management considers core funding - of $40.3 million as compared to $20.8
million at December 31, 2001. As expected, increased lending activity
materialized during 2002, as the Bank's presence in the market became more
widely known. The business development/lending staff remains very active in
contacting new prospects and continues its efforts to increase the Bank's
profile and recognition within the community. Management believes that this will
translate into continued growth of a portfolio of quality loans and ongoing
deposit relationships, although there can be no assurance of this.

         The Bank plans to maintain the allowance for credit losses at an
adequate level and ended the year with an allowance of 2.15% of outstanding
gross loans. The Bank formally reviews the adequacy of the allowance quarterly;
management monitors the adequacy on a monthly basis. During 2002, management
developed and refined an adequacy measurement methodology to facilitate the
review process; this is discussed in more detail under Provision for Credit
Losses. At December 31, 2002, the Company had three non-performing loans
totaling $75,000 to one borrower. During the third quarter of 2002, three
related commercial credits totaling $47,000 were charged against the allowance
for credit losses, partially offset by a recovery of $2,000; in January 2003, an
additional recovery of $6,000 was recorded. Finally, as described above, an
additional provision of $250,000 was recorded as of December 31, 2002 with
respect to a single credit.

Net Interest Income and Net Interest Margin

         Net interest income is the difference between income on assets and the
cost of funds supporting those assets. Earning assets are composed primarily of
loans and investments; the expense associated with interest bearing deposits and
customer repurchase agreements and other borrowings is the cost of funds.
Non-interest bearing deposits and capital are other components representing
funding sources. Changes in the volume and mix of assets and funding sources,
along with the changes in yields earned and rates paid, determine changes in net
interest income.

         Net interest income in 2002 was $1,332,634 as compared to $870,292 in
2001 and $359,615 in 2000. The following table shows the average balances and
the rates of the various categories of the Company's assets and liabilities for
the past three years. The table includes a measurement of spread and margin.
Interest spread is the mathematical difference between the average interest
yield on interest earning assets and average interest paid on interest bearing
liabilities. Interest margin is the net interest yield on interest earning
assets and is derived by dividing net interest income by average interest
earning assets. Management believes that the interest margin is a better
indicator of asset earning results when compared to peer groups or industry
standards, particularly in a mature financial institution.

         Net interest margin remained relatively stable at 3.95% in 2002 as
compared to 4.19% for the year 2001. Interest spread increased 79 basis points
in 2001, from 2.51% to 3.30%, reflecting the redeployment of assets from
relatively low yielding investment securities to higher yielding loans - a
natural progression of loan growth. As was the case in 2002, the Bank expects
that growth in loans in 2003 will have a positive impact on earnings.
Accordingly, the Bank intends to maintain a competitive posture in its deposit
interest rate offerings to fund the acquisition of those loans.

         The following table provides information to the designated periods with
respect to average balances, income and expense and annualized yields and costs
associated with various categories of interest earning assets and interest
bearing liabilities:


                                       12
<PAGE>

<TABLE>
<CAPTION>
                                                   CONSOLIDATED AVERAGE BALANCES, YIELDS AND RATES

(Dollars in thousands)
                                                DECEMBER 31, 2002             December 31, 2001                December 31, 2000
                                                -----------------             -----------------                 -----------------

                                            AVERAGE              YIELD/    Average             Yield/      Average            Yield/
                                            BALANCE  INTEREST     RATE     Balance  Interest    Rate       Balance   Interest  Rate
                                            -------  --------     ----     -------  --------    ----       -------   --------  ----
<S>                                        <C>          <C>      <C>      <C>          <C>     <C>         <C>         <C>   <C>
  ASSETS
  Total loans                              $ 26,398     1,911    7.24%    $ 12,680     1,105   8.71%       $ 1,167      119   10.20%
  Investment securities1/                     4,060       100    2.47%       3,765       160   4.25%           436       26    5.96%
  Federal funds sold                          3,300        58    1.75%       4,314       188   4.36%         4,932      314    6.37%
                                           --------     -----    -----    --------     -----   -----       -------      ---   ------
  TOTAL INTEREST-EARNING
    ASSETS                                 $ 33,758     2,069    6.13%    $ 20,759     1,453   7.00%       $ 6,535      459    7.02%
                                           --------     -----    -----    --------     -----   -----       -------      ---  ------

  Less allowance for credit losses             (346)                          (178)                            (20)
  Cash and due from banks                     1,657                            609                             277
  Premises and equipment, net                   244                            353                             163

  Other assets                                  236                            157                              61
                                           --------                        -------                         -------

    TOTAL ASSETS                           $ 35,549                       $ 21,700                         $ 7,016
                                           ========                       ========                         =======

  LIABILITIES AND STOCK-
      HOLDERS' EQUITY
  Interest-bearing demand deposits           $  764         6    0.81%      $  416         4   0.87%         $  30        -    1.00%
  Money market deposit accounts              11,270       266    2.36%       6,333       232   3.67%         1,180       69    5.85%
  Savings                                       376         6    1.60%          81         2   2.10%            21        1    2.38%
  Certificates of deposit                    10,906       419    3.84%       5,226       322   6.17%           429       30    6.99%
  Repurchase agreements                       2,670        39    1.44%         891        21   2.39%             -        -    0.00%
  Other borrowed funds                           42         1    1.43%          38         1   2.89%             8        -    2.50%
                                           --------     -----    -----    --------     -----   -----       -------      ---   ------
  TOTAL INTEREST-BEARING
       LIABILITIES                         $ 26,028       737     2.83%   $ 12,985       582   4.49%       $ 1,668      100    6.00%
                                           ========     =====    =====    ========     =====   =====       =======      ===   ======

  Non-interest-bearing demand deposits      $ 3,420                        $ 2,186                           $ 322
  Other liabilities                             134
                                                                                76                           1,293
  Stockholders' equity                        5,968                          6,453                           3,733
                                           --------                        -------                         -------
    TOTAL LIABILITIES AND
    STOCKHOLDERS' EQUITY                   $ 35,549                       $ 21,700                         $ 7,016
                                           ========                       ========                         =======

  Net interest income                                $ 1,332                          $ 871                            $ 360
                                                     =======                          =====                            =====

  Net interest spread                                            3.30%                         2.51%                           1.02%
                                                                 =====                         =====                           =====

  Net interest margin                                            3.95%                         4.19%                           5.49%
                                                                 =====                         =====                           =====
</TABLE>


  1/ Yields on securities available for sale have been calculated on the basis
  of historical cost and do not give effect to changes in fair value of such
  securities, which are reflected as a component of stockholders' equity.


                                       13
<PAGE>


Rate/Volume Analysis of Net Interest Income

         The following table sets forth certain information regarding changes in
interest income and interest expense of the Company for the periods indicated.
For each category of interest-earning assets and interest-bearing liabilities,
information is provided on changes attributable to: (i) changes in volume
(change in volume of the asset multiplied by the prior period's rate) and (ii)
changes in rates (change in rate multiplied by the current period's volume).

                EFFECT OF RATE AND VOLUME CHANGES ON NET INTEREST INCOME

<TABLE>
<CAPTION>
                                                                     Year ended December 31,
                                                                     ----------------------
                                                                          2002 vs 2001
                                                                          ------------
                                                                                                      DUE TO CHANGE
                                            INTEREST INCOME/EXPENSE        INCREASE                     IN AVERAGE:
                                            -----------------------           OR
                                            2002              2001        (DECREASE)             RATE             VOLUME
                                            ----              ----        ----------             ----             ------
<S>                                    <C>                <C>             <C>                  <C>               <C>
(Dollars in thousands)

Interest earning assets
    Loans                              $   1,911          $   1,105       $    806             $    (390)        $  1,196
    Investment portfolio                     100                160            (60)                  (72)              13
    Federal funds sold                        58                188           (130)                  (86)             (44)
                                       ---------          ---------       --------             ---------         --------

    Totals                             $   2,069          $     460       $    616             $    (548)        $  1,164
                                       =========          =========       ========             =========         ========

Interest bearing liabilities:

    Interest bearing demand deposits   $       6          $       4       $      2             $      (1)        $      3
    Money market deposit accounts            266                232             34                  (147)             181
    Savings deposits                           6                  2              4                    (2)               6
    Certificates of deposit                  419                322             97                  (254)             350
    Repurchase agreements                     39                 21             17                   (25)              43
    Other borrowed funds                       1                  1             (0)                   (1)               0
                                       ---------          ---------       --------             ---------         --------

    Totals                             $     737          $     582       $    154             $    (430)        $    584
                                       =========          =========       ========             =========         ========
</TABLE>

<TABLE>
<CAPTION>
                                                                     Year ended December 31,
                                                                          2001 vs 2000
                                                                          ------------

                                                                                                      Due to Change
                                            Interest income/expense        Increase                    in Average:
                                            -----------------------           or
                                            2001              2000        (Decrease)             Rate             Volume
                                            ----                           --------              ----             ------
<S>                                    <C>              <C>              <C>                  <C>               <C>
(Dollars in thousands)
Interest earning assets
    Loans                              $   1,105        $      119       $      986           $   (188)         $  1,174
    Investment portfolio                     160                26              134                (64)              198
    Federal funds sold                       188               314             (126)               (89)              (37)
                                       ---------        ----------       ----------           --------          --------

    Totals                             $   1,453        $      460       $      994           $   (341)         $  1,335
                                       =========        ==========       ==========           =========         ========


Interest bearing liabilities:
    Interest bearing demand deposits   $       4        $       --       $        4           $      --                4
    Money market deposit accounts            232                69              163                (139)             301
    Savings deposits                           2                 1                1                  --                1
    Certificates of deposit                  322                30              292                 (43)             335
    Repurchase agreements                     21                --               21                  --               21
    Other borrowed funds                       1                --                1                  --                1
                                       ---------        ----------       ----------           --------          --------

    Totals                             $     582        $      100       $      482           $    (182)          $  664
                                       =========        ==========       ==========           =========           ======
</TABLE>


                                       14

<PAGE>


Provision for Credit Losses

         The provision for credit losses represents the expense recognized to
fund the allowance for credit losses. At the conclusion of 2002, the allowance
for credit losses stood at $655,359, or 2.15% of outstanding gross loans. Of
this amount, general reserves are $269,080 and specific reserves are $386,279;
These reserves were built by a monthly expense allocation of $15,000 since
inception, less net charge-offs of $45,000 in the third quarter of 2002, and an
additional provision of $250,000 as of December 31, 2002 with respect to a
single commercial credit.

         During 2002, management devised and refined a comprehensive review
methodology to assess the adequacy of the allowance. This methodology permits
several different assessments to be made. Currently, principal consideration is
accorded the assessment based upon the risk rating assigned to individual
credits. Specific provisions reflect the amount of loss estimated to be embedded
in the loan, based upon current information about the borrower, other sources of
repayment and the realizable value of collateral. Other assessments may be made
by general categories of credits and by industry groups (at a number of levels)
based upon Standard Industrial Classification codes. The methodology has the
flexibility to permit additional evaluation criteria if so desired.

         Risk ratings are assigned to all credits at inception, and are reviewed
at least annually. Consideration is given to many different factors: past credit
record, capacity to repay, character of borrower, value of collateral, industry
standards and overall economic conditions.

         In addition to the above adequacy review, management also considers
some bulk measures of adequacy. Specifically, an analysis is made of the entire
portfolio, less the government guaranteed portion of SBA loans and those loans
secured by cash deposits within the bank. An additional measure compares the
gross loan total without consideration of guarantees and/or collateral to the
allowance.

         Management considers, in addition to the above, the growth and
composition of the portfolio, the loss experience of other banks in our peer
group, the results of examinations and evaluations of the overall portfolio by
regulatory examiners and by external auditors, and the local, state and national
economic outlook. Based principally on current economic conditions, perceived
asset quality, loan-loss experience of comparable institutions in the Company's
market area and a strong capital position, the allowance is believed to be
adequate.

         The activity in the allowance for credit losses is shown in the
following table:

                           ALLOWANCE FOR CREDIT LOSSES
                           ---------------------------

<TABLE>
<CAPTION>
(Dollars in thousands)
                                   DECEMBER 31, 2002   DECEMBER 31, 2001   DECEMBER 31, 2000
                                   -----------------   -----------------   -----------------
<S>                                      <C>                 <C>                  <C>
Balance at beginning of year             $ 270               $  90                $  --
Provision for credit losses                430                 180                   90
Loans charged off                          (47)                 --                   --
Recoveries                                   2                  --                   --
                                         -----               -----                -----
Balance at end of year                   $ 655               $ 270                $  90
                                         =====               =====                =====
Non-interest Income
</TABLE>

         Non-interest income is exclusively from Bank operations and represents
primarily service charge income and fees on deposit relationships. This source
of income totaled $175,046 as compared to $75,702 in 2001 and $9,931 in 2000, as
the account base grew. As the Bank matures and develops additional sources of
fee income, it is expected that non-interest income will continue to be a
significant contributor to the overall profitability of the Company.


                                       15
<PAGE>

Non-interest Expense

         Non-interest expenses of $1,720,978 were incurred in 2002 as compared
to $1,582,639 in 2001 and $1,167,397 in 2000. The most significant non-interest
expense item is salaries and benefits at $1,006,496 in 2002; the comparable
amounts in 2001 and 2000 were $904,450 and $643,347. A breakdown of other
non-interest expenses is in the income statement and Note 9 to the Consolidated
Financial Statements.

