U.S.
SECURITIES AND EXCHANGE COMMISSION
 Washington,
D.C.  20549
 
 FORM
10-Q
 (Mark
One)
 
 ý   Quarterly
report under Section 13 or 15(d) of the Securities Exchange Act of
1934
 
 For
the quarterly period ended March 31, 2009
 
 o   Transition
report under Section 13 or 15(d) of the Exchange Act
 
 For the
transition period from _________ to _________
 
 Commission
file number 333-103651
 
 
 MARCO
COMMUNITY BANCORP, INC.
 (Exact
Name of Registrant as Specified in Its Charter)
 
 Florida
                84-1620092(State
      or Other Jurisdiction
                (I.R.S. Employerof
      Incorporation or Organization)
                Identification
      No.)
 
 1770 San
Marco Road
 Marco Island, Florida
34145
 (Address
of Principal Executive Offices)
 
 (239)
389-5200
 (Issuer's
Telephone Number, Including Area Code)
 
 ______________________________________________________
 (Former
Name, Former Address and Former Fiscal Year, if Changed
 Since
Last Report)
 
 Check
whether the registrant: (1) filed all reports required to be filed by Section 13
or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days:
 
 YES ý       NO
o
 
 Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting
company.  See the definition of "large accelerated filer,"
"accelerated filer" and "smaller reporting company" in Rule 12b-2 of the
Exchange Act (Check one):
 
  Large
      accelerated filer
              o
              Accelerated
      filer
              oNon-accelerated
      filer
              o
              Smaller
      reporting company
              ý(Do
      not check if a smaller reporting company)
 
 Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). YES o          NO
ý
 
 State the
number of shares outstanding of each of the issuer's classes of common equity,
as of the latest practicable date;
 
 Common stock, par value $.01 per
      share
                3,222,608 shares(class)
                Outstanding
      at April 30, 2009
 
 
 MARCO
COMMUNITY BANCORP, INC. AND SUBSIDIARIES
 
 INDEX
 
 
 PART I. FINANCIAL INFORMATIONItem 1. Financial Statements
                PageCondensed Consolidated Balance Sheets - At March 31, 2009
      (unaudited) and at December 31, 2008
                2Condensed Consolidated Statements of Operations - Three Months
      ended March 31, 2009 and 2008 (unaudited)
                3Condensed Consolidated Statements of Changes in Stockholders'
      Equity - Three Months ended March 31, 2009 and 2008
      (unaudited)
                4Condensed Consolidated Statements of Cash Flows – Three Months
      ended March 31, 2009 and 2008 (unaudited)
                5Notes to Condensed Consolidated Financial Statements
      (unaudited)
                6-13Review by Independent Registered Public Accounting
      Firm
                14Report of Independent Registered Public Accounting
      Firm
                15Item 2.  Management's Discussion and Analysis of
      Financial Condition and Results of Operations
                16-20Item 4T.  Controls and Procedures
                21PART II. OTHER INFORMATIONItem 1.  Legal Proceedings
                22Item 5.  Other Information
                22Item 6.  Exhibits
                23SIGNATURES
                24
 
  1
 Index
  MARCO
COMMUNITY BANCORP, INC. AND SUBSIDIARIES
 
 PART
I. FINANCIAL INFORMATION
 
 Item
1. Financial Statements
 
 Condensed
Consolidated Balance Sheets
 ($
in thousands, except per share amounts)
 
 March 31,
                  
                  
                  December 31,Assets
                  
                  2009
                  
                  
                  2008(Unaudited)Cash
      and due from banks
                  
                  $
                  11,520
                  
                  
                  
                  1,587Federal
      funds sold
                  
                  
                  -
                  
                  
                  
                  7,237Interest-bearing
      deposits
                  
                  
                  604
                  
                  
                  
                  387Total
      cash and cash equivalents
                  
                  
                  12,124
                  
                  
                  
                  9,211Securities
      available for sale
                  
                  
                  7,899
                  
                  
                  
                  -Securities
      held to maturity (fair value of $8,256)
                  
                  
                  -
                  
                  
                  
                  8,147Loans,
      net of allowance for loan losses of $5,058 in 2009and
      $6,154 in 2008
                  
                  
                  114,851
                  
                  
                  
                  106,554Other
      real estate owned
                  
                  
                  3,422
                  
                  
                  
                  3,202Premises
      and equipment, net
                  
                  
                  3,320
                  
                  
                  
                  3,357Federal
      Reserve Bank stock, at cost
                  
                  
                  410
                  
                  
                  
                  452Federal
      Home Loan Bank stock, at cost
                  
                  
                  262
                  
                  
                  
                  262Accrued
      interest receivable
                  
                  
                  463
                  
                  
                  
                  413Deferred
      income taxes
                  
                  
                  5,080
                  
                  
                  
                  5,005Other
      assets
                  
                  
                  220
                  
                  
                  
                  146Total
      assets
                  
                  $
                  148,051
                  
                  
                  
                  136,749Liabilities
      and Stockholders' EquityLiabilities:Noninterest-bearing
      demand deposits
                  
                  
                  6,984
                  
                  
                  
                  4,353Savings,
      NOW and money-market deposits
                  
                  
                  46,523
                  
                  
                  
                  34,776Time
      deposits
                  
                  
                  73,515
                  
                  
                  
                  76,971Total
      deposits
                  
                  
                  127,022
                  
                  
                  
                  116,100Repurchase
      agreements
                  
                  
                  494
                  
                  
                  
                  931Official
      checks
                  
                  
                  983
                  
                  
                  
                  332Dividends
      payable
                  
                  
                  77
                  
                  
                  
                  120Accrued
      interest payable and other liabilities
                  
                  
                  655
                  
                  
                  
                  651Total
      liabilities
                  
                  
                  129,231
                  
                  
                  
                  118,134Stockholders'
      equity:Preferred
      stock, no par value; 1,000,000 shares authorized,298
      shares outstanding
                  
                  
                  -
                  
                  
                  
                  -Preferred
      stock, series B, $51,000 liquidation value; 125 sharesauthorized,
      96 shares outstanding
                  
                  
                  4,896
                  
                  
                  
                  4,896Preferred
      stock, series C, $7,500 liquidation value, 750 sharesauthorized,
      202 shares outstanding
                  
                  
                  1,058
                  
                  
                  
                  734Common
      stock, $.01 par value; 9,000,000 shares authorized,3,222,608
      shares issued and outstanding in 2009 and 2008
                  
                  
                  32
                  
                  
                  
                  32Additional
      paid-in capital
                  
                  
                  21,031
                  
                  
                  
                  21,024Accumulated
      deficit
                  
                  
                  (8,280
                  )
                  
                  
                  (8,071
                  )Accumulated
      other comprehensive income
                  
                  
                  83
                  
                  
                  
                  -Total
      stockholders' equity
                  
                  
                  18,820
                  
                  
                  
                  18,615Total
      liabilities and stockholders' equity
                  
                  $
                  148,051
                  
                  
                  
                  136,749
  See
Accompanying Notes to Condensed Consolidated Financial
Statements.
  2
 Index
  MARCO
COMMUNITY BANCORP, INC. AND SUBSIDIARIES
 
 Condensed
Consolidated Statements of Operations (Unaudited)
 (In
thousands, except per share amounts)
 
 Three
      Months EndedMarch 31,2009
                  
                  
                  2008Interest
      income:Loans
                  
                  $
                  1,585
                  
                  
                  
                  2,016Securities
                  
                  
                  93
                  
                  
                  
                  86Other
      interest-earning assets
                  
                  
                  7
                  
                  
                  
                  147Total
      interest income
                  
                  
                  1,685
                  
                  
                  
                  2,249Interest
      expense:Deposits
                  
                  
                  815
                  
                  
                  
                  1,267Other
      borrowings
                  
                  
                  3
                  
                  
                  
                  10Total
      interest expense
                  
                  
                  818
                  
                  
                  
                  1,277Net
      interest income
                  
                  
                  867
                  
                  
                  
                  972Provision
      for loan losses
                  
                  
                  130
                  
                  
                  
                  100Net
      interest income after provision for loan losses
                  
                  
                  737
                  
                  
                  
                  872Noninterest
      income:Service
      charges on deposit accounts
                  
                  
                  7
                  
                  
                  
                  6Gain
      on sale of securities
                  
                  
                  78
                  
                  
                  
