946090--3/24/2010--FIRST_MARINER

related topics

{loan, real, estate}

{condition, economic, financial}

{debt, indebtedness, cash}

{stock, price, share}

{tax, income, asset}

{provision, law, control}

{loss, insurance, financial}

{acquisition, growth, future}

{financial, litigation, operation}

{regulation, change, law}

{regulation, government, change}

{capital, credit, financial}

We are subject to restrictions and conditions of a Cease and Desist Order issued by the FDIC and the Commissioner of the Maryland Division of Financial Regulation (the "Commissioner") ("September Order"), and agreements with the FRB ("FRB Agreement" and "New FRB Agreement") and have incurred and expect to continue to incur significant additional regulatory compliance expense in connection with these enforcement actions. As of December 31, 2009, the Bank's capital levels were not sufficient to achieve compliance with the higher capital requirements we must meet by June 30, 2010, nor were they, on a consolidated basis, sufficient to satisfy the FRB's minimum capital requirements. If the amount of capital we raise in stock offerings and other actions we are taking to reduce assets is insufficient to satisfy capital requirements, we may need to take additional actions to reduce the amounts of our assets and liabilities or we may need to raise additional capital through a share issuance in the future that could dilute your ownership interest. We have taken actions, and may take additional actions, to help us meet immediate needs for capital, including reducing our assets and liabilities. The Company and the Bank are deemed to be in "troubled condition" within the meaning of federal statutes and regulations. Liquidity risk could impair our ability to fund operations and jeopardize our financial viability. We have elected to defer the payment of interest on $73.724 million in face amount of outstanding trust preferred securities issued by trust subsidiaries of our holding company and expect to continue to defer the payment of interest for the foreseeable future. We have had losses in recent periods. Higher loan losses could require us to increase our allowance for loan losses through a charge to earnings. We have a high percentage of commercial real estate and real estate construction loans in relation to our total loans. Mortgage banking activities generate a significant portion of our noninterest income. We face interest rate risk on our loans held for sale portfolio. We face credit risk related to our residential mortgage production activities. We face risk related to covenants in our loan sales agreements with investors. Declines in asset values may result in impairment charges and adversely impact the value of our investments, financial performance, and capital. Negative conditions in the general economy and financial services industry may limit our access to additional funding and adversely impact liquidity. Increased and/or special FDIC assessments will hurt our earnings. Our ability to pay cash dividends is limited. Our funding sources may prove insufficient to replace deposits and support our future growth. We currently hold a significant amount of bank owned life insurance. Fluctuating interest rates can adversely affect our profitability. We operate in a highly regulated environment and may be adversely affected by changes in federal and state laws and regulations, including changes that may restrict our ability to foreclose on single-family home loans and offer overdraft protection. We face significant operational risks. Our management controls a significant percentage of our common stock. Contracts with our officers may discourage a takeover or adversely affect our takeover value. Our Articles and Bylaws and Maryland law may discourage a corporate takeover. A continuation of recent turmoil in the financial markets could have an adverse effect on our financial position or results of operations. Our financial condition and results of operations are dependant on the economy in the Bank's market area. We currently have a significant amount of deferred tax assets. We could, as a result of a stock offering or future trading activity in our common stock, experience an "ownership change" for tax purposes that could cause us to permanently lose a portion of our U.S. federal deferred tax assets. Although publicly traded, our common stock has substantially less liquidity than the average liquidity of stocks listed on the NASDAQ Global Market. If we are unable to satisfy the continued listing standards of NASDAQ, our stock may be delisted from the NASDAQ Stock Market, which could adversely affect its market price and liquidity.

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946090--3/24/2010--FIRST_MARINER_BANCORP