UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
FORM 10-QSB
(MARK ONE)
( X ) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 2000
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
------------ -----------
Commission File Number 333-91817
--------------------------------
COMMERCEFIRST BANCORP, INC.
-------------------------------------
(Exact name of issuer as specified in its charter)
Maryland 52-2180744
--------------------------------------------------------------------------------
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1804 West Street, Suite 200, Annapolis MD 21401
--------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
410-280-6695
-----------------
(Issuer's telephone number, including area code)
<TABLE>
<CAPTION>
<S> <C>
-------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last report)
</TABLE>
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the preceding 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
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practical date.
As of November 7, 2000, there were 822,250 shares of the issuer's
common stock, $0.01 par value, outstanding.
<PAGE>
COMMERCEFIRST BANCORP, INC.
FORM 10-QSB
INDEX
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION PAGE(S)
-------
<S> <C>
Item 1 - Financial Statements
Consolidated Balance Sheets - September 30, 2000 (Unaudited)
and December 31, 1999 (Audited) 1
Consolidated Statements of Operations 2
o Three month period ended September 30, 2000 (Unaudited)
o Nine month period ended September 30, 2000 (Unaudited)
o For the period from July 9, 1999 to September 30, 2000 (Unaudited)
Consolidated Statements of Comprehensive Loss 3
o Three month period ended September 30, 2000 (Unaudited)
o Nine month period ended September 30, 2000 (Unaudited)
o For the period from July 9, 1999 to September 30, 2000 (Unaudited)
Consolidated Statements of Changes in Stockholders' Equity 4
o For the period from July 9, 1999 to September 30, 2000 (Unaudited)
Consolidated Statements of Cash Flows 5
o Nine month period ended September 30, 2000 (Unaudited)
o For the period from July 9, 1999 to September 30, 2000 (Unaudited)
Notes to Consolidated Financial Statements 6-12
Item 2 - Management's Discussion and Analysis of Financial Condition
and Results of Operations 13-14
PART II - OTHER INFORMATION 14
Item 1 - Legal Proceedings 14
Item 2 - Changes in Securities and Use of Proceeds 14
Item 3 - Default upon Senior Securities 14
Item 4 - Submission of Matters to a Vote of Security Holders 14
Item 5 - Other Information 14
Item 6 - Exhibits and Reports on Form 8-K 14
SIGNATURES 15
</TABLE>
2
<PAGE>
COMMERCEFIRST BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 2000 AND DECEMBER 31, 1999
ASSETS Sept 30, 2000 Dec 31, 1999
(Unaudited) (Audited)
Cash and due from banks $ 1,526,679 $ 143,774
Federal funds sold 4,900,000 --
Investment securities available for sale, 1,206,100 --
at fair value
Loans, less allowance for credit losses 2,795,826 --
of $45,000
Premises and equipment, at cost, less 347,681 7,012
accumulated depreciation
Other assets 93,833 --
------------ ------------
TOTAL ASSETS $ 10,870,119 $ 150,786
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
Non interest-bearing demand $ 628,691 $ --
Interest-bearing 2,871,064 --
------------ ------------
Total Deposits 3,499,755 --
Other liabilities 36,860 101,969
------------ ------------
TOTAL LIABILITIES $ 3,536,615 $ 101,969
------------ ------------
COMMITMENTS
STOCKHOLDERS' EQUITY
Common Stock
$.01 par value, 4,000,000 shares authorized,
32,500 shares issued & outstanding (12/31/1999) 325
822,250 shares issued & outstanding (9/30/2000) 8,223
Surplus 8,099,012 238,872
Accumulated deficit (773,508) (190,380)
Accumulated other comprehensive loss (223) --
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 7,333,504 48,817
------------ ------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 10,870,119 $ 150,786
============ ============
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1
<PAGE>
COMMERCEFIRST BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE PERIOD FROM
THREE MONTHS NINE MONTHS JULY 9, 1999
ENDED ENDED (DATE OF INCEPTION)
SEPTEMBER 30, 2000 SEPTEMBER 30, 2000 TO SEPTEMBER 30, 2000
<S> <C> <C> <C>
INTEREST INCOME ON:
Loans, including fees 6,919 6,919 6,919
U.S. Treasury securities 4,756 4,756 4,756
Federal Reserve stock 2,925 2,958 2,958
Other 117,969 201,982 205,974
--------- --------- ---------
Total interest income $ 132,569 $ 216,615 $ 220,607
--------- --------- ---------
INTEREST EXPENSE ON:
Deposits 19,031 19,031 19,031
--------- --------- ---------
NET INTEREST INCOME 113,538 197,584 201,576
