As filed with the Securities and Exchange Commission on February 14, 2000
Registration No. 333-91817
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
PRE-EFFECTIVE AMENDMENT NO. 2
TO
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-------------------
COMMERCEFIRST BANCORP, INC.
(Name of small business issuer in its charter)
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<CAPTION>
<S> <C> <C>
Maryland 6021 52-2180744
(State of other jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification
incorporation or organization) Classification Code Number) Number)
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705 Melvin Avenue
Suite 104
Annapolis, Maryland 21401
410.280.6673
(Address and telephone number of principal executive offices)
Richard J. Morgan, President and
Chief Executive Officer
CommerceFirst Bancorp, Inc.
705 Melvin Avenue
Suite 104
Annapolis, Maryland 21401
410.280.6673
(Name, address, including zip code, and telephone number agent for service)
Copies to:
Noel M. Gruber, Esquire Stephen C. Hosea, Esquire
David H. Baris, Esquire Garth E. Beall, Esquire
Kennedy, Baris & Lundy, L.L.P McNamee, Hosea, Jernigan & Kim, P.A.
4701 Sangamore Road, Suite P-15 6411 Ivy Lane, Suite 200
Bethesda, Maryland 20816 Greenbelt, Maryland 20770
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
If this form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ] ____________
If this form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] ______________
If this form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] ______________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
===========================================================================================================================
Title of Shares to be Amount to be Proposed Maximum Proposed Maximum Amount of Registration Fee
Registered registered Offering Price Per Unit Aggregate Offering Price
===========================================================================================================================
<S> <C> <C> <C> <C>
Common stock 1,000,000 $10.00 $10,000,000 $2,780.00
===========================================================================================================================
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(1) Registration fee calculated in accordance with Rules 457(a).
The Registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
PROSPECTUS
800,000 SHARES OF COMMON STOCK
MINIMUM PURCHASE - 100 SHARES
COMMERCEFIRST BANCORP, INC.
CommerceFirst Bancorp, Inc. is being organized to be the holding
company for a state chartered commercial bank in the process of organization,
CommerceFirst Bank, to be headquartered in Annapolis, Maryland.
CommerceFirst Bancorp is offering to sell up to 800,000 shares of its
common stock at a price of $10.00 per share. CommerceFirst Bancorp may also sell
up to an additional 200,000 shares of common stock if the number of shares
subscribed for exceeds the number of shares offered. No shares will be sold
unless acceptable subscriptions for at least 650,000 shares are received.
This offering will continue until April 30, 2000, unless extended in
the discretion of the Board of Directors. Until your subscription is accepted
all funds will be placed in an escrow account at Bank of America, N.A.
-----------------
SHARES OF COMMERCEFIRST BANCORP'S COMMON STOCK ARE NOT DEPOSITS, SAVINGS
ACCOUNTS, OR OTHER OBLIGATIONS OF A DEPOSITORY INSTITUTION AND ARE NOT INSURED
BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY.
INVESTING IN COMMON STOCK INVOLVES INVESTMENT RISKS.
-----------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THE COMMON STOCK OR DETERMINED IF THIS
PROSPECTUS IS ACCURATE OR ADEQUATE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------
CONSIDER CAREFULLY THE "RISK FACTORS" BEGINNING ON PAGE 6 OF THIS PROSPECTUS.
<TABLE>
<CAPTION>
Total - Minimum Total - Maximum
number of shares number of shares
Per share subscribed for subscribed for
--------------- --------------------- ----------------------
<S> <C> <C> <C>
Price to public $10.00 $6,500,000 8,000,000
Gross proceeds of the offering $10.00 $6,500,000 $8,000,000
Underwriting discounts and commissions None N/A N/A
Net proceeds of the offering (before
expenses) N/A $6,500,000 $8,000,000
</TABLE>
The date of this prospectus is ___________, 2000
<PAGE>
TABLE OF CONTENTS
PAGE
Summary........................................................................3
Risk Factors...................................................................6
The Offering..................................................................11
Use of Proceeds...............................................................16
Business of CommerceFirst Bancorp.............................................17
Capitalization of CommerceFirst Bancorp.......................................18
Business of CommerceFirst Bank................................................18
Management's Plan of Operation................................................23
Supervision and Regulation....................................................24
Management....................................................................29
Executive Compensation and Certain
Transactions with Management...............................................34
Shares Eligible for Future Sale...............................................37
Description of Capital Stock..................................................37
Litigation....................................................................39
Legal Matters.................................................................39
Experts.......................................................................39
Additional Information About CommerceFirst Bancorp ...........................39
Index to Financial Statements.................................................41
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SUMMARY
This summary presents selected information from this prospectus. You
should carefully read this entire document in order to understand this offering.
Items in this summary include page references that direct you to more complete
descriptions in this document of the topics discussed.
THE OFFERING
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General. CommerceFirst Bancorp, Inc. is offering to sell up to 800,000
shares of its common stock at an offering price of $10.00 per share.
CommerceFirst Bancorp may also sell up to an additional 200,000 shares of common
stock if the number of shares subscribed for exceeds the number of shares
offered. No shares will be sold unless acceptable subscriptions for at least
650,000 shares are received. Share subscriptions for which the purchase price
will be paid by submitting shares purchased with organizer contributions will be
counted in determining whether the minimum is met. See "Management's Plan of
Operation" (page 21). Directors and officers of CommerceFirst Bancorp and
CommerceFirst Bank may, but are not obligated to, purchase more shares than they
currently expect to purchase if necessary to meet the minimum subscription
required for completion of the offering. See "Risk Factors" (page 6) and
"Management" (page 29).
The minimum number of shares which may be subscribed for by any person
is 100. The maximum number of shares which any person, or group of affiliated or
related persons may subscribe is 5% of the total number of shares sold in the
offering, or 32,500 shares ($325,000) if the minimum number of shares is sold,
40,000 shares if the maximum number of shares is sold, and 50,000 shares
($500,000) if all of the oversubscription shares are sold. CommerceFirst Bancorp
may, however, permit larger subscriptions in its discretion. It is currently the
intention of the CommerceFirst Bancorp to permit larger subscriptions for
certain of the organizers. A person subscribing for 5% or more of the common
stock may be required to file applications with state or federal bank regulatory
agencies as a condition of the purchase. CommerceFirst Bancorp reserves the
right to reduce, or reject, in whole or in part, any subscription which would
require prior regulatory application or approval if such approval is not
obtained prior to the termination of the offering. "The Offering - General"
(page 11).
The offering is being conducted through the efforts of the organizing
directors and officers of CommerceFirst Bancorp and CommerceFirst Bank, with the
limited assistance of Koonce Securities, Inc., a registered broker dealer, in
order to comply with the securities laws of the jurisdictions in which the
common stock will be offered. See "The Offering - Manner of Distribution" (page
14).
Proceeds of the Offering. If the maximum number of the shares being
offered is sold, the gross proceeds of the offering will be $8,000,000 and the
net proceeds of the offering will be $7,890,000, after estimated expenses of the
offering. If the minimum number of shares being offered are sold, the gross
proceeds of the offering will be $6,500,000, and the net proceeds will be
$6,390,000, after expenses. If all of the oversubscription shares are sold, then
the gross proceeds will be $10,000,000, and the net proceeds will be $9,890,000
after expenses.
Use of Proceeds. The first $6,000,000 of the net proceeds of the
offering will be used to purchase all of the then-issued shares of common stock
of CommerceFirst Bank. If applicable federal or state bank regulatory agencies
require or permit a different minimum capitalization for CommerceFirst Bank,
CommerceFirst Bancorp may, but is not required to, purchase all of the
then-issued shares of common stock of CommerceFirst Bank for that greater or
lesser amount. Net proceeds in excess of $6,000,000 (or such other minimum
amount that the federal or state bank regulatory agencies may require or permit)
will be invested in short term U.S. government securities or other investments
authorized for bank holding companies, until such proceeds are used as working
capital or contributed to CommerceFirst Bank. In addition to acting as the
holding company for CommerceFirst Bank, CommerceFirst Bancorp may engage in
non-banking activities permissible for bank holding companies, including but not
limited to leasing and mortgage banking activities. Whether or not CommerceFirst
Bancorp contributes additional proceeds of the offering to CommerceFirst Bank
will depend on the total amount raised.
CommerceFirst Bank will use the funds contributed by CommerceFirst
Bancorp to furnish and
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equip its facilities, to provide working capital, and for its general corporate
purposes, including use in its lending and investment activities. See "Use of
Proceeds" (page 16).
Termination of the Offering. The offering will run until April 30,
2000, unless the Board of Directors of CommerceFirst Bancorp elects to extend
the offering to a date not later than June 30, 2000. See "The Offering -
General" (page 11).
Procedure for Subscribing to Shares. To subscribe for shares, you
should complete the subscription agreement accompanying this prospectus and
submit it, along with payment in full for the shares, to Koonce Securities,
Inc., the subscription agent for the offering, prior to the expiration of the
offering. You should carefully follow the instructions contained in this
prospectus under the caption "The Offering" and those included on the order
form. See "The Offering - Method of Subscription (page 11).
Escrow Account. Until a subscription is accepted, subscription funds
will be held in an in an escrow account under the control of an independent
escrow agent. If the offering is not completed, or if your subscription is not
accepted in whole or in part, your funds will be returned without interest or
deduction, except that interest will be paid to the extent that law, regulation
or administrative policy of the investor's state of residence specifically
requires. See "The Offering - Escrow Account; Release of Funds" (page 13).
COMMERCEFIRST BANCORP, INC.
COMMERCEFIRST BANCORP, INC.
705 Melvin Avenue
Suite 104
Annapolis, Maryland 21401
410.280.6673
CommerceFirst Bancorp, Inc. was incorporated under Maryland law on July
9, 1999, to be the bank holding company for CommerceFirst Bank. CommerceFirst
Bank is in the process of being chartered as a Maryland commercial bank and will
be headquartered in Annapolis, Maryland. Subject to receipt of regulatory
approvals, CommerceFirst Bank will be a member of the Federal Reserve System.
CommerceFirst Bancorp will initially use $6,000,000 (or other minimum amount
that may be required or permitted by the applicable federal or state bank
regulatory agencies) of the proceeds of this offering to purchase all of the
then-issued shares of the common stock of CommerceFirst Bank. In addition to
serving as the holding company for CommerceFirst Bank, CommerceFirst Bancorp may
engage in other business activities permitted for bank holding companies. See
"Use of Proceeds" (page 16) and "CommerceFirst Bancorp, Inc. - Supervision and
Regulation" (page 24).
Neither CommerceFirst Bancorp nor CommerceFirst Bank has commenced
operations and neither will do so unless this offering is completed and the
approvals of the Maryland Department of Financial Regulation, Board of Governors
of the Federal Reserve System and Federal Deposit Insurance Corporation are
received. As of December 31, 1999 CommerceFirst Bancorp's assets were $150,786,
consisting of cash and equipment, and its total shareholders' equity was
$48,817.
CommerceFirst Bancorp's organizational activities have been funded by
the purchase of organizer shares by each of the 13 organizers. Each organizer
purchased 25 shares of common stock at a price of $1,000 per share, or an
aggregate of $325,000 and 325 shares of common stock. Organizers will purchase
additional shares of common stock at $1,000 per share as necessary to provide
additional funds for CommerceFirst Bancorp's organizational activities prior to
the completion of this offering. Each of these shares will be used for the
purchase of 100 shares of common stock in the offering. The shares to be
purchased in the offering with the organizers shares will be counted in
determining whether the minimum number of shares is subscribed for in the
offering. See "Management's Plan of Operation" (page 23).
CommerceFirst Bank has not yet engaged in any business operations and
is in the process of obtaining the approvals necessary to commence operations as
a commercial bank. It is anticipated that CommerceFirst Bank, which will have a
primary market area in Anne Arundel County, Maryland, will open in the second
quarter of 2000, although we cannot be sure as to the date actual operations
will begin. See "Business of CommerceFirst Bancorp" (page 17).
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CommerceFirst Bancorp and CommerceFirst Bank are being organized by a
group of individuals active in business, professional, banking, financial and
charitable activities in Anne Arundel, Prince George's, Howard and Calvert
Counties, Maryland, and the surrounding areas, and Citizens Incorporated, the
registered bank holding company for The Citizens National Bank of Evans City, a
$336 million asset financial institution based in Evans City, Pennsylvania, with
which CommerceFirst Bank expects to work cooperatively in the future. See -
"Management - Other Organizers of CommerceFirst Bancorp and CommerceFirst Bank"
(page 34). Many of the organizers and proposed Directors and Officers of
CommerceFirst Bancorp and CommerceFirst Bank have significant prior experience
and contacts from service with other successful community banks. See
"Management" (page 29). We currently intend to seek to establish branch offices
of CommerceFirst Bank as rapidly as possible in order to more effectively
service anticipated customer relationships, and better compete in a highly
competitive environment, including the establishment of two branch offices
within thirty-six months of opening for business. There can be no assurance that
we will be able to establish any additional branches, that any of the
anticipated relationships will materialize, or that CommerceFirst Bank will be
able to compete successfully.
Organizer Warrants. Upon completion of the offering, and subject to
regulatory approval, the organizers of CommerceFirst Bancorp and CommerceFirst
Bank will receive warrants to purchase a number of shares of common stock equal
to 15% of the total number of shares sold in the offering (97,500 shares if the
minimum number of shares are sold, 120,000 shares if the maximum number of
shares are sold and 150,000 shares if all of the oversubscription shares are
sold). In general, the warrants will have a term of ten years and will vest over
a three year period. If not exercised, the warrants will be subject to mandatory
exercise or termination after the organizer ceases to be a director of
CommerceFirst Bank or CommerceFirst Bancorp. The warrants will have an exercise
price equal to $10.00 per share. See "Executive Compensation and Certain
Transactions with Management - Warrant Plan" (page 36).
Stock Options. Upon completion of the offering, and subject to
regulatory approval and approval a majority of the outstanding common stock
after this offering, CommerceFirst Bancorp intends to adopt a Stock Option Plan
to attract and retain highly qualified personnel. The plan would be administered
by a committee appointed by the Board and would provide incentive options
available for grant to officers and key employees of CommerceFirst Bancorp and
CommerceFirst Bank. The exercise price under each incentive stock option would
not be less than 100% of the fair market value of the shares on the date the
option is granted. The plan would have a ten year term, and the term of the
options would be limited to ten years. See "Executive Compensation and Certain
Transactions with Management - Incentive Stock Option Plan" (page 35).
5
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RISK FACTORS
An investment in the common stock involves various risks. You should
carefully consider the risk factors listed below. These risk factors may cause
CommerceFirst Bancorp's future earnings to be lower or its financial condition
to be less favorable than it expects. In addition, other risks which we are not
aware of, or which we do not believe are material, may cause our earnings to be
lower, or hurt our future financial condition. You should read this section
together with the other information in this prospectus .
AN ACTIVE PUBLIC MARKET WILL PROBABLY NOT EXIST FOR OUR COMMON STOCK
AFTER THE OFFERING, AND THEREFORE SHAREHOLDERS MAY NOT BE ABLE TO EASILY SELL
THEIR COMMON STOCK.
While the common stock will be freely transferable by most
shareholders, we do not expect that there will be an active market for trading
the common stock following the offering. We cannot be sure that an active or
established trading market will develop following completion of the offering, or
if one develops, that it will continue, or whether the price of the common stock
will be higher or lower than the offering price. While we currently intend to
list the common stock on The Nasdaq National Market, The Nasdaq SmallCap Market
or another securities market as soon as it meets the listing requirements, the
common stock will not be listed immediately after completion of the offering.
Additionally, even if qualified, future events may cause us to elect not to seek
listing on Nasdaq or another market. There can be no assurance that trading in
the over-the-counter market or through brokers or market makers will develop. As
a result, an investment in the common stock may be relatively illiquid. See "The
Offering - Limited Market for Common Stock" (page 14).
COMMERCEFIRST BANCORP AND COMMERCEFIRST BANK DO NOT HAVE A PROVEN
HISTORY OF SUCCESSFUL OPERATIONS OR PROFITABILITY, AND WE CANNOT GIVE ANY
ASSURANCE THAT WE WILL EVER BE PROFITABLE.
CommerceFirst Bancorp and CommerceFirst Bank are in the process of
organization, and neither has any prior operating history. CommerceFirst Bancorp
had a loss of $283,817 for the period July 9, 1999 to December 31, 1999.
CommerceFirst Bancorp will not have any initial business activities other than
acting as the holding company for CommerceFirst Bank and investing the proceeds
of the offering, and its profitability will primarily depend on the results of
operations of its principal asset, CommerceFirst Bank. Although the organizing
directors and executive officers have significant experience and contacts in the
market in which CommerceFirst Bank will operate, it is expected that
CommerceFirst Bank will incur operating losses during its initial years of
operation, and may not achieve significant profitability, if at all, for at
least three years. No assurance can be given as to CommerceFirst Bank's
long-term profitability. The cost of opening branch offices may further delay
profitability. There can be no assurance that CommerceFirst Bank will receive
approval to establish its first two branches as planned. See "Business of
CommerceFirst Bancorp" (page 17).
OUR ORGANIZATIONAL DOCUMENTS HAVE PROVISIONS WHICH MAY PREVENT AN
ACQUISITION OF THE COMPANY EVEN IF A MAJORITY OF SHAREHOLDERS FAVOR THE
ACQUISITION.