                  -Other
      service charges and fees
                  
                  
                  44
                  
                  
                  
                  41Total
      noninterest income
                  
                  
                  129
                  
                  
                  
                  47Noninterest
      expenses:Salaries
      and employee benefits
                  
                  
                  488
                  
                  
                  
                  659Occupancy
      and equipment
                  
                  
                  124
                  
                  
                  
                  159Advertising
                  
                  
                  22
                  
                  
                  
                  42Insurance
                  
                  
                  11
                  
                  
                  
                  24Data
      processing
                  
                  
                  75
                  
                  
                  
                  67Telephone
                  
                  
                  19
                  
                  
                  
                  19Regulatory
      assessments
                  
                  
                  158
                  
                  
                  
                  98Professional
      fees
                  
                  
                  107
                  
                  
                  
                  111Stationary
      and supplies
                  
                  
                  10
                  
                  
                  
                  10Other
      real estate owned
                  
                  
                  33
                  
                  
                  
                  43Loss
      on sale of other real estate owned
                  
                  
                  47
                  
                  
                  
                  -Other
                  
                  
                  106
                  
                  
                  
                  140Total
      noninterest expenses
                  
                  
                  1,200
                  
                  
                  
                  1,372Loss
      before income taxes
                  
                  
                  (334
                  )
                  
                  
                  (453
                  )Income
      tax benefit
                  
                  
                  (125
                  )
                  
                  
                  (171
                  )Net
      loss
                  
                  
                  (209
                  )
                  
                  
                  (282
                  )Dividends
      on preferred stock
                  
                  
                  96
                  
                  
                  
                  69Net
      loss available to common stockholders
                  
                  $
                  (305
                  )
                  
                  
                  (351
                  )Net
      loss per common share, basic and diluted
                  
                  $
                  (0.09
                  )
                  
                  
                  (0.11
                  )Weighted-average
      number of common shares outstanding, basic and diluted
                  
                  
                  3,223
                  
                  
                  
                  3,222
 
 
 See
Accompanying Notes to Condensed Consolidated Financial
Statements.
  3
 Index
  MARCO
COMMUNITY BANCORP, INC. AND SUBSIDIARIES
 
 Condensed
Consolidated Statements ofChanges in Stockholders'
Equity
 
 Three
Months Ended March 31, 2009 and 2008
 ($
in thousands)
 
 
 
 AccumulatedOtherSeries
      B
                        
                        
                        Series
      C
                        
                        
                        
                        
                        
                        Additional
                        
                        
                        
                        
                        
                        Compre-
                        
                        
                        TotalPreferred
                        
                        
                        Preferred
                        
                        
                        Common
                        
                        
                        Paid-In
                        
                        
                        Accumulated
                        
                        
                        hensive
                        
                        
                        Stockholders'Stock
                        
                        
                        Stock
                        
                        
                        Stock
                        
                        
                        Capital
                        
                        
                        Deficit
                        
                        
                        Income
                        
                        
                        EquityBalance
      at December 31, 2007
                        
                        $
                        4,896
                        
                        
                        
                        -
                        
                        
                        
                        32
                        
                        
                        
                        20,874
                        
                        
                        
                        (2,993
                        )
                        
                        
                        9
                        
                        
                        
                        22,818Comprehensive
      loss:Net
      loss (unaudited)
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        (282
                        )
                        
                        
                        -
                        
                        
                        
                        (282
                        )Net
      change in unrealized gainon
      security available forsale,
      net of tax effect(unaudited)
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        1
                        
                        
                        
                        1Comprehensive
      loss(unaudited)
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        (281
                        )Dividends
      declared-preferred (unaudited)
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        (69
                        )
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        (69
                        )Balance
      at March 31, 2008 (unaudited)
                        
                        $
                        4,896
                        
                        
                        
                        -
                        
                        
                        
                        32
                        
                        
                        
                        20,805
                        
                        
                        
                        (3,275
                        )
                        
                        
                        10
                        
                        
                        
                        22,468Balance
      at December 31, 2008
                        
                        $
                        4,896
                        
                        
                        
                        734
                        
                        
                        
                        32
                        
                        
                        
                        21,024
                        
                        
                        
                        (8,071
                        )
                        
                        
                        -
                        
                        
                        
                        18,615Comprehensive
      loss:Net
      loss (unaudited)
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        (209
                        )
                        
                        
                        -
                        
                        
                        
                        (209
                        )Net
      change in unrealized gainon
      security available forsale,
      net of tax effect(unaudited)
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        83
                        
                        
                        
                        83Comprehensive
      loss(unaudited)
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        (126
                        )Issuance
      of preferred stock (unaudited)
                        
                        
                        -
                        
                        
                        
                        324
                        
                        
                        
                        -
                        
                        
                        
                        103
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        427Dividends
      declared-preferred (unaudited)
                        
                        
                        -
                        
                        
                        
                        
                        
                        
                        
                        -
                        
                        
                        
                        (96
                        )
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        (96
                        )Balance
      at March 31, 2009 (unaudited)
                        
                        $
                        4,896
                        
                        
                        
                        1,058
                        
                        
                        
                        32
                        
                        
                        
                        21,031
                        
                        
                        
                        (8,280
                        )
                        
                        
                        83
                        
                        
                        
                        18,820
 
 See
Accompanying Notes to Condensed Consolidated Financial
Statements.
  4
 Index
  MARCO
COMMUNITY BANCORP, INC. AND SUBSIDIARIES
 
 Condensed
Consolidated Statements ofCash Flows (Unaudited)
 (In
thousands)
 
 Three
      Months EndedMarch 31,2009
                  
                  
                  2008Cash
      flows from operating activities:Net
      loss
                  
                  $
                  (209
                  )
                  
                  
                  (282
                  )Adjustments
      to reconcile net loss to net cashprovided
      by operating activities:Depreciation
                  
                  
                  52
                  
                  
                  
                  73Provision
      for loan losses
                  
                  
                  130
                  
                  
                  
                  100Deferred
      income taxes
                  
                  
                  (125
                  )
                  
                  
                  402Amortization
      of loan fees and costs, net
                  
                  
                  (17
                  )
                  
                  
                  (4
                  )Gain
      on sale of securities available for sale
                  
                  
                  (78
                  )
                  
                  
                  -(Increase)
      decrease in accrued interest receivable
                  
                  
                  (50
                  )
                  
                  
                  65(Increase)
      decrease in other assets
                  
                  
                  (74
                  )
                  
                  
                  14Loss
      on sale of other real estate owned
                  
                  
                  47
                  
                  
                  
                  -Increase
      in official checks, accrued interest payable andother
      liabilities
                  
                  
                  655
                  
                  
                  
                  1,141Net
      cash provided by operating activities
                  
                  
                  331
                  
                  
                  
                  1,509Cash
      flows from investing activities:Purchase
      of securities available for sale
                  
                  
                  (5,186
                  )
                  
                  
                  -Proceeds
      from sale of securities available for sale
                  
                  
                  5,359
                  
                  
                  
                  -Principal
      payments securities available for sale
                  
                  
                  286
                  
                  
                  
                  -Principal
      payments security held to maturity
                  
                  
                  -
                  
                  
                  
                  182Redemption
      of Federal Home Loan Bank stock
                  
                  
                  -
                  
                  
                  
                  31Purchase
      of Federal Reserve Bank stock
                  
                  
                  -
                  
                  
                  
                  (39
                  )Redemption
      of Federal Reserve Bank stock
                  
                  
                  42
                  
                  
                  
                  -Net
      (increase) decrease in loans
                  
                  
                  (9,146
                  )
                  
                  
                  6,804Proceeds
      from sale of other real estate owned
                  
                  
                  469
                  
                  
                  
                  -Purchase
      of premises and equipment
                  
                  
                  (15
                  )
                  
                  
                  (16
                  )Net
      cash (used in) provided by investing activities
                  
                  
                  (8,191
                  )
                  
                  
                  6,962Cash
      flows from financing activities:Net
      increase in deposits
                  
                  
                  10,922
                  
                  
                  
                  13,107Net
      decrease in repurchase agreements
                  
                  
                  (437
                  )
                  
                  
                  (844
                  )Net
      proceeds from issuance of preferred stock
                  
                  
                  427
                  
                  
                  
                  -Preferred
      dividends paid
                  
                  
                  (139
                  )
                  