--------- --------- ---------
PROVISION FOR CREDIT LOSSES 45,000 45,000 45,000
--------- --------- ---------
OTHER INCOME
Service charges 2,978 2,978 2,978
--------- --------- ---------
OTHER EXPENSES:
Salaries 223,777 400,223 527,559
Legal and Professional 32,217 66,223 96,899
Rent & Occupancy 49,896 96,541 102,541
Marketing and Consulting 43,278 80,178 98,028
Office Supplies 14,183 36,378 40,390
Business development 1,311 3,580 5,319
Miscellaneous 6,246 12,104 18,449
Depreciation 21,922 23,815 24,227
Other Expenses 19,649 19,649 19,650
--------- --------- ---------
Total other expenses 412,479 738,691 933,062
--------- --------- ---------
LOSS BEFORE INCOME TAX BENEFIT (340,963) (583,129) (773,508)
INCOME TAX BENEFIT -- -- --
--------- --------- ---------
NET LOSS $(340,963) $(583,129) $(773,508)
========= ========= =========
EARNINGS (LOSS) PER SHARE:
Basic net loss per share $ (0.43) $ (1.55) $ (3.24)
========= ========= =========
Diluted net loss per share $ (0.43) $ (1.55) $ (3.24)
========= ========= =========
Weighted average shares of
common stock outstanding 785,983 376,267 238,760
========= ========= =========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2
<PAGE>
COMMERCEFIRST BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
<TABLE>
<CAPTION>
FOR THE PERIOD FROM
THREE MONTHS NINE MONTHS JULY 9, 1999
ENDED ENDED (DATE OF INCEPTION)
SEPTEMBER 30, 2000 SEPTEMBER 30, 2000 TO SEPTEMBER 30, 2000
<S> <C> <C> <C>
Net Loss $(340,963) $(583,129) $(773,508)
Other comprehensive loss, net of tax:
Unrealized holding losses arising
during the period, net of deferred
tax benefits of $140 (223) (223) (223)
Reclassification adjustment for
(gains) losses included in net loss -- -- --
--------- --------- ---------
Comprehensive loss $(341,186) $(583,352) $(773,731)
========= ========= =========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3
<PAGE>
COMMERCEFIRST BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM JULY 9, 1999
(DATE OF INCEPTION) TO SEPTEMBER 30, 2000
<TABLE>
<CAPTION>
Accumulated
Common Other Total
Stock Accumulated Comprehensive Stockholders'
(Par Value) Surplus Deficit Loss Equity
<S> <C> <C> <C> <C> <C>
Balances, July 9, 1999 $ -- $ -- $ -- $ -- $ --
Net Loss -- -- (773,508) -- (773,508)
Cost of Raising Capital -- (115,266) -- -- (115,266)
Other comprehensive loss,
net of tax -- -- -- (223) (223)
Issuance of 822,250 shares
of common stock at
$10 per share 8,223 8,214,278 -- -- 8,222,500
----------- ----------- ----------- ----------- -----------
Balances, September 30, 2000 $ 8,223 $ 8,099,012 $ (773,508) $ (223) $ 7,333,504
=========== =========== =========== =========== ===========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4
<PAGE>
COMMERCEFIRST BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
For the Period from
Nine Months July 9, 1999
Ended (Date of Inception)
September 30, 2000 to September 30, 2000
<S> <C> <C>
CASH FLOWS FROM ACTIVITIES:
Net Loss $ (583,129) $ (773,508)
Adjustments to reconcile net loss to net cash
used by operating activities:
Depreciation 23,815 24,227
Provision for credit loss 45,000 45,000
Change in assets and liabilities
Increase in other assets (93,833) (93,833)
(Decrease) increase in other liabilities (65,109) 36,860
------------ ------------
Net cash used by
operating activities (673,256) (761,254)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of available-for-sale securities (1,206,323) (1,206,323)
Increase in loans (2,840,826) (2,840,826)
Purchases of premises and equipment (364,484) (371,908)
------------ ------------
Net cash used by
investing activities (4,411,633) (4,419,057)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in deposits $ 3,499,755 $ 3,499,755
Proceeds from issuance of
common stock 7,896,501 8,222,501
Costs of raising capital (28,462) (115,266)
------------ ------------
Net cash provided by
financing activities 11,367,794 11,606,990
------------ ------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 6,282,905 6,426,679
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 143,774 --
------------ ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD 6,426,679 6,426,679
============ ============
Supplemental Cash Flows Information:
Interest payments $ 17,971 $ 17,971
------------ ------------
Income tax payments $ -- $ --
------------ ------------
Total decrease in unrealized depreciation on $ (223) $ (223)
available-for-sale securities ------------ ------------
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation:
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not contain all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presented have been included.