CommerceFirst Bancorp's Articles of Incorporation and Bylaws contain
provisions which may be seen as having an "antitakeover" effect. These
provisions, which include provisions that require: the request of shareholders
owning 50% of the outstanding shares to call a special meeting of shareholders;
the vote of 80% of the outstanding shares to approve certain business
combinations and amendments to the Articles of Incorporation and Bylaws, in
addition to the statutory two thirds vote requirement; a classified board of
directors; and the absence of cumulative voting in the election of directors,
may have the effect of entrenching the current management. As a result of these
provisions, shareholder efforts to make changes in the conduct of CommerceFirst
Bancorp's business or to sell the company may be defeated, even if such
shareholders hold a majority of the common stock, or if such efforts are in the
best interests of a majority of shareholders. The overall effect of these
provisions could:
o make CommerceFirst Bancorp less attractive to a potential acquiror;
o deter a non-negotiated offer to acquire CommerceFirst Bancorp which a
majority of shareholders might view as being in their best interests, and
which could include substantial premium over the market price for the common
stock;
o result in a lower market price of the common stock.
See "Management" (page 29) and "Description of Capital Stock - Certain
Provisions of the Articles of Incorporation" (page 37)
6
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DIRECTORS AND OFFICERS OF COMMERCEFIRST BANCORP AND COMMERCEFIRST BANK
WILL OWN AT LEAST 33%, AND POSSIBLY MORE THAN 50%, OF THE OUTSTANDING COMMON
STOCK. AS A RESULT OF THEIR OWNERSHIP, THEY COULD DECIDE THE OUTCOME OF MATTERS
SUBMITTED TO SHAREHOLDER VOTE, INCLUDING THE ELECTION OF DIRECTORS AND VOTES ON
SOME ACQUISITIONS OF THE COMPANY, WITHOUT THE VOTES OF OTHER SHAREHOLDERS. THE
RESULTS OF THE VOTE MAY BE CONTRARY TO THE DESIRES OR INTERESTS OF THE PUBLIC
SHAREHOLDERS.
Directors and Officers of CommerceFirst Bancorp and CommerceFirst Bank
and their affiliates intend to purchase at least 330,000 shares of common stock
in the offering. These persons may purchase a greater or lesser number of shares
in the offering. If such persons purchase the number of shares indicated, then
at least 33% of the common stock (if all of the oversubscription shares are
sold), and as much as 50.77% of the common stock (if the minimum number of
shares are sold) will be owned by Directors and Officers of CommerceFirst
Bancorp and CommerceFirst Bank and their affiliates. This level of ownership may
enable these persons to elect the entire Board of Directors, if they voted
together. See "Management" (page 29).
By voting against a proposal submitted to shareholders, the Directors
and Officers of CommerceFirst Bancorp and CommerceFirst Bank, as a group, would
be able to block approval of any proposal submitted to shareholders which
requires an 80% vote of shareholders (such as certain votes under Maryland's
statute regarding business combinations with certain "interested stockholders"),
and make approval more difficult for proposals requiring the vote of two thirds
of shareholders (such as mergers, share exchanges, certain asset sales, and
amendments to CommerceFirst Bancorp's Articles of Incorporation). See
"Management" (page 29) and "Description of Capital Stock - Certain Provisions of
the Articles of Incorporation" (page 38).
COMMERCEFIRST BANK'S LOAN PORTFOLIO WILL CONSIST MAINLY OF COMMERCIAL
AND COMMERCIAL REAL ESTATE RELATED LOANS, WHICH HAVE A HIGHER DEGREE OF RISK
THAN OTHER TYPES OF LOANS.
CommerceFirst Bank intends to operate primarily as a commercial bank,
providing lending services, mainly to various types of small and medium size
businesses and professional organizations. These types of loans are generally
considered to have a higher degree of risk of default or loss than other types
of loans, such as residential real estate loans, because repayment may be
affected by general economic conditions, interest rates, the quality of
management of the business, and other factors which may cause a borrower to be
unable to repay its obligations. See "Business of CommerceFirst Bank - Primary
Business Area and Proposed Services" (page 18).
THE BOARD OF DIRECTORS DETERMINED THE OFFERING PRICE AT AN ARBITRARY
AMOUNT, IN ITS DISCRETION.
The subscription price of the common stock has been arbitrarily
determined by the Board of Directors of CommerceFirst Bancorp, and no
independent investment banking firm was retained to assist in such
determination. The $10.00 per share price bears no relationship to the assets,
earnings, book value or other established measure of value; rather, in fixing
the price the Board considered, a variety of factors, including:
o the subscription prices of securities offered by other newly organized
financial institutions and bank holding companies,
o the amount of capital sought to be raised, and
o the number of outstanding shares desired.
No specific weight was given to any factor.
THERE CAN BE NO ASSURANCE THAT COMMERCEFIRST BANCORP WILL HAVE
SUFFICIENT EARNINGS TO BE LEGALLY ABLE TO PAY DIVIDENDS.
CommerceFirst Bank will initially be the principal revenue producing
operation of
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CommerceFirst Bancorp. As a result, CommerceFirst Bancorp's ability to pay
dividends will largely depends on receiving dividends from CommerceFirst Bank.
The amount of dividends that CommerceFirst Bank may pay is limited by state and
federal laws and regulations. We expect that CommerceFirst Bank will incur
losses during its initial phase of operations, and therefore, it is not
anticipated that any dividends will be paid by CommerceFirst Bank or
CommerceFirst Bancorp for at least three years and in the foreseeable future.
Even if CommerceFirst Bank or CommerceFirst Bancorp have earnings in an amount
sufficient to pay dividends, the Board of Directors may decide to retain
earnings for the purpose of financing growth. No assurance can be given that
CommerceFirst Bank's earnings, if any, will ever permit the payment of any
dividends to CommerceFirst Bancorp or that CommerceFirst Bancorp's earnings, if
any, will ever permit the payment of dividends to shareholders. See "Description
of Capital Stock - Limitations on Payment of Dividends" (page 38) and "The
Offering - Limited Market for Common Stock" (page 14).
THERE IS NO ASSURANCE THAT COMMERCEFIRST BANCORP WILL BE ABLE TO
SUCCESSFULLY COMPETE WITH OTHERS FOR ITS BUSINESS.
CommerceFirst Bancorp and CommerceFirst Bank will compete for loans,
deposits, and investment dollars with other banks and other kinds of financial
institutions and enterprises, such as securities firms, insurance companies,
savings and loan associations, credit unions, mortgage brokers, and private
lenders, many of which have substantially greater resources. Recent legislation
expanding the array of firms that can own banks may result in increased
competition for CommerceFirst Bancorp and CommerceFirst Bank. The differences in
resources and regulations may make it harder for CommerceFirst Bancorp and
CommerceFirst Bank to compete profitably, reduce the rates that they can earn on
loans and investments, increase the rates they must offer on deposits and other
funds, and adversely affect CommerceFirst Bancorp's overall financial condition
and earnings. See "Business of CommerceFirst Bank - Competition (page 22) and
"Supervision and Regulation" (page 24).
NO BROKER HAS AGREED TO PURCHASE ANY OF THE COMMON STOCK AND
COMMERCEFIRST BANCORP MAY NOT BE ABLE TO COMPLETE THE OFFERING. COMMERCEFIRST
BANCORP'S RESULTS MAY BE ADVERSELY AFFECTED IF ONLY THE MINIMUM NUMBER OF SHARES
IS SOLD.
The common stock is being sold directly, through the efforts of the
organizing Directors and Officers of CommerceFirst Bancorp, with the limited
assistance of a registered broker-dealer for the purpose of compliance with the
securities laws of the jurisdictions in which the shares are being offered. No
broker-dealer which assists in the offering will have any obligation to
purchase, or find purchasers for, any shares of common stock. See "The Offering
- - Manner of Distribution" (page 14).
Because the offering is not underwritten, there can be no assurance
that the minimum number of shares will be sold. If the minimum number of shares
is not subscribed for, subscriber funds will be returned, without deduction, but
subscribers will have lost the use of their funds while the offering is being
conducted. See "The Offering - Escrow Account; Release of Funds" (page 13) and
"- Acceptance and Refunding of Subscriptions" (page 13).
If only the minimum number of shares are sold, CommerceFirst Bancorp
and CommerceFirst Bank will have less capital to fund initial operating losses,
operations and expansion activities. While we believe that the proceeds of the
sale of the minimum number of shares will be sufficient to finance CommerceFirst
Bancorp's business plans, the capital levels resulting from the sale of only the
minimum number of shares, in combination with adverse business conditions, could
result in restricted or slower growth for CommerceFirst Bank, slower
establishment of branches or non-banking activities, and lower shareholder
returns. CommerceFirst Bancorp could be required to raise additional capital
earlier than it would if it sold the maximum number of shares.
MANAGEMENT CAN SELL ADDITIONAL SHARES OF COMMON STOCK WITHOUT
CONSULTING SHAREHOLDERS AND WITHOUT OFFERING SHARES TO EXISTING SHAREHOLDERS,
WHICH COULD RESULT IN DILUTION OF SHAREHOLDERS' INTERESTS IN COMMERCEFIRST
BANCORP.
CommerceFirst Bancorp's articles of incorporation authorize 4,000,000
shares of common stock, 800,000 of which are offered in this offering (1,000,000
including the oversubscription shares). The Board of Directors is authorized to
issue additional shares of common stock, at such times and for such
consideration as it may determine, without shareholder action. The existence of
authorized shares of common stock could have the effect of rendering more
difficult or discouraging hostile takeover attempts, or of
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facilitating a negotiated acquisition and could affect the market for and price
of the common stock. Any future offering of capital stock could have a dilutive
effect on holders of common stock. See "Description of Capital Stock" (page 37).
INVESTORS WILL BE RELYING ON THE JUDGMENT AND DISCRETION OF THE
DIRECTORS AND OFFICERS TO DEVELOP AND OPERATE COMMERCEFIRST BANCORP'S AND
COMMERCEFIRST BANK'S BUSINESS.
As newly organized institutions which do not have existing operations,
facilities or business lines, CommerceFirst Bancorp and CommerceFirst Bank will
rely upon their Officers and Directors to locate, establish and outfit
appropriate quarters for CommerceFirst Bank, hire staff, develop and implement
marketing and business development strategies and evaluate lines of businesses
in addition to CommerceFirst Bank's core commercial banking functions. We cannot
be sure that the Board of Directors, which, subject to the requirements of safe
and sound banking practices, will have substantial discretion in these matters,
will be successful in this regard.
MANAGEMENT WILL HAVE DISCRETION IN ALLOCATING A SUBSTANTIAL PORTION OF
THE PROCEEDS OF THE OFFERING.
Subject to the anticipated requirement that at least $6,000,000 (or
such other minimum amount that the federal or state bank regulatory agencies may
require or permit) be contributed to the capital of CommerceFirst Bank, and the
requirements of safe and sound banking practices, the Board of Directors of
CommerceFirst Bank and CommerceFirst Bancorp will have substantial discretion in
determining the use of offering proceeds. The discretion of the Board of
Directors and management to allocate the proceeds of the offering may result in
the use of the proceeds for non-banking activities permitted for bank holding
companies which are not specifically identified in this prospectus.
THE LOSS OF THE SERVICES OF ANY KEY EMPLOYEES COULD ADVERSELY AFFECT
INVESTOR RETURNS.
The business of CommerceFirst Bancorp and CommerceFirst Bank will be
service-oriented, and their success will therefore depend to a large extent upon
the services of Richard J. Morgan, President and Chief Executive Officer, and
Lamont Thomas, Executive Vice President and Chief Operating Officer. The loss of
the services of Mr. Morgan or Mr. Thomas could adversely affect the business of
CommerceFirst Bancorp and CommerceFirst Bank. See "Management" (page 29).
THE ABILITY TO RECOVER MONEY DAMAGES FROM THE DIRECTORS AND OFFICERS OF
COMMERCEFIRST BANCORP IS LIMITED BY THE ARTICLES OF INCORPORATION.
The articles of incorporation of CommerceFirst Bancorp provide that to
the full extent permitted by Maryland law, an officer or director of
CommerceFirst Bancorp will not be liable to CommerceFirst Bancorp or its
shareholders for monetary damages. See "Management" (page 29). This could result
in monetary loss to CommerceFirst Bancorp and its shareholders as a result of
the default of its Officers or Directors without the ability to obtain
compensation for that loss from the Officers or Directors.
COMMERCEFIRST BANCORP'S PROFITABILITY WILL DEPEND ON ECONOMIC POLICIES AND
FACTORS BEYOND ITS CONTROL.
The operating income and net income of CommerceFirst Bank will depend
to a great extent on "rate differentials," i.e., the difference between the
interest yields CommerceFirst Bank receives on its loans, securities and other
interest bearing assets and the interest rates it pays on its interest bearing
deposits and other liabilities. These rates are highly sensitive to many factors
which are beyond the control of CommerceFirst Bank, including general economic
conditions and the policies of various governmental and regulatory authorities,
including the Board of Governors of the Federal Reserve System. See "Supervision
and Regulation - CommerceFirst Bank" (page 25).
GOVERNMENT REGULATION WILL SIGNIFICANTLY AFFECT COMMERCEFIRST BANCORP'S
BUSINESS, AND MAY RESULT IN HIGHER COSTS AND LOWER SHAREHOLDER RETURNS.
The banking industry is heavily regulated. Banking regulations are
primarily intended to protect the federal deposit insurance funds and
depositors, not shareholders. CommerceFirst Bank will be regulated and
supervised by the Maryland Department of Financial Regulation, the Board of
Governors of the Federal Reserve System and the Federal Deposit Insurance
Corporation. CommerceFirst Bancorp will be subject to regulation and supervision
by the Board of Governors of the Federal Reserve System. Changes in the laws,
regulations and regulatory practices affecting
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<PAGE>
the banking industry could impose additional costs on CommerceFirst Bancorp, or
could hurt its ability to compete profitably with other financial institutions.
See "Supervision and Regulation" (page 24).
COMMERCEFIRST BANCORP CAN DECIDE TO NOT ACCEPT ALL OR A PART OF YOUR
SUBSCRIPTION. UNTIL THAT DECISION IS MADE, YOU WILL NOT HAVE USE OF YOUR FUNDS.
CommerceFirst Bancorp will have broad discretion in determining which
subscriptions, other than those of Directors and Officers of CommerceFirst
Bancorp and CommerceFirst Bank, to accept, in whole or in part, including in the
event the offering is oversubscribed. In deciding which subscriptions to accept,
CommerceFirst Bancorp may consider the order in which subscriptions are
received, a subscriber's potential to do business with, or to direct business
to, CommerceFirst Bank, and the desire to have a broad distribution of stock
ownership. As a result, a subscriber cannot be assured of receiving the full
number of shares subscribed for, and may forego use of all or a portion of such
subscriber's funds pending allocation of available shares. (See "The Offering -
General" (page 11) and " - Acceptance and Refunding of Subscriptions" (page 13).
IF COMMERCEFIRST BANK DOES NOT OPEN WHEN EXPECTED, ORGANIZATION COSTS
MAY INCREASE AND SHAREHOLDER RETURNS MAY BE ADVERSELY AFFECTED.
Delays in leasing satisfactory premises for CommerceFirst Bank's main
office, or in effecting renovations to such premises, could result in the
opening being delayed. Delay may also be experienced as a result of the process
of obtaining regulatory approvals. Delay in the commencement of operations by
CommerceFirst Bank may result in increased aggregate organizational expense,
reduced funds available for the conduct of CommerceFirst Bancorp's business, and
possibly reduced returns.
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<PAGE>
THE OFFERING
GENERAL
CommerceFirst Bancorp is offering to sell up to 800,000 shares of its
common stock, at a price of $10.00 per share. CommerceFirst Bancorp also
reserves the right to sell up to an additional 200,000 shares of common stock if
the volume of subscriptions exceeds the number of shares offered. No shares will
be sold unless acceptable subscriptions for a minimum of 650,000 shares are
received, and all regulatory approvals required for CommerceFirst Bank to open
are received. It is expected that Directors and Officers of CommerceFirst
Bancorp and CommerceFirst Bank and their affiliates will purchase at least
330,000 shares of common stock, representing approximately 50.77% of the common
stock if the minimum number of shares are sold, 41.25% percent if the maximum
number of shares are sold, and 33% if all of the oversubscription shares are
sold. See "Management" (page 29).
Subscriptions to purchase shares must be received no later than 5:00
p.m., Eastern time, on April 30, 2000, unless the offering is terminated earlier
or extended by CommerceFirst Bancorp. CommerceFirst Bancorp reserves the right
to terminate the offering at any time prior to April 30, 2000, or to extend the
termination date for periods of up to thirty (30) days each, without notice to
subscribers; however, under no circumstances will the offering be extended
beyond June 30, 2000. See "The Offering - Method of Subscription" (page 11).
Investors must subscribe for the purchase of a minimum of 100 shares
(for a minimum investment of $1,000), subject to CommerceFirst Bancorp's right
to permit smaller subscriptions in its discretion. The maximum number of shares
any person or group of affiliated persons will be permitted to purchase is five
percent (5%) of the total number of shares sold in the offering (32,500 shares
if the minimum number of shares is sold, 40,000 shares if the maximum number of
shares are sold, 50,000 shares if all of the oversubscription shares are sold).
CommerceFirst Bancorp reserves the right, however, to permit larger purchases in
its discretion. It is the current intention of CommerceFirst Bancorp to permit
certain of the organizers to purchase five (5%) or more of the total number of
shares sold in the offering. See "The Offering - Regulatory Limitation" (page
14) and "Management" (page 29). In considering whether to permit larger or
smaller subscriptions, CommerceFirst Bancorp may consider the number of shares
purchased by a subscriber in other capacities, the potential of the subscriber
to do business with, or direct business to, CommerceFirst Bank, and other
factors relating to a particular subscription, and the number of shares which
have not been subscribed for at the time a subscription is accepted. In
determining whether to accept a larger subscription, CommerceFirst Bancorp may
also consider the identity of the subscriber and the subscriber's intentions
with respect to the operation, management and direction of CommerceFirst
Bancorp.