         Non-interest expense does not include legal, filing, and offering
expense of the Company and filing and organization expense of the Bank or
salaries during the Company's organizational period, start- up supplies and
marketing/advertising expense during that period. These costs associated with
raising capital, in the amount of $115,266, have been deducted from the proceeds
of the offering as reflected in stockholders' equity.

Income taxes

         A valuation allowance has been established for net deferred tax assets
relating to all amounts other than unrealized gains/losses on securities
available for sale, as the Bank has yet to attain sustained profitability.
Operating losses of approximately $2,185,000 are available to offset future
taxable income through 2019.

                                  ASSET QUALITY

Loan portfolio

         In its lending activities, the Company seeks to develop sound credits
with customers who will grow with the Company. There has not been an effort to
rapidly build the portfolio and earnings at the sacrifice of asset quality. Loan
growth in 2002 was strong: loans outstanding increased $9.7 million, to $30.5
from $20.8 million.

         At December 31, 2002, the Company had three loans totaling $265,000
delinquent beyond thirty days; there are three loans totaling $75,000 in
non-accrual status. At December 31, 2001 and 2000, the Company had no loans
delinquent beyond thirty days, and no loans which management considered impaired
or which were accounted for on a non-accrual basis, and no troubled debt
restructurings. The accrual of interest is discontinued when a loan is
specifically determined to be impaired or when principal or interest is
delinquent for 90 days or more. Based upon current economic conditions, the
composition of the loan portfolio, loan-loss experience of comparable
institutions in the Company's market area, and other factors, an allowance for
credit losses has been provided, currently at 2.15% of outstanding gross loans.
Based on its knowledge of the portfolio and current economic conditions,
management believes that as of December 31, 2002, the allowance is adequate to
absorb reasonably anticipated losses.

         The following table shows an analysis of nonperforming assets at the
dates indicated:

                        ANALYSIS OF NONPERFORMING ASSETS
                        --------------------------------

<TABLE>
<CAPTION>
       (Dollars in thousands)

                                                 DECEMBER 31, 2002   DECEMBER 31, 2001   DECEMBER 31, 2000
                                                 -----------------   -----------------   -----------------
<S>                                                   <C>                 <C>                 <C>
     Nonaccrual loans
           Commercial                                 $   75              $   --              $   --
     Accrual loans - Past due 90 days or more             --                  --                  --
     Restructured loans                                   --                  --                  --
     Real estate owned                                    --                  --                  --
                                                      ------              ------              ------
           Total nonperforming assets                 $   75              $   --              $   --
                                                      ======              ======              ======
</TABLE>

         At December 31, 2002, there was one performing loan in the amount of
$749,870 considered to be partially impaired for which the Bank has provided a
$250,000 specific reserve in the allowance for credit losses. In addition,


                                       16
<PAGE>

at December 31, 2002, there were nine commercial loans totaling $1,562,100,
while not considered potential problem loans and generally well secured by
collateral and/or Small Business Administration guarantees, which do exhibit
characteristics that warrant closer scrutiny and attention to these credits than
would otherwise be appropriate. Specific reserves of $136,279 have been
allocated to these credits. For these purposes, a "potential problem loan" is
defined as a loan which is not included in the past due, nonaccrual or
restructured categories but for which known information about possible credit
problems causes management to have serious doubts as to the ability of the
borrower to comply with the present loan repayment terms.

         The following table sets forth information on the composition of the
loan portfolio by type:

                          COMPOSITION OF LOAN PORTFOLIO
                          -----------------------------

<TABLE>
<CAPTION>
    (Dollars in thousands)
                                             DECEMBER 31, 2002       December 31, 2001        December 31, 2000
                                           ---------------------   ----------------------   ---------------------
                                                      PERCENTAGE               Percentage              Percentage
                                                       OF TOTAL                 of total                of total
                                           BALANCE       LOANS     Balance       loans      Balance      loans
                                           -------       -----     -------       -----      -------      -----

    <S>                                    <C>          <C>        <C>          <C>         <C>         <C>
    Commercial                             $ 19,978      65.45%    $ 14,497      70.07%     $  3,172     50.97%
    Real estate - commercial mortgage        10,544      34.55%       6,177      29.86%        3,036     48.76%
    Installment loans to individuals             --         --%          14       0.07%           17      0.27%
                                           --------     ------     --------     ------      --------    ------
    Gross loans                            $ 30,522     100.00%      20,688     100.00%        6,225    100.00%
                                                        ======                  ======                  ======
    Less allowance for credit losses           (655)                   (270)                     (90)
    Less unearned fees                          (36)                    (20)                      (7)
                                           --------                --------                 --------
    Loans, net                             $ 29,831                $ 20,398                 $  6,128
                                           ========                ========                 ========
</TABLE>

         The following table shows the interest rate sensitivity of the loan
portfolio at December 31, 2002. Demand loans, loans without a stated maturity
and overdrafts are reported as due in one year or less. At December 31, 2002,
the total amount of loans due after one year with fixed rates of interest was
approximately $9,867,000. At December 31, 2002, there were no loans due after
one year with floating rates of interest.


                   INTEREST RATE SENSITIVITY OF LOAN PORTFOLIO
                   -------------------------------------------

(Dollars in thousands)
                              One Year    After One Year    After Five
                               or Less   Through Five Years    Years     Total
                              --------   ------------------ -----------  -----
Fixed                          $ 5,560       $ 7,829          $ 2,067    15,456
Floating                        15,066            --               --    15,066
                               -------       -------          -------   -------
                               $20,626       $ 7,829          $ 2,067   $30,522
                               =======       =======          =======   =======

Investment securities portfolio

         At December 31, 2002, the carrying value of the Company's investment
securities portfolio was $5,092,500, as compared to carrying values of
$3,981,946 and $990,200 at December 31, 2001 and 2000, respectively. The before
tax unrealized gain on securities available for sale at December 31, 2002 was
$86,084 as compared to $171 and $336 at December 31, 2001 and 2000 respectively.
The increase in carrying value is a direct result of the purchase of additional
U.S. Treasury securities, principally to support the Securities Sold Under
Agreement to Repurchase/Sweep Account program that is discussed in greater
detail under Liquidity Management. The increase in unrealized gain is
attributable to a lengthening of the average maturity of the investment
portfolio by the purchase of two-year Treasury Notes during the second quarter
of 2002 (as opposed to six-month Treasury Bills) and by the subsequent increase
in market value caused by the continued decline in interest rates.


                                       17
<PAGE>

         The Company currently classifies its entire securities portfolio as
available for sale. Increases in the portfolio will occur whenever deposit
growth outpaces loan demand and the forecast for growth is such that the
investment of excess liquidity in investment securities (as opposed to short
term investments such as Federal Funds) is warranted. In general, our investment
policy is to acquire direct U.S. Treasury securities and fully guaranteed U.S.
government agency issues with a remaining maturity of four years or less. As the
Company develops its loan portfolio, it anticipates that it will maintain the
average maturity of the securities portfolio at two years or less. As the
Company and the loan portfolio mature, we will reassess the appropriate
composition and maturities of the securities portfolio. In addition, the Bank
will purchase Federal Reserve stock in accordance with regulation and expects to
maintain a small equity position in stock in a banker's bank to facilitate loan
participations.

         The following table provides information regarding the composition of
the Company's investment securities portfolio at the dates indicated. See Note 3
to the Consolidated Financial Statements for additional information regarding
the investment securities portfolio.

                     COMPOSITION OF THE INVESTMENT PORTFOLIO
                     ---------------------------------------

<TABLE>
<CAPTION>
(Dollars in thousands)
                                DECEMBER 31, 2002    December 31, 2001    December 31, 2000
                                -----------------    -----------------    -----------------
Available for Sale                        PERCENT              Percent              Percent
  (at Estimated Market Value)    BALANCE  OF TOTAL   Balance   of Total   Balance   of Total
                                 -------  --------   -------   --------   -------   --------
<S>                              <C>      <C>        <C>       <C>        <C>       <C>
U.S. Treasury                    $5,093    96.65%    $3,982     95.45%    $  990     81.89%

Federal Reserve Stock               139     2.65%       153      3.67%       182     15.05%

Corporate equity                     37     0.70%        37      0.89%        37      3.06%
                                 ------   ------     ------    ------     ------    ------
Total                            $5,269   100.00%    $4,172    100.00%    $1,209    100.00%
                                 ======   ======     ======    ======     ======    ======
</TABLE>

         The following table sets forth the projected maturities of the U.S.
Treasury securities component of the investment securities portfolio as of
December 31, 2002 and the average yields:

           PROJECTED MATURITIES OF THE INVESTMENT SECURITIES PORTFOLIO
           -----------------------------------------------------------


<TABLE>
<CAPTION>
(Dollars in thousands)
                                                  After One Year
                    One Year or Less            Through Five Years                  Total
                   -------------------         -------------------         -----------------------
                   Carrying    Average         Carrying    Average         Carrying        Average
                    Value       Yield           Value       Yield           Value           Yield
                   --------    -------         --------    -------         --------        -------
<S>                <C>         <c>             <C>          <C>            <C>              <c>
U.S. Treasuries    $    --          --         $ 5,093      2.70%          $ 5,093          2.70%
                   =======     =======         =======      ====           =======          ====
</TABLE>

At December 31, 2002, there were no issuers, other than the U.S. Government,
whose securities owned by the Company or the Bank had a book or market value
exceeding ten percent of the Company's stockholders' equity.

                              LIQUIDITY MANAGEMENT

         Liquidity is a measure of the Bank's ability to meet the demands
required for the funding of loans and to meet depositors' requirements for use
of their funds. The Bank's principal sources of liquidity are cash balances, due
from banks, Federal funds sold and short term securities.

         At December 31, 2002, management considers the liquidity position of
the Company and Bank to be satisfactory despite strong loan growth. At year-end
2002, under the Company's liquidity formula, it had $10.5 million of liquidity
representing 22.7% of total Company assets. Continued strong growth in deposits
will be required to fund loan growth. Accordingly, the Bank intends to maintain
a competitive posture in its deposit interest rate offerings. While adequate
liquidity is imperative, excess liquidity has the effect of a lower interest
margin,


                                       18
<PAGE>

as funds not invested in loans are placed in short-term investments that
generally carry a lower yield.

         The Bank expects that the principal sources of funds will be core
deposits, consisting of demand deposits, NOW accounts, money market accounts,
savings accounts and certificates of deposit from the local market area. These
accounts provide the Bank with a relatively stable source of funds and a source
of fee income.

          The following table indicates the amount of the Bank's certificates of
deposit of $100,000 or more by time remaining until maturity as of December 31,
2002.

  CERTIFICATE OF DEPOSIT ($100,000 OR >) MATURITY SCHEDULE AT DECEMBER 31, 2002

(Dollars in thousands)

     Due in:       3 MONTHS OR LESS                       $  4,179
                   OVER 3 MONTHS THROUGH 6 MONTHS              200
                   OVER 6 MONTHS THROUGH 12 MONTHS           3,158
                   OVER 12 MONTHS                            5,115
                                                          --------
                                                          $ 12,651
                                                          ========

         In addition, the Bank offers Securities Sold under Repurchase
Agreement/Sweep accounts to its commercial clientele as an effective means of
cash management. Although these funds are technically not deposit liabilities,
they are nonetheless an ongoing source of core funding and contribute
significantly to the Bank's liquidity management. At December 31, 2002, the Bank
had $5.3 million in such funding; by comparison, the December 31, 2001 and 2000
totals were $2.7 million and $51 thousand, respectively.

         The Bank participates in the U.S. Treasury Tax & Loan program,
facilitating the payment of taxes by its commercial clientele. These funds
generally remain at the bank as a non-deposit liability, at interest, until
called by the Treasury. At December 31, 2002, the balance outstanding was zero;
at December 31, 2001, the balance outstanding was $38 thousand; at December 31,
2000, the balance outstanding was zero.

                          INTEREST RATE RISK MANAGEMENT

         Banks and other financial institutions are dependent upon net interest
income, the difference between interest earned on interest earning assets and
interest paid on interest bearing liabilities. Changes in interest rates
inevitably have an impact on interest income. GAP, a measure of the difference
in volume between interest bearing assets and interest bearing liabilities, is a
means of monitoring the sensitivity of a financial institution to changes in
interest rates. The chart below provides an indicator of the rate sensitivity of
the Company. A positive GAP indicates the degree to which the volume of
repriceable assets exceeds repriceable liabilities in particular time periods.
The Company has a positive GAP of 7.65% out to three months and a cumulative
negative GAP of (1.47%) out to twelve months - essentially an evenly balanced
position.

         Management has carefully considered its strategy to maximize interest
income by reviewing interest rate levels and economic indicators. These factors
have been thoroughly discussed with the Board of Directors and management
believes that existing strategies are appropriate to current economic and
interest rate trends. The GAP is carefully monitored and will be favorably
impacted by normal growth in loan assets and by the renewal of maturing
certificates at current rates.