The financial data at December 31, 1999 is derived from audited
financial statements that are included in the Company's Prospectus
dated February 22, 2000 relating to its offering of shares of common
stock and should be read in conjunction with the audited financial
statements and notes contained therein. Interim results are not
necessarily indicative of results for the full year.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from
those estimates. It is again suggested that these financial statements
be read in conjunction with the prospectus dated February 22, 2000 and
the supplement statement dated July 20, 2000.
Principles of Consolidation:
The consolidated financial statements include the accounts of
CommerceFirst Bancorp, Inc. (the "Company") and its subsidiary,
CommerceFirst (the "Bank"). Intercompany balances and transactions have
been eliminated.
Use of Estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles 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 September 30, 2000.
6
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Securities Available for Sale:
Marketable debt and equity 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.
Federal Reserve Bank ("FRB") stock is an equity interest in the FRB,
which does not have a readily determinable fair value for purposes of
Statement of Financial Accounting Standard ("SFAS") No 115, Accounting
for Certain Investments in Debt and Equity Securities, because its
ownership is restricted and it lacks a market. FRB stock can be sold
back only at its par value of $100 per share and only to the FRB or
another member institution.
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 Bank has no loans
considered to be impaired as of September 30, 2000.
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.
7
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
While management believes it has established the allowance for credit
losses in accordance with generally accepted accounting principles 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.
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 which 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 income. Expenditures for repairs and
maintenance are charged to other expenses as incurred. Computer
software is recorded at cost and amortized over three to five 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.
Credit Risk:
The Bank has deposits in other financial institutions in excess of
amounts insured by the Federal Deposit Insurance Corporation ("FDIC").
The Bank had deposits and Federal funds sold of approximately
$6,277,000 with one financial institution as of September 30, 2000.
Cash and Cash Equivalents:
The Bank has included cash and due from banks and Federal funds sold as
cash and cash equivalents for the purpose of reporting cash flows.
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
Statement of Financial Accounting Standard (SFAS) No. 7, "Accounting
and Reporting by Development Stage Enterprises." The Bank commenced
lending and teller operations during the third quarter of 2000 and is
no longer considered in the development stage.
8
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3. INVESTMENT SECURITIES
Investment securities are summarized as follows:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
SEPTEMBER 30, 2000 Cost Gains Losses Value
------------------ --------- ---------- ---------- -----
<S> <C> <C> <C> <C>
AVAILABLE FOR SALE:
U.S. TREASURY (DUE WITHIN ONE YEAR) $ 974,462 $ -- $ 362 $ 974,100
OTHER EQUITY SECURITIES 37,000 -- -- 37,000
---------- ---------- ---------- ----------
1,011,462 -- 362 1,011,100
FEDERAL RESERVE BANK STOCK 195,000 -- -- 195,000
---------- ---------- ---------- ----------
$1,206,462 $ -- $ 362 $1,206,100
========== ========== ========== ==========
</TABLE>
Securities with amortized costs of $97,446 were pledged as collateral
for short-term borrowings and financial instruments with off-balance
sheet risk at September 30, 2000.