COMMERCEFIRST BANCORP RESERVES THE RIGHT TO ACCEPT OR REJECT ANY
SUBSCRIPTION IN WHOLE OR IN PART. IN DETERMINING WHETHER TO ACCEPT ANY
SUBSCRIPTION, IN WHOLE OR IN PART, THE DIRECTORS MAY, IN THEIR SOLE DISCRETION,
TAKE INTO ACCOUNT THE ORDER IN WHICH SUBSCRIPTIONS ARE RECEIVED, A SUBSCRIBER'S
POTENTIAL TO DO BUSINESS WITH, OR TO DIRECT CUSTOMERS TO, COMMERCEFIRST BANK AND
COMMERCEFIRST BANCORP'S DESIRE TO HAVE A BROAD DISTRIBUTION OF STOCK OWNERSHIP,
AS WELL AS LEGAL OR REGULATORY RESTRICTIONS. NOTWITHSTANDING COMMERCEFIRST
BANCORP'S UNFETTERED RIGHT OF REJECTION, ONCE RECEIVED BY COMMERCEFIRST BANCORP,
ALL SUBSCRIPTIONS ARE IRREVOCABLE BY THE SUBSCRIBER.
METHOD OF SUBSCRIPTION
Investors who wish to participate in the offering and invest in
CommerceFirst Bancorp may do so by completing and signing the subscription
agreement accompanying this prospectus and delivering the completed subscription
agreement to Koonce Securities, Inc. prior to the termination of the offering,
together with payment in full of the offering price of all shares subscribed
for. Payment in full must be by (a) check or bank draft drawn upon a U.S. bank;
or (b) postal, telegraphic or express money order, in either case, payable to
"Bank of America, N.A., Escrow Agent for CommerceFirst Bancorp, Inc.". The
offing price will be deemed to have been received only upon (i) clearance of any
uncertified check, or (ii) receipt of any certified check or bank draft drawn
upon a U.S. bank or of any postal, telegraphic or express money order. A postage
paid, addressed envelope is included for the return of subscription agreement.
If paying by uncertified personal check, please note that the funds paid thereby
may take at
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<PAGE>
least five business days to clear. Accordingly, investors who wish to pay the
offering price by means of uncertified personal check are urged to make payment
sufficiently in advance of the termination of the offering to ensure that such
payment is received and clears by such date. All funds received in payment of
the subscription price will be deposited at Bank of America, N.A. in the
CommerceFirst Bancorp, Inc. Escrow Account and, until closing of the offering,
will be invested at the direction of CommerceFirst Bancorp.
All checks or other instruments in payment of the subscription price
must be made payable to the Bank of America, N.A., Escrow Agent for
CommerceFirst Bancorp, Inc. Checks made payable to Koonce or CommerceFirst
Bancorp will be returned with your subscription documents.
The address to which subscription agreements and payment of the
offering price should be delivered is:
Koonce Securities, Inc. (CommerceFirst Bancorp, Inc.)
6550 Rock Spring Drive
Suite 600
Bethesda, Maryland 20817
Telephone No.: (800) 368-2806 or (301) 897-9700
If the aggregate amount paid by a subscriber is insufficient to
purchase the number of shares that such person indicates are being subscribed
for, or if a subscriber does not specify the number of shares to be purchased,
then such subscriber will be deemed to have subscribed to purchase shares to the
full extent of the payment tendered (subject only to the reduction to the extent
necessary to comply with any regulatory limitation or conditions imposed by
CommerceFirst Bancorp in connection with the offering). If the amount paid by a
subscriber exceeds the amount necessary to purchase the number of shares for
which such subscriber has indicated an intention to subscribe, then such
subscriber will be deemed to have subscribed to purchase shares to the full
extent of the excess payment tendered (subject only to reduction to the extent
necessary to comply with any regulatory limitation or conditions imposed by
CommerceFirst Bancorp in connection with the offering). Notwithstanding the
foregoing, CommerceFirst Bancorp reserves the right to reject, in whole or in
part, any subscription. In determining whether to accept any subscription, in
whole or in part, the Directors may, in their sole discretion, take into account
the order in which subscriptions are received, a subscriber's potential to do
business with, or to direct customers to, CommerceFirst Bank and CommerceFirst
Bancorp's desire to have a broad distribution of stock ownership, as well as
legal or regulatory restrictions.
FAILURE TO INCLUDE THE FULL OFFERING PRICE WITH THE APPLICATION MAY
CAUSE COMMERCEFIRST BANCORP TO REJECT THE SUBSCRIPTION.
The method of delivery of subscription agreements and payment of the
offering price will be at the election and risk of persons participating in the
offering, but if sent by mail, it is recommended that subscription agreements
and payments be sent by registered mail, return receipt requested, and that a
sufficient number of days be allowed to ensure delivery and clearance of payment
prior to the termination date.
All questions concerning the timeliness, validity, form and eligibility
of subscription agreements received will be determined by CommerceFirst Bancorp,
whose determinations will be final and binding. CommerceFirst Bancorp in its
sole discretion may waive any defect or irregularity, or permit any defect or
irregularity to be corrected within such time as it may determine, or reject the
purported subscription. Subscription agreements will not be deemed to have been
received or accepted until all irregularities have been waived or cured within
such time as CommerceFirst Bancorp determines in its sole discretion. Neither
CommerceFirst Bancorp nor any broker-dealer utilized by CommerceFirst Bancorp
will be under any duty to give notification of any defect or irregularity in
connection with the submission of subscription agreements or incur any liability
for failure to give such notification.
Subscriptions for common stock which are received by CommerceFirst
Bancorp or its broker-dealer may not be revoked by subscribers.
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<PAGE>
ESCROW ACCOUNT; RELEASE OF FUNDS
In connection with the sale of common stock by CommerceFirst Bancorp,
an escrow account has been established at Bank of America, N.A. All funds
submitted with subscription agreements will be forwarded to Bank of America,
N.A. by noon of the following business day, for deposit in the escrow account.
Koonce Securities has agreed to deposit funds submitted with the subscriptions
agreement into the escrow account by noon of the following business day. Koonce
Securities will receive a fee of $18.00 per deposit in connection with
depositing the funds submitted with the subscription agreements. Subscription
funds may be invested temporarily in short-term government obligations and
investments which are permissible under Commission rule 15c2-4. The funds in the
escrow account will be held by Bank of America, N.A., which has agreed to hold
the funds for the benefit of subscribers and to release the funds only upon the
occurrence of the events set forth in the escrow agreement. The escrow agreement
provides that funds will not be released until Bank of America, N.A. receives
the certification of officers of CommerceFirst Bancorp that CommerceFirst
Bancorp has accepted subscriptions for not less than 650,000 shares and all
regulatory approvals are received. In determining whether the minimum number of
shares has been subscribed for, shares to be acquired by organizers using
organizer shares as payment will be counted. See "Management's Plan of
Operation" (page 23).
In the event that the offering is not completed because the minimum
number of shares are not subscribed for, all regulatory approvals are not
received, or otherwise, all subscription funds will be returned to investors,
without interest or deduction, except that interest will be paid to the extent
that law, regulation or administrative policy of an investor's state of
residence specifically requires.
Whether or not the offering is completed and shares sold, all interest
and other amounts earned on funds held in escrow representing accepted
subscriptions will be retained by CommerceFirst Bancorp. By submitting a
subscription, subscribers will forego interest they otherwise could have earned
on the funds for the period during which their funds are held in escrow.
Notwithstanding the foregoing, interest will be paid to the extent that law,
regulation or administrative policy of an investor's state of residence
specifically requires in the event that the offering is not completed. Prior to
the time the offering is completed or terminated, CommerceFirst Bancorp will be
entitled to request, from time to time, that the escrow agent distribute accrued
earnings on the escrowed funds to CommerceFirst Bancorp for general corporate
purposes.
ACCEPTANCE AND REFUNDING OF SUBSCRIPTIONS
Subscription agreements are not binding on CommerceFirst Bancorp until
accepted by CommerceFirst Bancorp, which reserves the right to reject, in whole
or in part, in its sole discretion, any subscription agreement or, if the
offering is oversubscribed, to allot a lesser number of shares than the number
for which a person has subscribed. In determining the number of shares to allot
to each subscriber in the event the offering is oversubscribed, the Directors,
in their sole discretion, may take into account the order in which subscriptions
are received, a subscriber's potential to do business with, or to direct
customers to, CommerceFirst Bank, and CommerceFirst Bancorp's desire to have a
broad distribution of stock ownership, as well as legal or regulatory
restrictions. CommerceFirst Bancorp will decide which subscription agreements to
accept within three days after the termination of the offering. Once made, a
subscription is irrevocable by the subscriber during the period of the offering,
including extensions, if any.
In the event CommerceFirst Bancorp rejects all or a portion of any
subscription, the escrow agent will promptly refund to the subscriber by check
sent by first-class mail all, or the appropriate portion of, the amount
submitted with the subscription agreement, without interest or deduction, except
that interest will be paid to the extent that law, regulation or administrative
policy of an investor's state of residence specifically requires. If the
offering is not completed, because CommerceFirst Bank does not receive its
charter to open for business, the minimum number of shares are not subscribed
for by the termination date, including extensions, if any, or for any other
reason, all subscription funds will be promptly refunded to subscribers without
interest or deduction, except that interest will be paid to the extent that law,
regulation or administrative policy of an investor's state of residence
specifically requires.
After all refunds have been made, the escrow agent, CommerceFirst
Bancorp, CommerceFirst Bank and their respective Directors, Officers, and agents
will have no further liabilities to subscribers. Certificates representing
shares
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<PAGE>
duly subscribed and paid for will be issued by CommerceFirst Bancorp as soon as
practicable after funds are released to CommerceFirst Bancorp by the escrow
agent.
LIMITED MARKET FOR COMMON STOCK
Except for common stock held by CommerceFirst Bancorp's Directors and
certain Officers, the common stock will be freely transferable immediately upon
issuance and will not be subject to any transfer restrictions. Although the
common stock may be bought or sold in the over-the-counter market through
securities brokers and dealers, it is not anticipated that an active trading
market will develop in the foreseeable future. There can be no assurance that an
over-the-counter market will develop for the common stock. It is not anticipated
that the common stock will initially be listed on any stock exchange or be
designated for trading on the Nasdaq system, although CommerceFirst Bancorp
currently intends to list the shares on The Nasdaq National Market, The Nasdaq
Small Capitalization Market or another market as soon as it meets the
requirements therefor. There can be no assurance however, that CommerceFirst
Bancorp will qualify for, or if qualified for will seek, listing on any market.
Qualification requirements for The Nasdaq SmallCap Market currently
include net tangible assets of $4,000,000, market capitalization of $50 million
or Net Income (in latest fiscal year or 2 of last 3 fiscal years) of $750,000; a
public float of one million shares (exclusive of shares held directly or
indirectly by any Officer or Director of CommerceFirst Bancorp and shares held
by any other person who is the beneficial owner of more than 10 percent of the
total shares outstanding); a market value of the public float of at least
$5,000,000; 3 market makers; 300 shareholders holding a minimum of 100 shares
each; one year of operating history or $50,000,000 in market capitalization; a
minimum bid price of $4/share; distribution of annual and interim reports; a
minimum of two independent directors; An audit committee (a majority of which
are independent directors); an annual shareholder meeting; certain quorum
requirements; solicitation of proxies; review of conflicts of interest by the
Nasdaq; shareholder approval for certain corporate actions; and certain voting
rights. There can be no assurance that CommerceFirst Bancorp common stock will
qualify for listing on The Nasdaq SmallCap Market or another securities market.
REGULATORY LIMITATION
The purchase of five percent (5%) or more of the common stock of
CommerceFirst Bancorp may require the subscriber to provide certain information
to, or seek the prior approval of, state and federal bank regulators.
CommerceFirst Bancorp will not be required to issue shares of common stock in
the offering to any person who, in the opinion of CommerceFirst Bancorp, would
be required to obtain prior clearance or approval from any state or federal bank
regulatory authority to own or control such shares if, at the termination date,
such clearance or approval has not been obtained or any required waiting period
has not expired. CommerceFirst Bancorp reserves the right to reduce or reject,
in whole or in part, any subscription which would require prior regulatory
application or approval if such has not been obtained prior to the termination
date. See "The Offering - Acceptance and Refunding of Subscriptions" (page 13).
MANNER OF DISTRIBUTION
The Offering will be made through the efforts of the Officers and
Directors of CommerceFirst Bancorp. The Officers and Directors will not receive
any special compensation for such services, but will be reimbursed for
reasonable out-of-pocket expenses, if any, incurred by them. Although all of the
Officers and Directors of CommerceFirst Bancorp and CommerceFirst Bank will
participate in the Offering, Milton D. Jernigan, II, the Chairman of
CommerceFirst Bancorp and CommerceFirst Bank, Richard J. Morgan, the President
and Chief Executive Officer of CommerceFirst Bancorp and CommerceFirst Bank ,
and Lamont Thomas, Executive Vice President and Chief Operating Officer of
CommerceFirst Bancorp and CommerceFirst Bank, will have principal responsibility
for coordination of investor development activities, answering questions from
investors and, participating in informational meetings and coordinating the
efforts of the Officers and Directors in the Offering. CommerceFirst Bancorp has
retained Koonce, a registered broker-dealer, to provide limited assistance to
CommerceFirst Bancorp in order to effect sales of shares in compliance with the
securities laws of the jurisdictions in which the offering will be made. To the
extent CommerceFirst Bancorp seeks to offer shares in jurisdictions in which
Koonce is not registered,
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<PAGE>
CommerceFirst Bancorp may effect sales through another registered broker-dealer.
Neither Koonce, nor any other broker-dealer who assists CommerceFirst Bancorp in
the offering, nor any other person, has any obligation to purchase any of the
shares being offered.
Executed subscription documents (which will be promptly forwarded to
CommerceFirst Bancorp) and subscription funds (which will be forwarded to the
escrow agent by noon of the business day following receipt) will be received by
Koonce. No broker-dealer who assists CommerceFirst Bancorp in the offering,
including Koonce, will independently assess the information in this prospectus
or determine the value of the common stock or the reasonableness of the offering
price. Koonce will receive $15,000 for its services in connection with the
offering, if the offering is completed. Koonce will also receive reimbursement
of its out-of-pocket expenses, whether or not the offering is completed.
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<PAGE>
USE OF PROCEEDS
The gross proceeds to CommerceFirst Bancorp from the sale of the common
stock offered hereby will be $6,500,000 if the minimum number of shares are
sold, $8,000,000 if the maximum number of shares are sold, and $10,000,000 if
all of the oversubscription shares are sold, in each case before deducting
expenses of the offering, which are estimated at $110,000.
CommerceFirst Bancorp will initially use $6,000,000 of the net proceeds
of the offering to purchase all of the then-issued common stock of CommerceFirst
Bank. If applicable federal and state bank regulatory agencies require or permit
a minimum capitalization for CommerceFirst Bank either greater or less than
$6,000,000, CommerceFirst Bancorp may, but is not required to, purchase all of
the then-issued shares of common stock of CommerceFirst Bank for such greater or
lesser amount. If more than $6,000,000 (or such other minimum amount as may be
required or permitted by applicable federal and state bank regulatory agencies)
of net proceeds is raised in the offering, CommerceFirst Bancorp may use all or
a portion of the additional proceeds for purchase of more shares of
CommerceFirst Bank's common stock (or otherwise contribute such funds to
CommerceFirst Bank) or may retain all or a portion of the additional proceeds in
CommerceFirst Bancorp for general corporate purposes, including permitting
CommerceFirst Bancorp to engage in business activities permitted for bank
holding companies, and to meet future accounting, legal and regulatory expenses.
See "Supervision and Regulation" (page 24). There can be no assurance that
CommerceFirst Bancorp will not be required to contribute to the capital of
CommerceFirst Bank more than the amount currently anticipated as a condition to
the approval of CommerceFirst Bank's charter.
CommerceFirst Bank will apply the proceeds of the sale of its capital
stock to CommerceFirst Bancorp to build-out, furnish and equip CommerceFirst
Bank's premises and CommerceFirst Bancorp's offices (at an estimated cost of
$380,000), to provide working capital for expansion, to fund lending activities
and for general corporate purposes (including the investment of all or a portion
of the working capital funds in interest-bearing certificates of deposit or
other deposits with CommerceFirst Bank or other types of securities, such as
government bonds).
Set forth below is a tabular presentation reflecting the anticipated
allocation of the net proceeds of the offering, after deducting estimated
expenses of the offering of $110,000. The presentation assumes the sale of a
maximum of 800,000 shares, that no oversubscription shares are sold, the payment
of all pre-opening and organizational costs (other than bank premises and
equipment expense) by CommerceFirst Bancorp, and in the case of the maximum
number of shares being sold, the contribution of all proceeds in excess of
$6,500,000 to CommerceFirst Bank.
<TABLE>
<CAPTION>
Minimum Maximum(1)
Amount % of Amount % of
Proceeds(1) Proceeds(1)
-------------- ---------------- --------------- ---------------
<S> <C> <C> <C> <C>
COMMERCEFIRST BANCORP:
Net Proceeds $6,390,000 100% $ 7,890,000 100%
Purchase of Stock of Bank/
Salary(2)(5) 150,000 2.35% 150,000 1.90%
Other pre-opening expense(3)(5) 142,000 2.22% 142,000 1.80%
Working Capital(5) 98,000 1.53% 208,000 2.64%
COMMERCEFIRST BANK
Proceeds of Capital Contributions
Premises and equipment expense(4)(5) 380,000 5.95% 380,000 4.82%
Working Capital(5) 5,400,000 87.95% 6,790,000 88.85%
</TABLE>
(1) Represents, in case of CommerceFirst Bank, percentage of total net
proceeds of Offering. CommerceFirst Bancorp reserves the right to not
contribute to CommerceFirst Bank any portion of the proceeds of the
Offering in excess of $6,000,000 (or such other minimum amount as may
be required or permitted by applicable federal and state bank
regulatory agencies).