                  
                  (81
                  )Net
      cash provided by financing activities
                  
                  
                  10,773
                  
                  
                  
                  12,182Net
      increase in cash and cash equivalents
                  
                  
                  2,913
                  
                  
                  
                  20,653Cash
      and cash equivalents at beginning of period
                  
                  
                  9,211
                  
                  
                  
                  11,174Cash
      and cash equivalents at end of period
                  
                  $
                  12,124
                  
                  
                  
                  31,827Supplemental
      disclosure of cash flow information:Cash
      paid (received) during the period for:Interest
                  
                  $
                  968
                  
                  
                  
                  1,214Income
      taxes
                  
                  $
                  -
                  
                  
                  
                  (574
                  )Noncash
      transactions:Preferred
      dividends payable at beginning of period
                  
                  $
                  120
                  
                  
                  
                  35Preferred
      dividends payable at end of period
                  
                  $
                  77
                  
                  
                  
                  23Transfer
      of loans to other real estate owned
                  
                  $
                  736
                  
                  
                  
                  17Transfer
      of securities held to maturity to available for sale
                  
                  $
                  8,147
                  
                  
                  
                  -Net
      change in unrealized gain on security available for sale,net
      of tax effect
                  
                  $
                  83
                  
                  
                  
                  1
  See
Accompanying Notes to Condensed Consolidated Financial
Statements.
  5
 Index
  MARCO
COMMUNITY BANCORP, INC. AND SUBSIDIARIES
 
 Notes
to Condensed Consolidated Financial Statements
(Unaudited)
 
 
 1.         Description
of Business and Basis of Presentation
 General.
Marco Community Bancorp, Inc. (the "Holding Company") which was incorporated on
January 28, 2003 owns 100% of the outstanding common stock of Marco Community
Bank (the "Bank") and Commercial Lending Capital Corp. ("CLCC") (collectively
the "Company").   The Holding Company's only business activity is
the operation of the Bank and CLCC.  The Bank is a state (Florida)
chartered commercial bank. The Bank offers a variety of community banking
services to individual and corporate customers through its banking office
located in Marco Island, Florida. The deposits of the Bank are insured up to the
applicable limits by the Federal Deposit Insurance Corporation. CLCC was
incorporated to provide commercial loans to customers that would otherwise seek
financing elsewhere because of credit limit constraints.  Effective
December 31, 2008, CLCC's operations were suspended due to economic
conditions.
 
 In the
opinion of the management, the accompanying condensed consolidated financial
statements contain all adjustments (consisting principally of normal recurring
accruals) necessary to present fairly the financial position at March 31, 2009
and the results of operations and cash flows for the three-month periods ended
March 31, 2009 and 2008. The results of operations and other data for the three-
month period ended March 31, 2009 are not necessarily indicative of results that
may be expected for the year ending December 31, 2009.
 
 2.        Loan
Impairment and Loan Losses
 Impaired
      collateral dependent loans were as follows (in
  thousands):
 
 Three
      Months EndedMarch 31,2009
                    
                    
                    2008Balance
      at end of period
                    
                    $
                    9,191
                    
                    
                    
                    10,996Total
      related allowance for losses
                    
                    $
                    2,503
                    
                    
                    
                    1,498Average
      investment in impaired loans
                    
                    $
                    8,629
                    
                    
                    
                    10,580Interest
      income recognized on impaired loans
                    
                    $
                    -
                    
                    
                    
                    -Interest
      income received on impaired loans
                    
                    $
                    -
                    
                    
                    
                    -
 
 (continued)
  6
 Index
  MARCO
COMMUNITY BANCORP, INC. AND SUBSIDIARIES
 
 Notes
to Condensed Consolidated Financial Statements (Unaudited),
Continued
 
 
 2.    
    Loan Impairment and Loan Losses, Continued
 The
activity in the allowance for loan losses follows (in thousands):
 
 
 Three
      Months EndedMarch 31,2009
                      
                      
                      2008Beginning
      balance
                      
                      $
                      6,154
                      
                      
                      
                      3,794Recoveries
                      
                      
                      72
                      
                      
                      
                      -Charge-offs
                      
                      
                      (1,298
                      )
                      
                      
                      (135
                      )Provision
      for loan losses
                      
                      
                      130
                      
                      
                      
                      100Ending
      balance
                      
                      $
                      5,058
                      
                      
                      
                      3,759
 3.     
   Non-Performing Assets
 Non-performing
loans include non-accrual loans and restructured loans.  Non-accrual
loans represent loans of which interest accruals have been
discontinued.  Restructured loans are loans in which the borrower has
been granted a concession on the interest rate or the original repayment terms
due to financial distress.
 
 The
Company discontinues interest accruals when principal or interest is due and has
remained unpaid for ninety days.  When a loan is placed on non-accrual
status, all unpaid interest is reversed.  Non-accrual loans may not be
restored to accrual status until all delinquent principal and interest has been
paid.  At March 31, 2009 and 2008, the Company had no loans which were
over ninety days past due and still accruing interest.
 
 Non-performing
loans are closely monitored on an ongoing basis as part of the Company's loan
review and work-out process.  The potential risk of loss on these
loans is evaluated by comparing the loan balance to the fair value of any
underlying collateral or the present value of projected future cash
flows.  Losses are recognized where appropriate.
 
 Following
is a summary of non-performing assets (in thousands):
 
 March
      31,
                    
                    
                    March
      31,2009
                    
                    
                    2008Non-accrual
      loans
                    
                    $
                    9,981
                    
                    
                    
                    12,159Restructured
      loans
                    
                    
                    1,099
                    
                    
                    
                    -Total
      non-performing loans
                    
                    
                    11,080
                    
                    
                    
                    12,159Other
      real estate owned
                    
                    
                    3,422
                    
                    
                    
                    2,874Total
      non-performing assets
                    
                    $
                    14,502
                    
                    
                    
                    15,033
 
 (continued)
 
  7
 Index
  MARCO
COMMUNITY BANCORP, INC. AND SUBSIDIARIES
 
 Notes
to Condensed Consolidated Financial Statements (Unaudited),
Continued
 
 
 3.         Non-Performing
Assets, Continued
 Asset
quality ratios:
 
 March
      31,
                    
                    
                    March
      31,2009
                    
                    
                    2008Non-performing
      loans as a percent of total loans
                    
                    
                    9.24
                    %
                    
                    
                    10.42
                    %Non-performing
      assets as a percent of total assets
                    
                    
                    9.80
                    %
                    
                    
                    9.25
                    %
 
 The
$1.1million decrease in non-performing loans results primarily from a $1.2
million charge-off of certain previously purchased loan pools which financed the
acquisition and renovation of residential real estate properties located in
Duval and Hillsborough Counties, Florida.  Due to the inability of the
loans’ servicer to perform in accordance with its servicing agreements, the
management of the Bank had previously concluded that the pool loans were to be
considered impaired.  Since then, the Bank has acted aggressively to
mitigate its residual exposure through the sales of individual loans within
these pools or through foreclosure and subsequent disposal of the
properties.
 
 4.        Other
Real Estate Owned
 Other
real estate owned ("OREO") is comprised of real estate properties obtained in
partial or total satisfaction of loan obligations.  At March 31, 2009
OREO totaled $3.4 million which was comprised of twenty-four residential real
estate lots obtained from the loan pools held for an average of two months,
eight residential real estate lots held for an average of seventeen months, six
residential properties held for an average of nine months and one commercial
property held for an average of one month and recorded at estimated fair value
less estimated selling costs.  Changes in the value subsequent to
transfer are recorded in non-interest expense along with direct operating
expenses.  Gains or losses not previously recognized resulting from
the sale of OREO is recognized in non-interest expense on the date of
sale.  During the three months ended March 31, 2009, the Company,
recorded $470,000 in proceeds from the sale of three residential properties
which resulted in a $47,000 loss.  The Company also recorded $33,000
in expenses to refurbish or maintain the properties held.
 
 At the
time of booking OREO, the Bank orders a current appraisal and books OREO at the
lower of the carrying value or the fair market value less the cost to
sell.  OREO is actively marketed by professional real estate
individuals in an attempt to sell parcels at their current market
value.  The Company is exposed to the weakening real estate conditions
in the Florida markets including Orlando, Naples, Fort Myers and
Tampa.  With the general economic downturn, the Company may not be
able to sell its OREO property at the current market value and may experience an
increase in OREO.
 