                                       19
<PAGE>

<TABLE>
<CAPTION>
                                         GAP ANALYSIS
                                         ------------
(Dollars in thousands)
                                              0-3          4-12           1-3           3-5         Over
                                             Months       Months         Years         Years      5 Years       Total
                                             ------       ------         -----         -----      -------       -----
<S>                                       <C>           <C>           <C>          <C>           <C>         <C>
Interest-earning assets:

    Federal funds sold                    $   8,547     $      --     $       --   $        --   $      --   $   8,547

    Investment securities                        --            --          5,000            --          --       5,000

    Loans                                    19,669           957          3,341         4,488       2,067      30,522
                                          ---------     ---------     ----------   -----------   ---------   ---------

    Total interest-earning assets            28,216           957          8,341         4,488       2,067      44,069
                                          =========     =========     ==========   ===========   =========   =========
Interest-bearing liabilities:

    Money market deposit accounts            15,224            --             --            --          --      15,224

    NOW accounts                              1,093            --             --            --          --       1,093

    Savings                                     236            --             --            --          --         236

    Certificates of deposit                   4,179         3,468          4,708           295          148     12,797

    Repurchase agreements                     5,326            --             --            --           --      5,326
                                          ---------     ---------     ----------   -----------   ---------   ---------
    Total interest-bearing liabilities       26,058         3,468          4,708           295          148  $  34,676
                                          =========     =========     ==========     =========    =========  =========


GAP                                           2,158        (2,511)         3,633         4,193        1,919


CUMULATIVE GAP                            $   2,158     $    (353)     $   3,280     $   7,473    $   9,392
                                          =========     =========     ==========     =========    =========

CUMULATIVE GAP TO CUMULATIVE
    INTEREST-EARNING ASSETS                    7.65%        (1.47%)         8.74%        17.79%       21.31%

</TABLE>


                                       20
<PAGE>


ITEM 7. FINANCIAL STATEMENTS.

                          INDEPENDENT AUDITORS' REPORT

The Board of Directors
CommerceFirst Bancorp, Inc. and Subsidiary
Annapolis, Maryland

We have audited the accompanying consolidated balance sheets of CommerceFirst
Bancorp, Inc. and subsidiary as of December 31, 2002 and 2001, and the related
consolidated statements of operations, changes in stockholders' equity and
comprehensive loss, and cash flows for each of the years in the three year
period ended December 31, 2002. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
CommerceFirst Bancorp, Inc. and subsidiary as of December 31, 2002 and 2001, and
the results of their operations and their cash flows for each of the years in
the three year period ended December 31, 2002 in conformity with accounting
principles generally accepted in the United States of America.

/s/ Trice Geary & Myers LLC

Salisbury, Maryland
March 14, 2003


                                       21

<PAGE>

<TABLE>
<CAPTION>
                                  COMMERCEFIRST BANCORP, INC. AND SUBSIDIARY
                                          CONSOLIDATED BALANCE SHEETS

----------------------------------------------------------------------------------------------------------------
December 31,                                                                     2002               2001
----------------------------------------------------------------------------------------------------------------
<S>                                                                               <C>              <C>
                                                    ASSETS

 Cash and due from banks                                                          $ 1,709,719      $  1,099,419
 Federal funds sold                                                                 8,752,825           994,132
                                                                          --------------------------------------
               Cash and cash equivalents                                           10,462,544         2,093,551
 Investment securities available for sale, at fair value                            5,092,500         3,981,946
 Federal Reserve Bank stock, at cost                                                  139,450           153,050
 Atlantic Central Bankers Bank stock, at cost                                          37,000            37,000
 Loans, less allowance for credit losses
               2002 $655,359; 2001 $270,000                                        29,830,614        20,397,987
 Premises and equipment, at cost, less
               accumulated depreciation                                               176,132           309,733
 Accrued interest receivable                                                          135,781            87,371
 Other assets                                                                         194,290            88,599
                                                                          --------------------------------------

                     TOTAL ASSETS                                                $ 46,068,311     $  27,149,237
                                                                          ======================================

                                      LIABILITIES AND STOCKHOLDERS' EQUITY

 Liabilities:
 Deposits:

               Noninterest-bearing demand                                         $ 5,575,800      $  3,322,996
               Interest-bearing                                                    29,350,254        14,774,178
                                                                          --------------------------------------
                     Total deposits                                                34,926,054        18,097,174
 Securities sold under agreements to repurchase                                     5,325,946         2,713,150
 Short-term borrowings                                                                     --            37,875
 Accrued interest payable on deposits                                                  22,245            15,746
 Other liabilities                                                                    168,190            72,820
                                                                          --------------------------------------
                     TOTAL LIABILITIES                                             40,442,435        20,936,765
                                                                          --------------------------------------

 COMMITMENTS AND CONTINGENCIES

 Stockholders' equity:

 Common stock, par value $.01, authorized 4,000,000 shares;
               822,250 shares issued and outstanding                                    8,223             8,223
 Surplus                                                                            8,099,012         8,099,012
 Accumulated deficit (see Note 2)                                                  (2,538,174)       (1,894,876)

 Accumulated other comprehensive income                                                56,815               113
                                                                          ---------------------------------------
                    TOTAL STOCKHOLDERS' EQUITY                                      5,625,876         6,212,472
                                                                          --------------------------------------

                    TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                   $ 46,068,311     $  27,149,237
                                                                          ======================================
</TABLE>

The Notes to Consolidated Financial Statements are an integral part of these
consolidated financial statements.


                                       22
<PAGE>


                                     COMMERCEFIRST BANCORP, INC. AND SUBSIDIARY
                                       CONSOLIDATED STATEMENTS OF OPERATIONS

                                    YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000
<TABLE>
<CAPTION>

----------------------------------------------------------------------------------------------------------------------
                                                                       2002              2001             2000
---------------------------------------------------------------------------------------------------------------------

<S>                                                                     <C>             <C>               <C>
INTEREST INCOME ON:

       Loans, including fees                                            $1,911,062      $ 1,104,740       $  119,368
       U.S. Treasury securities                                             90,918          149,265           20,158
       Other investments                                                     9,236           10,442            5,767
       Federal funds sold                                                   57,925          188,340          314,174
                                                                 ----------------------------------------------------
              Total interest income                                      2,069,141        1,452,787          459,467
                                                                 ----------------------------------------------------

INTEREST EXPENSE ON:

       Deposits                                                            697,340          560,062           99,426
       Securities sold under agreements to repurchase                       38,517           21,284              220
       Short-term borrowings                                                   650            1,149              206
                                                                 ---------------------------------------------------
              Total interest expense                                       736,507          582,495           99,852
                                                                 ---------------------------------------------------

              NET INTEREST INCOME                                        1,332,634          870,292          359,615

PROVISION FOR CREDIT LOSSES                                                430,000          180,000           90,000
                                                                 ---------------------------------------------------
              NET INTEREST INCOME AFTER
                 PROVISION FOR CREDIT LOSSES                               902,634          690,292          269,615
                                                                 ---------------------------------------------------

OTHER INCOME:
       Service charges on deposit accounts                                 175,046           75,702            9,931
                                                                 ---------------------------------------------------

OTHER EXPENSES:

       Salaries and employee benefits                                    1,006,496          904,450          643,347
       Legal and professional                                               63,153           75,416           89,929
       Rent and occupancy                                                  194,139          191,315          141,451
       Marketing and business development                                   31,382           40,293           89,192
       Insurance                                                            23,977           21,158           10,658
       Data processing                                                      51,942           41,255            8,865
       Support services                                                     75,990           76,160           42,278
       Office supplies                                                      15,291           19,686           42,146
       Depreciation and amortization                                       133,601          125,883           60,358
       Other expenses                                                      125,007           87,023           39,173
                                                                 ---------------------------------------------------
              Total other expenses                                       1,720,978        1,582,639        1,167,397
                                                                 ---------------------------------------------------

NET LOSS                                                               $ (643,298)     $  (816,645)     $  (887,851)
                                                                 ===================================================

BASIC AND DILUTED LOSSES PER SHARE OF COMMON STOCK                      $   (0.78)      $    (0.99)      $    (1.82)
                                                                 ===================================================
</TABLE>

The Notes to Consolidated Financial Statements are an integral part of these
consolidated financial statements.


                                       23
<PAGE>


                   COMMERCEFIRST BANCORP, INC. AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF CHANGES IN
                  STOCKHOLDERS' EQUITY AND COMPREHENSIVE LOSS
                  YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000

<TABLE>
<CAPTION>
                                                                                                      Accumulated
                                                        Common                                           Other           Total
                                                         Stock                       Accumulated     Comprehensive   Stockholders'
                                                      (Par Value)       Surplus        Deficit       Income (Loss)       Equity
                                                     ------------------------------------------------------------------------------
<S>                                                   <C>             <C>              <C>             <C>             <C>
Balances, December 31, 1999                           $     325       $   238,872      $  (190,380)     $      --      $  48,817

Comprehensive loss:
    Net loss                                                 --                --         (887,851)            --       (887,851)
    Other Comprehensive income, net of tax:
      Unrealized holding gains on securities
      available for sale arising during the period           --                --               --            206           206
                                                                                                                       --------
Total comprehensive loss                                                                                               (887,645)

    Costs of raising capital during
      development stage                                      --           (29,463)              --             --       (29,463)
    Shares issued                                         7,898         7,889,603               --             --     7,897,501
                                                     ------------------------------------------------------------------------------
Balances, December 31, 2000                               8,223         8,099,012       (1,078,231)           206     7,029,210
                                                     ------------------------------------------------------------------------------

Comprehensive loss:
    Net loss                                                 --                --         (816,645)            --      (816,645)
    Other comprehensive loss, net of tax:
      Unrealized holding losses on securities
      available for sale arising during the period           --                --               --            (93)          (93)
                                                                                                                      -------------
Total comprehensive loss                                                                                               (816,738)
                                                     ------------------------------------------------------------------------------
BALANCES, DECEMBER 31, 2001                               8,223         8,099,012       (1,894,876)           113     6,212,472
                                                     ------------------------------------------------------------------------------
COMPREHENSIVE LOSS:
    NET LOSS                                                 --                --         (643,298)            --      (643,298)
    OTHER COMPREHENSIVE INCOME, NET OF TAX:
      UNREALIZED HOLDING GAINS ON SECURITIES
      AVAILABLE FOR SALE ARISING DURING THE PERIOD           --                --               --         56,702        56,702
                                                                                                                      -------------
TOTAL COMPREHENSIVE LOSS                                                                                               (586,596)
                                                     ------------------------------------------------------------------------------

BALANCES, DECEMBER 31, 2002                           $   8,223        $8,099,012      $(2,538,174)    $   56,815   $ 5,625,876
                                                     ==============================================================================
</TABLE>

The Notes to Consolidated Financial Statements are an integral part of these
consolidated financial statements.


                                       24
<PAGE>


                   COMMERCEFIRST BANCORP, INC. AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                  YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000
<TABLE>
<CAPTION>


--------------------------------------------------------------------------------------------------------------
                                                                 2002                2001           2000
--------------------------------------------------------------------------------------------------------------
<S>                                                              <C>                 <C>                <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
 Net Loss                                                   $   (643,298)      $   (816,645)      $  (887,851)
 Adjustments to reconcile net loss to net cash
    used by operating activities:
    Depreciation, amortization and accretion                     107,550            (23,382)           40,200
    Provision for credit losses                                  430,000             180,000           90,000
    Provision for losses on unfunded commitments                  12,000                  --               --
    Change in assets and liabilities:
       Increase in accrued interest receivable                   (48,410)           (39,173)          (48,198)
       Increase in other assets                                 (105,691)           (24,404)          (64,195)
       Increase in accrued interest payable                        6,499                 909           14,837
       Increase (decrease) in other liabilities                   54,159             15,225           (44,432)
                                                          ----------------------------------------------------
           Net cash used by operating activities                (187,191)          (707,470)         (899,639)
                                                          ----------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
 Purchases of available for sale securities                   (8,498,590)        (9,842,646)         (969,706)
 Maturities of available for sale securities                   7,500,000           7,000,000               --
 Purchases of FRB and ACBB stock                                      --                 --          (232,000)
 Proceeds from sale of FRB stock                                  13,600              29,050           12,900
 Increase in loans, net                                       (9,862,627)       (14,450,332)       (6,217,655)
 Purchases of premises and equipment                                  --            (36,603)         (452,359)
                                                          ----------------------------------------------------
          Net cash used by investing activities              (10,847,617)       (17,300,531)       (7,858,820)
                                                          ----------------------------------------------------

CASH FLOWS FROM FINANCING ACTIVITIES:
 Increase in noninterest-bearing deposits, net                 2,252,804           2,168,967        1,154,029
 Increase in time deposits, net                               14,576,076           3,291,252       11,482,926
 Increase in securities sold under agreements
     to repurchase, net                                        2,612,796           2,661,466           51,684
 (Decrease) increase in short-term borrowings, net               (37,875)             37,875               --
 Issuance of common stock                                             --                  --        7,897,501
 Costs of raising capital                                             --                 --           (29,463)
                                                          ----------------------------------------------------
          Net cash provided by financing activities           19,403,801           8,159,560       20,556,677
                                                           ---------------------------------------------------

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS               8,368,993          (9,848,441)      11,798,218

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR                   2,093,551          11,941,992          143,774
                                                          ----------------------------------------------------
CASH AND CASH EQUIVALENTS, END OF YEAR                       $10,462,544       $   2,093,551      $11,941,992
                                                          ====================================================
SUPPLEMENTAL CASH FLOWS INFORMATION:
 Interest paid                                              $    730,008       $     581,586          $85,015
 Total increase (decrease) in unrealized appreciation
     on available for sale securities                             85,913                (165)             336
</TABLE>

The Notes to Consolidated Financial Statements are an integral part of these
consolidated financial statements.


