##### Table of Contents

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U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-QSB



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(Mark One)

|x | Quarterly report under Section 13 or 15(d) of the Securities Exchange Act of 1934
|- | ---------------------------------------------------------------------------------



For the quarterly period ended June 30, 2004



| ̈ | Transition report under Section 13 or 15(d) of the Exchange Act
|- | ---------------------------------------------------------------



For the transition period from  to



Commission file number 333-103651



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MARCO COMMUNITY BANCORP, INC.

(Exact Name of Small Business Issuer as Specified in Its Charter)



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|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Florida                                                        |  | 84-1620092                          
|(State or Other Jurisdiction of Incorporation or Organization) |  | (I.R.S. Employer Identification No.)



1122 North Collier
Boulevard

Marco Island, Florida 34145

(Address of Principal Executive Offices)



(239) 394-3901

(Issuers Telephone Number, Including Area Code)



(Former Name, Former Address and Former Fiscal Year, if Changed

Since Last Report)



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Check whether the issuer: (1) filed all
reports required to be filed by Section 12, 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the
past 90 days:    YES  x    NO ̈



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 |  | 1,301,602 shares            
|(class)                                |  | Outstanding at July 13, 2004



Transitional Small Business Format
(Check One):    YES ̈NO  x



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##### Table of Contents

MARCO COMMUNITY BANCORP, INC. AND SUBSIDIARY



INDEX



|                                                                                                                                                                                                                           |  |      
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -----
|                                                                                                                                                                                                                           |  | Page 
|PART I.
FINANCIAL INFORMATION                                                                                                                                                                                              |  |      
|                                                                                                                                                                                                                           | 
|Item 1.
Financial Statements                                                                                                                                                                                               |  |      
|                                                                                                                                                                                                                           | 
|Condensed Consolidated Balance Sheets - At June 30, 2004 (unaudited) and at December 31, 2003                                                                                                                              |  | 2    
|                                                                                                                                                                                                                           | 
|Condensed Consolidated Statements of Operations - Three and Six Months ended June 30, 2004, Three Months Ended June 30, 2003 and for the Period from January 28, 2003 (Date of Incorporation) to June 30, 2003
(unaudited) |  | 3    
|                                                                                                                                                                                                                           | 
|Condensed Consolidated Statements of Changes in Stockholders Equity - Six Months ended June 30, 2004 and for the Period from January 28, 2003 (Date of Incorporation) to June 30, 2003 (unaudited)                        |  | 4    
|                                                                                                                                                                                                                           | 
|Condensed Consolidated Statements of Cash Flows  Six Months ended June 30, 2004 and for the Period from January 28, 2003 (Date of Incorporation) to June 30, 2003 (unaudited)                                             |  | 5    
|                                                                                                                                                                                                                           | 
|Notes to Condensed Consolidated Financial Statements (unaudited)                                                                                                                                                           |  | 6-9  
|                                                                                                                                                                                                                           | 
|Review by Independent Registered Public Accounting Firm                                                                                                                                                                    |  | 10   
|                                                                                                                                                                                                                           | 
|Report of Independent Registered Public Accounting Firm                                                                                                                                                                    |  | 11   
|                                                                                                                                                                                                                           | 
|Item 2.
Managements Discussion and Analysis of Financial Condition and Results of Operations                                                                                                                              |  | 12-15
|                                                                                                                                                                                                                           | 
|Item 3.
Controls and Procedures                                                                                                                                                                                            |  | 16   
|                                                                                                                                                                                                                           | 
|PART II.
OTHER INFORMATION                                                                                                                                                                                                 |  |      
|                                                                                                                                                                                                                           | 
|Item 1.
Legal Proceedings                                                                                                                                                                                                  |  | 16   
|                                                                                                                                                                                                                           | 
|Item 4.
Submission of Matters to a Vote of Security Holders                                                                                                                                                                |  | 16-17
|                                                                                                                                                                                                                           | 
|Item 6.
Exhibits and Reports on Form 8-K                                                                                                                                                                                   |  | 18   
|                                                                                                                                                                                                                           | 
|SIGNATURES                                                                                                                                                                                                                 |  | 19   