 5.        
Loss Per Common Share
 Loss per
share of common stock has been computed on the basis of the weighted-average
number of shares of common stock outstanding. Outstanding stock options and
convertible preferred stock are not considered dilutive securities for the three
months ended March 31, 2009 and 2008 due to the net losses incurred by the
Company.
 
 (continued)
  8
 Index
  MARCO
COMMUNITY BANCORP, INC. AND SUBSIDIARIES
 
 Notes
to Condensed Consolidated Financial Statements (Unaudited),
Continued
 
 
 6.         Regulatory
Capital
 The Bank
is required to maintain certain minimum regulatory capital
requirements.  The following is a summary at March 31, 2009 of the
regulatory capital requirements for a well capitalized financial institution and
the Bank's actual capital on a percentage basis:
 
 RegulatoryActual
                    
                    
                    RequirementTotal
      capital to risk-weighted assets
                    
                    
                    12.25
                    %
                    
                    
                    10.00
                    %Tier
      I capital to risk-weighted assets
                    
                    
                    10.96
                    %
                    
                    
                    6.00
                    %Tier
      I capital to total assets - leverage ratio
                    
                    
                    8.72
                    %
                    
                    
                    5.00
                    %
 
 7.         Share-Based
Compensation
 Effective
January 1, 2006, the Company adopted the fair value recognition provisions of
FASB Statement No. 123(R), Share-Based Payment("SFAS
123(R)"), using the
modified-prospective-transition method.  Under that transition method,
compensation cost recognized includes: (a) compensation cost for all share-based
payments granted prior to, but not yet vested as of January 1, 2006, based on
the grant date fair value calculated in accordance with the original provisions
of SFAS 123, and (b) compensation cost for all share-based payments granted
subsequent to December 31, 2005, based on the grant-date fair value estimated in
accordance with the provisions of SFAS 123(R).  The directors advisory
stock option plan is being expensed over the vesting period based on the fair
value of the option on the date the options become fully vested.  The
Company recognizes stock-based compensation expense in salaries and employee
benefits in the accompanying consolidated statements of operations on an
accelerated basis over the vesting period.
 
 In 2004,
the Company adopted three stock option plans.  The Employees' Stock
Option Plan is for the benefit of officers and other key employees of the
Holding Company, the Bank and CLCC.  Stock options are granted at an
exercise price equal to or greater than the fair market value of the common
stock on the date of grant.  These options have ten year terms and
vest 20% a year over a five year period.
 
 The
Directors' Stock Option Plan is for the benefit of directors of the Holding
Company, the Bank and CLCC.  Stock options are granted at an exercise
price equal to or greater than the fair market value of the common stock on the
date of grant.  These options have ten year terms and have various
vesting schedules.
 
 The
Advisory Directors' Stock Option Plan is for the benefit of advisory directors
of the Company.  Stock options are granted at an exercise price equal
to or greater than the fair market value of the common stock on the date of
grant.  These options have six year terms and begin vesting one year
after the date of grant at 25% a year over a four year period.
 
 (continued)
  9
 Index
  MARCO
COMMUNITY BANCORP, INC. AND SUBSIDIARIES
 
 Notes
to Condensed Consolidated Financial Statements (Unaudited),
Continued
 
 
 7.         Share-Based
Compensation, Continued
 The plans
were amended in 2007 to increase the size of the three Company plans so that the
number of shares of common stock reserved for issuance under all three Company
plans is a collective amount equal to 15% of the common stock outstanding, up to
a maximum of 1,500,000 shares.  At March 31, 2009, an aggregate of
53,242 options remain available for grant in all three plans.
 
 A summary
of the plans is as follows (in thousands, except for share and per share
information):
 
 Weighted-
                    
                    
                    Weighted-Average
      Per
                    
                    
                    AverageNumber
                    
                    
                    Share
                    
                    
                    Remaining
                    
                    
                    Aggregateof
                    
                    
                    Exercise
                    
                    
                    Contractual
                    
                    
                    IntrinsicShares
                    
                    
                    Price
                    
                    
                    Term
                    
                    
                    ValueThe
      Employees' Plan:Options
      outstanding at December 31, 2008
                    
                    
                    219,750
                    
                    
                    $
                    6.01Options
      granted
                    
                    
                    15,000
                    
                    
                    
                    2.54Options
      forfeited
                    
                    
                    (46,750
                    )
                    
                    
                    8.28Options
      outstanding at March 31, 2009
                    
                    
                    188,000
                    
                    
                    $
                    5.17
                    
                    
                    
                    8.93
                    
                    
                    $
                    71Options
      exercisable at March 31, 2009
                    
                    
                    27,350
                    
                    
                    $
                    4.56
                    
                    
                    
                    6.79
                    
                    
                    $
                    -The
      Directors' Plan:Options
      outstanding at December 31, 2008
                    
                    
                    90,000
                    
                    
                    
                    7.12Options
      granted
                    
                    
                    7,500
                    
                    
                    
                    4.00Options
      forfeited
                    
                    
                    (11,250
                    )
                    
                    
                    6.00Options
      outstanding at March 31, 2009
                    
                    
                    86,250
                    
                    
                    $
                    6.99
                    
                    
                    
                    7.45
                    
                    
                    $
                    1Options
      exercisable at March 31, 2009
                    
                    
                    39,000
                    
                    
                    $
                    6.77
                    
                    
                    
                    5.27
                    
                    
                    $
                    -The
      Advisory Directors' Plan:Options
      outstanding at December 31, 2008
                    
                    
                    20,814
                    
                    
                    
                    8.57Options
      granted
                    
                    
                    1,500
                    
                    
                    
                    4.25Options
      outstanding at March 31, 2009
                    
                    
                    22,314
                    
                    
                    $
                    8.28
                    
                    
                    
                    .52
                    
                    
                    $
                    1Options
      exercisable at March 31, 2009
                    
                    
                    14,245
                    
                    
                    $
                    7.08
                    
                    
                    
                    .50
                    
                    
                    $
                    -
 
 There
were no options exercised during the three months ended March 31, 2009 and
2008.  At March 31, 2009, there was $367,000 of total unrecognized
compensation expense related to nonvested share-based compensation arrangements
granted under the plans.  The cost is expected to be recognized over a
period of five years.  Due to the effect of forfeited options, there
was no compensation expense recognized during the three month period ended March
31, 2009 or 2008.
 
 (continued)
  10
 Index
  MARCO
COMMUNITY BANCORP, INC. AND SUBSIDIARIES
 
 Notes
to Condensed Consolidated Financial Statements (Unaudited),
Continued
 
 
 7.
              Share-Based
      Compensation, Continued
 The fair
value of each option granted for the three months ended March 31, 2009 and 2008
is estimated on the date of grant using the Black-Scholes option-pricing model
with the following assumptions ($ in thousands):
 
 Three
      Months EndedMarch 31,2009
                    
                    
                    2008Weighted-average
      risk-freeinterest
      rate
                    
                    
                    2.86
                    %
                    
                    
                    3.39
                    %Weighted-average
      dividend yield
                    
                    
                    -
                    %
                    
                    
                    -
                    %Weighted-average
      expectedstock
      volatility
                    
                    
                    24.33
                    %
                    
                    
                    70.64
                    %Expected
      life in years
                    
                    6.5
      years
                    
                    
                    6.5
      yearsPer
      share weighted-average grant-date fair value ofoptions
      issued during the period
                    
                    $
                    1.26
                    
                    
                    
                    1.76
 
 As part
of its adoption of SFAS 123(R), the Company examined its historical pattern of
option exercises in an effort to determine if there were any pattern based on
certain employee populations.  From this analysis, the Company could
not identify any patterns in the exercise of options.  As such, the
Company used the guidance in Staff Accounting Bulletin No. 107 to determine the
estimated life of options issued subsequent to the adoption of SFAS
123(R).  Expected volatility is based on historical volatility of the
Company's stock.  The risk-free rate for periods within the
contractual life of the option is based on the U.S. Treasury yield curve in
effect at the time of the grant.  The dividend yield assumption is
based on the Company's history and expectation of dividend
payments.
 
 8.      
  Fair Value Measurements
 On
January 1, 2008, the Company adopted SFAS No. 157, Fair Value Measurements for
financial assets and liabilities.  This standard defines fair value,
provides guidance for measuring fair value and requires certain
disclosures.  This standard does not require any new fair value
measurements, but rather applies to all other accounting pronouncements that
require or permit fair value measurements.  This standard does not
apply to measurements related to share-based payments.
 