(2) Represents pre-opening salary and benefits for the Chairman, President
- Chief Executive Officer and Executive Vice President - Chief
Operating Officer of CommerceFirst Bank. See "Executive Compensation
and Certain Transactions with Management" (page 34).
(3) Includes bank and bank holding company application costs and related
legal expense, and office expense for pre-opening period.
(4) Represents estimated costs of outfitting main offices of CommerceFirst
Bank. (5) Assumes that CommerceFirst Bank will open no later than May
1, 2000.
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BUSINESS OF COMMERCEFIRST BANCORP
CommerceFirst Bancorp was incorporated under Maryland law on July 9,
1999. CommerceFirst Bancorp's application to become a bank holding company was
filed with the Federal Reserve Bank of Richmond on December 2, 1999.
CommerceFirst Bancorp knows of no reason why the approval of the Federal Reserve
Board would not be received, although no assurances can be given as to when, or
if, such approval will be received, and if received, whether it will be received
without conditions.
The principal asset of CommerceFirst Bancorp will be its investment in
all of the issued and outstanding capital stock of CommerceFirst Bank. Future
operations of CommerceFirst Bancorp have not been decided upon at this time but
will be closely evaluated and may be predicated on the availability of
additional business opportunities and/or acquisitions to be financed by
dividends from CommerceFirst Bank, borrowings, the sale of additional common
stock, or any combination thereof.
With the prior approval of the Federal Reserve Board, a bank holding
company may engage in non-banking activities closely related to the business of
banking. With such approval CommerceFirst Bancorp could engage in the making and
servicing of loans, which would be made by companies engaged in consumer
finance, credit card issuance, making of mortgages, and commercial financing.
Further, the Federal Reserve Board allows bank holding companies to give
investment or financial advice, lease personal or real property, provide data
processing and courier services and invest in Small Business Investment
Companies, among others. If a favorable opportunity is presented, CommerceFirst
Bancorp could engage in such activities, or other activities which the Federal
Reserve Board currently or in the future may consider closely related to
banking, with the prior approval of the Federal Reserve Board. Under recently
enacted legislation, bank holding companies may also be permitted to engage in a
wider variety of financial activities. See "Supervision and Regulation" (page
24).
Although CommerceFirst Bancorp has not determined the nature of any
non-banking or other financial activities it may engage in, and has no
agreements or understandings pursuant to which it would engage in any such
activities, CommerceFirst Bancorp anticipates that it will explore the
feasibility of engaging in leasing and mortgage banking activities, either
directly or through subsidiaries established for the purpose. There can be no
assurance that CommerceFirst Bancorp will conduct such activities, or if it
does, that any such activities will be profitable or successful for
CommerceFirst Bancorp.
Market Experience. While CommerceFirst Bancorp and CommerceFirst Bank
are newly formed enterprises without existing operations, CommerceFirst Bancorp
believes that the composition of its and CommerceFirst Bank's boards of
directors will give them substantial ability to successfully establish
CommerceFirst Bank's business and compete in the highly competitive and heavily
banked Anne Arundel County market. Prior to joining the organizing group, a
majority of CommerceFirst Bancorp's directors were members of the Board of
Directors of one or more commercial banks in the Anne Arundel/Prince George's
County area. The proposed President - Chief Executive Officer and Executive Vice
President - Chief Operating Officer of CommerceFirst Bank each has over 29 years
of banking and finance related experience. Each of the organizers is a
successful member of the business community in CommerceFirst Bank's proposed
market area, and has significant business and personal relationships within that
area. See "Management" (page 29).
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<PAGE>
CAPITALIZATION OF COMMERCEFIRST BANCORP
The following table sets forth the capitalization of CommerceFirst
Bancorp (as adjusted to reflect the conversion of each organizer share into 100
shares of common stock) and the pro forma consolidated capitalization of
CommerceFirst Bancorp at December 31, 1999, after giving effect to the receipt
of the estimated net proceeds of (i) the sale of the minimum number of shares
required to be sold in the offering; and (ii) the sale of all of the shares
offered hereby, other than oversubscription shares, and based upon the
assumptions set forth herein.
<TABLE>
<CAPTION>
October 31, 1999
-------------------------------------------------------
Actual Pro Forma 1 Pro Forma 2(3)
--------------- ------------- ---------------
<S> <C> <C> <C>
Stockholders' equity:
Common stock, $.01 par value; shares authorized,
Capital surplus $324,675 6,493,500 7,992,000
Retained earnings (deficit) ($ 276,183) ($ 276,183) ($ 276,183)
--------------- ------------- ---------------
Total stockholders' equity $ 48,817 $ 6,223,817 $ 7,723,817
=============== ============= ===============
Book value per share of common stock(2) $ 1.50 $ 9.58 $ 9.65
=============== ============= ===============
</TABLE>
(1) Adjusted to reflect the conversion of each organizer share into 100
shares of common stock in connection with the offering, in accordance
with the requirements of SFAS No. 128.
(2) Book value per share of common stock is determined by dividing
CommerceFirst Bancorp's consolidated equity and pro forma total
consolidated equities at October 31, 1999 by 32,500, 650,000 and
800,000 shares issued and outstanding, respectively.
(3) If all of the oversubscription shares were sold, total stockholders'
equity and book value per share of common stock would be $9,723,817 and
$9.72 respectively.
BUSINESS OF COMMERCEFIRST BANK
As of the date of this prospectus, CommerceFirst Bank has not been
authorized to conduct banking business and has not engaged in banking business
or other operational activities. Applications for a bank charter and deposit
insurance were filed with the Department of Financial Regulation and the Federal
Deposit Insurance Corporation on December 2, 1999. The issuance of a Charter by
the Department of Financial Regulation and approval of deposit insurance by the
FDIC will be dependent upon compliance with certain conditions and procedures,
including the sale of CommerceFirst Bank's stock to CommerceFirst Bancorp, the
completion of CommerceFirst Bank's premises, the purchase of certain fidelity
and other insurance, the hiring of its staff and the adoption of certain
operating procedures and policies. Upon completion of this offering and issuance
of the Charter by the Department of Financial Regulation, and subject to receipt
of all required regulatory approvals, CommerceFirst Bank will open for business
with its main office in Annapolis, Maryland and will engage in the business of
commercial banking. It is currently intended that CommerceFirst Bank will
establish two branches within thirty-six months of opening, subject to current
market conditions, the results of CommerceFirst Bank's operations and approval
by applicable state and federal regulators. CommerceFirst Bank will accept
checking, savings and time deposits, offer a range of commercial, installment
and real estate loans and provide customary banking services principally to
corporations, partnerships, small and medium-sized businesses and sole
proprietorships.
CommerceFirst Bank will seek to operate as a local business bank
alternative to the superregional financial institutions which dominate its
primary market area. The cornerstone of CommerceFirst Bank's philosophy will be
to provide superior, personalized service to its customers. CommerceFirst Bank
will seek to focus 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.
PRIMARY SERVICE AREA AND PROPOSED SERVICES
Bank Location and Market Area
CommerceFirst Bank's proposed main office and the headquarters of
CommerceFirst Bancorp and CommerceFirst Bank will be located in Annapolis,
Maryland. As of the date hereof, CommerceFirst Bancorp has
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signed a letter of intent, and is in the process of negotiating a lease for a
facility located at 1804 West Street in Annapolis. See "Business of
CommerceFirst Bank - Premises" (page 23). It is currently anticipated that two
branches will be established within thirty-six months of the opening of
CommerceFirst Bank, subject to then current market conditions, the results of
CommerceFirst Bank's operations and approval by applicable state and federal
regulators. As of this date, no leases have been entered into.
The primary service area of CommerceFirst Bank is Anne Arundel County,
Maryland, with a secondary market area in the adjacent counties of Baltimore,
Howard, Prince George's, Queen Anne and Calvert counties.
CommerceFirst Bank's primary service area, Anne Arundel County, enjoys
a diverse and presently thriving economy. Anne Arundel County is the seat of the
State government, has 437 miles of shoreline, possesses an increasing number of
high technology firms, houses a major international airport and is home to the
United States Naval Academy. These factors combine to provide the residents of
Anne Arundel County a high quality of life that is attractive to increasing
numbers of businesses, tourists and residents. Annapolis serves as the cultural
and historic center of the region, attracting more than 25% of Maryland's total
tourism each year. Tourism has increased significantly since 1990 and has become
an effective economic development tool, increasing awareness of the area and
assisting in strategies to attract domestic and international business to Anne
Arundel County. Hotel tax revenues, which have increased 67% over the past four
years, confirm the trend of increasing tourism and overall strong growth.
A well-trained work force is a major competitive advantage for Anne
Arundel County's economy. Although Anne Arundel County enjoys a low 3.1%
unemployment rate compared to 3.6% for the State of Maryland, it also has
abundant labor resources. In the past few years, Anne Arundel County has
expanded its economy at a greater pace than many other regions in the United
States. Anne Arundel County initially developed as a bedroom labor community to
the larger Washington and Baltimore markets. Today, over 45% of all Anne Arundel
County residents still commute to other markets for employment. Many of these
commuting workers have significant high technology training and skills and
prefer to work close to where they live as congestion increases in adjacent
areas. As Anne Arundel County has increased its business base over the past
decade, companies relocating to this market have been attracted to the abundant,
highly skilled labor pool. The increasing influence of the high pay technology
sector can be measured by the growth in median family income.
Median family income for Anne Arundel County increased to a record
$61,351 in 1998, compared to the average $40,543 for the State of Maryland
during the same period.
The primary objective of CommerceFirst Bank is to acquire relationships
with the growing number of small to medium sized businesses located in its
primary and secondary service areas. Anne Arundel County is home to 11,500
businesses, 9% of all businesses in Maryland. Anne Arundel County-based firms
are generally small businesses, with over 90% employing less than 100 persons,
and nearly 75% employing less than 20 persons. By contrast, bank consolidations
and mergers have greatly impacted Anne Arundel County as super-regional banks
having acquired many local community and regional banks. Current market and
banking trends combine to provide an opportunity for CommerceFirst Bank to
execute a focused strategy of offering personal and customized services and
attract under-served and dissatisfied small business clients.
Description of Services
CommerceFirst Bank will offer full commercial banking services to its
business and professional clients. CommerceFirst Bank will primarily emphasize
providing commercial banking services to corporations, partnerships, small and
medium-sized businesses and sole proprietorships as well as to non-profit
organizations and associations.
CommerceFirst Bank's business plan articulates a strategy for building
a commercial loan portfolio consisting of term loans, lines of credit and owner
occupied commercial real estate loans provided to primarily locally-based
borrowers. These types of loans are generally considered to have a higher degree
of risk of default or loss than other types of loans, such as residential real
estate loans, because repayment may be affected by general economic conditions,
interest rates, the quality of management of the business, and other factors
which may cause a borrower to be unable to repay its obligations. Traditional
installment loans and personal lines of credit will be available on a
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selective basis. General economic conditions can directly affect the quality of
a small and mid-sized business loan portfolio. The loan portfolio will be
managed to avoid high concentrations of similar industry and/or collateral
pools. It is currently estimated, considering economic opportunities presently
existing in our projected market, that approximately 45% of the loan portfolio
will be comprised of commercial mortgage loans. Approximately 30% of the
portfolio will consist of commercial term loans, approximately 20% in commercial
lines of credit and 5% in consumer loan products (car loans, boat loans,
personal lines of credit and other similar forms of credit products). There can
be no assurance that we will be able achieve this distribution of loans.
Principal credit services will include commercial loans for such
business purposes as working capital, equipment purchases, real estates
acquisition, contract financing and working capital lines of credit.
CommerceFirst Bank intends to offer merchant credit card services through an
outside vendor.
The direct lending activities in which CommerceFirst Bank expects to
engage 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 CommerceFirst Bank's primary
market area will have a significant impact on CommerceFirst Bank's and
CommerceFirst Bancorp's results of operations. To the extent that economic
conditions deteriorate, business and individual borrowers may be less able to
meet their obligations to CommerceFirst Bank in full, in a timely manner,
resulting in decreased earnings or losses to CommerceFirst Bank. To the extent
that loans are secured by real estate, adverse conditions in the real estate
market may reduce ability of the borrower to generate the necessary cash flow
for repayment of the loan, and reduce our ability to collect the full amount of
the loan upon a default. To the extent CommerceFirst Bank makes fixed rate
loans, general increases in interest rates will tend to reduce CommerceFirst
Bank's spread as the interest rates CommerceFirst 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.
CommerceFirst Bank will constantly strive to mitigate risks in the
event of unforeseen threats to the loan portfolio as a result of an economic
downturn or other negative influences. Plans for mitigating inherent risks in
managing loan assets include carefully enforcing loan policies and procedures,
evaluating each borrower's industry and business plan during the underwriting
process, identifying and monitoring primary and alternative sources for
repayment and obtaining collateral that is margined to minimize loss in the
event of liquidation.
Commercial real estate loans will generally be owner occupied
transactions with a principal reliance on the borrower's ability to repay, as
well as prudent guidelines for assessing real estate values. Risks inherent in
managing a commercial real estate portfolio relate to either sudden or gradual
drops in property values as a result of a general or local economic downturn. A
decline in real estate values can cause loan to value margins to increase and
diminish the bank's equity cushion on both an individual and portfolio basis.
CommerceFirst Bank will mitigate commercial real estate lending risks by
carefully underwriting each loan of this type to address the perceived risks in
the individual transaction. Generally, CommerceFirst Bank will require a loan to
value ratio of 75% of the lower of an appraisal or cost. A borrower's ability to
repay will be carefully analyzed and a policy will be enforced that calls for an
ongoing cash flow to debt service requirement of 1.2:1.0. An approved list of
commercial real estate appraisers will be selected on the basis of rigorous
standards. Each appraisal will be scrutinized in an effort to insure current
comparable market values.
As noted above, commercial real estates loans will generally be made on
owner occupied properties where there is both a reliance on the borrower's
financial health and the ability of the borrower and the business to repay.
Whenever appropriate and available, CommerceFirst Bank will seek Federal and
State loan guarantees, such as the Small Business Administration's "7A" and
"504" loan programs to reduce risks. CommerceFirst Bank will generally require
personal guarantees on all loans as a policy; approval of exceptions to policy
will be properly documented. All borrowers will be required to forward annual
corporate, partnership and personal financial statements to comply with bank
policy and enforced through the loan covenants documentation for each
transaction. Interest rate risks to CommerceFirst Bank will be mitigated by
using either floating interest rates or by fixing rates for a short period of
time, generally less than three years. While loan amortizations may be approved
for up to 240 months, each loan will have a call provision (maturity date) of
five years or less. Non-specific provisions for loan
20
<PAGE>
loss reserves will generally be set at 1.25% of the portfolio value, subject to
adjustment depending on national and local economic circumstances. Specific
reserves will be used to increase overall reserves based on increased credit
and/or collateral risks on an individual loan basis. A risk rating system will
be used to proactively determine loss exposure and provide a measurement system
for setting general and specific reserve allocations.
Commercial term loans will be used to provide funds for equipment and
general corporate needs. This loan category is designed to support borrowers who
have a proven ability to service debt over a term generally not to exceed 84
months. CommerceFirst Bank will generally require a first lien position on all
collateral and require guarantees from owners having at least a 20% interest in
the involved business. Interest rates on commercial term loans will generally be
floating or fixed for a term not to exceed three years. Management will
carefully monitor industry and collateral concentrations to avoid loan exposures
to a large group of similar industries and/or similar collateral. Commercial
loans will be evaluated for historical and projected cash flow attributes,
balance sheet strength, and primary and alternate resources of personal
guarantors. Commercial term loan documents will require borrowers to forward
regular financial information on both the business and on personal guarantors.
Loan covenants will require at least annual submission of complete financial
information and in certain cases this information will be required monthly,
quarterly or semi-annually depending on the degree to which lenders desire
information resources for monitoring a borrower's financial condition and
compliance with loan covenants. Examples of properly margined collateral for
loans, as required by bank policy, would be a 75% advance on the lesser of
appraisal or recent sales price on commercial property, 80% or less advance on
eligible receivables, 50% or less advance on eligible inventory and an 80%
advance on appraised residential property. Collateral borrowing certificates may
be required to monitor certain collateral categories on a monthly or quarterly
basis. Generally, loans will require personal guarantees as a matter of policy.
Key person life insurance will be required as appropriate and as necessary to
mitigate the risk loss of a primary owner or manager.
CommerceFirst Bank will attempt to further mitigate commercial term
loan loss by using Federal and State loan guarantee programs such as offered by
the United States Small Business Administration or the State of Maryland's
Department of Business and Economic Development. Management will create a loan
loss reserve of approximately 1.25% of the entire portfolio in this group.
Specific loan reserves will be used to increase overall reserves based on
increased credit and/or collateral risks on an individual loan basis. A risk
rating system will be used to proactively determine loss exposure and provide a
measurement system for setting general and specific reserve allocations.
Commercial lines of credit will be used to finance a business
borrower's short-term credit needs and/or to finance a percentage of eligible
receivables and inventory. In addition to the risks inherent in term loan
facilities, line of credit borrowers typically require additional monitoring to
protect the lender against increasing loan volumes and diminishing collateral
values. Commercial lines of credit are generally revolving in nature and require
close scrutiny. CommerceFirst Bank will either require at least an annual out of
debt period (for seasonal borrowers) or regular financial information (monthly
or quarterly financial statements, borrowing base certificates, etc.) for
borrowers with more growth and greater permanent working capital financing
needs. Advances against collateral will be in the same percentages as in term
loan lending. All lines of credit and term loans to the same borrowers will be
cross-defaulted and cross-collateralized. Industry and collateral concentration,
general and specific reserve allocation and risk rating disciplines will be
identical to those used in managing the commercial term loan portfolio. Interest
rate charges on this group of loans generally float at a factor at or above the
prime lending rate. Generally, personal guarantees will be required on all
loans.