1



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##### Table of Contents

MARCO COMMUNITY BANCORP, INC. AND SUBSIDIARY



PART I. FINANCIAL INFORMATION



Item 1. Financial Statements



Condensed Consolidated Balance Sheets



|                                                                                                                                  |  |               |            |   |                  |            |  
|--------------------------------------------------------------------------------------------------------------------------------- |  | ------------- | ---------- | - | ---------------- | ---------- | -
|                                                                                                                                  |  | June 30, 2004 |            |   | December 31,2003 |           
|                                                                                                                                  |  | (Unaudited)   |            |   |                  |           
|Assets                                                                                                                            |  |               |            |   |                  |            |  
|                                                                                                                                  |  |              
|Cash and due from banks                                                                                                           |  | $             | 728,259    |   |                  | 1,019,814  |  
|Federal funds sold                                                                                                                |  |               | 15,878,000 |   |                  | 8,829,000  |  
|Interest-bearing deposits                                                                                                         |  |               | 3,006,354  |   |                  |           |  
|                                                                                                                                  |  |               |            |   |                  |            |  
|Total cash and cash equivalents                                                                                                   |  |               | 19,612,613 |   |                  | 9,848,814  |  
|                                                                                                                                  |  |              
|Loans, net of allowance for loan losses of $711,856 in 2004 and $235,716 in 2003                                                  |  |               | 60,886,844 |   |                  | 18,625,199 |  
|Premises and equipment, net                                                                                                       |  |               | 3,293,416  |   |                  | 2,064,253  |  
|Federal Reserve Bank stock, at cost                                                                                               |  |               | 175,300    |   |                  | 180,950    |  
|Accrued interest receivable                                                                                                       |  |               | 165,542    |   |                  | 48,302     |  
|Deferred income taxes                                                                                                             |  |               | 519,727    |   |                  | 341,983    |  
|Other assets                                                                                                                      |  |               | 59,129     |   |                  | 175,766    |  
|                                                                                                                                  |  |               |            |   |                  |            |  
|Total assets                                                                                                                      |  | $             | 84,712,571 |   |                  | 31,285,267 |  
|                                                                                                                                  |  |               |            |   |                  |            |  
|Liabilities and Stockholders Equity                                                                                              |  |               |            |   |                  |            |  
|                                                                                                                                  |  |              
|Liabilities:                                                                                                                      |  |               |            |   |                  |            |  
|Noninterest-bearing demand deposits                                                                                               |  |               | 3,310,949  |   |                  | 3,346,587  |  
|Savings, NOW and money-market deposits                                                                                            |  |               | 48,055,539 |   |                  | 14,451,702 |  
|Time deposits                                                                                                                     |  |               | 21,583,051 |   |                  | 1,730,847  |  
|                                                                                                                                  |  |               |            |   |                  |            |  
|Total deposits                                                                                                                    |  |               | 72,949,539 |   |                  | 19,529,136 |  
|                                                                                                                                  |  |              
|Official checks                                                                                                                   |  |               | 775,125    |   |                  | 504,894    |  
|Accrued interest payable and other liabilities                                                                                    |  |               | 175,954    |   |                  | 159,106    |  
|                                                                                                                                  |  |               |            |   |                  |            |  
|Total liabilities                                                                                                                 |  |               | 73,900,618 |   |                  | 20,193,136 |  
|                                                                                                                                  |  |               |            |   |                  |            |  
|Stockholders equity:                                                                                                             |  |               |            |   |                  |            |  
|Preferred stock, no par value; 1,000,000 shares authorized, none issued or outstanding                                            |  |               |           |   |                  |           |  
|Common stock, $.01 par value; 9,000,000 shares authorized, 1,301,602 and 1,300,000 shares issued and outstanding in 2004 and
2003 |  |               | 13,016     |   |                  | 13,000     |  
|Additional paid-in capital                                                                                                        |  |               | 11,660,352 |   |                  | 11,645,950 |  
|Accumulated deficit                                                                                                               |  |               | (861,415   | ) |                  | (566,819   | )
|                                                                                                                                  |  |               |            |   |                  |            |  
|Total stockholders equity                                                                                                        |  |               | 10,811,953 |   |                  | 11,092,131 |  
|                                                                                                                                  |  |               |            |   |                  |            |  
|Total liabilities and stockholders equity                                                                                        |  | $             | 84,712,571 |   |                  | 31,285,267 |  
|                                                                                                                                  |  |               |            |   |                  |            |  



See Accompanying Notes to Condensed
Consolidated Financial Statements.