 SFAS 157
defines fair value as the exchange price that would be received for an asset or
paid to transfer a liability (an exit price) in the principal or most
advantageous market for the asset or liability in an orderly transaction between
market participants on the measurement date. The statement utilizes a fair value
hierarchy that prioritizes the inputs to valuation techniques used to measure
fair value into three broad levels.  The following is a brief
description of those three levels:
 
 -
              Level
      1:  Observable inputs such as quoted prices (unadjusted) in
      active markets for identical assets or
  liabilities.
 
 (continued)
  11
 Index
  MARCO
COMMUNITY BANCORP, INC. AND SUBSIDIARIES
 
 Notes
to Condensed Consolidated Financial Statements (Unaudited),
Continued
 
 
 8.       
 Fair Value Measurements, Continued
 -
              Level
      2:  Inputs other than quoted prices that are observable for the
      asset or liability, either directly or indirectly.  These
      include quoted prices for similar assets or liabilities in active markets
      and quoted prices for identical or similar assets or liabilities that are
      not active.  Such inputs may include interest rates and yield
      curves, volatilities, prepayment speeds, credit risks, and default
      rates.
 -
              Level
      3:  Unobservable inputs to measure fair value of assets and
      liabilities for which there is little, if any market activity at the
      measurement date, using reasonable inputs and assumptions based upon the
      best information at the time, to the extent that inputs are available
      without undue cost and effort.
 
 Valuation of Available for Sale
Securities. The value of the security available for sale is determined by
matrix pricing, which is a mathematical technique widely used in the industry to
value debt securities without relying exclusively on quoted prices for the
specific security but rather by relying on the security's relationship to the
other benchmark quoted security.  Accordingly, the fair value estimate
for the available for sale security is classified as Level 2.
 
 Valuation of Impaired Loans.
A loan is considered impaired when, based upon current information and events,
it is probable that we will be unable to collect all amounts due, including
principal and interest, according to the contractual terms of the loan
agreement.  The Company's impaired loans are normally collateral
dependent and, as such, are carried at the lower of the Company's net recorded
investment in the loan or the estimated fair value of the collateral less
estimated selling costs. Adjustments to the recorded investment are made through
specific valuation allowances that are recorded as part of the overall allowance
for loan losses.  Estimates of fair value are determined based on a
variety of information, including the use of available appraisals, estimates of
the market value by licensed appraisers or local real estate brokers and the
knowledge and experience of the Company's management related to values of
properties in the Company's market areas.  These officers take into
consideration the type and location of the property as well as current economic
conditions in the area the property is located in assessing estimates of fair
value.  Accordingly, the fair value estimates for impaired loans is
classified as Level 3.
 
 Valuation of Other Real Estate
Owned. Other real estate owned represents real estate acquired by the
Company as a result of foreclosure or by deed in lieu of foreclosure and is
carried, net of any allowance for losses if any, at the lower of cost or
estimated fair value less estimated selling costs.  Fair value is
estimated in the same manner as impaired loans and, as such, is also classified
as Level 3.  As these properties are actively marketed, estimated fair
value may be periodically adjusted through an allowance for losses to reflect
changes in values resulting from changing market conditions.
 
 (continued)
  12
 Index
  MARCO
COMMUNITY BANCORP, INC. AND SUBSIDIARIES
 
 Notes
to Condensed Consolidated Financial Statements (Unaudited),
Continued
 
 
 8.        
Fair Value Measurements, Continued
 Our
listing of assets subject to fair value measurements on a recurring basis are as
follows (in thousands):
 
 Fair Value Measurements at Reporting Date
      UsingQuoted
      PricesIn
      Active
                              
                              
                              SignificantFair
      Value
                              
                              
                              Markets
      for
                              
                              
                              Other
                              
                              
                              Significantas
      of
                              
                              
                              Identical
                              
                              
                              Observable
                              
                              
                              UnobservableMarch
      31,
                              
                              
                              Assets
                              
                              
                              Inputs
                              
                              
                              Inputs2009
                              
                              
                              (Level 1)
                              
                              
                              (Level 2)
                              
                              
                              (Level 3)Available
      for sale securities
                              
                              $
                              7,899
                              
                              
                              
                              -
                              
                              
                              
                              7,899
                              
                              
                              
                              -
 
 Assets
measured at fair value on a non-recurring basis are summarized below (in
thousands):
 
 Net Carrying Value at March 31,
      2009
                    
                    
                    
                    
                    
                    LossesRecordedin
      EarningsTotal
                    
                    
                    DuringTotal
                    
                    
                    Level 1
                    
                    
                    Level 2
                    
                    
                    Level 3
                    
                    
                    Losses
                    
                    
                    2009Impaired
      loans (1)
                    
                    $
                    3,306
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    3,306
                    
                    
                    
                    624
                    
                    
                    
                    350Other
      real estate owned
                    
                    $
                    3,422
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    3,422
                    
                    
                    
                    -
                    
                    
                    
                    -
 
 (1)
              In
      addition, loans with a carrying value of $3.4 million were measured for
      impairment using Level 3 inputs and had a fair value in excess of carrying
      value.
 
 9.      
  Preferred Stock
 On
February 28, 2009, Marco Community Bancorp, Inc. (the "Company") completed an
offering of its Series C Preferred Stock ("Preferred Stock") and warrants to
purchase 290,000 shares of common stock ("Warrants") by issuing 202 shares of
the Preferred Stock and Warrants (the "Units").  These warrants have
an exercise price of $3.75, $4.50 and $5.25 on or before December 31, 2009, 2010
and 2011, respectively.  The offering raised $1,515,000 in gross
proceeds, at an offering price of $7,500 per Unit.  Directors of the
Company and/or its subsidiaries purchased in excess of 53% of the shares
sold.
 
 In 2007,
the Company issued ninety-six shares of Series B Preferred Stock ("Preferred
Stock"). The shares have no voting rights, but have a liquidation preference
value of $51,000 per share.  Cash dividends are payable in arrears
within the first ten days of each March and September.  The dividends
are not cumulative, are payable semiannually at an annual rate of $2,900 and are
prorated for any partial period.  At the Company's discretion, on any
dividend payment date occurring at least two years after issuance, each share of
Preferred Stock is mandatorily convertible into 6,000 shares of common stock;
provided, however, that the Company may also convert the Preferred Stock upon
any change in control.
 
  13
 Index
  MARCO
COMMUNITY BANCORP, INC. AND SUBSIDIARIES
 
 Review
by Independent Registered Public Accounting Firm
 
 
 
 Hacker,
Johnson & Smith PA, the Company's independent registered public accounting
firm, have made a limited review of the financial data as of March 31, 2009, and
for the three-month periods ended March 31, 2009 and 2008 presented in this
document, in accordance with standards established by the Public Company
Accounting Oversight Board.
 
 Their
report furnished pursuant to Article 10 of Regulation S-X is included
herein.
 
 
 
  
 
  14
 Index
  
  
 Report
of Independent Registered Public Accounting Firm
 
 
 
 Marco
Community Bancorp, Inc.
 Marco
Island, Florida:
 
 We have
reviewed the accompanying interim condensed consolidated balance sheet of Marco
Community Bancorp, Inc. and Subsidiaries (the "Company") as of March 31, 2009
and the related interim condensed consolidated statements of operations, changes
in stockholders' equity and cash flows for the three-month periods ended March
31, 2009 and 2008. These interim condensed financial statements are the
responsibility of the Company's management.
 
 We
conducted our reviews in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  A review of interim
financial information consists principally of applying analytical procedures and
making inquiries of persons responsible for financial and accounting matters. It
is substantially less in scope than an audit conducted in accordance with the
standards of the Public Company Accounting Oversight Board, the objective of
which is the expression of an opinion regarding the financial statements taken
as a whole.  Accordingly, we do not express such an opinion.
 
 Based on
our reviews, we are not aware of any material modifications that should be made
to the accompanying interim condensed consolidated financial statements for them
to be in conformity with U.S. generally accepted accounting
principles.
 