CommerceFirst Bank will manage a modest portfolio of consumer credit
facilities. Typical loans in this group are car loans, boat loans, home equity
loans and personal lines of credit. Consumer credit facilities will be
underwritten to focus on the borrower's credit record, length of employment and
cash flow to debt service. Car, boat and similar loans will require advances of
the lesser of 80% loan to collateral value or cost. Loan loss reserves
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for this group of loans will generally be set at 1% subject to adjustments as
required by national or local economic conditions.
Deposit services will include checking accounts, NOW accounts, Money
Market accounts, certificates of deposits and savings accounts. CommerceFirst
Bank does not expect to accept brokered deposits.
Additionally, CommerceFirst Bank expects to provide various cash
management services such as sweep accounts, repurchase agreements, account
reconciliation, credit card depository, Automated Clearing House origination,
wire transfers, night depositories and, on a selective basis, daily messenger
service.
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SOURCE OF BUSINESS
Management believes that the market segments targeted, small to medium
sized businesses of CommerceFirst Bank's market area, are demanding the
convenience and personal service that a smaller, independent financial
institution can offer. It will be those themes of convenience and personal
service that will form the basis for CommerceFirst Bank's business development
strategies. CommerceFirst Bank first plans to provide services from its main
office in Annapolis, Maryland, followed by branches in adjacent areas which it
believes will complement the needs of CommerceFirst Bank's customers, and will
provide 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, CommerceFirst
Bancorp presently plans for CommerceFirst Bank to establish two branches offices
within thirty-six months of opening for business. There can be no assurance that
CommerceFirst Bank will establish such branches or that they will be profitable.
CommerceFirst Bank expects to capitalize upon the extensive business
and personal contacts and relationships of its Directors and Executive Officers
to establish CommerceFirst Bank's initial customer base. To introduce new
customers to CommerceFirst Bank, early reliance will be on Directors' referrals,
officer-originated calling programs and customer and shareholder referrals.
Management intends to build a staff of competent, professional
associates to provide CommerceFirst Bank's customers with bankers sensitive to
customer needs and experienced in providing a level of personal and professional
service expected by the business community.
ASSET MANAGEMENT
Consistent with the objective of CommerceFirst Bank to serve the needs
of the business community, assets will be concentrated in commercial loans and
commercial real estate loans. To be consistent with the requirements of prudent
banking practices, adequate assets will be invested in high grade securities to
provide liquidity and safety. Loans will be targeted at 80% or less of deposits
(including repurchase agreements), and structured generally with variable rates
and/or fixed rates with short maturities. Investment securities will primarily
be United States treasury securities and United States government or
"quasi-government" agencies.
The risk of nonpayment (or deferred payment) of loans is inherent in
commercial banking. CommerceFirst Bank's marketing focus on small to
medium-sized businesses may result in the assumption by CommerceFirst Bank of
certain lending risks that are different from those attendant to loans to larger
companies. Management of CommerceFirst Bank will carefully evaluate all loan
applications and will attempt 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.
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 Anne Arundel County, and the nearby
Washington DC and Baltimore metropolitan areas, 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,
CommerceFirst Bank will compete 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 CommerceFirst 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 will not be offered directly by
CommerceFirst Bank. Further, the greater capitalization of the larger
institutions allows for substantially higher lending
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limits than CommerceFirst 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.
Competition may become more intense as a result of the Gramm
Leach-Bliley Act of 1999 (the "GLB Act"), which becomes effective in relevant
part on March 11, 2000 The GLB Act permits the creation of a new type of
regulated entity, the financial holding company, that can offer a broad range of
financial products. These new financial holding companies will be able to
affiliate with and engage in banking, securities, insurance and other financial
activities not permitted under current law. The GLB Act also permits banks with
or without holding companies to establish and operate financial subsidiaries
that may engage in most financial activities in which financial holding
companies may engage. Large bank holding companies and other large financial
service companies in particular will be able to take advantage of the new
activities and provide a wider array of product then may be possible for smaller
institutions such as CommerceFirst Bancorp.
EMPLOYEES
Management anticipates that CommerceFirst Bank will initially employ
approximately 8 persons on a full time basis in addition to the senior executive
officers of CommerceFirst Bank, and 1 person on a part time basis. It is not
anticipated that CommerceFirst Bancorp (as distinguished from CommerceFirst
Bank) will have any employees or officers during the first year of operations.
PREMISES
CommerceFirst Bancorp has entered into a letter of intent with respect
to a facility to serve as the executive offices for CommerceFirst Bancorp and
CommerceFirst Bank and as the main banking office for CommerceFirst Bank. The
facility, consists of approximately 7,850 square feet on the first floor of a
two story brick and masonry structure at 1804 West Street, Annapolis, Maryland.
Subject to preparation of satisfactory plans for the renovation and buildout of
the space and the execution of a definitive lease, it is anticipated that
CommerceFirst Bancorp will lease the property for five years with three five
year renewal options, at an initial rent of $19.00 per square foot following the
delivery of the renovated premises, plus annual increases of 3%, plus the
proportionate share of common area costs. The letter of intent anticipates that
a lease will be signed by February 15, 2000, and that pre-renovation rent at a
lower rate will begin as early as March 1, 2000. Delivery of the premises is
anticipated to occur in May 2000. In the event that all regulatory approvals
required for the opening of CommerceFirst Bank are not received, the lease can
be terminated by the payment of a fee of $100,000 in addition to the forfeiture
of a $15,000 security deposit and all other rental payments made, and the
payment of certain excess buildout costs.
In the event that CommerceFirst Bancorp is unable to reach agreement on
a lease, it will continue to explore other locations in the Annapolis area.
CommerceFirst Bancorp's organizational offices are located at Suite
104, 705 Melvin Avenue, Annapolis, Maryland, in a two story, brick office
building. The offices are sublet on a month to month basis from McNamee, Hosea,
Jernigan & Kim, P.A., of which an organizer is a member. See "Executive
Compensation and Certain Transaction with Management - Certain Transactions"
(page 36). The space consists of two executive offices and a reception area, and
includes the use of office equipment, conference and meeting space, kitchen
facilities, parking and limited secretarial/receptionist support.
MANAGEMENT'S PLAN OF OPERATION
As of the date hereof, neither CommerceFirst Bancorp nor CommerceFirst
Bank has commenced operations or engaged in any activities except those related
to the organization of CommerceFirst Bancorp and CommerceFirst Bank and raising
capital in this offering. Such limited activities have been financed solely by
the proceeds of the sale of 325 organizers shares of common stock, for aggregate
proceeds of $325,000. Organizers will purchase additional organizer shares at a
price of $1,000 per share as necessary to finance additional expenses of the
organization of CommerceFirst Bancorp and CommerceFirst Bank. If the offering is
not completed, no person or entity is obligated to reimburse the organizers for
their contributions. This temporary funding source is expected to be sufficient
to meet
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CommerceFirst Bancorp's needs until the sale of shares pursuant to the offering
is completed. Each organizer share will be submitted in payment of the purchase
price of 100 shares of common stock in the offering. These shares will be
counted in determining whether the minimum number of shares is subscribed for in
the offering.
It is anticipated that CommerceFirst Bank will incur approximately
$380,000 in expenses in leasehold improvements for its main office and in
furniture, fixtures and equipment for such offices, including vaults, teller
equipment, computer work stations, furniture for the branch lobby and
administrative offices and other equipment. CommerceFirst Bank will contract its
data processing requirements to an outside vendor. CommerceFirst Bancorp had two
full time employees at September 1, 1999, and expects to have 11employees at
CommerceFirst Bank after the main office has opened.
CommerceFirst Bancorp believes that the proceeds of the offering,
$6,500,000 if the minimum number of shares are sold, $8,000,000 if the maximum
number of shares are sold, and $10,000,000 if all of the oversubscription shares
are sold (in each case without deduction for $110,000 estimated expenses of the
offering), will be sufficient to fund the expenses of establishing and opening
CommerceFirst Bank, and CommerceFirst Bank's and CommerceFirst's operations for
at least twelve months after the offering, and does not anticipate a need to
raise additional capital during that period.
SUPERVISION AND REGULATION
COMMERCEFIRST BANCORP
CommerceFirst Bancorp will be a bank holding company registered under
Bank Holding Company Act of 1956, as amended, (the "Act") and will be subject to
supervision by the Federal Reserve Board. As a bank holding company,
CommerceFirst Bancorp will be 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 CommerceFirst Bancorp 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.
Under current law, 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 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.
Effective on March 11, 2000, the Gramm Leach-Bliley Act of 1999 (the
"GLB Act") will allow a bank holding company or other company to certify status
as a financial holding company, which will allows such
25
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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.
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 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
CommerceFirst Bancorp or any other subsidiary of CommerceFirst Bancorp; 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.
COMMERCEFIRST BANK
CommerceFirst Bank, as a Maryland chartered commercial bank which will
be a member of the Federal Reserve System (a "state member bank") and whose
accounts will be insured by the Bank Insurance Fund of the FDIC up to the
maximum legal limits of the FDIC, will be subject to regulation, supervision and
regular examination by the Department of Financial Institutions and the Federal
Reserve Board. If CommerceFirst Bancorp elects to forego membership by
CommerceFirst Bank in the Federal Reserve System, which it reserves the right to
do, then the FDIC will be the primary federal regulator of CommerceFirst Bank.
The FDIC will regulate CommerceFirst Bank in substantially the same manner as
the Federal Reserve Board. The regulations of these various agencies govern most
aspects of CommerceFirst 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
CommerceFirst 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 which 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. The GLB Act will allow a wider
array of companies to own banks, which could result in companies with resources
substantially in excess of CommerceFirst Bancorp's entering into competition
with CommerceFirst Bancorp and CommerceFirst Bank.
Banking is a business which 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 CommerceFirst Bank's earnings. Thus, the earnings and growth of
CommerceFirst 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 CommerceFirst Bank cannot be
predicted.
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
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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 which
specifically allow for such branching. The District of Columbia, Maryland and
Virginia have all enacted laws which permit interstate acquisitions of banks and
bank branches and permit out-of-state banks to establish de novo branches.
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 CommerceFirst
Bank and will apply to CommerceFirst Bancorp (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 CommerceFirst Bank shall achieve its minimum Leverage Capital Ratio
requirement. A bank which fails to file such plan is deemed to be operating in
an unsafe and unsound manner, and could subject CommerceFirst 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.
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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 which 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 which 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 an
extension is agreed to by the federal regulators. In general, good cause is
defined as capital which has been raised and is imminently available for
infusion into CommerceFirst Bank except for certain technical requirements which
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 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
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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.
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MANAGEMENT
The following table sets forth certain information concerning the
Directors and Officers of CommerceFirst Bancorp, including the number and
percentage of the common stock expected to be acquired in this offering by each
individual (directly and indirectly), each person who may acquire common stock
in this offering in excess of 5%, all Directors and Officers of CommerceFirst
Bancorp as a group, and all Directors and Officers of CommerceFirst Bancorp and
CommerceFirst Bank as a group. Directors and Officers of CommerceFirst Bancorp
and CommerceFirst Bank may buy more shares than reflected in the following
table, including if such additional purchases are necessary to meet the minimum
subscription required to complete the offering. No Director or Officer has any
obligation to make any additional purchase to meet the minimum subscription.
<TABLE>
<CAPTION>
% of Outstanding Shares
---------------------------
Number of
Name Age Position Shares(1) Minimum Maximum(2)
- ----------------------------------- ------ ---------------------------------------- -------------- ------------- ------------
<S> <C> <C> <C> <C> <C>
CommerceFirst Bancorp:
Edward B. Howlin, Jr. 63 Director of CommerceFirst Bancorp and 80,000 12.31% 10%
CommerceFirst Bank
Milton D. Jernigan, II(3) 45 Chairman of the Board of Directors of 20,000 3.08% 2.5%
Alvin R. Maier 66 Vice Chairman of the Board of 30,000 4.62% 3.75%
Richard J. Morgan 52 President, Chief Executive Officer and 5,000 0.77% 0.63%
Lamont Thomas 59 Executive Vice President, Chief 20,000 3.08% 2.5%
Operating Officer and Director of
CommerceFirst Bancorp and
CommerceFirst Bank
All directors and officers of
CommerceFirst Bancorp as a group
(5 persons) 155,000 23.85% 19.38%
-------------- ------------- ------------
All directors and officers of
CommerceFirst Bancorp and
CommerceFirst Bank as a group (15
persons) 330,000 50.77% 41.25%
-------------- ------------- ------------
All directors, officers and
organizers of CommerceFirst
Bancorp and CommerceFirst Bank as
a group (16 persons) 360,000 55.38% 45%
-------------- ------------- ------------
</TABLE>
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(1) Includes shares purchased through conversion of organizer shares.
(2) Does not reflect sale of the oversubscription shares.
(3) Milton D. Jernigan, II is the son of Milton D. Jernigan, Sr., a
proposed director of CommerceFirst Bank. Intended share purchases shown
for Mr. Jernigan, II, do not include intended purchases by Mr.
Jernigan, Sr.
CommerceFirst Bancorp's Articles of Incorporation provide that the
number of Directors of CommerceFirst Bancorp shall be not less than 3 nor more
than 25. The Bylaws provide that the number of Directors shall be fixed from
time to time by the majority vote of the Directors then in office. CommerceFirst
Bancorp's Bylaws provide that the Board of Directors shall be divided into three
classes, the first of which shall serve for an initial one year term, the second
of which shall serve for an initial two year term and the third of which shall
serve for an initial three year term. Upon the expiration of the initial terms,
directors shall be elected for three year terms. The Board has fixed the current
number of Directors at 5, consisting of two directors in each of the first two
classes and one in the third class. The Bylaws may be amended by action of the
Board of Directors.
Directors of CommerceFirst Bancorp may be removed only for cause upon
the affirmative vote of a majority of the combined voting power of all
outstanding shares of voting stock. Cause is defined as the willful and
continuous failure of a director substantially to perform his or her duties to
CommerceFirst Bancorp (other than any failure resulting from incapacity due to
physical or mental illness) or the willful engaging by a director in gross
misconduct materially and demonstrably injurious to CommerceFirst Bancorp.
CommerceFirst Bank's Bylaws will provide for a minimum of 5 and a
maximum of 20 Directors and will permit the Board of Directors to fix an exact
number of Directors within that range. The Board of Directors plans to initially
fix the number of Directors at 15. Before CommerceFirst Bank opens for business,
its sole stockholder, CommerceFirst Bancorp, will be required to elect Directors
of CommerceFirst Bank, subject to the approval of the Department of Financial
Regulation and Federal Reserve Board. Directors of CommerceFirst Bank will serve
for one year and until their successors are elected and qualified. CommerceFirst
Bancorp intends, together with the 10 additional persons set forth under
"Management -- Additional Information About the Directors, Officers and
Organizers of CommerceFirst Bancorp and CommerceFirst Bank - CommerceFirst Bank"
to elect all of the 5 current Directors of CommerceFirst Bancorp to serve on the
Board of CommerceFirst Bank.
Each of CommerceFirst Bank's Directors is required by law to own a
minimum of 50 shares of common stock of CommerceFirst Bancorp.
The Articles of Incorporation of CommerceFirst Bancorp provide that to
the full extent that the Maryland General Corporation Law (the "MGCL") permits
the limitation or elimination of the liability of directors or officers, a
director or officer of CommerceFirst Bancorp shall not be liable to
CommerceFirst Bancorp or its shareholders for monetary damages. The MGCL
provides that the liability of a director or officer in a proceeding brought by
or in the right of shareholders, or on behalf of shareholders may be eliminated,
except that the liability of a director or officer may not be eliminated if the
officer or director received an improper benefit or profit, or if a judgment
against the director or officer is based on a finding that such person's action
or failure to act was the result of active and deliberate dishonesty and was
material to the cause of action against such person. The Articles of
Incorporation of CommerceFirst Bank will similarly provide that to the full
extent that the MGCL permits the limitation or elimination of the liability of
directors or officers, subject to federal law limitations on that authority, a
director or officer shall not be liable to CommerceFirst Bank or its
shareholders for monetary damages.
The Articles of Incorporation of CommerceFirst Bancorp provide that to
the full extent permitted by the MGCL and other applicable law, CommerceFirst
Bancorp shall indemnify a director or officer of CommerceFirst Bancorp who is or
was a party to any proceeding by reason of the fact that he is or was such a
director or officer, and the Board of Directors of CommerceFirst Bancorp may
contract in advance to indemnify any director or officer. The MGCL provides that
except as limited by its articles of incorporation, a corporation shall
indemnify a director who entirely prevails in the defense of any proceeding to
which he was a party because he is or was a director of the corporation against
reasonable expenses incurred in connection with the proceeding. The MGCL further
provides that a corporation may indemnify an individual made a party to a
proceeding because he is or was a director against liability incurred in the
proceeding unless (i) the act or omission was material to the matter giving rise
to the proceeding and was committed in bad faith or was the result of active and
deliberate dishonesty; (ii) the director actually received an
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improper personal benefit; or (iii) in the case of any criminal proceeding, the
director had reasonable cause to believe the act or omission was unlawful,
provided however, that if the proceeding was by or in the right of the
corporation, no indemnification may be made if the director is adjudged liable
to the corporation. The Board of Directors may also indemnify an employee or
agent of CommerceFirst Bancorp who was or is a party to any proceeding by reason
of the fact that he is or was an employee or agent of CommerceFirst Bancorp.