2



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##### Table of Contents

MARCO COMMUNITY BANCORP, INC. AND SUBSIDIARY



Condensed Consolidated Statements of Operations (Unaudited)



|                                                                 |  |                            |           |   |                              |          |   |                                                                            |           |   |  |          |  
|---------------------------------------------------------------- |  | -------------------------- | --------- | - | ---------------------------- | -------- | - | -------------------------------------------------------------------------- | --------- | - |  | -------- | -
|                                                                 |  | Three Months EndedJune 30, |           |   | Six MonthsEndedJune 30, 2004 |          |   | For the Period from January 28, 2003(Date ofIncorporation) toJune 30, 2003 |          
|                                                                 |  | 2004                       |           |   | 2003                         |          |   |                                                                           
|Interest income:                                                 |  |                            |           |   |                              |          |   |                                                                            |           |   |  |          |  
|Loans                                                            |  | $                          | 633,889   |   |                              |         |   |                                                                            | 954,167   |   |  |         |  
|Other interest-earning assets                                    |  |                            | 39,521    |   |                              |         |   |                                                                            | 70,886    |   |  |         |  
|                                                                 |  |                            |           |   |                              |          |   |                                                                            |           |   |  |          |  
|Total interest income                                            |  |                            | 673,410   |   |                              |         |   |                                                                            | 1,025,053 |   |  |         |  
|                                                                 |  |                            |           |   |                              |          |   |                                                                            |           |   |  |          |  
|Interest expense-                                                |  |                            |           |   |                              |          |   |                                                                            |           |   |  |          |  
|Deposits                                                         |  |                            | 180,736   |   |                              |         |   |                                                                            | 261,434   |   |  |         |  
|                                                                 |  |                            |           |   |                              |          |   |                                                                            |           |   |  |          |  
|Net interest income                                              |  |                            | 492,674   |   |                              |         |   |                                                                            | 763,619   |   |  |         |  
|                                                                 |  |                            |           |  
|Provision for loan losses                                        |  |                            | 298,018   |   |                              |         |   |                                                                            | 476,140   |   |  |         |  
|                                                                 |  |                            |           |   |                              |          |   |                                                                            |           |   |  |          |  
|Net interest income after provision for loan losses              |  |                            | 194,656   |   |                              |         |   |                                                                            | 287,479   |   |  |         |  
|                                                                 |  |                            |           |   |                              |          |   |                                                                            |           |   |  |          |  
|Noninterest income:                                              |  |                            |           |   |                              |          |   |                                                                            |           |   |  |          |  
|Service charges on deposit accounts                              |  |                            | 1,675     |   |                              |         |   |                                                                            | 3,182     |   |  |         |  
|Other service charges and fees                                   |  |                            | 8,499     |   |                              |         |   |                                                                            | 11,062    |   |  |         |  
|                                                                 |  |                            |           |   |                              |          |   |                                                                            |           |   |  |          |  
|Total noninterest income                                         |  |                            | 10,174    |   |                              |         |   |                                                                            | 14,244    |   |  |         |  
|                                                                 |  |                            |           |   |                              |          |   |                                                                            |           |   |  |          |  
|Noninterest expenses:                                            |  |                            |           |   |                              |          |   |                                                                            |           |   |  |          |  
|Salaries and employee benefits                                   |  |                            | 186,824   |   |                              |         |   |                                                                            | 380,682   |   |  |         |  
|Occupancy and equipment                                          |  |                            | 43,557    |   |                              |         |   |                                                                            | 89,053    |   |  |         |  
|Advertising                                                      |  |                            | 21,901    |   |                              |         |   |                                                                            | 40,009    |   |  |         |  
|Insurance                                                        |  |                            | 4,034     |   |                              |         |   |                                                                            | 7,832     |   |  |         |  
|Data processing                                                  |  |                            | 23,223    |   |                              |         |   |                                                                            | 44,377    |   |  |         |  
|Telephone                                                        |  |                            | 3,698     |   |                              |         |   |                                                                            | 7,889     |   |  |         |  
|Professional fees                                                |  |                            | 46,367    |   |                              |         |   |                                                                            | 66,676    |   |  |         |  
|Preopening and organizational expenses                           |  |                            |          |   |                              | 119,920  |   |                                                                            |          |   |  | 132,387  |  
|Other                                                            |  |                            | 84,349    |   |                              |         |   |                                                                            | 137,545   |   |  |         |  
|                                                                 |  |                            |           |   |                              |          |   |                                                                            |           |   |  |          |  
|Total noninterest expenses                                       |  |                            | 413,953   |   |                              | 119,920  |   |                                                                            | 774,063   |   |  | 132,387  |  
|                                                                 |  |                            |           |   |                              |          |   |                                                                            |           |   |  |          |  
|Loss before income tax benefit                                   |  |                            | (209,123  | ) |                              | (119,920 | ) |                                                                            | (472,340  | ) |  | (132,387 | )
|                                                                 |  |                            |           |  
|Income tax benefit                                               |  |                            | 78,696    |   |                              |         |   |                                                                            | 177,744   |   |  |         |  
|                                                                 |  |                            |           |   |                              |          |   |                                                                            |           |   |  |          |  
|Net loss                                                         |  | $                          | (130,427  | ) |                              | (119,920 | ) |                                                                            | (294,596  | ) |  | (132,387 | )
|                                                                 |  |                            |           |   |                              |          |   |                                                                            |           |   |  |          |  
|Loss per share, basic and diluted                                |  | $                          | (0.10     | ) |                              | (.35     | ) |                                                                            | (0.23     | ) |  | (0.76    | )
|                                                                 |  |                            |           |   |                              |          |   |                                                                            |           |   |  |          |  
|Weighted-average number of shares outstanding, basic and diluted |  |                            | 1,300,572 |   |                              | 342,501  |   |                                                                            | 1,300,396 |   |  | 174,089  |  
|                                                                 |  |                            |           |   |                              |          |   |                                                                            |           |   |  |          |  
|Dividends per share                                              |  | $                          |          |   |                              |         |   |                                                                            |          |   |  |         |  
|                                                                 |  |                            |           |   |                              |          |   |                                                                            |           |   |  |          |  