                                       25

<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         CommerceFirst Bancorp, Inc. (the "Company") is a bank holding company
         formed on July 9, 1999, whose principal activity is the ownership and
         management of its wholly owned subsidiary, CommerceFirst Bank (the
         "Bank"). Upon obtaining sufficient capital from the Company, the de
         novo Bank was granted final approvals by regulatory agencies and began
         its operations on June 29, 2000.

         The Bank provides financial services to individuals and corporate
         customers located in Anne Arundel County and surrounding areas of
         Central Maryland, and is subject to competition from other financial
         institutions. The Bank is also subject to the regulations of certain
         Federal and State of Maryland (the "State") agencies and undergoes
         periodic examinations by those regulatory authorities. The accounting
         policies of the Bank conform to accounting principles generally
         accepted in the United States of America and to general practices
         within the banking industry.

         Significant accounting policies not disclosed elsewhere in the
         consolidated financial statements are as follows:

         Principles of Consolidation:

         The consolidated financial statements include the accounts of
         CommerceFirst Bancorp, Inc. and its subsidiary, CommerceFirst.
         Intercompany balances and transactions have been eliminated. The Parent
         Only financial statements (see Note 18) of the Company account for the
         subsidiary using the equity method of accounting.

         Use of Estimates:

         The preparation of financial statements in conformity with accounting
         principles generally accepted in the United States of America requires
         management to make estimates and assumptions that affect the reported
         amounts of assets and liabilities and disclosure of contingent assets
         and liabilities at the dates of the financial statements and the
         reported amounts of revenues and expenses during the reporting periods.
         Actual results could differ from those estimates.

         Securities Held to Maturity:

         Bonds, notes and debentures for which the Bank has the positive intent
         and ability to hold to maturity are reported at cost, adjusted for
         premiums and discounts that are recognized in interest income using the
         effective interest rate method over the period to maturity. Securities
         transferred into held to maturity from the available for sale portfolio
         are recorded at fair value at time of transfer with unrealized gains or
         losses reflected in equity and amortized over the remaining life of the
         security. The Bank has no investment securities classified as held to
         maturity as of December 31, 2002 and 2001.

         Securities Available for Sale:

         Marketable debt securities not classified as held to maturity are
         classified as available for sale. Securities available for sale may be
         sold in response to changes in interest rates, loan demand, changes in
         prepayment risk, and other factors. Changes in unrealized appreciation
         (depreciation) on securities available for sale are reported in other
         comprehensive income. Realized gains (losses) on securities available
         for sale are included in other income (expense) and, when applicable,
         are reported as a reclassification adjustment, net of tax, in other
         comprehensive income. The gains and losses on securities sold are
         determined by the specific identification method. Premiums and
         discounts are recognized in interest income using the effective
         interest rate method over the period to maturity. Additionally,
         declines in the fair value of individual investment securities below
         their cost that are other than temporary are reflected as realized
         losses in the consolidated statements of income.


                                       26

<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

         Other Securities:

         Federal Reserve Bank ("FRB") and Atlantic Central Bankers Bank ("ACBB")
         stocks are equity interests that do not have readily determinable fair
         values for purposes of Statement of Financial Accounting Standard
         ("SFAS") No. 115, Accounting for Certain Investments in Debt and Equity
         Securities, because their ownership is restricted and lacks a market.

         Loans and Allowance for Credit Losses:

         Loans are generally carried at the amount of unpaid principal, adjusted
         for deferred loan fees, which are amortized over the term of the loan
         using the effective interest rate method. Interest on loans is accrued
         based on the principal amounts outstanding. It is the Bank's policy to
         discontinue the accrual of interest when a loan is specifically
         determined to be impaired or when principal or interest is delinquent
         for ninety days or more. When a loan is placed on nonaccrual status,
         all interest previously accrued but not collected is reversed against
         current period interest income. Interest income generally is not
         recognized on specific impaired loans unless the likelihood of further
         loss is remote. Cash collections on such loans are applied as
         reductions of the loan principal balance and no interest income is
         recognized on those loans until the principal balance has been
         collected. Interest income on other nonaccrual loans is recognized only
         to the extent of interest payments received. The carrying value of
         impaired loans is based on the present value of the loan's expected
         future cash flows or, alternatively, the observable market price of the
         loan or the fair value of the collateral.

         The allowance for credit losses is established through a provision for
         credit losses charged to expense. Loans are charged against the
         allowance for credit losses when management believes that the
         collectibility of the principal is unlikely. The allowance, based on
         evaluations of the collectibility of loans and prior loan loss
         experience, is an amount that management believes will be adequate to
         absorb possible losses on existing loans that may become uncollectible.
         The evaluations take into consideration such factors as changes in the
         nature and volume of the loan portfolio, overall portfolio quality,
         review of specific problem loans, and current economic conditions and
         trends that may affect the borrower's ability to pay.

         While management believes it has established the allowance for credit
         losses in accordance with accounting principles generally accepted in
         the United States of America and has taken into account the views of
         its regulators and the current economic environment, there can be no
         assurance that in the future the Bank's regulators or its economic
         environment will not require further increases in the allowance.

         Reserve for Unfunded Commitments

         The reserve for unfunded commitments is established through a provision
         for unfunded commitments charged to other expenses. The reserve is
         calculated by utilizing the same methodology and factors as the
         allowance for credit losses. The reserve, based on evaluations of the
         collectibiltiy of loans and prior loan loss experience, is an amount
         that management believes will be adequate to absorb possible losses on
         unfunded commitments (off-balance sheet financial instruments) that may
         become uncollectible in the future.

         Bank Premises and Equipment:

         Bank premises and equipment are stated at cost less accumulated
         depreciation. The provision for depreciation is computed using the
         straight-line method over the estimated useful lives of the assets.
         Leasehold improvements are depreciated over the lesser of the terms of
         the leases or their estimated useful lives. Expenditures for
         improvements that extend the life of an asset are capitalized and
         depreciated over the asset's remaining useful life. Any gains or losses
         realized on the disposition of premises and equipment are reflected in
         the consolidated statements of operations. Expenditures for


                                       27

<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

         repairs and maintenance are charged to other expenses as incurred.
         Computer software is recorded at cost and amortized over three years.

         Long-Lived Assets:

         The carrying value of long-lived assets and certain identifiable
         intangibles is reviewed by the Bank for impairment whenever events or
         changes in circumstances indicate that the carrying amount of an asset
         may not be recoverable. As of December 31, 2002 and 2001, no long-lived
         assets existed in which management considered impaired, as prescribed
         in SFAS No. 121, Accounting for Impairment of Long-Lived Assets and for
         Long-Lived Assets to be Disposed Of, and later superceded by SFAS No.
         144, Accounting for the Impairment or Disposal of Long-Lived Assets.

         Income Taxes:

         The provision for Federal and State income taxes is based upon the
         results of operations, adjusted for tax-exempt income. Deferred income
         taxes are provided by applying enacted statutory tax rates to temporary
         differences between financial and taxable bases.

         Temporary differences, which give rise to deferred tax assets, relate
         principally to the allowance for credit losses, accumulated
         depreciation, and operating loss carryovers.

         Temporary differences, which give rise to deferred tax liabilities,
         relate principally to accumulated depreciation, net deferred loan
         costs, and unrealized gains on securities available for sale.

         Securities Sold Under Agreements to Repurchase:

         Securities sold under agreements to repurchase are comprised of
         customer deposit agreements with daily maturities. These obligations
         are not federally insured, but are collateralized by a security
         interest in various investment securities. These pledged securities are
         segregated and maintained by a third-party institution. The amortized
         cost of these securities at December 31, 2002 and 2001 was $5,006,416
         and $3,782,064, respectively. The fair value of these securities at
         December 31, 2002 and 2001 was $5,092,500 and $3,782,106, respectively.
         The securities sold under agreements to repurchase were
         under-collateralized by approximately $320,000 as of December 31, 2002.

         Credit Risk:

         The Bank and Company have deposits in other financial institutions in
         excess of amounts insured by the Federal Deposit Insurance Corporation
         ("FDIC"). The Bank and Company had deposits and Federal funds sold of
         approximately $9,915,000 and $1,873,000 with three and one financial
         institution(s) as of December 31, 2002 and 2001, respectively.

         Cash and Cash Equivalents:

         The Bank has included cash and due from banks, interest bearing
         deposits in other financial institutions and Federal funds sold as cash
         and cash equivalents for the purpose of reporting cash flows.

         Earnings (loss) per common share:

         Basic earnings (loss) per common share is determined by dividing net
         income (loss) by the weighted average number of shares of common stock
         outstanding. Diluted earnings (loss) per share is calculated including
         the average dilutive common stock equivalents outstanding during the
         period, using the treasury stock method, unless they are anti-dilutive.
         Potential future dilutive common equivalent shares consist of stock
         warrants.


                                       28

<PAGE>
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

         Financial Statement Presentation:

         Certain amounts in the prior years' financial statements have been
         reclassified to conform to the current year's presentation.

NOTE 2. DEVELOPMENT STAGE OPERATIONS

         Through June 30, 2000, the Company devoted substantially all of its
         efforts towards establishing a new banking business and raising
         capital, and accordingly, the Company met the criteria defined by SFAS
         No. 7, Accounting and Reporting by Development Stage Enterprises. The
         Bank was fully funded and commenced lending and banking operations at
         the end of the second quarter of 2000 and was no longer considered in
         the development stage. The Company had a deficit accumulated during the
         development stage of $432,547 through June 30, 2000.

NOTE 3. INVESTMENT SECURITIES

        Investment securities are summarized as follows:


<TABLE>
<CAPTION>
                                                              Gross           Gross
                                            Amortized      Unrealized       Unrealized        Fair
                                               Cost           Gains           Losses          Value
                                            ---------      ----------       ----------        -----
        DECEMBER 31, 2002
        -----------------
        <S>                                <C>             <C>             <C>              <C>
        AVAILABLE FOR SALE:
          U.S. TREASURY (DUE OVER ONE
            TO THREE YEARS)                $ 5,006,416     $    86,084     $         --     $ 5,092,500
                                           ===========     ===========     ============     ===========
        DECEMBER 31, 2001
        -----------------
        Available for sale:
          U.S. Treasury (due within one
            year)                          $ 3,981,775     $       171               --     $ 3,981,946
                                           ===========     ===========     ============     ===========
</TABLE>


NOTE 4. LOANS

        Major categories of loans are as follows:


                                                       2002           2001
                                                   -----------    ------------
        Commercial mortgages                       $ 10,543,776   $  6,176,790
        Commercial demand and time                   19,977,922     14,497,045
        Installment                                          --         14,188
                                                   ------------   ------------
                                                     30,521,698     20,688,023
        Unearned income on loans                        (35,725)       (20,036)
                                                   ------------   ------------
                                                     30,485,973     20,667,987
        Allowance for credit losses                    (655,359)      (270,000)
                                                   ------------   ------------
                                                   $ 29,830,614   $ 20,397,987
                                                   ============   ============


                                       29
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 4. LOANS (CONTINUED)

        The Bank makes loans to customers located primarily in Anne Arundel
        County and surrounding areas of Central Maryland. Although the loan
        portfolio will be diversified, its performance will be influenced by the
        economy of the region.

        Executive officers, directors, and their affiliated interests enter into
        loan transactions with the Bank in the ordinary course of business.
        These loans are made on the same terms, including interest rates and
        collateral, as those prevailing at the time for comparable loans with
        unrelated borrowers. They do not involve more than normal risk of
        collectibility or present other unfavorable terms. At December 31, 2002
        and 2001, such loans outstanding totaled $4,458,933 and $4,320,266,
        respectively. During 2002 and 2001, loan additions were $883,450 and
        $3,791,000, respectively. During 2002 and 2001, loan repayments were
        $744,783 and $1,184,156, respectively.


        The allowance for credit losses is as follows:

                                               2000          2001
                                             ---------     ---------
        Balance, beginning of year           $ 270,000     $  90,000
        Provision for credit losses            430,000       180,000
        Recoveries                               2,000            --
        Loans charged off                      (46,641)           --
                                             ---------     ---------
        Balance, end of year                 $ 655,359     $ 270,000
                                             =========     =========

        Subsequent to year-end, management of the Bank determined that an
        automotive floor plan commercial loan, with a principal balance of
        $749,870 at December 31, 2002, may not be fully collectible. Based on
        its assessment of its loss exposure on this loan, an additional $250,000
        provision for credit losses has been recorded in the fourth quarter of
        2002. All interest on this loan has been paid in accordance with the
        terms of the loan agreement.

        Loans on which the accrual of interest has been discontinued amounted to
        $75,000 and $0 at December 31, 2002 and 2001, respectively. Interest
        that would have been accrued under the terms of these loans totaled
        $1,582 for the year ended December 31, 2002. The Bank has no commitments
        to loan additional funds to the borrowers of impaired or non-accrual
        loans.

        According to management, the Bank has no investments in troubled debt
        restructurings as of December 31, 2002 and 2001.

NOTE 5. PREMISES AND EQUIPMENT

        A summary of premises and equipment is as follows:

<TABLE>
<CAPTION>
                                                     Useful lives    2002        2001
                                                     ------------  ---------   ---------
        <S>                                            <C>         <C>         <C>
        Equipment                                      3-5 years   $ 215,852   $ 215,852
        Furniture and fixtures                          5 years       93,331      93,331
        Leasehold improvements                         4-5 years      38,351      38,351
        Software                                        3 years      148,852     148,852
                                                                   ---------   ---------
                                                                     496,386     496,386
        Accumulated depreciation and amortization                   (320,254)   (186,653)
                                                                   ---------   ---------
                                                                   $ 176,132   $ 309,733
                                                                   =========   =========
</TABLE>


                                       30
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 5. PREMISES AND EQUIPMENT (CONTINUED)

         Depreciation expense was $83,984, $84,400 and $41,650 for the years
         ended December 31, 2002, 2001 and 2000, respectively. Amortization of
         software and intangible assets was $49,617, $41,483, and $18,708 for
         the years ended December 31, 2002, 2001 and 2000, respectively.