The Articles of Incorporation and the Bylaws of CommerceFirst Bank
similarly will provide that, subject to limitations under federal statute or
regulation, to the full extent permitted by the MGCL, CommerceFirst Bank shall
indemnify a director or officer of CommerceFirst Bank who is or was a party to
any proceeding by reason of the fact that he is or was such a director or
officer.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to Directors, Officers and persons controlling
CommerceFirst Bancorp pursuant to the foregoing provisions, CommerceFirst
Bancorp has been informed that in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Securities Act of 1933 and is therefore unenforceable.
ADDITIONAL INFORMATION ABOUT THE DIRECTORS, OFFICERS AND ORGANIZERS OF
COMMERCEFIRST BANCORP AND BANK
Set forth below is a description of the principal occupation and
business experience of each of the Directors, Officers, and organizers of
CommerceFirst Bancorp and CommerceFirst Bank. Each of the Directors of
CommerceFirst Bancorp is also a Director of CommerceFirst Bank. Except as
expressly indicated below, each person has been engaged in his principal
occupation for at least five years.
CommerceFirst Bancorp
Edward B. Howlin, Jr. Mr. Howlin, 63, 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. Mr. Howlin is also Chief Executive Officer of Howlin
Construction Company, 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 CommerceFirst Bancorp and a member of the
Board of Directors of CommerceFirst Bancorp and CommerceFirst Bank.
Milton D. Jernigan, II. Mr. Jernigan, 45, an attorney engaged in
private practice since 1982 is the co-managing principal of the business and
corporate law firm of McNamee, Hosea, Jernigan & Kim, P.A. Mr. Jernigan is the
Resident Principal-in-Charge of the firm's Annapolis office. Mr. Jernigan's
practice areas have included banking and regulatory law and he has represented
banks and bank holding companies in 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. Mr. Jernigan was one
of the founding organizers and members of the Board of Directors of Commerce
Bank in College Park, Maryland. Commerce Bank was formed and opened in 1989. Mr.
Jernigan served as General Counsel to Commerce Bank from its organization and
until its acquisition by MainStreet BankGroup in December, 1997. MainStreet was
subsequently acquired by BB&T Corporation in 1999. From 1989 until 1993, Mr.
Jernigan served as a Member of the Board of Directors of Commerce Bank and on
its Executive Committee, Loan Committee, Compensation Committee, and Strategic
Planning Committee. Mr. Jernigan is a resident of Annapolis, Maryland and is
active in local chambers of commerce, service and civic organizations. Mr.
Jernigan is a founding organizer of CommerceFirst Bancorp and a member of the
Board of Directors of CommerceFirst Bancorp and CommerceFirst Bank.
Alvin R. Maier. Mr. Maier, 66, is engaged in the business of
manufacturing and selling building supplies as President of Ernest Maier, Inc..
Mr. Maier has 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
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Board of Commerce Bank (and following its acquisition by MainStreet) from 1989
until the acquisition of MainStreet by BB&T Corporation in 1999 and he served on
the bank's Executive Committee, Loan Committee, Compensation Committee and
Strategic Planning Committee. 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 28 year perfect
attendance record. Mr. Maier is a founding organizer of CommerceFirst Bancorp
and a member of the Board of Directors of CommerceFirst Bancorp and
CommerceFirst Bank.
Richard J. Morgan. Mr. Morgan, 52, until joining CommerceFirst Bancorp
and CommerceFirst 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 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
Maryland National Bank's commercial loan portfolio in the Maryland National
Bank's Washington suburban market from zero to $150 million. Mr. Morgan has over
29 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 the United Way of Anne Arundel County; the Annapolis
and Anne Arundel Chamber of Commerce (formerly Trade Council); Scholarships for
Scholars; State of Maryland's Revitalization Loan Committee; Anne Arundel County
Conference and Visitors Bureau; Greater Baltimore Alliance Economic Development
Advisory Board; Greater Washington Initiative Economic Development Advisory
Board; and the Treasurer and member of the Executive Committee of the Maryland
Industrial Development Association. Mr. Morgan is a founding organizer of
CommerceFirst Bancorp and a member of the Board of Directors of CommerceFirst
Bancorp and CommerceFirst Bank.
Lamont Thomas. Mr. Thomas, 59, until joining CommerceFirst Bancorp and
CommerceFirst Bank, served as the Executive Vice President and Treasurer of
Commerce Bank in College Park, Maryland from September, 1989 until June, 1999
serving as chief operating and financial officer. 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 the Commerce Bank's Executive, Asset/Liability and Strategic Planning
Committees. From 1976 until the organization of Commerce Bank, Mr. Thomas
managed numerous corporate functions and supervised the Investment, Compliance,
Personnel, Proof and Discount Brokerage Departments 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 its Vice President and Treasurer. Mr. Thomas was
also responsible for all liaisons with the Federal Deposit Insurance Corporation
and the Maryland State Banking Department and was Secretary to the Board of
Directors and the Executive Committee. Prior to 1976, Mr. Thomas served as
Treasurer of Citizens Bank, where his principal responsibilities involved the
investment portfolio and the daily cash position of Citizens Bank. Mr. Thomas is
a founding organizer of CommerceFirst Bancorp and a member of the Board of
Directors of CommerceFirst Bancorp and CommerceFirst Bank.
CommerceFirst Bank
Wilfred T. Azar, III, Mr. Azar, 38, is engaged in commercial real
estate ownership, development and management as President and Chief Executive
Officer of Empire Corporation, a managing member of Empire Management Services,
LLC and partner of Azar Brothers Partnership. Mr. Azar serves as an officer or
director of a number of other businesses located in and around Anne Arundel
County, including as a director of the Anne Arundel County Chamber of Commerce,
the North Arundel Health System, and the Mt. Washington Pediatric Hospital as
well as serving as a director and President of Pony Express, Inc., a documents
storage and services
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business. From 1994 to 1997, Mr. Azar served as a director of Annapolis National
Bank, Annapolis, Maryland. Mr. Azar is a member of the Board of Directors of
CommerceFirst Bank.
William F. Chesley. Mr. Chesley, 56, is engaged in residential and
commercial real estate sales, management and development in his capacity as
President of William F. Chesley Real Estate, Inc., Dee Corporation, Enterprise
Office Park, Inc. and Ridgley Builders, Inc., as Vice President of Builders &
Brokers Guarantee Program, Inc. and as a managing member of Builder's Advantage,
LLC. Mr. Chesley is also a partner in several local real estate partnerships
located in and around Anne Arundel County. Mr. Chesley is involved in a number
of charitable and professional associations, including both the national and
local Association of Realtors, Suburban Maryland Building Industry Association,
Kiwanis Club of Prince George's County, Bowie Health Center Foundation, Inc. and
as Chairman of the VIP Panel for United Cerebral Palsy. Mr. Chesley is a member
of the Board of Directors of CommerceFirst Bank.
Milton D. Jernigan, Sr. Mr. Jernigan, 69, until retiring in 1996, was
the founder, Chairman and President of AAA Rentals, Inc. and AAA Tools, Inc.,
equipment and party supplies rental and sale businesses with which he served for
thirty years. From 1969, Mr. Jernigan served as Chairman and President of the
companies until 1996 when the equipment company was sold. The companies that
acquired Mr. Jernigan's equipment company are now a part of a national, publicly
traded network of rental equipment companies headquartered in Connecticut. Mr.
Jernigan was one of the original organizers and directors of Commerce Bank and
served as a director of Commerce Bank from 1989 until its acquisition by
MainStreet in 1997. Mr. Jernigan also served on the Commerce Bank's
Asset/Liability Committee and its Business Development Committee. Mr. Jernigan
is a resident of Edgewater, Maryland in Anne Arundel County and is active in
local service and civic organizations, including the Rotary Club of Bladensburg
and Woodmore Country Club. Mr. Jernigan is a founding organizer of CommerceFirst
Bancorp and is a member of the Board of Directors of CommerceFirst Bank.
Andrew R. Lombardo, CPA. Mr. Lombardo, 51, is a Member of the certified
public accounting firm of Sturn, Wagner, Sacclaris & Lombardo, LLC in Annapolis,
Maryland. In addition to being a certified public accountant, Mr. Lombardo holds
a certified valuation analyst designation. Mr. Lombardo is highly involved in
local business and civic groups. He is a Board member and Treasurer of the Anne
Arundel County Police Foundation, and President of the County's 21st Century
Foundation. He was a founding Board member of the Anne Arundel Economic
Development Corporation and served as its Treasurer from 1993 until 1999.
Additionally, Mr. Lombardo served two terms as President of the Anne Arundel
County Trade Council in 1994 and 1995. Mr. Lombardo is a resident of Anne
Arundel County. Mr. Lombardo is a member of the Board of Directors of
CommerceFirst Bank
Michael J. Miller. Mr. Miller, 41, is engaged in the business of road
construction, residential and commercial real estate ownership and construction
equipment leasing as Vice President of Concrete General, Inc. and Tri M Leasing
Corp. and as a partner of Tri M Properties. Mr. Miller is actively involved in
several industry associations, including the Maryland Highway Contractors
Association, the Public Works Contractors Association and is a member of
Associated Builders and Contractors. Mr. Miller is a founding organizer of
CommerceFirst Bancorp and is a member of the Board of Directors of CommerceFirst
Bank.
Robert R. Mitchell. Mr. Mitchell, 56, until retiring in 1988 was the
President of Mitchell Business Equipment, Inc., with which he served for over 25
years until its sale in 1988. Mitchell Business Equipment, Inc. represented
several nationally known brands of general business equipment, providing sales
and services to a wide range of clients, from small storefront retail operations
to billion dollar corporations. Mr. Mitchell was one of the original organizers
and directors of Commerce Bank and served as a director of Commerce Bank from
1989 until its acquisition by MainStreet in 1997. Mr. Mitchell served on
Commerce Bank's Executive, Loan, Business Development and Strategic Planning
Committees. Mr. Mitchell has served as an outside director of two privately held
local business firms and is active in local service and civic organizations,
including membership in Rotary International for 17 years, service on the Prince
George's Salvation Army Local Board for 15 years and membership in the Anne
Arundel Junior Golf Association for 3 years. Mr. Mitchell is a resident of
Harwood, Maryland. Mr. Mitchell is a founding organizer of CommerceFirst Bancorp
and is a member of the Board of Directors of CommerceFirst Bank.
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John A. Richardson. Mr. Richardson, 56, is engaged in electrical
equipment and fixture sales as President of Branch Electric Supply Company. Mr.
Richardson has served as its President since 1968. Mr. Richardson is also the
President of Crofton Bowling Center and is a partner in numerous real estate
investment partnerships located throughout Anne Arundel and Prince George's
Counties. Mr. Richardson is also involved in several professional associations,
including the National Association of Electrical Distributors and the National
Bowling Proprietors Association. Mr. Richardson is a resident of Anne Arundel
County. Mr. Richardson is a founding organizer of CommerceFirst Bancorp and is a
member of the Board of Directors of CommerceFirst Bank.
George C. Shenk, Jr. Mr. Shenk, 47, is engaged in the business of
printing and graphics as the President of Whitmore Printing and Imaging, Inc.,,
an Annapolis based business. Mr. Shenk has served as its President since 1976.
Mr. Shenk is a past Chairman of the Printing Industries of Maryland association,
an active member of the Rotary Club of Annapolis and a past President of the
Maryland Hall Creative Arts association. Mr. Shenk was Chairman of County
Executive John Gary's transition team in 1994 and served on the Anne Arundel
County Planning Advisory Board from 1995 until 1998. Mr. Shenk is a resident of
Anne Arundel County. Mr. Shenk is a founding organizer of CommerceFirst Bancorp
and is a member of the Board of Directors of CommerceFirst Bank.
Dale R. Watson, Mr. Watson, 45, is engaged in the business of computer
consulting as President of Alpha Engineering Associates, Inc., an Annapolis
headquartered business that Mr. Watson formed in 1991. Mr. Watson's firm
configures, installs and supports the computers and networks of local, small to
medium businesses. He is a member of Rotary International and the Anne Arundel
Chamber of Commerce. In addition Mr. Watson's firm has supported both local and
wide area networks at the State, the County and the local City of Annapolis
government level. Before starting Alpha Engineering Associates, Inc., Mr. Watson
worked for a large international company as a high level consultant developing
large scale software solutions for various Federal Agencies, the U.S. Military,
State Governments, various multi-national companies and private businesses. Mr.
Watson is a founding organizer of CommerceFirst Bancorp and is a member of the
Board of Directors of CommerceFirst Bank.
Jerome A. Watts. Mr. Watts, 57, is the owner of Plan Management, a
supplier of insurance and employee benefit plans in Lanham, Maryland. Mr. Watts
was one of the founding organizers and member of the Board of Directors of
Commerce Bank. Mr. Watts served as a Director of Commerce Bank from 1989 until
MainStreet's acquisition by BB&T in 1999 and also served on Commerce Bank's
Executive Committee and Loan Committee. Mr. Watts is a member of a number of
civic and professional associations, including the National Association of Life
Underwriters, the Association of Health Insurance Agents and the Prince George's
County Chamber of Commerce. Mr. Watts is a founding organizer of CommerceFirst
Bancorp and is a member of the Board of Directors of CommerceFirst Bank.
OTHER ORGANIZERS OF COMMERCEFIRST BANCORP AND COMMERCEFIRST BANK
Citizens Incorporated is the registered bank holding company for The
Citizens National Bank of Evans City, a $336 million asset bank based in Evans
City Pennsylvania. Citizens, Incorporated is a passive investor in CommerceFirst
Bancorp. Once CommerceFirst Bank opens for business, we expect that it will
maintain a correspondent relationship with Citizens National Bank of Evans City,
to facilitate loan participations. We expect that most participations sold will
be the amounts of owner occupied, commercial real estate mortgages which are
above our internal and/or legal lending limits. Any sales of participations are
expected to be without recourse, and will be on terms comparable to those which
we could obtain from other participants. Such participations will increase our
ability to effectively service our borrowing clients who have needs in excess of
our self imposed or legal lending limits. The establishment of a relationship
with CommerceFirst Bancorp will enhance the efficiency of the participation
process. CommerceFirst Bank does not have any obligation to sell participations
to Citizens. We do not currently expect that we will purchase any loans from
Citizens. No representatives of Citizens will be a director or officer of
CommerceFirst Bancorp or CommerceFirst Bank.
EXECUTIVE COMPENSATION AND
CERTAIN TRANSACTIONS WITH MANAGEMENT
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It is not anticipated that following the opening for business of
CommerceFirst Bank, CommerceFirst Bancorp will separately compensate any
officers or employees of CommerceFirst Bancorp or CommerceFirst Bank for
services rendered to CommerceFirst Bancorp. Prior to the opening of
CommerceFirst Bank , Messrs. Jernigan, Morgan and Thomas, the proposed Chairman,
President - Chief Executive Officer and Executive Vice President - Chief
Operating Officer of CommerceFirst Bank will receive compensation from the
Company at annual rates of $30,000, $125,000 and $120,000, respectively. Messrs.
Jernigan, Morgan and Thomas have agreed to defer 40% of their annual
compensation until the opening of CommerceFirst Bank.
CommerceFirst Bancorp does not anticipate that it will provide its and
CommerceFirst Bank's directors with any fees for attending meetings of the Board
of Directors or its committees until it is profitable.
Chairman's Employment Agreement. Pursuant to a certain chairman
employment agreement between CommerceFirst Bancorp and Mr. Jernigan, Mr.
Jernigan will serve as the Chairman of the Board of Directors of CommerceFirst
Bancorp and as Chairman of the Board of Directors of CommerceFirst Bank. Under
the chairman employment agreement Mr. Jernigan will receive (i) an annual base
salary of $30,000, (ii) a term life insurance policy in the amount of $100,000,
(iii) 2,500 options to purchase CommerceFirst Bancorp stock, at an exercise
price of $10.00 per share, upon the opening of CommerceFirst Bank, (iv) annual
stock options in an amount to be determined by the Board of Directors of
CommerceFirst Bancorp, and (v) an annual cash bonus in an amount to be
determined by the Board of Directors of CommerceFirst Bancorp. The term of the
chairman employment agreement will expire on July 14, 2002 unless sooner
terminated. If the agreement is terminated by CommerceFirst Bancorp without
cause, CommerceFirst Bancorp will continue to pay Mr. Jernigan his annual
compensation and benefits as severance compensation for a period of 12 months.
In the event of any sale or exchange of stock resulting in a change in a
controlling interest of CommerceFirst Bancorp, Mr. Jernigan may either continue
his employment with CommerceFirst Bancorp, execute a new employment agreement on
mutually agreeable terms or resign his employment. In the event that Mr.
Jernigan resigns his employment 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 Mr. Jernigan during the 12 months immediately preceding the
change in control. See "Certain Transactions" (page 36).
President's Employment Agreement. Pursuant to a certain president
employment agreement between CommerceFirst Bancorp and Mr. Morgan, Mr. Morgan
will serve as the President and Chief Executive Officer of CommerceFirst Bancorp
and CommerceFirst Bank. Under the president employment agreement Mr. Morgan will
receive (i) an annual base salary of $125,000, (ii) a term life insurance policy
in the amount of $300,000, (iii) 10,000 options to purchase CommerceFirst
Bancorp stock, at an exercise price of $10.00 per share, upon the opening of
CommerceFirst Bank, (iv) annual stock options in an amount to be determined by
the Board of Directors of CommerceFirst Bancorp, (v) an annual cash bonus in an
amount to be determined by the Board of Directors of CommerceFirst Bancorp, and
(vi) and participation in all other health, welfare, benefit, stock, option and
bonus plans, if any, generally available to officers or employees of the
CommerceFirst Bank or CommerceFirst Bancorp. Once CommerceFirst Bank opens, Mr.