See Accompanying Notes to Condensed
Consolidated Financial Statements.



3



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##### Table of Contents

MARCO COMMUNITY BANCORP, INC. AND SUBSIDIARY



Condensed Consolidated Statements of Changes in Stockholders Equity



For the Period from January 28, 2003 (Date of Incorporation)

to June 30, 2003
and the Six Months Ended June 30, 2004



|                                                                                     |  |             |        |                           |            |                    |          |   |                          |            |  
|------------------------------------------------------------------------------------ |  | ----------- | ------ | ------------------------- | ---------- | ------------------ | -------- | - | ------------------------ | ---------- | -
|                                                                                     |  | CommonStock |        | Additional Paid-InCapital |            | AccumulatedDeficit |          |   | TotalStockholdersEquity |           
|Balance at January 28, 2003 (date of incorporation)                                  |  | $           |       |                           |           |                    | (90,473  | ) |                          | (90,473    | )
|Net loss (unaudited)                                                                 |  |             |       |                           |           |                    | (132,387 | ) |                          | (132,387   | )
|Sale of common stock (1,000,000 shares) net of issuance costs of $41,050 (unaudited) |  |             | 10,000 |                           | 8,948,950  |                    |         |   |                          | 8,958,950  |  
|                                                                                     |  |             |        |                           |            |                    |          |   |                          |            |  
|Balance at June 30, 2003 (unaudited)                                                 |  | $           | 10,000 |                           | 8,948,950  |                    | (222,860 | ) |                          | 8,736,090  |  
|                                                                                     |  |             |        |                           |            |                    |          |   |                          |            |  
|Balance at December 31, 2003                                                         |  | $           | 13,000 |                           | 11,645,950 |                    | (566,819 | ) |                          | 11,092,131 |  
|Exercise of stock warrants (1,602 shares) (unaudited)                                |  |             | 16     |                           | 14,402     |                    |         |   |                          | 14,418     |  
|Net loss (unaudited)                                                                 |  |             |       |                           |           |                    | (294,596 | ) |                          | (294,596   | )
|                                                                                     |  |             |        |                           |            |                    |          |   |                          |            |  
|Balance at June 30, 2004 (unaudited)                                                 |  | $           | 13,016 |                           | 11,660,352 |                    | (861,415 | ) |                          | 10,811,953 |  
|                                                                                     |  |             |        |                           |            |                    |          |   |                          |            |  



See Accompanying Notes to Condensed
Consolidated Financial Statements.