         The Company leases a facility to serve as the executive offices for the
         Company and as the main banking office for the Bank. The facility,
         which is approximately 8,100 square feet and located in Annapolis,
         Maryland, is leased by the Company through April 2005, with three five
         year renewal options, with annual increases of 3%. Total rent expense
         relating to this agreement was $172,612, $167,444 and $121,094 for the
         years ended December 31, 2002, 2001 and 2000, respectively.

NOTE 6. DEPOSITS

        Major classifications of interest-bearing deposits are as follows:



<TABLE>
<CAPTION>
                                                             2002              2001
                                                         ------------      ------------
        <S>                                              <C>               <C>
        NOW                                              $  1,092,907      $    385,457
        Money Market                                       15,224,218         6,977,389
        Savings                                               235,941            61,406
        Certificates of Deposit, $100,000 or more          12,651,130         7,062,059
        Other time deposits                                   146,058           287,867
                                                         ------------      ------------
                                                         $ 29,350,254      $ 14,774,178
                                                         ============      ============
</TABLE>
        Interest expense on interest-bearing deposits, by category, is
        as follows:

<TABLE>
<CAPTION>
                                                             2002               2001
                                                         ------------      ------------
        <S>                                              <C>               <C>
        NOW                                              $      6,197      $      3,645
        Money Market                                          266,294           232,324
        Savings                                                 5,978             1,701
        Certificates of Deposit, $100,000 or more             412,541           315,329
        Other time deposits                                     6,330             7,063
                                                         ------------      ------------
                                                         $    697,340      $    560,062
                                                         ============      ============
</TABLE>


         At December 31, 2002, the scheduled maturities of time deposits are
         approximately as follows:

                                                     2002
                                                 ------------
                 2003                            $  7,647,000
                 2004                               4,536,000
                 2005                                 172,000
                 2006                                 147,000
                 2007                                 147,000
         2008 and thereafter                          148,000
                                                 ------------
                                                 $ 12,797,000
                                                 ============




         Deposit and repurchase agreement balances of executive officers and
         directors and their affiliated interests totaled approximately
         $8,820,000 and $6,770,000 at December 31, 2002 and 2001, respectively.

         The Bank had no brokered deposits at December 31, 2002 and 2001.


                                       31
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 7. SHORT-TERM BORROWINGS

         Notes payable to the U.S. Treasury are Federal treasury tax and loan
         deposits accepted by the Bank from its customers to be remitted on
         demand to the Federal Reserve Bank. The Bank pays interest on these
         balances at a slight discount to the Federal funds rate. The note
         payable was unsecured and secured by investment securities with an
         amortized cost of approximately $200,000 at December 31, 2002 and 2001,
         respectively.

         The Bank has received approval of unsecured credit facilities for
         short-term liquidity needs from financial institutions of $3,000,000
         and $2,000,000 at December 31, 2002 and 2001, respectively. There were
         no borrowings outstanding under these credit arrangements at December
         31, 2002 and 2001.

NOTE 8. INCOME TAXES

         Income taxes included in other liabilities are as follows:


<TABLE>
<CAPTION>
                                                            2002               2001
                                                          ---------         ---------
         <S>                                              <C>               <C>
         Deferred tax assets:
           Accumulated depreciation                       $   8,249         $      --
           Accumulated securities discount accretion             --             7,785
           Allowance for credit losses                      148,826            69,516
           Charitable contributions                             106               222
           Deferred loan fees, net                            2,749                --
           Net operating loss carryforwards                  83,161           644,031
           Reserve for unfunded commitments                   4,634                --
                                                          ---------         ---------
                                                            247,725           741,554
                                                          =========         =========

        Deferred tax liabilities:
           Accumulated depreciation                              --             5,836
           Deferred loan costs, net                              --             5,390
           Net unrealized gains on securities available
            for sale                                         29,269                58
                                                          ---------         ---------
                                                             29,269            11,284
                                                          =========         =========

        Net deferred tax asset                              218,456           730,270
        Valuation allowance                                (247,725)         (730,328)
                                                          ---------         ---------
        Net deferred tax liability                        $ (29,269)        $     (58)
                                                          =========         =========
</TABLE>

         A valuation allowance has been established for net deferred tax assets
         relating to all amounts other than unrealized gains/losses on
         securities available for sale, as the Bank has yet to attain sustained
         profitability. Operating losses of approximately $2,185,000 are
         available to offset future taxable income through 2020.


                                       32
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 9. OTHER OPERATING EXPENSES

         Other operating expenses include the following:

<TABLE>
<CAPTION>
                                                            2002         2001          2000
                                                         ---------     ---------     ---------
        <S>                                              <C>           <C>           <C>
        Correspondent service charges                    $  10,575     $   1,972     $   1,166
        Courier                                             10,650        10,572         3,400
        Credit reports                                       1,867         9,089         3,751
        Internet charges                                     8,355         3,214            --
        Loan collection expenses                            17,297            --            --
        Loan fees - SBA                                     12,661         3,828            --
        Postage                                             10,314         7,380         3,087
        Repairs and maintenance                              3,783         5,345         2,998
        Provision for losses on unfunded commitment         12,000            --            --
        Telephone                                           10,115        10,381         5,424
        Other                                               27,410        35,242        19,347
                                                         ---------     ---------     ---------
                                                         $ 125,007     $  87,023     $  39,173
                                                         =========     =========     =========
</TABLE>

NOTE 10. COMMITMENTS AND CONTINGENCIES

         Financial instruments:

         The Bank is a party to financial instruments in the normal course of
         business to meet the financing needs of its customers. These financial
         instruments include commitments to extend credit and standby letters of
         credit, which involve, to varying degrees, elements of credit and
         interest rate risk in excess of the amounts recognized in the
         consolidated financial statements.

         Outstanding loan commitments and unused lines of credit are
         approximately as follows:

<TABLE>
<CAPTION>

                                                     2002                 2001
                                                 -------------       -------------
        <S>                                      <C>                 <C>
        Loan commitments:
          Commercial                             $   3,588,000       $   1,205,000
                                                 =============       =============

        Unused lines of credit
          Commercial lines                       $   5,850,000       $   4,750,000
                                                 =============       ==============
</TABLE>

         Loan commitments and lines of credit are agreements to lend to
         customers as long as there is no violation of any conditions of the
         contracts. Loan commitments generally have interest rates reflecting
         current market conditions, fixed expiration dates, and may require
         payment of a fee. Lines of credit generally have variable interest
         rates. Some of the loan commitments and lines of credit are expected to
         expire without being drawn upon; accordingly, the total commitment
         amounts do not necessarily represent future cash requirements. The Bank
         evaluates each customer's creditworthiness on a case-by-case basis. The
         amount of collateral or other security obtained, if deemed necessary by
         the Bank upon extension of credit, is based on the Bank's credit
         evaluation. Collateral held varies but may include deposits held in
         financial institutions, U.S. Treasury securities, other marketable
         securities, accounts receivable, inventory, property and equipment,
         personal residences, income-producing commercial properties, and land
         under development. Personal guarantees are normally obtained to provide
         added security for certain commitments.


                                       33
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 10. COMMITMENTS AND CONTINGENCIES (CONTINUED)

         The Bank's exposure to credit loss in the event of nonperformance by
         the customer is the contractual amount of the commitment. Loan
         commitments and lines of credit are made on the same terms, including
         collateral, as outstanding loans. As of December 31, 2002, the Bank has
         accrued $12,000 for unfunded commitments related to these financial
         instruments with off balance sheet risk, which is included in other
         liabilities.

         Employment agreements:

         The Company has employment agreements with the Chairman of the Board of
         Directors, President, and Executive Vice President which expire in
         2004.

NOTE 11. STOCKHOLDERS' EQUITY

         Restrictions on dividends:

         Banking regulations limit the amount of dividends that may be paid
         without prior approval of the Bank's regulatory agencies. Regulatory
         approval is required to pay dividends that exceed the Bank's net
         profits for the current year plus its retained net profits for the
         preceding two years.

         Regulatory capital requirements:

         The Company and Bank are subject to various regulatory capital
         requirements administered by Federal and State banking agencies.
         Failure to meet minimum capital requirements can initiate certain
         mandatory, and possibly additional discretionary actions by regulators
         that, if undertaken, could have a direct material effect on the
         Company's financial statements. The Company and Bank must meet specific
         capital guidelines that involve quantitative measures of the Company's
         and Bank's assets, liabilities, and certain off-balance sheet items as
         calculated under regulatory accounting principles. The Company's and
         Bank's capital amounts and classification are also subject to
         qualitative judgments by the regulators about components, risk
         weightings, and other factors.

         Quantitative measures established by regulation to ensure capital
         adequacy require the Company and Bank to maintain minimum amounts and
         ratios (as defined in the regulations) of total and Tier I capital to
         risk-weighted assets and of Tier I capital to average assets.
         Management believes, as of December 31, 2002 and 2001 the Company and
         Bank meet all capital adequacy requirements to which it is subject.

         As of December 31, 2002, the most recent notification from the FDIC
         categorized the Bank as well capitalized under the regulatory framework
         for prompt corrective action. To be categorized as well capitalized the
         Bank must maintain minimum total risk-based, Tier I risk-based, and
         Tier I leverage ratios. There are no conditions or events since that
         notification that management believes have changed the Bank's category.


                                       34
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 11. STOCKHOLDERS' EQUITY (CONTINUED)

         A Comparison of capital as of December 31, 2002 and 2001 with minimum
         requirements is approximately as follows:
<TABLE>
<CAPTION>
                                                                                               TO BE WELL CAPITALIZED
                                                                            FOR CAPITAL              UNDER PROMPT
                                                       ACTUAL            ADEQUACY PURPOSES            PROVISIONS
                                               AMOUNT          RATIO      AMOUNT      RATIO       AMOUNT        RATIO
                                              -----------      -----    -----------   -----    -----------      -----
         <S>                                  <C>               <C>     <C>            <C>     <C>              <C>
         As of December 31, 2002
          Total Capital
           (to Risk Weighted Assets)
           Company                            $ 5,698,248       18.9%   $ 2,408,000    8.0%               N/A
           Bank                                 4,712,499       15.7%     2,404,000    8.0%     $ 3,005,000     10.0%

         Tier I Capital
          (to Risk Weighted Assets)
          Company                               5,319,060       17.7%     1,204,000    4.0%               N/A
          Bank                                  4,333,311       14.4%     1,202,000    4.0%       1,803,000      6.0%

         Tier I Capital
          (to Average Assets)
          Company                               5,319,060       12.3%     1,726,000    4.0%               N/A
          Bank                                  4,333,311       10.1%     1,714,000    4.0%       2,143,000      5.0%

         As of December 31, 2001
          Total Capital
           (to Risk Weighted Assets)
           Company                            $ 6,707,000       33.8%   $ 1,588,000    8.0%               N/A
           Bank                                 5,184,000       26.2%     1,582,000    8.0%     $ 1,977,000     10.0%

         Tier I Capital
          (to Risk Weighted Assets)
           Company                              6,460,000       32.5%       794,000    4.0%               N/A
           Bank                                 4,936,000       25.0%       791,000    4.0%       1,186,000      6.0%

         Tier I Capital
          (to Average Assets)
           Company                              6,460,000       24.2%     1,066,000    4.0%               N/A
           Bank                                 4,936,000       19.0%     1,039,000    4.0%       1,298,000      5.0%
</TABLE>

NOTE 12. WARRANT AND OPTION PLANS

        The Board of Directors of the Company has adopted a Warrant Plan that
        will issue non-transferable warrants to each organizer. At December 31,
        2002 and 2001, 123,337 shares were obligated but not issued under the
        plan.

        The plan calls for warrants to vest over three years at a rate of 30%,
        30%, and 40%, respectively and entitles each holder thereof to purchase
        one share of stock. At December 31, 2002, vested warrants totaled
        74,002. The exercise price of each warrant is $10 per share and must be
        exercised, unless earlier called by the Company, not later than 10 years
        from August 18, 2000. Generally, vested warrants also expire one year
        following the date that the organizer ceases to be a director of the
        Bank. Warrants may


                                       35
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 12. WARRANT AND OPTION PLANS (CONTINUED)

        be called by the Company in the event that a merger, sale, acquisition,
        share exchange or other similar extraordinary event is approved by the
        Board of Directors of the Company. Upon call by the Company, warrant
        holders have 90 days in which to exercise their warrants. If they are
        not exercised, the Company will pay the warrant holder the difference
        between the exercise price of the warrant and the fair market value of
        the stock of the Company at the time of the closing of the transaction.
        In the event that an applicable Federal or state regulatory authority
        determine that the Bank's capital fails to meet minimum capital
        requirements, such regulatory authority may direct the Company to call
        all outstanding warrants. Any warrants not exercised will be thereafter
        forfeited. At December 31, 2002, no warrants had been exercised.