 We have
previously audited, in accordance with the standards of the Public Company
Accounting Oversight Board, the consolidated balance sheet of the Company as of
December 31, 2008, and the related consolidated statements of operations,
changes in stockholders' equity and cash flows for the year then ended (not
presented herein); and in our report dated March 26, 2009, we expressed an
unqualified opinion on those consolidated financial statements.  In our
opinion, the information set forth in the accompanying condensed consolidated
balance sheet as of December 31, 2008, is fairly stated, in all material
respects, in relation to the consolidated balance sheet from which it has been
derived.
 
 
 /s/
Hacker, Johnson & Smith PA
 
 
 HACKER,
JOHNSON & SMITH PA
 Tampa,
Florida
 May 1,
2009
 
  15
 Index
  MARCO
COMMUNITY BANCORP, INC. AND SUBSIDIARIES
 
 Item
2. Management's Discussion and Analysis
 of
Financial Condition and Results of Operations
 
 Comparison
of March 31, 2009 and December 31, 2008
 
 
 General
 
 Marco
Community Bancorp, Inc. (the "Holding Company"), which was incorporated on
January 28, 2003, owns 100% of the outstanding common stock of Marco Community
Bank (the "Bank") and Commercial Lending Capital Corp. ("CLCC") (collectively
the "Company"). The Holding Company's only business is the ownership and
operation of the Bank and CLCC.  The Bank is a Florida state-chartered
commercial bank and its deposits are insured up to the applicable limits by the
Federal Deposit Insurance Corporation.  CLCC was incorporated to
provide commercial loans to customers that would otherwise seek financing
elsewhere because of credit limit constraints.  Effective December 31,
2008, CLCC's operations were suspended due to economic conditions.
 
 The
Company is exposed to the weakening real estate conditions in the Florida
markets of Naples, Fort Myers and Tampa.  The Company believes the
challenging market conditions are primarily attributable to a regional softening
in demand for real estate assets as well as an oversupply of residential and
commercial properties, particularly within the Company's local
markets.
 
 A March
2009 report by the Regional Economic Research Institute of Florida Gulf Coast
University (http://www.fgcu.edu/cob/reri/indicators/indicators200903.pdf)
noted that unemployment rates for the region have continued to rise with Lee
County's unemployment rate reaching 11.5 percent and Collier County reaching
8.8% in January 2009.  The report also notes that unemployment levels
are expected to remain relatively high through 2010.  There are some
positive indications for the regional economy in that existing home sales are
continuing at higher levels reflecting more affordable price
levels.
 
 In
response to the general economic down turn, the Company has focused its lending
resources upon nominal loan growth, while specifically addressing any asset
challenges presented by its existing loan portfolios.  Pricing of
loans remains competitive with current lending initiatives focused primarily
upon Marco Island opportunities.
 
 Liquidity
and Capital Resources
 
 Liquidity
 
 Liquidity
management involves monitoring sources and uses of funds in order to meet
day-to-day cash flow requirements while maximizing profits.  Liquidity
represents the ability of a company to convert assets into cash or cash
equivalents without significant loss and to raise additional funds by increasing
liabilities.  Asset liquidity is provided by cash and assets which are
readily marketable, which can be pledged, or which will mature in the near
future.
 
 In
addition to deposits, within its geographic market place, the sources of funds
available to the Banks for lending and other business purposes include loan
repayments, sales of loans and securities, national market funding sources, and
contributions from the Holding Company.  Loan repayments are a
relatively stable source of funds, while deposit inflows and outflows and loan
prepayments are influenced significantly by competition, general interest rates
and money market conditions.  Borrowings may be used on a short-term
basis to compensate for reductions in other sources, such as deposits at less
than projected levels and may be used to fund the origination of mortgage loans
designated to be sold in the secondary market.
 
  16
 Index
  MARCO
COMMUNITY BANCORP, INC. AND SUBSIDIARIES
 
 Item
2. Management's Discussion and Analysis
 of
Financial Condition and Results of Operations, Continued
 
 
 Liquidity
and Capital Resources, Continued
 
 At March
31, 2009, the Company had no outstanding borrowings from any correspondent Bank
and there was $15 million in other available lines from
correspondents.
 
 Managements
regularly reviews the Bank's liquidity position and has implemented internal
policies that establish guidelines for sources of asset-backed liquidity and
limit the total amount of purchased funds used to support the balance sheet and
funding from non-core sources.
 
 Capital
 
 The
Federal Reserve Bank and other bank regulatory agencies require bank holding
companies and financial institutions to maintain capital at adequate levels
based on a percentage of assets and off-balance sheet exposures, adjusted for
risk weights ranging from 0% to 100%.  Under the risk-based standard,
capital is classified into two tiers.  Tier 1 capital consists of
common stockholders' equity, excluding the unrealized gain (loss) on available
for sale securities, minus certain intangible assets.  Tier 2 capital
consists of the general allowance for credit losses subject to certain
limitations.  An institution's qualifying capital base for purposes of
its risk-based capital ratio consists of the sum of its Tier 1 and Tier 2
capital.  Bank holding companies and banks are also required to
maintain capital at a minimum level based on total average assets as defined by
a leverage ratio.
 
 The Bank
was considered well capitalized as of March 31, 2009.  The Bank's Tier
1 Leverage ratio, Tier 1 risk-based capital ratio and Tier 2 risk-based capital
ratio were 8.72%, 10.96% and 12.25%, respectively, as of March 31,
2009.
 
 Off-Balance
Sheet Arrangements
 
 The
      Company is a party to financial instruments with off-balance-sheet risk in
      the normal course of business to meet the financing needs of its
      customers.  These financial instruments include unused lines of
      credit.  These instruments involve, to varying degrees, elements
      of credit and interest-rate risk in excess of the amounts recognized in
      the condensed consolidated balance sheet.  The contract or
      notional amounts of those instruments reflect the extent of the Company's
      involvement in particular classes of financial
  instruments.
 
 The
      Company's exposure to credit loss in the event of nonperformance by the
      other party to the financial instruments for unused lines of credit is
      represented by the contractual amount of those instruments.  The
      Company uses the same credit policies in making commitments as it does for
      on-balance-sheet instruments.
 
 
  17
 Index
  MARCO
COMMUNITY BANCORP, INC. AND SUBSIDIARIES
 
 Item
2. Management's Discussion and Analysis
 of
Financial Condition and Results of Operations, Continued
 
 
 Off-Balance
Sheet Arrangements, Continued
 
 Commitments
      to extend credit are agreements to lend to a customer as long as there is
      no violation of any condition established in the
      contract.  Commitments generally have fixed expiration dates or
      other termination clauses and may require payment of a
      fee.  Since many of the commitments are expected to expire
      without being drawn upon, the total committed amounts do not necessarily
      represent future cash requirements.  The Company evaluates each
      customer's credit worthiness on a case-by-case basis.  The
      amount of collateral obtained, if it is deemed necessary by the Company
      upon extension of credit, is based on management's credit evaluation of
      the counterparty.
 
 Unused
lines of credit typically result in loans with a market interest rate when
funded.
 
 A
      summary of the Company's financial instruments with off-balance sheet risk
      at March 31, 2009 follows (in
thousands):
 
 ContractAmountUnused
      lines of credit
                    
                    $
                    10,944
 
 Management
believes that the Company has adequate resources to fund all of its
commitments.
 
 Selected
Ratios
 
 The
following table shows selected ratios for the periods ended or at the dates
indicated:
 
 Three
      Months
                    
                    
                    
                    
                    
                    Three
      MonthsEnded
                    
                    
                    Year
      Ended
                    
                    
                    EndedMarch
      31,
                    
                    
                    December
      31,
                    
                    
                    March
      31,2009
                    
                    
                    2008
                    
                    
                    2008Average
      equity as a percentageof
      average assets
                    
                    
                    13.15
                    %
                    
                    
                    14.36
                    %
                    
                    
                    14.31
                    %Total
      equity to total assets at end of period
                    
                    
                    12.71
                    %
                    
                    
                    13.61
                    %
                    
                    
                    13.82
                    %Return
      on average assets (1)
                    
                    
                    (0.60
                    )%
                    
                    
                    (3.44
                    )%
                    
                    
                    (0.72
                    )%Return
      on average common stockholdersequity
      (1)
                    
                    
                    (10.22
                    )%
                    
                    
                    (32.14
                    )%
                    
                    
                    (7.97
                    )%Noninterest
      expense to average assets (1)
                    
                    
                    3.45
                    %
                    
                    
                    4.04
                    %
                    
                    
                    3.49
                    %
 _______________________________
 (1)  Annualized
for the three months ended March 31, 2009 and 2008.
  18
 Index
  MARCO
COMMUNITY BANCORP, INC. AND SUBSIDIARIES
 
 Results
of Operations
 
 The
following table sets forth, for the periods indicated, information regarding (i)
the total dollar amount of interest and dividend income of the Company from
interest-earning assets and the resultant average yields; (ii) the total dollar
amount of interest expense on interest-bearing liabilities and the resultant
average costs; (iii) net interest/dividend income; (iv) interest-rate spread;
and (v) net interest margin. Yields and costs were derived by dividing
annualized income or expense by the average balance of assets or liabilities,
respectively, for the periods shown.
 