4



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##### Table of Contents

MARCO COMMUNITY BANCORP, INC. AND SUBSIDIARY



Condensed Consolidated Statements of Cash Flows (Unaudited)



|                                                                                          |  |                                |             |   |                                                                            |            |  
|----------------------------------------------------------------------------------------- |  | ------------------------------ | ----------- | - | -------------------------------------------------------------------------- | ---------- | -
|                                                                                          |  | Six Months Ended June 30, 2004 |             |   | For the Period from January 28, 2003(Date ofIncorporation) toJune 30, 2003 |           
|Cash flows from operating activities:                                                     |  |                                |             |   |                                                                            |            |  
|Net loss                                                                                  |  | $                              | (294,596    | ) |                                                                            | (132,387   | )
|Adjustments to reconcile net loss to net cash provided by (used in) operating activities: |  |                                |             |   |                                                                            |            |  
|Depreciation                                                                              |  |                                | 34,308      |   |                                                                            |           |  
|Provision for loan losses                                                                 |  |                                | 476,140     |   |                                                                            |           |  
|Credit for deferred income taxes                                                          |  |                                | (177,744    | ) |                                                                            |           |  
|Amortization of loan fees and costs, net                                                  |  |                                | 30,743      |   |                                                                            |           |  
|Increase in accrued interest receivable                                                   |  |                                | (117,240    | ) |                                                                            |           |  
|Decrease (increase) in other assets                                                       |  |                                | 116,637     |   |                                                                            | (328,308   | )
|Increase (decrease) in official checks, accrued interest payable and other liabilities    |  |                                | 287,079     |   |                                                                            | (177,510   | )
|                                                                                          |  |                                |             |   |                                                                            |            |  
|Net cash provided by (used in) operating activities                                       |  |                                | 355,327     |   |                                                                            | (638,205   | )
|                                                                                          |  |                                |             |   |                                                                            |            |  
|Cash flows from investing activities:                                                     |  |                                |             |   |                                                                            |            |  
|Net increase in loans                                                                     |  |                                | (42,768,528 | ) |                                                                            |           |  
|Purchase of premises and equipment                                                        |  |                                | (1,263,471  | ) |                                                                            | (1,115,710 | )
|Redemption of Federal Reserve Bank Stock                                                  |  |                                | 5,650       |   |                                                                            |           |  
|                                                                                          |  |                                |             |   |                                                                            |            |  
|Net cash used in investing activities                                                     |  |                                | (44,026,349 | ) |                                                                            | (1,115,710 | )
|                                                                                          |  |                                |             |   |                                                                            |            |  
|Cash flows from financing activities:                                                     |  |                                |             |   |                                                                            |            |  
|Net increase in deposits                                                                  |  |                                | 53,420,403  |   |                                                                            |           |  
|Net proceeds from exercise of common stock warrants                                       |  |                                | 14,418      |   |                                                                            |           |  
|Increase in due to organizers                                                             |  |                                |            |   |                                                                            | 60,000     |  
|Net proceeds from issuance of common stock                                                |  |                                |            |   |                                                                            | 8,958,950  |  
|                                                                                          |  |                                |             |   |                                                                            |            |  
|Net cash provided by financing activities                                                 |  |                                | 53,434,821  |   |                                                                            | 9,018,950  |  
|                                                                                          |  |                                |             |   |                                                                            |            |  
|Net increase in cash and cash equivalents                                                 |  |                                | 9,763,799   |   |                                                                            | 7,265,035  |  
|                                                                                          |  |                               
|Cash and cash equivalents at beginning of period                                          |  |                                | 9,848,814   |   |                                                                            | 12,835     |  
|                                                                                          |  |                                |             |   |                                                                            |            |  
|Cash and cash equivalents at end of period                                                |  | $                              | 19,612,613  |   |                                                                            | 7,277,870  |  
|                                                                                          |  |                                |             |   |                                                                            |            |  
|Supplemental disclosure of cash flow information:                                         |  |                                |             |   |                                                                            |            |  
|                                                                                          |  |                               
|Cash paid during the period for:                                                          |  |                                |             |   |                                                                            |            |  
|Interest, net of interest capitalized of $43,313                                          |  | $                              | 217,229     |   |                                                                            |           |  
|                                                                                          |  |                                |             |   |                                                                            |            |  
|Income taxes                                                                              |  | $                              |            |   |                                                                            |           |  
|                                                                                          |  |                                |             |   |                                                                            |            |  



See Accompanying Notes to Condensed
Consolidated Financial Statements.