Morgan will also be entitled to receive the use of a leased vehicle or a
comparable vehicle allowance. The term of the president employment agreement
will expire on August 2, 2004 unless sooner terminated. If the agreement is
terminated by CommerceFirst Bancorp without cause, CommerceFirst Bancorp 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 sale or exchange of
stock resulting in a change in a controlling interest of CommerceFirst Bancorp,
Mr. Morgan may either continue his employment with CommerceFirst Bancorp,
execute a new employment agreement on mutually agreeable terms or resign his
employment. In the event that Mr. Morgan resigns his employment 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 Mr. Morgan during the 12 months
immediately preceding the change in control.
Executive Vice President's Employment Agreement. Pursuant to an
executive vice president employment agreement between CommerceFirst Bancorp and
Mr. Thomas, Mr. Thomas will serve as the Executive Vice President and Chief
Operating Officer of CommerceFirst Bancorp and CommerceFirst Bank. Under the
executive vice president employment agreement Mr. Thomas will receive (i) an
annual base salary of $120,000, (ii) a term life insurance policy in the amount
of $200,000, (iii) 7,500 options to purchase CommerceFirst Bancorp stock, at an
exercise price of $10.00 per share, upon the opening of CommerceFirst Bank, (iv)
annual stock options in an amount to
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be determined by the Board of Directors of CommerceFirst Bancorp, (v) an annual
cash bonus in an amount to be determined by the Board of Directors of
CommerceFirst Bancorp and (vi) and participation in all other health, welfare,
benefit, stock, option and bonus plans, if any, generally available to officers
or employees of the CommerceFirst Bank or CommerceFirst Bancorp. Once
CommerceFirst Bank opens, Mr. Thomas will also be entitled to receive the use of
a leased vehicle or a comparable vehicle allowance. The term of the executive
vice president employment agreement will expire on August 1, 2004 unless sooner
terminated. If the agreement is terminated by CommerceFirst Bancorp without
cause, CommerceFirst Bancorp 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 sale or exchange of stock resulting in a change in a
controlling interest of CommerceFirst Bancorp, Mr. Thomas may either continue
his employment with CommerceFirst Bancorp, execute a new employment agreement on
mutually agreeable terms or resign his employment. In the event that Mr. Thomas
resigns his employment 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 Mr. Thomas during the 12 months immediately preceding the change
in control.
Incentive Stock Option Plan. To attract and retain highly qualified
personnel, it is the intention of the Directors of CommerceFirst Bancorp to
adopt a Stock Option Plan which would be subject to approval by the holders of a
majority of the outstanding Common stock after this offering. It is intended
that the plan provide for incentive options which would be available for grant
to officers and key employees of CommerceFirst Bancorp and CommerceFirst Bank.
The exercise price under each incentive stock option would not be less than 100%
of the fair market value of the shares on the date the option is granted. No
taxable income would be recognized by the optionee at the time an incentive
stock option is granted or at the time exercised, and correspondingly,
CommerceFirst Bancorp would not be entitled to a compensation expense deduction
for federal income tax purposes. The aggregate fair market value of the Common
stock for which any one officer or employee may be granted incentive stock
options in any calendar year would not exceed $100,000 as provided in Section
422A of the Internal Revenue Code, including the requirements which restrict the
term of such an option to ten years. Within three (3) months following
termination of employment for any reasons other than death, disability or
retirement, or cause, an optionee would be entitled to exercise his or her
option to the extent such option were exercisable on the date of termination.
The plan would extend for a period of ten years and be administered by a
committee appointed by the Board.
Since the Plan has not yet been adopted, it is impossible at this time
to designate the identity of the recipients of stock options or the number of
options to be granted.
Warrant Plan. In order to encourage the continued involvement of the
organizers in the CommerceFirst Bank, the Directors of CommerceFirst Bancorp has
adopted a warrant plan under which non-transferable warrants have been granted
to each organizer. The aggregate number of warrants under the plan is equal to
15% of the total shares of stock sold by CommerceFirst Bancorp in the offering
(97,500 shares if the minimum number of shares are sold, 120,000 shares if the
maximum number of shares are sold and 150,000 shares if all of the
oversubscription shares are sold). The actual number of warrants subject to the
plan and granted to each organizer will be determined upon completion of this
offering. In general, subject to the overall limit on the number of warrants
subject to the plan, each organizer is entitled to be allocated a number of
warrants equal to the number of shares purchased by the organizer in the
offering. Each organizer will receive 2,500 warrants in consideration of their
initial capital contribution to CommerceFirst Bancorp. Any warrants remaining
from the total number subject to the plan after the allocation of these initial
warrants will be allocated among the organizers in the proportion that the
number of shares purchased by the organizer and its affiliates bears to the
total number of shares purchased by all organizers, limited to the total number
of shares purchased by the organizer and its affiliates in the offering.
The warrants vest over 3 years at a rate of 30%, 30% and 40%,
respectively and vested warrants will entitled the holder thereof to purchase
one share of stock. In accordance with the terms of the organizers agreement,
the exercise price of each warrant will be the price of the common stock in this
offering, $10.00 per share. The warrants must be exercised, unless earlier
called by CommerceFirst Bancorp, within 10 years from the date of termination of
the offering. With the exception of Citizens, Inc., vested warrants will also
expire 1 year following the date that the organizer ceases to be a director of
CommerceFirst Bank. Warrants may be called by CommerceFirst Bancorp in the event
that a merger, sale, acquisition, share exchange or other similar extraordinary
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event is approved by the Board of Directors of CommerceFirst Bancorp. Upon call
by CommerceFirst Bancorp, warrant holders will have 90 days in which to exercise
their warrants. If they are not exercised, CommerceFirst Bancorp will pay the
warrant holder the difference between the exercise price of the warrant and the
fair market value of the stock of CommerceFirst Bancorp at the time of the
closing of the transaction. In the event that an applicable state or federal
regulatory authority determine that CommerceFirst Bank's capital fails to meet
minimum capital requirements, such regulatory authority may direct CommerceFirst
Bancorp to call all outstanding warrants. Any warrants not exercised will be
thereafter forfeited.
CERTAIN TRANSACTIONS
It is anticipated that the Directors and Officers of CommerceFirst
Bancorp and the business and professional organizations with which they are
associated will have banking transactions with CommerceFirst Bank in the
ordinary course of business. It is the policy of management that any loans and
loan commitments will be made in accordance with applicable laws and on
substantially the same terms, including interest rates and collateral, as those
prevailing at the time for comparable transactions with other persons of
comparable credit standing. Loans to Directors and Officers must comply with
CommerceFirst Bank's lending policies and statutory lending limits, and
directors with a personal interest in any loan application will be excluded from
considering any such loan application.
Milton D. Jernigan, II, a founding organizer and Chairman of the Board
of Directors of CommerceFirst Bancorp and Commerce First Bank is also a
principal of McNamee, Hosea, Jernigan & Kim, P.A. McNamee, Hosea, Jernigan &
Kim, P.A has been retained by CommerceFirst Bancorp to perform certain legal and
advisory services in connection with the formation of CommerceFirst Bancorp and
CommerceFirst Bank, including but not limited to, the preparation of regulatory
applications, organizational documents, employment agreements for the senior
officers, including Mr. Jernigan, and the organizers agreement and Warrant plan,
and participating in the preparation of this prospectus. CommerceFirst Bancorp
also leases its organizational offices from McNamee, Hosea, Jernigan & Kim, P.A.
for a rental of $1,500 per month pursuant to an oral lease between McNamee,
Hosea, Jernigan & Kim, P.A. and CommerceFirst Bancorp. It is anticipated that
following the termination of the offering, McNamee, Hosea, Jernigan & Kim, P.A.
will serve as general corporate and regulatory counsel for CommerceFirst Bancorp
and CommerceFirst Bank. We believe that the terms of the agreement for the lease
are at least as favorable to CommerceFirst Bancorp as could have been obtained
from an unaffiliated party.
McNamee, Hosea, Jernigan & Kim, P.A. will not charge CommerceFirst
Bancorp for any of Mr. Jernigan's time or efforts with respect to the offering
or the organization of CommerceFirst Bancorp and CommerceFirst Bank. Mr.
Jernigan has agreed not to provide any legal services to CommerceFirst Bancorp
or CommerceFirst Bank. McNamee, Hosea, Jernigan & Kim, P.A. has agreed to defer
the payment of certain legal fees pending the successful completion of this
offering.
Other attorneys in the firm of McNamee, Hosea, Jernigan & Kim, P.A. may
subscribe for shares in the offering.
SHARES ELIGIBLE FOR FUTURE SALE
All shares sold in this offering will be freely tradable without
restriction or registration under the Securities Act of 1933, except for any
shares purchased by an "affiliate" of CommerceFirst Bancorp, which will be
subject to the resale limitations set forth in Securities and Exchange
Commission Rule 144. Shares issued to Citizens Incorporated have not been
registered for sale under the laws of the Commonwealth of Pennsylvania, but have
been issued in reliance on an exemption from registration. Such shares may only
be resold pursuant to an available exemption from registration under
Pennsylvania law, or pursuant to an effective registration thereunder.
All of CommerceFirst Bancorp's Directors are considered "affiliates"
within the meaning of Rule 144 and will, therefore, be subject to the applicable
resale limitations with respect to the shares purchased in this offering. In
general, the number of shares that can be sold by each Director in brokers'
transactions, (as that term is used in Rule 144) within any three month period
may not exceed the greater of (i) one percent (1%) of the outstanding shares as
shown by the most recent report or statement published by the Company (6,500
shares if the minimum number of
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shares are sold or 8,000 shares if the maximum number of shares are sold), or
(ii) the average weekly reported volume of trading in the shares on all national
securities exchanges and/or reported through the automated quotation system of a
registered securities association during the four calendar weeks preceding the
sale.
DESCRIPTION OF CAPITAL STOCK
CommerceFirst Bancorp's authorized capital consists of 4,000,000 shares
of common stock, $.01 par value. CommerceFirst Bancorp will issue warrants to
purchase up to 150,000 shares of common stock to organizers. The number of
warrants to be issued will depend upon the number of shares sold in the
offering. See "Executive Compensation and Certain Transactions With Management -
Warrant Plan" (page 36). Under the employment agreements between CommerceFirst
Bancorp and Messrs. Jernigan, Morgan and Thomas, CommerceFirst Bancorp is
obligated to issue options to purchase an aggregate of 20,000 shares of common
stock upon the opening of CommerceFirst Bank. See "Executive Compensation and
Certain Transactions With Management - Employment Agreements" (page 34).
Holders of common stock are entitled to cast one vote for each share
held of record, to receive such dividends as may be declared by the Board of
Directors out of legally available funds, and to share ratably in any
distribution of CommerceFirst Bancorp's assets after payment of all debts and
other liabilities, upon liquidation, dissolution or winding up. Shareholders do
not have cumulative voting rights or preemptive rights or other rights to
subscribe for additional shares, and the common stock is not subject to
conversion or redemption. The shares of common stock to be issued in this
offering will be, when issued, fully paid and non-assessable. Three hundred
twenty five shares of common stock, issued to the organizers to finance
CommerceFirst Bancorp's organizational efforts, are presently outstanding, each
of which will be used to purchase 100 shares of common stock in the offering.
Limitations on Payment of Dividends. The payment of dividends by
CommerceFirst Bancorp will depend largely upon the ability of CommerceFirst Bank
to declare and pay dividends to CommerceFirst Bancorp, as the principal source
of CommerceFirst Bancorp's revenue will initially be from dividends paid by
CommerceFirst 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 CommerceFirst Bancorp and CommerceFirst Bank. It is
anticipated that CommerceFirst Bank will incur losses during its initial phase
of operations, and therefore, it is not anticipated that any dividends will be
paid by CommerceFirst Bank or CommerceFirst Bancorp for at least three years and
in the foreseeable future. Even if CommerceFirst Bank and CommerceFirst Bancorp
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
CommerceFirst Bank and CommerceFirst Bancorp.
Regulations of the Federal Reserve Board and Maryland law place limits
on the amount of dividends CommerceFirst Bank may pay to CommerceFirst Bancorp
without prior approval. Prior regulatory approval is required to pay dividends
which exceed CommerceFirst 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 amended from time to time, could possibly limit the amount of dividends
that CommerceFirst Bancorp 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.
CERTAIN PROVISIONS OF THE ARTICLES OF INCORPORATION
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Restrictions on Business Combinations with Interested Shareholders.
CommerceFirst Bancorp's Articles of Incorporation provides that certain
"business combinations" (including, among various other transactions, a merger,
consolidation, or, in certain circumstances involving assets having a value
equal to 10% or more of CommerceFirst Bancorp's equity, an asset transfer or
issuance of equity securities, and the adoption of certain plans of liquidation
or dissolution) involving and any person who beneficially owns at least 20% of
the corporation's stock and such persons, affiliates or associates (an
"interested shareholder"). Such a business combination must be: (a) approved by
the affirmative vote of at least (i) 80% of the voting power of all outstanding
shares of voting stock and (ii) a majority of the voting power of all
outstanding shares of voting stock which are not held by the interested
shareholder with whom the business combination is to be effected, unless, among
other things, the business combination is approved by a majority of the members
of the Board of Directors who are "disinterested directors," and the common
shareholders receive a price (as described in the articles) generally equal to
the higher of the "fair market value" of the common stock and the highest price
paid by the interested shareholders for any shares of common stock. Under
Maryland law, a two thirds vote is generally required for approval of business
combinations.
Consideration of Business Combinations. The Articles of Incorporation
provide that that where the Board of Directors evaluates any actual or proposed
business combination, the Board of Directors shall consider the following
factors: the effect of the business combination on CommerceFirst Bancorp and any
of its subsidiaries, and their respective shareholders, employees, customers and
the communities which they serve; the timing of the proposed business
combination; the risk that the proposed business combination will not be
consummated; the reputation, management capability and performance history of
the person proposing the business combination; the current market price of the
corporation's capital stock; the relation of the price offered to the current
value of the corporation in a freely negotiated transaction and in relation to
the directors' estimate of the future value of CommerceFirst Bancorp and its
subsidiaries as an independent entity or entities; tax consequences of the
business combination to the corporation and its shareholders; and such other
factors deemed by the directors to be relevant. In such considerations, the
Board of Directors may consider all or certain of such factors as a whole and
may or may not assign relative weights to any of them. The foregoing is not
intended as a definitive list of factors to be considered by the Board of
Directors in the discharge of their fiduciary responsibility to CommerceFirst
Bancorp and its shareholders, but rather to guide such consideration and to
provide specific authority for the consideration by the Board of Directors of
factors which are not purely economic in nature in light of the circumstances of
the corporation and its subsidiaries at the time of such proposed business
combination.
Amendment of the Articles of Incorporation. In general, the Articles of
Incorporation may be amended upon the vote of two thirds of the outstanding
shares of capital stock entitled to vote, the standard vote required under
Maryland law. The provisions of the Articles of Incorporation relating to the
vote required for business combinations and the factors which shall be
considered by the Board of Directors in considering business combinations, and
the provisions requiring the vote of eighty percent of the combined voting power
of the outstanding voting stock to adopt any change to the Bylaws which is not
approved by two thirds of the disinterested directors, may be amended only upon
the affirmative vote of 80% of the voting power of the outstanding voting stock.
LITIGATION
To the knowledge of CommerceFirst Bancorp and its Directors and
Officers, there is no pending or threatened litigation involving CommerceFirst
Bancorp.
LEGAL MATTERS
The validity of the securities offered hereby will be passed upon for
CommerceFirst Bancorp by Kennedy, Baris & Lundy, L.L.P., Bethesda, Maryland.
Members of such firm may subscribe to purchase shares of common stock offered
hereby.
EXPERTS
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The audited financial statements of CommerceFirst Bancorp, Inc. (a
development stage company) for the period ending December 31, 1999 included in
this prospectus has been included herein in reliance upon the report of Trice &
Geary, LLC, independent certified public accountants, and upon the authority of
said firm as experts in accounting and auditing.
ADDITIONAL INFORMATION ABOUT COMMERCEFIRST BANCORP
CommerceFirst Bancorp is a newly organized company and to date has not
engaged in any business operations,. and except for shares issued to the
organizers to fund organizational activities, has not issued any capital stock.
It is not currently subject to the reporting requirements of the Securities
Exchange Act of 1934, as amended, although it will become subject to the
periodic reporting requirements following the completion of this offering, until
such time as it has fewer than three hundred shareholders of record.
CommerceFirst Bancorp will furnish stockholders with annual reports containing
audited financial statements. It may also send other reports to keep
stockholders currently informed concerning its affairs.
This prospectus is part of a registration statement on Form SB-2 filed
by CommerceFirst Bancorp with the Securities and Exchange Commission. This
prospectus does not contain all of the information contained in the registration
statement, certain parts of which have been omitted in accordance with rules of
the SEC. Any statements contained herein concerning the provisions of any
document filed as an exhibit to the registration statement or otherwise filed
with the SEC are not necessarily complete, and, in each instance, reference is
made to the copy of the filed document for a more complete description of the
matter involved, and each such statement is qualified in its entirety by such
reference. The registration statement may be read and copied at the SEC's public
reference room located at 450 Fifth Street, NW, Room 1024, Washington, DC 20549.
Please call the SEC at 1-800-SEC-0330 for further information on the public
reference room. The SEC maintains an Internet web site that contains information
of issuers, including CommerceFirst Bancorp who file electronically with the
SEC. The address of that web site is http://www.sec.gov.