        The Board of Directors of the Company also intends to adopt a stock
        option plan as a performance incentive for the Bank's officers and key
        employees. The employment contracts, signed by the Chairman of the
        Board, President, and Executive Vice President, obligates the Company to
        issue non-transferable stock options in the amount of 2,500, 10,000, and
        7,500, respectively, at an exercise price of $10 per share. At December
        31, 2002 and 2001, no stock options had been issued by the Company.

NOTE 13. EMPLOYEE BENEFIT PLANS

        The Bank has employee benefit programs that include health and dental
        insurance, life and long-term and short-term disability insurance and a
        401(k) retirement plan under which the Bank made no matching
        contributions in 2002, but will commence a 50% match of eligible
        employee contributions up to 6% of base salary in 2003.

NOTE 14. LOSSES PER COMMON SHARE

<TABLE>
<CAPTION>

        Losses per common share are calculated as follows:

                                                                2002              2001            2000
                                                            -----------       -----------     -----------
        <S>                                                 <C>               <C>             <C>

        Basic
          Net loss                                          $  (643,298)      $  (816,645)    $  (887,851)
          Weighted average common shares outstanding            822,250           822,250         487,763
          Basic net loss per share                          $     (0.78)      $     (0.99)    $     (1.82)
</TABLE>

        Diluted losses per share calculations were not applicable for 2002,
        2001, and 2000 since consideration of outstanding warrants would have
        been anti-dilutive.

NOTE 15. RELATED PARTY TRANSACTIONS

        The Bank paid $4,831, $12,670 and $90,370 during the years ended
        December 31, 2002, 2001 and 2000 respectively, to a computer consulting
        firm of which a Director is also a principal. Expenditures included
        computer hardware, software, installation, training, and support
        services.

        The Bank paid $82,749, $71,827 and $29,038 during the years ended
        December 31, 2002, 2001 and 2000 respectively, for various group
        insurance benefits for which a Director will ultimately receive
        commission compensation.

        The Bank also paid $2,089, $4,968 and $2,115 during the years ended
        December 31, 2002, 2001 and 2000 respectively, for office supplies to a
        company of which a Director is also a principal.

        Expenses of approximately $21,267, $5,400, and $61,000 were paid for
        legal services with a law firm, of which the Chairman of the Board of
        the Company is a principal, for the years ended December 31, 2002, 2001
        and 2000, respectively. All of the above transactions appear to have
        been consummated on terms equivalent to those that prevail in arms
        length transactions.


                                       36
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 16.  FAIR VALUES OF FINANCIAL INSTRUMENTS

In accordance with the disclosure requirements of SFAS No. 107, the estimated
fair value and the related carrying values of the Company's financial
instruments are as follows:

<TABLE>
<CAPTION>
                                                                                       2002
                                                                       ---------------------------------
                                                                            CARRYING           FAIR
                                                                             AMOUNT            VALUE
                                                                       ---------------------------------
        <S>                                                             <C>                 <C>
        FINANCIAL ASSETS
          Cash and due from banks                                       $ 1,684,719         $ 1,684,719
          Interest bearing deposits in other financial institutions         230,500             230,500
          Federal funds sold                                              8,547,325           8,547,325
          Investment securities available for sale, at fair value         5,092,500           5,092,500
          Federal Reserve Bank stock, at cost                               139,450             139,450
          Atlantic Central Bankers Bank stock, at cost                       37,000              37,000
          Loans, less allowance for credit losses                        29,830,614          29,830,614
          Accrued Interest Receivable                                       135,781             135,781

        FINANCIAL LIABILITIES
          Noninterest-bearing demand                                      5,575,800           5,575,800
          Interest-bearing                                               29,350,254          29,350,254
          Securities sold under agreements to repurchase                  5,325,946           5,325,946
          Accrued interest payable on deposits                               22,245              22,245
</TABLE>

        For purposes of the disclosures of estimated fair value, the following
        assumptions were used.

        Loans:

        The fair value of loans is considered to approximate carrying value
        because of the ability to re-price at short-term intervals.

        Investment securities:

        Estimated fair values are based on quoted market prices.

        Deposits:

        The estimated fair value of deposits with no stated maturity, such as
        noninterest-bearing demand deposits, savings, NOW accounts and money
        market accounts, is equal to the amount payable on demand at the
        reporting date (that is, their carrying amounts).

        Other assets and liabilities:

        The estimated fair values for cash and due from banks, interest-bearing
        deposits in other financial institutions, Federal funds sold and accrued
        interest receivable and payable are considered to approximate cost
        because of their short-term nature.

        Other assets and liabilities of the Bank that are not defined as
        financial instruments are not included in the above disclosures, such as
        property and equipment. In addition, non-financial instruments typically
        not recognized in the financial statements nevertheless may have value
        but are not included in the above disclosures. These include, among
        other items, the estimated earnings power of core deposit accounts, the
        trained work force, customer goodwill, and similar items.


                                       37
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 17.  RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

         In June 2002, the FASB issued statements of Financial Accounting
         Standards No. 146, Accounting for Costs Associated with Exit or
         Disposal Activities, ("SFAS 146"). This statement addresses financial
         accounting and reporting for costs associated with exit or disposal
         activities which changes the current practice of accounting for these
         transactions by changing the timing of the recognition of exit or
         disposal costs and generally requires such costs to be recognized when
         the liability is incurred rather than on the date the entity commits to
         a plan of exit or disposal. It also requires such liabilities to be
         measured at fair value.

         The provisions of SFAS 146 are effective for exit or disposal
         activities initiated after December 31, 2002. In management's opinion,
         the Company and the Bank are currently in compliance with all
         applicable provisions of this pronouncement.

NOTE 18. PARENT COMPANY FINANCIAL INFORMATION

         The Balance Sheets, Statements of Operations and Statements of Cash
         Flows for CommerceFirst Bancorp, Inc. (Parent Only) are presented
         below:

<TABLE>
<CAPTION>
                                    BALANCE SHEETS
        -----------------------------------------------------------------------------
        DECEMBER 31,                                         2002          2001
        -----------------------------------------------------------------------------
                                        ASSETS
        <S>                                              <C>            <C>
        Cash                                             $ 1,230,500    $ 1,269,132
        Investment in CommerceFirst Bank                   4,390,128      4,936,340
        Other Assets                                           5,248          7,000
                                                         -----------    -----------
               TOTAL ASSETS                              $ 5,625,876    $ 6,212,472
                                                         ===========    ===========

                                  STOCKHOLDERS' EQUITY

        Stockholders' equity:
          Common Stock                                   $     8,223    $     8,223
          Surplus                                          8,099,012      8,099,012
          Accumulated deficit                             (2,538,174)    (1,894,876)
          Accumulated other comprehensive income              56,815            113
                                                         -----------    -----------
               TOTAL STOCKHOLDERS' EQUITY                $ 5,625,876    $ 6,212,472
                                                         ===========    ===========


</TABLE>

<TABLE>
<CAPTION>

                                       STATEMENTS OF OPERATIONS
                              YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000

        ------------------------------------------------------------------------------------------------
                                                                   2002          2001           2000
        ------------------------------------------------------------------------------------------------

        <S>                                                     <C>           <C>           <C>
        Income                                                  $    3,588    $   45,933    $  115,188
        Expenses                                                   (43,972)      (43,083)     (258,761)
                                                                ----------    ----------    ----------
        (Loss) income before equity in loss of subsidiary          (40,384)        2,850      (143,573)
        Net loss of subsidiary                                    (602,914)     (819,495)     (744,278)
                                                                ----------    ----------    ----------

             NET LOSS                                           $ (643,298)   $ (816,645)   $ (887,851)
                                                                ==========    ==========    ==========
</TABLE>


                                       38

<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 18. PARENT COMPANY FINANCIAL INFORMATION (CONTINUED)


                                           STATEMENTS OF CASH FLOWS
                                   YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000
<TABLE>
<CAPTION>
        ----------------------------------------------------------------------------------------------------------
                                                                        2002            2001             2000
        ----------------------------------------------------------------------------------------------------------
        <S>                                                       <C>              <C>              <C>
        CASH FLOWS FROM OPERATING ACTIVITIES:
          Net loss                                                $   (643,298)    $   (816,645)    $   (887,851)
          Adjustments to reconcile net loss to net
           cash used by operating activities:
             Decrease (increase) in other assets                         1,752           (4,000)          (3,000)
             Decrease in other liabilities                                  --               --         (101,969)
             Net loss of subsidiary                                    602,914          819,495          744,278
                                                                  ------------     ------------     ------------
           Net cash used by operating activities                       (38,632)          (1,150)        (248,542)
                                                                  ------------     ------------     ------------

        CASH FLOWS FROM INVESTING ACTIVITIES:
          Investment in subsidiary                                          --               --       (6,500,000)
          Proceeds fron sales of premises and equipment                     --               --            7,012
                                                                  ------------     ------------     ------------

           Net cash used by investing activities                            --               --       (6,492,988)
                                                                  ------------     ------------     ------------

        CASH FLOWS FROM FINANCING ACTIVITIES:
          Issuance of common stock                                          --               --        7,897,501
          Costs of raising capital                                          --               --          (29,463)
                                                                  ------------     ------------     ------------

          Net cash provided by financing activities                         --               --        7,868,038
                                                                  ------------     ------------     ------------

        (DECREASE) INCREASE IN CASH                                    (38,632)          (1,150)       1,126,508

        CASH, BEGINNING OF YEAR                                      1,269,132        1,270,282          143,774
                                                                  ------------     ------------     ------------

        CASH, END OF YEAR                                         $  1,230,500     $  1,269,132     $  1,270,282
                                                                  ============     ============     ============
</TABLE>


                                       39
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 19. QUARTERLY RESULTS OF OPERATIONS (Unaudited)

<TABLE>
<CAPTION>
                  2002                                                      Three Months ended,
        ---------------------------------------------------------------------------------------------------------
           (Dollars in thousands
           except per share amounts)                  December 31      September 30       June 30      March 31
        ---------------------------------------------------------------------------------------------------------

        <S>                                             <C>              <C>             <C>          <C>
        Interest income                                 $   603          $   567         $   481      $   417
        Interest expense                                    210              200             168          158
        Net interest income                                 394              367             313          259
        Provision for credit losses                         295               45              45           45
        Net loss                                            266               60             142          175
        Net loss per share (basic and diluted)          $ (0.33)         $ (0.07)        $ (0.17)     $ (0.21)
</TABLE>

<TABLE>
<CAPTION>
                  2001                                                      Three Months ended,
        ---------------------------------------------------------------------------------------------------------
           (Dollars in thousands
           except per share amounts)                  December 31      September 30       June 30      March 31
        ---------------------------------------------------------------------------------------------------------

        <S>                                             <C>              <C>             <C>          <C>
        Interest income                                 $   421          $   411         $   309      $   312
        Interest expense                                    159              165             126          132
        Net interest income                                 262              246             183          180
        Provision for credit losses                          45               45              45           45
        Net loss                                            162              164             251          240
        Net loss per share (basic and diluted)          $ (0.20)         $ (0.20)        $ (0.30)     $ (0.29)
</TABLE>

<TABLE>
<CAPTION>
                  2000                                                      Three Months ended,
        ---------------------------------------------------------------------------------------------------------
           (Dollars in thousands
           except per share amounts)                  December 31      September 30       June 30      March 31
        ---------------------------------------------------------------------------------------------------------

        <S>                                             <C>              <C>             <C>          <C>
        Interest income                                 $   243          $   133         $    75      $     9
        Interest expense                                     81               19              --           --
        Net interest income                                 162              114              75            9
        Provision for credit losses                          45               45              --           --
        Net loss                                            305              341              85          174
        Net loss per share (basic and diluted)          $ (0.27)         $ (0.43)        $ (0.30)     $ (3.21)
</TABLE>



                                       40
<PAGE>


ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS.

         None.

                                    PART III

ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.

         The Company's Bylaws provide that the number of Directors of the
Company shall be fixed from time to time by the Board of Directors but shall not
be less than 3 or more than 25. The Board has fixed the current number of
Directors at 5. The Company's Bylaws provide that the Board of Directors shall
be divided into three classes, one of which is elected at each annual meeting of
shareholders to serve for a three-year term. The Bylaws may be amended by action
of the Board of Directors. All of the Company's current Directors were duly
elected to the Board and will continue to serve as Directors until their
successors are elected and qualified.

         Set forth below is a description of the principal occupation and
business experience of each of the directors and executive officers of the
Company. Except as expressly indicated below, each person has been engaged in
his principal occupation for at least five years.