NOTE 4. LOANS
Major categories of loans are as follows:
SEPTEMBER 30,
2000
-------------
Mortgage related:
Commercial $2,183,495
Commercial demand and time loans 657,331
----------
2,840,826
Unearned income on loans --
Allowance for credit losses (45,000)
----------
$2,795,826
==========
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 September
30, 2000 the amounts of such loans outstanding were approximately
$479,000.
9
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The allowance for credit losses is as follows:
SEPTEMBER 30,
2000
-------------
Balance, beginning of year $ --
Provision for credit losses 45,000
Recoveries --
Loans charged off --
-------
Balance, end of year $45,000
=======
NOTE 5. PREMISES AND EQUIPMENT
A summary of premises and equipment is as follows:
SEPTEMBER 30,
2000
-------------
Equipment $322,756
Leasehold improvements 10,146
Software 39,006
--------
371,908
Accumulated depreciation (24,227)
--------
$347,681
========
NOTE 6. DEPOSITS
Major classifications of interest-bearing deposits are as follows:
SEPTEMBER 30,
2000
-------------
NOW $ 5,109
Money Market 2,308,313
Savings 43,882
Certificates of Deposit, $100,000 or more 497,523
Other time deposits 16,237
----------
$2,871,064
==========
Deposit balances of executive officers and directors and their
affiliated interests totaled approximately $328,441 at September 30,
2000.
10
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7. INCOME TAXES
The Company uses the liability method of accounting for income taxes as
required by SFAS No. 109, Accounting for Income Taxes. Under the
liability method, deferred tax assets and liabilities are determined
based on differences between the financial statement carrying amounts
and the enacted rates that will be in effect when these differences
reverse. Deferred income taxes will be recognized when it is deemed
more likely than not that the benefits of such deferred income taxes
will be realized, accordingly, no deferred income taxes or income tax
benefits have been recorded by the Company.
NOTE 8. NET LOSS PER COMMON SHARE
Net loss per common share has been computed (basic and diluted) for all
periods presented and is based on the weighted average number of shares
outstanding during the period. There are no common stock equivalents
resulting from dilutive stock options.
NOTE 9. RELATED PARTY TRANSACTIONS
The Company paid $12,400 during the third quarter of 2000 for legal
expenses to a law firm of which the Chairman of the Board of the
Company is also a principal.
The Company paid $85,850 during the third quarter of 2000 to a computer
consulting firm of which a Director is also a principal. Expenditures
included computer hardware, software, installation, training and
support services.
The Company also paid $8,142 during the third quarter of 2000 for
various group insurance benefits for which a Director will ultimately
receive commission compensation.
NOTE 10. COMMITMENTS
Building Lease:
On February 17, 2000, the Company entered into a lease for 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 for five years with three five year renewal options, at an
initial rent of $19 per square foot, plus annual increases of 3%. Total
rent expense relating to this agreement was $38,484 for the third
quarter of 2000.
Agreement:
The Company has entered into an agreement with an outside vendor to
provide a full compliment of internet banking services to its
customers. The cost of implementing and installing this system is
approximately $27,000 and is estimated to be completed during the
fourth quarter of 2000.
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 typically 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.
11
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Outstanding unused lines of credit are as follows:
2000
---------
Unused lines of credit:
Commercial lines $ 321,519
12
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
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.
The following discussion should be read in conjunction with the prospectus
dated February 22, 2000 and the supplement thereto dated July 20, 2000.
General
CommerceFirst Bancorp, Inc. (the "Company") is the bank holding company for
CommerceFirst Bank, a Maryland chartered commercial bank headquartered in
Annapolis, Maryland (the "Bank"). The Bank was capitalized, became a wholly
owned subsidiary of the Company and commenced operations on June 29, 2000.