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INDEX TO FINANCIAL STATEMENTS
Independent Auditor's Report................................................F-1
Audited Balance Sheet of the CommerceFirst Bancorp at October 31, 1999......F-2
Audited Statement of Operations.............................................F-3
Audited Statement of Changes in Stockholders' Deficit.......................F-4
Audited Statement of Cash Flows.............................................F-5
Notes to Audited Financial Statements.......................................F-6
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INDEPENDENT AUDITORS' REPORT
To the Board of Directors
CommerceFirst Bancorp, Inc.
Annapolis, MD 21401
We have audited the accompanying balance sheet of CommerceFirst Bancorp, Inc. (a
Development Stage Company) as of December 31, 1999 and the related statements of
operations, changes in stockholders' equity and cash flows for the period July
9, 1999 (date of inception) to December 31, 1999. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on the audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of CommerceFirst Bancorp, Inc. ( a
Development Stage Company) as of December 31, 1999 and the results of operations
and cash flows for the period July 9, 1999 (date of inception) to December 31,
1999 in conformity with generally accepted accounting principles.
/s/ Trice Geary and Myers, L.L.C.
Salisbury, Maryland
January 17, 2000
F-1
<PAGE>
COMMERCEFIRST BANCORP, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
DECEMBER 31, 1999
ASSETS
Cash $ 143,774
Equipment (net) 7,012
---------
TOTAL ASSETS $ 150,786
=========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued expenses $ 101,969
---------
COMMITMENTS
STOCKHOLDERS' EQUITY
Common Stock
$.01 par value, 4,000,000 shares authorized,
32,500 shares issued and outstanding 325
Surplus 324,675
Deficit accumulated during the
development stage (276,183)
---------
TOTAL STOCKHOLDERS' EQUITY 48,817
---------
TOTAL LIABILITIES &
STOCKHOLDERS' EQUITY $ 150,786
=========
See Accompanying Notes
F-2
<PAGE>
COMMERCEFIRST BANCORP, INC.
(A Development Stage Company)
Statement of Operations
For the Period From July 9, 1999
(Date of Inception) to December 31, 1999
REVENUES: Interest income $ 3,991
----------
EXPENSES:
Depreciation 412
Legal and professional 116,460
Salaries 127,336
Rent 6,000
Marketing and consulting 17,870
Office supplies 4,012
Business development 1,739
Miscellaneous 6,345
----------
Total expenses 280,174
----------
LOSS BEFORE INCOME TAX BENEFIT (276,183)
INCOME TAX BENEFIT --
----------
NET LOSS $ (276,183)
==========
EARNINGS PER SHARE:
Basic net loss per share $ (8.50)
===========
Diluted net loss per share $ (8.50)
==========
See Accompanying Notes
F-3
<PAGE>
COMMERCEFIRST BANCORP, INC.
(A Development Stage Company)
Statement of Changes in Stockholders' Equity
For the Period From July 9, 1999
(Date of Inception) to December 31, 1999
<TABLE>
<CAPTION>
Common Surplus Deficit Accumulated Total
Stock During the
Development Stage
<S> <C> <C> <C> <C>
Balances at July 9, 1999 ........................ $ -- $ -- $ -- $ --
Issuance of Common Stock ........................ 325 324,675 325,000
Net Loss ........................................ (276,183) (276,183)
--------- --------- --------- ---------
BALANCES AT DECEMBER 31, 1999 ................... $ 325 $ 324,675 $(276,183) $ 48,817
========= ========= ========= =========
</TABLE>
See Accompanying Notes
F-4
<PAGE>
COMMERCEFIRST BANCORP, INC.
(A Development Stage Company)
Statement of Cash Flows
For the Period From July 9, 1999
(Date of Inception) to December 31, 1999
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $ (276,183)
Adjustments to reconcile net loss to net cash
used by operating activities:
Depreciation 412
Accounts payable 101,969
---------
Net cash used by
operating activities (173,802)
---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of equipment (7,424)
---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of
common stock to organizers 325,000
---------
NET INCREASE IN CASH 143,774
CASH AT BEGINNING OF PERIOD --
---------
CASH AT END OF PERIOD $ 143,774
=========
Supplemental Cash Flows Information:
Interest payments $ --
=========
Income tax payments $ --
=========
See Accompanying Notes
F-5
<PAGE>
COMMERCEFIRST BANCORP, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD FROM JULY 9, 1999
(DATE OF INCEPTION) TO DECEMBER 31, 1999
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS
CommerceFirst Bancorp, Inc. (the "Company") was incorporated on July 9, 1999
under the laws of the State of Maryland to operate as a bank holding company of
a proposed new commercial bank with the name CommerceFirst Bank (the "Proposed
Bank"). It is intended that the Company will purchase all the shares of common
stock to be issued by the Proposed Bank. The Company's operations to date have
been limited to taking necessary actions to organize and capitalize the Company
and the Proposed Bank. The Proposed Bank has not commenced operations and will
not do so unless the public offering of stock by the Company is successful and
the Proposed Bank meets the conditions and approvals of the Maryland Department
of Financial Regulation and the Board of Governors of the Federal Reserve System
to receive its charter authorizing it to commence operations as a commercial
bank, has obtained the approval of the Federal Deposit Insurance Corporation
(FDIC) to insure its deposit accounts, and meets certain other regulatory
requirements.
The Proposed Bank will seek to operate as a local business bank alternative to
the superregional financial institutions which dominate its primary market area
within Anne Arundel County and surrounding areas. The Proposed Bank will focus
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. The accounting policies of the Company conform
to generally accepted accounting principles and general practices within the
banking industry.
Significant accounting policies not disclosed elsewhere in the financial
statements are as follows:
DEPRECIATION
Depreciation is computed using the straight-line method over the estimated
useful lives of the assets.
CREDIT RISK
The Company has deposits in a financial institution in excess of amounts insured
by the FDIC; however, this institution is considered to be a sound institution
within the industry.
F-6
<PAGE>
COMMERCEFIRST BANCORP, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
EARNINGS (LOSS) PER SHARE
Basic net loss per common share is computed by dividing net loss available to
common stockholders by the weighted average number of common shares outstanding
during the period. Diluted net loss per common share is computed by dividing net
loss available to common stockholders by the weighted average number of common
shares outstanding during the period, including any potential dilutive common
shares outstanding, such as options and warrants.
NOTE 2. INCOME TAXES
Federal and state income tax expense (benefit) consists of the following for the
period ended October 31, 1999:
Current federal income tax $ --
Current state income tax --
Deferred federal income tax expense (benefit)
--
Deferred state income tax expense (benefit)
--
Total income tax expense (benefit) $ --
===========
The following chart is a summary of the tax effect of temporary differences that
give rise to a significant portion of deferred tax assets:
Deferred tax assets:
Net operating loss carryforward $ 57,000
Less valuation allowance 57,000
Total deferred tax assets $ --
===========
F-7
<PAGE>
COMMERCEFIRST BANCORP, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 2. INCOME TAXES (CONTINUED)
No income tax benefit or deferred tax asset is reflected in the financial
statements. Deferred tax assets are recognized for future deductible temporary
differences and tax loss carryforward if their realization is "more likely than
not".
NOTE 3. EMPLOYMENT CONTRACTS
The Company has signed employment agreements with the Chairman of the Board of
Directors, President, and Executive Vice President, which will expire July 14,
2002, August 2, 2004, and August 1, 2004, respectively. In the event the
agreements are terminated by the Company without cause, the Company will
continue to pay annual compensation and benefits as severance compensation for a
period of one year. The agreements also grant to the above individuals certain
specified levels of non-incentive stock options to purchase shares of the
Company at an exercise price equal to the initial offering price per share upon
opening of the Proposed Bank. Annual stock options will also be provided at the
discretion of the Board of Directors of the Company
NOTE 4. ISSUANCE OF COMMON STOCK
The Company offered and sold 325 shares of its common stock, $.01 par value per
share for a price of $1,000 per share and received aggregate consideration of
$325,000 to be used for funding organizational activities. In anticipation of
the successful completion of the offering, the shares are reflected as being
converted to 32,500 shares of common stock, $.01 par value per share for a price
of $10 per share, in the equity section of the balance sheet and in the earnings
per share calculation displayed on the statement of operations.
The Company is offering to sell a minimum of 650,000 shares and up to 800,000
shares of its common stock, at a price of $10 per share. The Company reserves
the right to sell up to an additional 200,000 shares of common stock if the
volume of subscription exceeds the number of shares offered.
NOTE 5. WARRANTS AND OPTIONS
The Board of Directors of the Company has adopted a Warrant Plan which will
issue non-transferable warrants to each organizer. The maximum number of
warrants to be issued under the plan will equal 15% of the total shares of stock
sold by the Company in the offering. Each organizer will first be allocated a
number of warrants equal to the number of shares purchased by the organizer in
the offering. Remaining warrants for the organizers will be allocated in the
proportion that the number of shares purchased by the organizers bears to the
total number of shares purchased by all organizers, limited to the total number
of shares purchased by the organizers in the offering.
F-8
<PAGE>
COMMERCEFIRST BANCORP, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 5. WARRANTS AND OPTIONS (CONTINUED)
The warrants will vest over 3 years at a rate of 30%, 30% and 40%, respectively
and vested warrants will entitle the holder thereof to purchase one share of
stock. The exercise price of each warrant will be $10 per share and must be
exercised, unless earlier called by the Company not later than 10 years from the
date of termination of the offering. Generally, vested warrants will also expire
1 year following the date that the organizer ceases to be a director of the
Proposed Bank. Warrants may 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 will 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 state or federal regulatory authority determine that the Proposed
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.
The Board of Directors of the Company intends to adopt a stock option plan as a
performance incentive for its and the Proposed Bank's officers and key
employees.
NOTE 6. RELATED PARTY TRANSACTIONS
The Company has incurred approximately $20,000 of legal expenses with a law firm
of which the Chairman of the Board of the Company is also a principal. The
Company also sub-leases office space in Annapolis, Maryland for $1,500 per month
from this law firm. The terms of the sub-lease agreement appear to be at least
as favorable as what could have been attained from an unaffiliated party.
Accounts payable and accrued expenses include $45,206 payable to the law firm
and $46,333 of unpaid officer salaries.
NOTE 7. COMMITMENTS
The Company has entered into a letter of intent to ;lease a facility to serve as
the executive offices for the Company and as the main banking office for the
Proposed Bank. The facility, which is approximately 7,850 square feet and
located in Annapolis, Maryland, will be 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%. The letter of intent anticipates that a lease will
be signed by February 15, 20000, with delivery of the premises anticipated to
occur in May 2000. In the event that all regulatory approvals required for the
opening of the Proposed Bank are not received, the lease can be terminated by
the payment of a fee of $100,000 in addition to the forfeiture of a $15,000
deposit.
F-9
<PAGE>
COMMERCEFIRST BANCORP, INC.
800,000 SHARES
COMMON STOCK
Prospectus
___________, 2000
COMMERCEFIRST BANCORP HAS NOT AUTHORIZED ANYONE TO GIVE ANY INFORMATION
OR MAKE ANY REPRESENTATION ABOUT THE OFFERING THAT DIFFERS FROM, OR ADDS TO, THE
INFORMATION IN THIS PROSPECTUS OR IN ITS DOCUMENTS THAT ARE PUBLICLY FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION. THEREFORE, IF ANYONE DOES GIVE YOU
DIFFERENT OR ADDITIONAL INFORMATION, YOU SHOULD NOT RELY ON IT. THE DELIVERY OF
THIS PROSPECTUS AND/OR THE SALE OF SHARES OF COMMON STOCK DO NOT MEAN THAT THERE
HAVE NOT BEEN ANY CHANGES IN COMMERCEFIRST BANCORP'S CONDITION SINCE THE DATE OF
THIS PROSPECTUS. IF YOU ARE IN A JURISDICTION WHERE IT IS UNLAWFUL TO OFFER TO
SELL, OR TO ASK FOR OFFERS TO BUY, THE SECURITIES OFFERED BY THIS PROSPECTUS, OR
IF YOU ARE A PERSON TO WHOM IT IS UNLAWFUL TO DIRECT SUCH ACTIVITIES, THEN THE
OFFER PRESENTED BY THIS PROSPECTUS DOES NOT EXTEND TO YOU. THIS PROSPECTUS
SPEAKS ONLY AS OF ITS DATE EXCEPT WHERE IT INDICATES THAT ANOTHER DATE APPLIES.
UNTIL , ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER
OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A
PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A
PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
PROSPECTUS
<PAGE>
PART II: INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers
The Articles of Incorporation of CommerceFirst provide that
CommerceFirst may indemnify officers, directors, employees and agents of
CommerceFirst to the fullest extent permitted by the Maryland law (the "Maryland
law"). Pursuant to the Maryland law, CommerceFirst generally has the power to
indemnify its present and former directors, officers, agents and employees, or
persons serving as such in another entity at CommerceFirst's request, against
expenses (including attorneys' fees) and liabilities incurred by them in any
action, suit, or proceeding to which they are, or are threatened to be made, a
party by reason of their serving in such positions, so long as they acted in
good faith and in a manner they reasonably believed to be in or not opposed to
the best interests of CommerceFirst, or in the case of a criminal proceeding,
had no reasonable cause to believe their conduct was unlawful. In respect of
suits by or in the right of CommerceFirst, the indemnification is generally
limited to expenses (including attorneys' fees) and is not available in respect
of any claim where such person is adjudged liable to CommerceFirst, unless the
court determines that indemnification is appropriate. To the extent such person
is successful in the defense of any suit, action or proceeding, indemnification
against expenses (including attorneys' fees) is mandatory. CommerceFirst has the
power to purchase and maintain insurance for such persons and indemnification.
The indemnification provided by the Maryland law is not exclusive of other
rights to indemnification which any person may otherwise be entitled under any
bylaw, agreement, shareholder or disinterested director vote, or otherwise.
Item 25. Other Expenses of Issuance and Distribution
The estimated expenses payable by CommerceFirst in connection with the
Offering described in this Registration Statement (other than underwriting
discounts and commissions) are as follows:
<TABLE>
<S> <C>
SEC registration fee $ 3,837
Blue Sky qualification fees and expenses 12,500
Printing, engraving & Edgar expenses 15,000
Registered Broker Dealer Fees 15,000
Legal fees and expenses 50,000
Accounting fees and expenses 10,000
Other 3,663
-----------
Total $ 110,000
===========
</TABLE>
Item 26. Recent Sales of Unregistered Securities.
Between July 14, 1999 and October 18, 1999, CommerceFirst issued an
aggregate of 325 shares of common stock to organizers of CommerceFirst and
CommerceFirst 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.
Item 27. Exhibits.
<TABLE>
<CAPTION>
Number Description
------ -----------
<S> <C>
3(a) Articles of Incorporation of CommerceFirst, as amended (1)
3(b) Bylaws of CommerceFirst(1)
4 Refer to Articles III through V and Articles IX
through XI of the Articles of Incorporation (included
as Exhibit 3(a) previously filed) and Article II of
the Bylaws (included as Exhibit 3(b) previously
filed)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Number Description
------ -----------
<S> <C>
5(a) Opinion of Kennedy, Baris & Lundy, L.L.P. (1)
10(a) Chairman Employment Agreement dated July 14, 1999 between Milton D. Jernigan, II and CommerceFirst
Bancorp, Inc. (1)
10(b) President Employment Agreement dated August 2, 1999 between Richard J. Morgan and CommerceFirst Bancorp,
Inc. (1)
10(c) Executive Vice President Employment Agreement dated July 14, 1999 between Lamont Thomas and CommerceFirst
Bancorp, Inc. (1)
23(a) Consent of Trice & Geary, L.L.C., Independent Auditors
23(b) Consent of Kennedy, Baris & Lundy, L.L.P., included in Exhibit 5
99(a) Form of Subscription Agreement(1)
99(b) Amended and Restated Organizers Agreement (1)
99(c) Form of Escrow Agreement(1)
99(d) Warrant Plan
99(e) Letter of Intent for 1804 West Street
</TABLE>
- --------------------------
(1) Previously filed and incorporated by reference to the exhibit of the same
number in the original filing of the Company's registration statement on Form
SB-2 (No. 333-91817)
Item 28. Undertakings. The Registrant hereby undertakes that it will:
(1) file, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to: (i) include any
prospectus required by section 10(a)(3) of the Securities Act; (ii) reflect in
the prospectus any facts or events which, individually or together represent a
fundamental change in the information in the registration statement; and
notwithstanding the foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) (ss. 230.424(b) of this
chapter) if, in the aggregate, the changes in the volume and price represent no
more than a 20% change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration statement;
and (iii) include any additional or changed material information on the plan of
distribution.
(2) for determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial bona
fide offering.
(3) file a post-effective amendment to remove from registration any of
the securities that remain unsold at the end of the offering.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the
II-2
<PAGE>
Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or paid by a
director, officer or controlling person of the Registrant in the successful
defense of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question of whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
II-3
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Annapolis, State of Maryland on February 11, 2000.
COMMERCEFIRST BANCORP, INC.
By: /s/ Richard J. Morgan
--------------------------------
Richard J. Morgan, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed below by the following persons in the capacities and
on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
Director , 2000
- --------------------------------------------- ---------
Edward B. Howlin, Jr.
/s/ Milton D. Jernigan II Chairman of the Board of Directors February 11, 2000
- ---------------------------------------------
Milton D. Jernigan II
Vice Chairman of the Board of Directors, , 2000
- --------------------------------------------- ---------
Alvin R. Maier Secretary and Treasurer
/s/ Richard J. Morgan Director, President - Chief Executive February 11, 2000
- ---------------------------------------------
Richard J. Morgan Officer
(Principal Executive Officer)
/s/ Lamont Thomas Director, Executive Vice President- February 11, 2000
- ---------------------------------------------
Lamont Thomas Chief Operating Officer
(Principal Financial and Accounting Officer)
</TABLE>