     Milton D. Jernigan, II. Mr. Jernigan, 48, an attorney engaged in private
practice since 1982, is a co-founder and is a co-managing principal of the law
firm of McNamee, Hosea, Jernigan, Kim, Greenan & Walker, P.A. Mr. Jernigan is
the Resident Principal-in-Charge of the firm's Annapolis office. Mr. Jernigan's
practice areas have included corporate, business, real estate, tax, banking and
regulatory law and he has represented numerous businesses, companies and their
owners in various corporate, real estate, tax and planning matters. Since 1984,
Mr. Jernigan's practice has included representing banks and bank holding
companies in organization, capital formation, mergers and acquisitions, general
business, lending and other matters, including matters before the Federal
Deposit Insurance Corporation, the Federal Reserve Board, the Federal Reserve
Bank of Richmond, the Federal Reserve Bank of Cleveland, the Office of the
Comptroller of the Currency, the Maryland State Bank Commissioner, the
Securities and Exchange Commission and the Maryland State Securities
Commissioner. In 1989 Mr. Jernigan was one of the founding organizers and
members of the Board of Directors of the former Commerce Bank in College Park,
Maryland. Mr. Jernigan served as General Counsel to Commerce Bank from its
organization until its acquisition by MainStreet BankGroup in December 1997.
MainStreet BankGroup was subsequently acquired by BB&T Corporation in 1999.
Commerce Bank's operations continue today as a part of BB&T Bank. From 1989
until 1993, Mr. Jernigan served as a member of the Board of Directors of
Commerce Bank and served on its Executive, Loan, Compensation and Strategic
Planning Committees. Mr. Jernigan is a resident of Annapolis, Maryland and is
active in local chambers of commerce, service and civic organizations, including
serving on the Board of Directors of the Annapolis and Anne Arundel County
Chamber of Commerce and the Board of Trustees of the Anne Arundel County Bar
Association. Mr. Jernigan is a founding organizer of the Company and its bank
subsidiary and is a member of the Board of Directors of the Company, where he
serves as Chairman of the Board. Mr. Jernigan also serves as a member of and as
Chairman of the Board of Directors of CommerceFirst Bank, as a member and
Chairman of the Executive Committee of the Board of CommerceFirst Bank and as a
member of the Loan and Compensation Committees of the Bank. Mr. Jernigan's
current term as director of the Company expires in 2005.

         Alvin R. Maier. Mr. Maier, 69, a private investor, until his retirement
in 2001 was engaged in the business of manufacturing and selling building
supplies as President of Ernest Maier, Inc. Mr. Maier had been a corporate
officer of Ernest Maier, Inc. since 1955. Mr. Maier was one of the original
organizers and directors of Commerce Bank. Mr. Maier served as Chairman of the
Board of Commerce Bank (and following its acquisition by MainStreet) from 1989
until the acquisition of MainStreet by BB&T Corporation in 1999; he served on
the bank's Executive, Loan, Compensation and Strategic Planning Committees. A
Korean War veteran, Mr. Maier is a resident of Anne Arundel County and is active
in several local service and civic organizations, including Rotary International
in which he has a 32-year perfect attendance record. Mr. Maier is a founding
organizer of the Company and a member of the Board of Directors of the Company
and the Bank. Mr. Maier's current term as director of the Company expires in
2003.


                                       41
<PAGE>

         Richard J. Morgan. Mr. Morgan, 55, until joining the Company and the
Bank, was involved as a cabinet level officer in the County Executive
Administration, in the management of economic and community development
programs, focusing on marketing, project and financial management, throughout
Anne Arundel County as President and Chief Executive Officer of Anne Arundel
Economic Development Corporation ("AAEDC"), a position he held since 1997. Mr.
Morgan was awarded the 2002 Business Leader of the Year by both the Annapolis &
Anne Arundel County Chamber of Commerce and the Anne Arundel County
Entrepreneur's Exchange; the Service Excellence Award by the Anne Arundel Trade
Council in 1998 and County Business Leader of the Year in 1994. From 1990 to
1997, Mr. Morgan served as President and Chief Executive Officer of Annapolis
National Bank. Under Mr. Morgan's leadership, Annapolis National Bank became a
successful, well-capitalized and profitable commercial bank and earned an
"Outstanding" CRA rating. Annapolis National Bank became one of Maryland's top
five SBA lenders and Mr. Morgan was selected as the SBA's Financial Services
Leader of the Year for the State of Maryland in 1994. Mr. Morgan's has also
served as Chief Financial Officer and Group Vice President of the Toddson
Company, Inc.; Chief Financial Officer and Group Vice President of the Phillips
Corporation; Regional Vice President and Loan Officer of Maryland National Bank
and served in commercial lending roles with Marine Midland Bank in New York from
1970 to 1977. At Maryland National Bank, he was responsible for building the
commercial loan portfolio in the Washington suburban market from zero to $150
million. Mr. Morgan has over 30 years of banking and financial management
experience and has served on numerous boards, commissions and community service
groups in Annapolis and Anne Arundel County including as Board member of the
Anne Arundel Medical Center; Board member and Chair of United Way of Anne
Arundel County; Board and Executive Committee of the Annapolis and Anne Arundel
Chamber of Commerce (formerly Trade Council) and Chair of the Chambers Economic
Development Committee; State of Maryland's Neighborhood Revitalization Loan
Committee; and the Treasurer and member of the Executive Committee of the
Maryland Economic Development Association; Board and Executive Committee of the
Anne Arundel Community College Foundation; Board member and Chair for Executive
Leadership Program for Leadership Anne Arundel. Mr. Morgan is a founding
organizer of the Company and a member of the Board of Directors of the Company
and the Bank. Mr. Morgan's current term as director of the Company expires in
2003.

         Lamont Thomas. Mr. Thomas, 62, until joining the Company and the Bank,
served as the Executive Vice President and Treasurer (chief operating and
financial officer) of Commerce Bank in College Park, Maryland from September
1989 until July 1999. Mr. Thomas was one of the original organizers and
directors of Commerce Bank and served as a director until MainStreet's
acquisition by BB&T in 1999. As a director, Mr. Thomas served on Commerce Bank's
Executive, Asset/Liability and Strategic Planning Committees. From 1976 until
the organization of Commerce Bank, Mr. Thomas managed numerous corporate
functions of Citizens Bank of Maryland, a then $1.8 billion commercial bank with
a 100-plus-branch network in the Washington D.C. area. As Vice President and
Treasurer, Mr. Thomas was also responsible for liaison with the Federal Deposit
Insurance Corporation and the Maryland State Banking Department. Mr. Thomas is a
founding organizer of the Company and a member of the Board of Directors of the
Company and the Bank. Mr. Thomas's current term as director of the Company
expires in 2004.

         Edward B. Howlin, Jr. Mr. Howlin, 66, is the Chairman and Chief
Executive Officer of Howlin Realty Management, Inc., a real estate holding,
management and development firm, and of Edward B. Howlin, Inc., a management and
holding company, and of its subsidiary companies, Dunkirk Supply, Inc. and
Howlin Concrete, Inc. In addition to real estate management and development, the
Howlin companies construct residential subdivisions and design, manufacture and
sell construction components, systems and supplies to various commercial,
residential and government projects primarily in Southern Maryland. Mr. Howlin
is a founding organizer of the Company and a member of the Board of Directors of
the Company and the Bank. Mr. Howlin's current term as director of the Company
expires in 2004.


                                       42
<PAGE>

ITEM 10. EXECUTIVE COMPENSATION.

The following table sets forth a comprehensive overview of the compensation for
all executive officers of the Company who received total salary and bonus of
$100,000 or more during the fiscal years ended December 31, 2002.

                           SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
                                                                                      Long-term
                                                                                    Compensation
                                                       Annual Compensation              Awards
                                                  -----------------------------   ------------------
                                                                                      Securities           All Other
        Name and Principal Position               Year       Salary       Bonus   Underlying Options     Compenstion(s)
        ---------------------------               ----       ------       -----   ------------------     --------------

        <S>                                       <C>       <C>             <C>            <C>              <C>
        Richard J. Morgan                         2002      $135,000        $0             0(1)             $6,928(2)
        President and Chief Executive             2001      $125,000        $0             0                $6,696(3)
        Officer of the Company and                2000      $145,539        $0             0                $3,706(4)
        the Bank


        Lamont Thomas                             2002      $130,000        $0             0(5)             $7,473(6)
        Executive Vice President and              2001      $120,000        $0             0                $7,117(7)
        Chief Operating Officer of the            2000      $137,797        $0             0                $4,127(8)
        Company and the Bank
</TABLE>
        --------------------------------------
        (1) Mr. Morgan is entitled to receive options to purchase 10,000 shares
            of Common Stock, which have not yet been granted.
        (2) Represents insurance premium of $948 and car allowance of $5,980.
        (3) Represents insurance premium of $716 and car allowance of $5,980.
        (4) Represents insurance premium of $716 and car allowance of $2,990.
        (5) Mr. Thomas is entitled to receive options to purchase 7,500 shares
            of Common Stock, which have not yet been granted.
        (6) Represents insurance premium of $1,493 and car allowance of $5,980.
        (7) Represents insurance premium of $1,137 and car allowance of $5,980.
        (8) Represents insurance premium of $1,137 and car allowance of $2,990.

         Employment Agreements. Mr. Morgan and Mr. Thomas each has an employment
agreement with the Company pursuant to which they serve as President and Chief
Executive Officer of the Bank, and Executive Vice President and Chief Operating
Officer of the Bank, respectively.

         President's Employment Agreement. Under his employment agreement, Mr.
Morgan is entitled to receive a 2003 base salary of $140,000, a term life
insurance policy in the amount of $300,000, and options (which have not yet been
issued) to purchase 10,000 shares of common stock at an exercise price of $10.00
per share. Mr. Morgan is also entitled to receive bonuses and additional grants
of options as determined by the Board of Directors, and to participate in all
other health, welfare, benefit, stock, option and bonus plans, if any, generally
available to officers or employees of the Company. Mr. Morgan is also entitled
to the use of a leased vehicle or a comparable vehicle allowance. The term of
Mr. Morgan's employment agreement expires on August 2, 2004 unless sooner
terminated. If the agreement is terminated by the Company without cause, the
Company will continue to pay Mr. Morgan his annual compensation and benefits as
severance compensation for a period of 12 months. In the event of any change in
control (as defined) of the Company, Mr. Morgan may continue his employment,
execute a new employment agreement on mutually agreeable terms or resign his
employment. In the event that Mr. Morgan resigns or is terminated within 12
months of the change in control, Mr. Morgan will be entitled to the sum of twice
the base salary and bonuses paid to him during the 12 months immediately
preceding the change in control.

         Executive Vice President's Employment Agreement. Under his employment
agreement, Mr. Thomas is entitled to receive a 2003 base salary of $135,000, a
term life insurance policy in the amount of $200,000, and options (which have
not yet been issued) to purchase 7,500 shares of common stock at an exercise
price of $10.00 per share. Mr. Thomas is also entitled to receive bonuses and
additional grants of options as determined by the Board of Directors, and to
participate in all other health, welfare, benefit, stock, option and bonus
plans, if any, generally available to officers or employees of the Company. Mr.
Thomas is also entitled to the use of a leased vehicle or a comparable


                                       43
<PAGE>

vehicle allowance. The term of Mr. Thomas' employment agreement expires on
August 1, 2004 unless sooner terminated. If the agreement is terminated by the
Company without cause, the Company will continue to pay Mr. Thomas his annual
compensation and benefits as severance compensation for a period of 12 months.
In the event of any change in control (as defined) of the Company, Mr. Thomas
may continue his employment, execute a new employment agreement on mutually
agreeable terms or resign his employment. In the event that Mr. Thomas resigns
or is terminated within 12 months of the change in control, Mr. Thomas will be
entitled to the sum of twice the base salary and bonuses paid to him during the
12 months immediately preceding the change in control.

         Employee Benefit Plans. The Bank provides a benefit program that
includes health and dental insurance, life and long term and short-term
disability insurance and a 401(k) plan under which the Company made no matching
contributions in 2002 but will commence a 50% match of eligible employee
contributions up to 6% of base salary in 2003.

DIRECTOR COMPENSATION

          Directors of the Company and Bank did not receive compensation for
membership on the Board or attendance at Board or committee meetings in 2001;
however, such compensation may be considered at some future date. Under his
employment agreement with the Company, Mr. Jernigan is entitled to receive
$34,500 in 2003 for service as Chairman of the Boards of Directors of the
Company and the Bank, a term life insurance policy in the amount of $100,000,
and options (which have not yet been issued) to purchase 2,500 shares of common
stock at an exercise price of $10.00 per share. He is also entitled to receive
cash bonuses and additional grants of options as determined by the Board of
Directors. The term of Mr. Jernigan's employment agreement expired on July 14,
2002; that contract has been extended to expire on July 14, 2004 unless sooner
terminated, with no other change in terms. If the agreement is terminated by the
Company without cause, the Company will continue to pay his annual compensation
and benefits as severance compensation for a period of 12 months. In the event
of any change in control (as defined) of the Company, Mr. Jernigan may continue
his employment, execute a new employment agreement on mutually agreeable terms
or resign his employment. In the event that Mr. Jernigan resigns or is
terminated within 12 months of the change in control, Mr. Jernigan will be
entitled to the sum of twice the base salary and bonuses paid to him during the
12 months immediately preceding the change in control.

ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

                  The following table sets forth certain information as of
December 31, 2002 concerning the number and percentage of shares of the
Company's Common Stock beneficially owned by its directors, nominee for
director, executive officers the compensation of which is disclosed herein, and
by its directors and all executive officers as a group, as well as information
regarding each other person known by the Company to own in excess of 5% of the
outstanding Common Stock. Except as otherwise indicated, all shares are owned
directly, and the named person possesses sole voting and sole investment power
with respect to all such shares. Except as set forth below, the Company knows of
no other person or persons, who beneficially own in excess of 5% of the
Company's Common Stock. Further, the Company is not aware of any arrangement
that at a subsequent date may result in a change of control of the Company.