Prior to that date, substantially all of the Company's efforts had been
devoted to organizing the Bank, obtaining the requisite regulatory
approvals for operation of the Bank and raising capital. As a result of the
Company's offering of shares of its common stock at an offering price of
$10.00 per share, an aggregate of $8,222,500 was raised, including shares
purchased by organizers. To date, $6,500,000 of the gross proceeds of the
offering have been contributed to the capital of the Bank. The balance
remains at the Company level, invested in repurchase agreements, and
remains available for future contributions to the capital of the Bank, for
payment of Company operating expenses and for other corporate purposes.
The Bank has incurred approximately $425,000 in committed expenses for
furniture, fixtures and equipment and leasehold improvements for its
headquarters, branch and operations space. The Bank has contracted its data
processing requirements to an outside vendor. The Company had no employees
at September 30, 2000 but, at the Bank level, had thirteen employees on
that date.
1. RESULTS OF OPERATIONS
The Company reported a net loss of $(340,963) for the quarter and a net
loss of $(583,129) for the nine months ended September 30, 2000. From date
of inception to September 30, 2000 the Company reported a cumulative loss
of $(773,508). The loss over the three-month period ended September 30,
2000 is attributed almost exclusively to the results of operations of the
Bank and is in line with expectations; the balance of the loss is
attributable primarily to start-up costs associated with filing fees, legal
fees and salary expenses. There are no meaningful comparisons to the
quarter ended June 30, 2000 or to other reporting periods.
2. FINANCIAL CONDITION.
At September 30, 2000 deposits totaled $3.5 million, principally Money
Market Deposit Accounts ($2.3 million) and demand deposits ($629 thousand).
New loans totaled $2.8 million, principally real estate secured term loans.
An allocation of $45,000 as a Provision for Credit Losses was taken during
the quarter in accordance with the established business plan; there were no
non-performing assets. Federal Funds Sold totaled $4.9 million while
Investments (principally U.S. Treasury Bills and Federal Reserve Bank
stock) were $1.2 million.
13
<PAGE>
Allowance for Credit Losses. 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
borrowers' ability to pay. As the Bank is a new institution and has not had
any experience of loan losses or non-performing assets, management also
considers the loan loss experience of peer institutions in establishing the
level of the allowance.
3. LIQUIDITY AND CAPITAL RESOURCES. The Company currently has no business
other than that of the Bank and does not currently have any material
funding commitments unrelated to that business. The Company's principal
source of liquidity is cash on hand, which totaled $1.3 million on
September 30, 2000. The Bank's principal sources of funds for loans,
investments and general operations are deposits from its primary market
area, principal and interest payments on loans, proceeds from maturing
investment securities, and net income. Its principal funding commitments
are for the origination or purchase of loans and the payment of maturing
deposits. Deposits are considered a primary source of funds supporting the
Bank's lending and investment activities. The Bank's most liquid assets are
cash and cash equivalents, which are cash on hand, amounts due from other
financial institutions and Federal Funds Sold. The levels of such assets
are dependent on the Bank's lending, investment and operating activities at
any given time. The variations in levels of cash and cash equivalents are
influenced by deposit flows and loan demand, both current and anticipated.
On September 30, 2000, the Bank's cash and cash equivalents totaled $5.2
million.
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings - None
Item 2 - Changes in Securities and 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, $0.01 par
value, was declared effective by the Securities and Exchange Commission,
and the offering commenced. On July 20, 2000, 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 such shares, resulting of 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 has received a fee of $15,000 for its
services in connection with the offering, plus payment of $1,026 for
deposit delivery services. $6,500,000 has been contributed to the capital
of the Bank for use in its lending and investment activities; the Company
has received reimbursement of $59,746 from the Bank for payment of
Bank-related expenses prior to opening.
Item 3 - Default upon Senior Securities - None
Item 4 - Submission of Matters to a Vote of Security Holders - None
Item 5 - Other Information - None
Item 6 - Exhibits and reports on Form 8-K
a) Exhibit 27. Financial Data Schedule
b)Report on Form 8-K - No reports on Form 8-K were filed during the
quarter.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
COMMERCEFIRST BANCORP, INC.
Date: November 10, 2000 By: /s/ Richard J. Morgan
---------------------------------------
Richard J. Morgan, President
Date: November 10, 2000 By: /s/ Lamont Thomas
----------------------------------
Lamont Thomas, Executive Vice President
15