 Three Months Ended March
31,2009
                  
                  
                  2008Interest
                  
                  
                  Average
                  
                  
                  
                  
                  
                  Interest
                  
                  
                  AverageAverage
                  
                  
                  and
                  
                  
                  Yield/
                  
                  
                  Average
                  
                  
                  and
                  
                  
                  Yield/Balance
                  
                  
                  Dividends
                  
                  
                  Cost
                  
                  
                  Balance
                  
                  
                  Dividends
                  
                  
                  Cost($
      in thousands)Interest-earning
      assets:Loans
                  
                  $
                  115,683
                  
                  
                  
                  1,585
                  
                  
                  
                  5.56
                  %
                  
                  $
                  123,493
                  
                  
                  
                  2,016
                  
                  
                  
                  6.55
                  %Investment
      securities
                  
                  
                  8,027
                  
                  
                  
                  93
                  
                  
                  
                  4.70
                  
                  
                  
                  6,510
                  
                  
                  
                  86
                  
                  
                  
                  5.30Other
      interest-earning assets (1)
                  
                  
                  4,051
                  
                  
                  
                  7
                  
                  
                  
                  0.70
                  
                  
                  
                  17,537
                  
                  
                  
                  147
                  
                  
                  
                  3.36Total
      interest-earning assets
                  
                  
                  127,761
                  
                  
                  
                  1,685
                  
                  
                  
                  5.35
                  
                  
                  
                  147,540
                  
                  
                  
                  2,249
                  
                  
                  
                  6.11Noninterest-earning
      assets
                  
                  
                  12,282
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  10,500Total
      assets
                  
                  $
                  140,043
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  $
                  158,040Interest-bearing
      liabilities:Savings
                  
                  
                  6,777
                  
                  
                  
                  21
                  
                  
                  
                  1.26
                  
                  
                  
                  10,146
                  
                  
                  
                  56
                  
                  
                  
                  2.21Money
      market and NOW deposits
                  
                  
                  33,740
                  
                  
                  
                  116
                  
                  
                  
                  1.39
                  
                  
                  
                  30,069
                  
                  
                  
                  145
                  
                  
                  
                  1.93Time
      deposits
                  
                  
                  73,743
                  
                  
                  
                  678
                  
                  
                  
                  3.73
                  
                  
                  
                  88,740
                  
                  
                  
                  1,066
                  
                  
                  
                  4.82Total
      interest-bearing deposits
                  
                  
                  114,260
                  
                  
                  
                  815
                  
                  
                  
                  2.89
                  
                  
                  
                  128,955
                  
                  
                  
                  1,267
                  
                  
                  
                  3.94Repurchase
      agreements
                  
                  
                  642
                  
                  
                  
                  3
                  
                  
                  
                  1.90
                  
                  
                  
                  826
                  
                  
                  
                  10
                  
                  
                  
                  4.86Total
      interest-bearing liabilities
                  
                  
                  114,902
                  
                  
                  
                  818
                  
                  
                  
                  2.89
                  
                  
                  
                  129,781
                  
                  
                  
                  1,277
                  
                  
                  
                  3.95Noninterest-bearing
      liabilities
                  
                  
                  6,729
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  5,642Stockholders'
      equity
                  
                  
                  18,412
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  22,617Total
      liabilities and stockholders' equity
                  
                  $
                  140,043
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  $
                  158,040Net
      interest income
                  
                  
                  
                  
                  
                  $
                  867
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  $
                  972Interest-rate
      spread (2)
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  2.46
                  %
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  2.17
                  %Net
      interest-earning assets, net margin (3)
                  
                  $
                  12,859
                  
                  
                  
                  
                  
                  
                  
                  2.76
                  %
                  
                  $
                  17,759
                  
                  
                  
                  
                  
                  
                  
                  2.64
                  %Ratio
      of interest-earning assets tointerest-bearing
      liabilities
                  
                  
                  1.11
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  1.14
 _____________________
 (1)
              Includes
      interest-earning deposits, federal funds sold, Federal Reserve Bank stock
      and Federal Home Loan Bank stock.
 (2)
              Interest-rate
      spread represents the difference between the average yield on
      interest-earning assets and the average cost of interest-bearing
      liabilities.
 (3)
              Net
      interest margin is annualized net interest income divided by average
      interest-earning assets.
  19
 Index
  MARCO
COMMUNITY BANCORP, INC. AND SUBSIDIARIES
 
 Comparison
of the Three-Month Periods Ended March 31, 2009 and 2008
 
 
 General.  Net
losses for the three months ended March 31, 2009 were $209,000 or $0.09 per
basic and diluted common share compared to net losses of $282,000 or $0.11 per
basic and diluted earnings per common share for the three months ended March 31,
2008.
 
 Interest Income
and Expense.  Interest income decreased to $1.7 million for the
three months ended March 31, 2009 from $2.2 million for the three months ended
March 31, 2008.  Interest income on loans decreased $431,000 due to
lower yields in the portfolio.
 
 Interest
expense on interest-bearing deposits decreased to $818,000 for the three months
ended March 31, 2009 compared to $1.3 million, for the three months ended March
31, 2008.  Interest expense on interest-bearing deposits decreased due
to a decrease in the weighted interest rate paid on deposits, and a decrease in
the average balance.
 
 Provision for
Loan Losses.  The provision for loan losses was $130,000 for
the three months ended March 31, 2009 compared to $100,000 at March 31, 2008.
The allowance for loan losses is $5.1 million at March 31, 2009. While
management believes that its allowance for loan losses is adequate as of March
31, 2009, future adjustments to the Company's allowance for loan losses may be
necessary if economic conditions differ substantially from the assumptions used
in making the initial determination.
 
 Noninterest
Income.Noninterest income increased to $129,000 during the
three month period ended March 31, 2009 compared $47,000 for the same period in
2008.  Noninterest income increased due to the increase in gain on
sale of securities.
 
 Noninterest
Expenses.  Noninterest expenses decreased to $1.2 million
during the three-month period ended March 31, 2009 compared to $1.4 million for
the same period in 2008.  Noninterest expense decreased primarily due
to a decrease in other real estate owned expenses and a decrease in salary and
occupancy expenses, somewhat offset by an increase in data processing and
regulatory assessments.
 
 Income
Taxes.  The Company recorded an income tax benefit of $125,000
for the three-month period ended March 31, 2009 (an effective rate of 37.4%)
compared to an income tax benefit of $171,000 for the 2008 period (an effective
rate of 37.7%).
 
 
  20
 Index
  MARCO
COMMUNITY BANCORP, INC. AND SUBSIDIARIES
 
 Item
4T.  Controls and Procedures
 
 
 (a)
      Evaluation of Disclosure Controls and
Procedures
 
 We
      maintain controls and procedures designed to ensure that information
      required to be disclosed in the reports that the Company files or submits
      under the Securities Exchange Act of 1934 is recorded, processed,
      summarized and reported within the time periods specified in the rules and
      forms of the Securities and Exchange Commission. Based upon management's
      evaluation of those controls and procedures performed within the 90 days
      preceding the filing of this Report, our Principal Executive Officer and
      Principal Financial Officer concluded that, subject to the limitations
      noted below, the Company's disclosure controls and procedures (as defined
      in Rules 13a-15(e) under the Securities Exchange Act of 1934) are
      effective to ensure that the information required to be disclosed by the
      Company in the reports that it files or submits under the Securities
      Exchange Act of 1934 is recorded, processed, summarized and reported
      within the time periods specified in the U.S. Securities and Exchange
      Commission's rules and forms.
 
 (b)
      Changes in Internal Controls
 
 We
      have made no significant changes in our internal controls over financial
      reporting during the quarter ended March 31, 2009 that have materially
      affected or are reasonably likely to materially affect our internal
      control over financial reporting.
 