                                       44
<PAGE>


<TABLE>
<CAPTION>
                                                 Security Ownership Table

Name                             Age     Position                        Number of Shares    Percentage(1)
----------------------------------------------------------------------------------------------------------
<S>                              <C>                                              <C>              <C>
Milton J. Jernigan II            48      Chairman of the Board of the             26,600(2)        3.24%
                                         Company and the Bank

Alvin R. Maier                   69      Vice Chairman and Treasurer              78,100(3)        9.50%
                                         of the Company; Vice Chairman
                                         of the Bank

Richard J. Morgan                55      President and CEO of the                  7,000(4)        0.85%
                                         Company and the Bank

Lamont Thomas                    62      Executive Vice President of the          20,000(5)        2.43%
                                         Company and the Bank; Treasurer
                                         of the Bank

Edward B. Howlin, Jr.            66      Director of the Company and             100,000(6)       12.16%
                                         the Bank                                -------          ------

All directors and executive officers of
the Company as a group (5 persons)                                               231,700          28.18%
                                                                                 ========         ======
</TABLE>
---------------------------------

1    Represents percentage of 822,250 shares issued and outstanding as of
     March 1, 2003. At March 1, 2003 there were no outstanding options or
     warrants that were exercisable within 60 days of March 1, 2003.
2    Does not include warrants to purchase 8,876 shares at an exercise price of
     $10.00 per share or options to purchase 2,500 shares, also at an exercise
     price of $10.00 per share; neither the warrants nor the options have been
     physically issued.
3    Does not include warrants to purchase 16,965 shares at an exercise price of
     $10.00 per share; the warrants have not been physically issued.
4    Does not include warrants to purchase 6,072 shares at an exercise price of
     $10.00 per shares or options to purchase 10,000 shares also at an exercise
     price of $10.00 per share; neither the warrants nor the options have been
     physically issued.
5    Does not include warrants to purchase 8,125 shares at an exercise price of
     $10.00 per share or options to purchase 7,500 shares, also at an exercise
     price of $10.00 per share; neither the warrants nor the options have been
     physically issued.
6    Does not include warrants to purchase 20,320 shares at an exercise price of
     $10.00 per share, the warrants have not been physically issued.


         Securities Authorized for Issuance Under Equity Compensation Plans. The
following table sets forth information regarding outstanding options and other
rights to purchase common stock under the Company's compensation plans.

<TABLE>
<CAPTION>
                                          Equity Compensation Plan Information
                                                                                                           Number of securities
                                                                                                         remaining available for
                                                                                                       future issuance under equity
                               Number of securities to be issued     Weighted average exercise              compensation plans
                                  upon exercise of outstanding       price of outstanding options,        (excluding securities
Plan Category                     options warrants and rights             warrants and rights             reflected in column (a)
----------------------------------------------------------------------------------------------------------------------------------
<S>                                            <C>                          <C>                                    <C>
                                               (a)                          (b)                                      (c)

Equity compensation plans approved by
security holders(1)                             0                           N/A                                       0
Equity compensation plans not approved by
security holders                                0(1)                        (1)                                    143,337(1)
                                          ----------------------------------------------------------------------------------------
              Total                             0(1)                        (1)                                    143,337(1)
                                          ========================================================================================
</TABLE>



                                       45
<PAGE>

(1) Column (c) includes, and column (a) does not reflect, 123,337 shares of
common stock subject to issuance upon the exercise of warrants issuable to
organizers of the Company and Bank under the Organizer's Agreement and related
Warrant Plan, which provided for the issuance of warrants to purchase an
aggregate of 15% of the number of shares sold in the Company's initial
registered offering of shares of its common stock to organizers. The warrants,
which have not been physically issued as of the date hereof, but to which the
organizers are entitled, vested over a three-year period, ending in August 2003,
and have a term ending in August 2010. The warrants are subject to call by the
Company upon the occurrence of certain events, and are subject to mandatory
exercise or forfeiture upon certain regulatory events. Column (c) also includes,
and column (a) does not reflect, options to purchase 20,000 shares of common
stock at an exercise price of $10.00 per share issuable to certain officers of
the Company under their employment agreements, described in response to Item 10
hereof. No additional options are required to be issued under the employment
agreements.

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

         The Bank has had, and expects to have in the future, banking
transactions in the ordinary course of business with some of its and the
Company's directors, officers, and employees and their associates. In the past,
substantially all of such transactions have been on the same terms, including
interest rates, maturities and collateral requirements as those prevailing at
the time for comparable transactions with non-affiliated persons and did not
involve more than the normal risk of collectibility or present other unfavorable
features.

         The maximum aggregate amount of loans during 2002 to officers,
directors and their related interests amounted to $ 4,902,562, representing
approximately 83.4% of the Company's total shareholders' equity at December 31,
2002. In the opinion of the Board of Directors, the terms of these loans are no
less favorable to the Bank than terms of the loans from the Bank to unaffiliated
parties. On December 31, 2002, the aggregate amount of loans outstanding to
officers, directors or their related interests was $4,458,933. At the time each
loan was made, management believed that the loan involved no more than the
normal risk of collectibility and did not present other unfavorable features.
None of such loans were classified as Substandard, Doubtful or Loss.

         During 2002, the Bank paid a computer consulting firm of which Mr.
Watson, a director of the Bank, is a principal, $4,831 for software support and
related services; and in 2001, $12,670 for software support and related
services. During 2002, the Company and the Bank paid the law firm of which Mr.
Jernigan, the Chairman of the Board of Directors, is a principal, $21,267 for
legal services; and in 2001, $5,400 for legal services. During 2002, the Bank
paid $82,749 for various group insurance benefits for which Mr. Watts, a
director of the Bank, will ultimately received commission compensation; and in
2001, $71,827 for similar services. During 2002, the Bank paid a printing
company of which Mr. Shenk, a director of the Bank, is a principal, $2,089 for
office supplies; and in 2001, and $4,968 for similar supplies. The Company and
Bank believe that the terms of these transactions were at least as favorable to
the Company and Bank as could have been obtained from unaffiliated parties.



                                       46
<PAGE>


ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-K

(A) EXHIBITS

Exhibit No.   Description of Exhibits

3(a)          Certificate of Incorporation of the Company, as amended (1)
3(b)          Bylaws of the Company (1)
10(a)         Employment Agreement between Richard J. Morgan and the Company (2)
10(b)         Employment Agreement between Lamont Thomas and the Company (3)
11            Statement Regarding Computation of Per Share Income
21            Subsidiaries of the Registrant

        The sole subsidiary of the Registrant is CommerceFirst Bank, a Maryland
chartered commercial bank.

99(a)         Amended and Restated Organizers Agreement (4)
99(b)         Certification of Richard J. Morgan, President and Chief
              Executive Officer
99(c)         Certification of Lamont Thomas, Executive Vice President and
              Chief Financial Officer

--------------------

(1)    Incorporated  by  reference  to exhibit of the same number filed with the
       Company's  Registration  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 Form SB-2, as amended) (File No. 333-91817)
(3)    Incorporated by reference to exhibits 10(c) to the Company's to
       Registration Statement on Form SB-2, as amended) (File No. 333-91817)
(4)    Incorporated by reference to Exhibits 99(b) and 99(d) to the Company's to
       Registration Statement on Form SB-2, as amended) (File No. 333-91817)

(3)    (B) REPORTS ON FORM 8-K

       No reports on Form 8-K were filed during the fourth quarter of 2002.

ITEM 14.  CONTROLS AND PROCEDURES

         Within the ninety days prior to the filing of this report, the
Company's management, under the supervision and with the participation of the
Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness
of the design and operation of the Company's disclosure controls and procedures,
as defined in Rule 13a-14 under the Securities Exchange Act of 1934. Based on
that evaluation, the Chief Executive Officer and Chief Financial Officer
concluded that the Company's disclosure controls and procedures were adequate.
There were no significant changes (including corrective actions with regard to
significant deficiencies or material weaknesses) in the Company's internal
controls or in other factors subsequent to the date of the evaluation that would
significantly affect those controls.



                                       47
<PAGE>


                                   SIGNATURES

         In accordance with Section 13 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


March 18, 2003                          By: /s/ Richard J. Morgan,
                                            -----------------------------------
                                            Richard J. Morgan, President and CEO

         In accordance with the Exchange  report has been signed below
by the following persons on behalf of the registrant and in the capacities and
on the dates indicated.

<TABLE>
<CAPTION>
            NAME                                   POSITION                          DATE



<S>                                <C>                                              <C>
 /s/ Milton. D. Jernigan           Chairman of the Board of Directors of the        March 18, 2003
--------------------------------             Company and the Bank
Milton D. Jernigan II



 /s/ Alvin R. Maier                Vice Chairman of the Board of Directors          March 18, 2003
--------------------------------   of the Company and the Bank; Treasurer of
Alvin R. Maier                                   the Company




 /s/ Richard J. Morgan             Director, President and CEO of the               March 18, 2003
--------------------------------          Company and the Bank
Richard J. Morgan




 /s/ Lamont Thomas                 Director and Executive Vice President of the     March 18, 2003
--------------------------------       Company and the Bank; Treasurer of
Lamont Thomas                                     the Bank



 /s/ Edward B. Howlin, Jr.
--------------------------------   Director of the Company and the Bank             March 18, 2003
Edward B. Howlin, Jr.

</TABLE>


                                       48
<PAGE>

                            SECTION 302 CERTIFICATION

I, Richard J. Morgan, President and Chief Executive Officer of CommerceFirst
Bancorp, Inc., certify that:

1.   I have reviewed this annual report on Form 10-KSB of CommerceFirst Bancorp,
     Inc.;

2.   Based on my knowledge, this annual report does not contain any untrue
     statement of a material fact or omit to state a material fact necessary to
     make the statements made, in light of the circumstances under which such
     statements were made, not misleading with respect to the period covered by
     this quarterly report;

3.   Based on my knowledge, the financial statements, and other financial
     information included in this annual report, fairly present in all material
     respects the financial condition, results of operations and cash flows of
     the registrant as of, and for, the periods presented in this annual report;

4.   The registrant's other certifying officers and I are responsible for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

     a)  designed such disclosure controls and procedures to ensure that
         material information relating to the registrant, including its
         consolidated subsidiaries, is made known to us by others within those
         entities, particularly during the period in which this annual report is
         being prepared;

     b)  evaluated the effectiveness of the registrant's disclosure controls and
         procedures as of a date within 90 days prior to the filing date of this
         annual report (the "Evaluation Date"); and

     c)  presented in this quarterly report our conclusions about the
         effectiveness of the disclosure controls and procedures based on our
         evaluation as of the Evaluation Date;

5.   The registrant's other certifying officers and I have disclosed, based on
     our most recent evaluation, to the registrant's auditors and the audit
     committee of registrant's board of directors (or persons performing the
     equivalent function):

     a)  all significant deficiencies in the design or operation of internal
         controls which could adversely affect the registrant's ability to
         record, process, summarize and report financial data and have
         identified for the registrant's auditors any material weaknesses in
         internal controls; and

     b)  any fraud, whether or not material, that involves management or other
         employees who have a significant role in the registrant's internal
         controls; and

6.   The registrant's other certifying officers and I have indicated in this
     annual report whether or not there were significant changes in internal
     controls or in other factors that could significantly affect internal
     controls subsequent to the date of our most recent evaluation, including
     any corrective actions with regard to significant deficiencies and material
     weaknesses.



Date: March 18, 2003                       /s/ Richard J. Morgan
                                           ------------------------------
                                           Richard J. Morgan
                                           President and Chief Executive Officer


                                       49

<PAGE>


                            SECTION 302 CERTIFICATION

I, Lamont Thomas, Executive Vice President and Chief Financial Officer of
CommerceFirst Bancorp, Inc., certify that:

1.   I have reviewed this annual report on Form 10-KSB of CommerceFirst Bancorp,
     Inc.;

2.   Based on my knowledge, this annual report does not contain any untrue
     statement of a material fact or omit to state a material fact necessary to
     make the statements made, in light of the circumstances under which such
     statements were made, not misleading with respect to the period covered by
     this annual report;

3.   Based on my knowledge, the financial statements, and other financial
     information included in this annual report, fairly present in all material
     respects the financial condition, results of operations and cash flows of
     the registrant as of, and for, the periods presented in this annual report;

4.   The registrant's other certifying officers and I are responsible for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

     a)  designed such disclosure controls and procedures to ensure that
         material information relating to the registrant, including its
         consolidated subsidiaries, is made known to us by others within those
         entities, particularly during the period in which this annual report is
         being prepared;

     b)  evaluated the effectiveness of the registrant's disclosure controls and
         procedures as of a date within 90 days prior to the filing date of this
         annual report (the "Evaluation Date"); and

     c)  presented in this annual report our conclusions about the effectiveness
         of the disclosure controls and procedures based on our evaluation as of
         the Evaluation Date;

5.   The registrant's other certifying officers and I have disclosed, based on
     our most recent evaluation, to the registrant's auditors and the audit
     committee of registrant's board of directors (or persons performing the
     equivalent function):

     a)  all significant deficiencies in the design or operation of internal
         controls which could adversely affect the registrant's ability to
         record, process, summarize and report financial data and have
         identified for the registrant's auditors any material weaknesses in
         internal controls; and

     b)  any fraud, whether or not material, that involves management or other
         employees who have a significant role in the registrant's internal
         controls; and

6.   The registrant's other certifying officers and I have indicated in this
     annual report whether or not there were significant changes in internal
     controls or in other factors that could significantly affect internal
     controls subsequent to the date of our most recent evaluation, including
     any corrective actions with regard to significant deficiencies and material
     weaknesses.

Date: March 18, 2003                         /s/ Lamont Thomas
                                             ----------------------------------
                                             Lamont Thomas
                                             Executive Vice President
                                             Chief Financial Officer








                                       50