 (c)
      Limitations on the Effectiveness of
Controls
 
 Our
      management, including our Principal Executive Officer and Principal
      Financial Officer, does not expect that our disclosure controls and
      internal controls will prevent all error and all fraud. A control system,
      no matter how well conceived and operated, can provide only reasonable,
      not absolute, assurance that the objectives of the control system are met.
      Further, the design of a control system must reflect the fact that there
      are resource constraints, and the benefits of controls must be considered
      relative to their costs. Because of the inherent limitations in all
      control systems, no evaluation of controls can provide absolute assurance
      that all control issues and instances of fraud, if any, within the Company
      have been detected. These inherent limitations include the realities that
      judgments in decision-making can be faulty, and that breakdowns can occur
      because of simple error or mistake. Additionally, controls can be
      circumvented by the individual acts of some persons, by collusion of two
      or more people, or by management override of the
  control.
 
 The
      design of any system of controls also is based in part upon certain
      assumptions about the likelihood of future events, and there can be no
      assurance that any design will succeed in achieving its stated goals under
      all potential future conditions; over time, controls may become inadequate
      because of changes in conditions, or the degree of compliance with the
      policies or procedures may deteriorate. Because of the inherent
      limitations in a cost-effective control system, misstatements due to error
      or fraud may occur and not be
detected.
 
 
 
  21
 Index
  MARCO
COMMUNITY BANCORP, INC. AND SUBSIDIARIES
 
 PART
II. OTHER INFORMATION
 
 
 Item
1.  Legal Proceedings
 
 On
Thursday,August
22,2008, Marco Community Bancorp, Inc's (the "Company") wholly owned subsidiary,
Marco Community Bank (the "Bank"), instituted an action (Marco Community Bank v. Atlantic
Capital Associates, Inc., Florida Capital Bank N.A. and Allen C. Ewing& Co., Case No.
08-6362 CA)in
the Circuit Court of the Twentieth Judicial Circuit in and for Collier County,
Florida against each of Atlantic Capital Assoc., Inc. ("ACA"), Florida Capital
Bank, N.A. ("FCB") and Allen C. Ewing & Co. ("Ewing" and collectively with
ACA and FCB, the "Defendants").
 
 Specifically,
the Bank alleges that ACA, the loan originator, loan servicer, lender and
underwriter, along with its agents, FCB and Ewing, failed to underwrite mortgage
loans in conformity with their own offering documents, servicing agreements and
industry standards. In addition, the Bank alleges that the Defendants also
failed to perform as required under their agreements with the Bank and that all
of these failures and conflicts led up to the issuance of loan pools, which were
impaired securities founded on material misstatements and omissions in the
offering documents, servicing agreements and other material documents delivered
in connection with the purchases bythe Bank of these loan
pools.
 
 The Bank
has instituted the action alleging violations of the Florida Securities and
Investor Protection Act, breach of contract and negligence. The Bank is
seekingto recover
damages sustained, pre-judgment interest, attorney's fees and cost in connection
with its purchase of more than $19 million of loan pools from the
Defendants.
 
 Item
5.  Other Information
 
 On August
14, 2007, the Bank entered into a Written Agreement with the Federal Reserve
Bank of Atlanta ("FRB") and the Florida Office of Financial Regulation ("OFR").
The purpose of the Written Agreement is for the Bank to address the FRB's and
OFR's supervisory and regulatory concerns primarily related to the volume of
certain loan pools which are described elsewhere in this Form 10-Q, as well as
other loan quality issues. Pursuant to the Written Agreement, the Bank must take
corrective actions within specified time frames, which may be extended with the
consent of the FRB and the OFR although the Bank has not yet had to request any
extensions.  When the FRB and OFR have determined that the Bank is in
full compliance with the Written Agreement and that the issues that precipitated
the Written Agreement are unlikely to occur, we expect that they will release
the Bank from the Written Agreement. Failure to comply with the terms of the
Written Agreement could result in the assessment of civil money penalties
against the Bank and its Board of Directors. The actions to be taken include an
evaluation by the Bank's Board of Directors of its current management and
staffing to determine if any additional or replacement personnel are needed; the
preparation and implementation of a strategic business plan and budget designed
to improve the Bank's financial condition and credit risk management; a review
and adoption of any necessary revisions to the Bank's loan policy and loan
review/grading program; a reduction of the Bank's volume of adversely classified
assets; and the continual monitoring of the Bank's allowance for loan and lease
losses. In addition, the Bank may not make any loans to borrowers who previously
had loans charged-off by the Bank; not because of any specific concern with the
Bank, but because such provision is typically included in such written
agreements as a proactive preventive measure; must prepare a plan to effectively
manage the Bank's capital relative to its volume of adversely classified assets,
anticipated growth and risk profile; and may not pay any dividends without
regulatory consent.
 
  22
 Index
  MARCO
COMMUNITY BANCORP, INC. AND SUBSIDIARIES
 
 Item
5. Other Information, Continued
 
 
 Since
entering into the Written Agreement, the Company has made certain material
changes to its operations. These changes include: confining its lending
activities to Collier County; increasing the level of detail and analysis
contained in its loan underwriting files; restructuring its loan policy and
methodology for determining its allowance for loan losses; broadening marketing
efforts to utilize more forms of media and to emphasize increased community
involvement; cross-training employees to increase their skill sets and better
serve the Company's customers; and increasing lobby hours for the convenience of
customers.
 
 
 Item
6. Exhibits
 
 (a)
                Exhibits
 
 The
exhibits denominated with (a) were filed with the Company's Form SB-2 which was
filed with the Securities and Exchange Commission on March 7, 2003, those
denominated with (b) were filed with the Company's Form 10-Q which was filed
with the Securities and Exchange Commission on August 14, 2007, those
denominated with (c) were filed with the Company's Form 10-K which was filed
with the Securities and Exchange Commission on March 19, 2008, those denominated
with (d) were filed with the Company's Definitive Schedules 14-A which was filed
with the Securities and Exchange Commission on March 21, 2007 and March 20, 2008
and those denominated with (e) were file with the Company's Form 10-K which was
filed with the Securities and Exchange Commission on March 31,
2009.
 
 Exhibit No.
                    Description of Exhibit(a)
                    3.1
                    Articles
      of Incorporation of Marco Community Bancorp, Inc. as filed with the
      Florida Department of State(a)
                    3.2
                    Bylaws
      of Marco Community Bancorp, Inc.(e)
                    3.3
                    Articles
      of Amendment to the Articles of Incorporation(e)
                    3.4
                    Articles
      of Amendment to the Articles of Incorporation(a)
                    4.1
                    Specimen
      Common Stock Certificate(d)
                    10.1
                    Employees'
      Stock Option Plan, as amended(d)
                    10.2
                    Directors'
      Stock Option Plan, as amended(d)
                    10.3
                    Advisory
      Directors' Stock Option Plan, as amended(c)
                    10.4
                    Employee
      Severance Agreement with Paul Nidasso(c)
                    10.5
                    Employee
      Severance Agreement with Anthony Iannotta(c)
                    10.6
                    Employee
      Severance Agreement with David Klein(b)
                    10.8
                    Written
      Agreement with the Federal Reserve Bank of Atlanta and the Florida Office
      of Financial Regulation31.1
                    Certification
      of Chief Executive Officer required by Rule 13a-14(a)/15d-14(a) under the
      Exchange Act31.2
                    Certification
      of Chief Financial Officer required by Rule 13a-14(a)/15d-14(a) under the
      Exchange Act32.1
                    Certification
      of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted
      pursuant to Section 906 of Sarbanes-Oxley Act of 200232.2
                    Certification
      of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted
      pursuant to Section 906 of Sarbanes-Oxley Act of
  2002
 
  23
 Index
  MARCO
COMMUNITY BANCORP, INC. AND SUBSIDIARIES
 
 
 SIGNATURES
 
 Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
 
 
 MARCO
      COMMUNITY BANCORP, INC.(Registrant)Date:
              May 4, 2009
              
              By:
              /s/Richard Storm, Jr.Richard
      Storm, Jr., Principal Executive OfficerDate:
              May 4, 2009
              
              By:
              /s/Thomas J. MitchussonThomas
      J. Mitchusson, Senior Vice Presidentand
      Principal Financial Officer
 
   24