5



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##### Table of Contents

MARCO COMMUNITY BANCORP, INC. AND SUBSIDIARY



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) (collectively the Company). The organizing entity was merged into the Holding Company effective with the incorporation of the Holding Company. The transaction was
recorded at historical cost, similar to a pooling of interests. The Holding Companys only business activity is the operation of the Bank. 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 by the Federal Deposit Insurance Corporation. The Bank commenced operations on August 18, 2003.



In the opinion of management, the accompanying condensed
consolidated financial statements contain all adjustments (consisting principally of normal recurring accruals) necessary to present fairly the financial position at June 30, 2004, the results of operations for the three-and six-months ended June
30, 2004, the three-months ended June 30, 2003 and for the period from January 28, 2003 (date of incorporation) to June 30, 2003 and cash flows for the six-months ended June 30, 2004 and for the period from January 28, 2003 (date of incorporation)
to June 30, 2003. The results of operations for the three- and six-months ended June 30, 2004 are not necessarily indicative of the results to be expected for the year ending December 31, 2004.



|2. | Loan Impairment and Loan Losses
|-- | -------------------------------



The Company had no impaired loans during the six months ended June 30, 2004. Also, at June 30, 2004, the Company had no nonaccrual loans or loans which
were over ninety days past due but still accruing interest.



The activity in the allowance for loan losses follows:



|                          |  |                               |         |                             |        
|------------------------- |  | ----------------------------- | ------- | --------------------------- | -------
|                          |  | ThreeMonthsEndedJune 30, 2004 |         | SixMonthsEndedJune 30, 2004
|                          |  |                              
|Beginning balance         |  | $                             | 413,838 |                             | 235,716
|Provision for loan losses |  |                               | 298,018 |                             | 476,140
|                          |  |                               |         |                             |        
|Ending balance            |  | $                             | 711,856 |                             | 711,856
|                          |  |                               |         |                             |        



|3. | Loss Per Share
|-- | --------------



Basic and diluted loss per share have been computed based on the weighted-average number of shares outstanding during the period. Outstanding warrants are
not considered dilutive due to the net loss incurred by the Company.



(continued)



6



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##### Table of Contents

MARCO COMMUNITY BANCORP, INC. AND SUBSIDIARY



Notes to Condensed Consolidated Financial Statements (Unaudited),
Continued



|4. | Regulatory Capital
|-- | ------------------



The Bank is required to maintain certain minimum regulatory capital requirements. The following is a summary at June 30, 2004 of the regulatory capital
requirements for a well capitalized financial institution and the Banks actual capital on a percentage basis:



|                                                |  |        |   |  |                       |  
|----------------------------------------------- |  | ------ | - |  | --------------------- | -
|                                                |  | Actual |   |  | RegulatoryRequirement |  
|Total capital to risk-weighted assets           |  | 11.27  | % |  | 10.00                 | %
|Tier I capital to risk-weighted assets          |  | 10.02  | % |  | 6.00                  | %
|Tier I capital to total assets - leverage ratio |  | 7.98   | % |  | 5.00                  | %



|5. | Income Taxes
|-- | ------------



At June 30, 2003, the Company was in the organizational phase of operations, therefore, no deferred tax asset was recorded. The deferred tax asset was
recognized when banking operations commenced in the third quarter of 2003, when management determined it was more likely than not that the deferred tax asset would be realized over the loss carryforward period with future earnings.



|6. | Stock Compensation Plans
|-- | ------------------------



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 and the Bank. A total of 95,000 shares have been reserved for this plan. 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. In May 2004, 78,000 options were granted under this plan with a retroactive effective date coinciding with the employees date of employment.



The Directors Stock Option Plan is for the benefit of directors of the
Holding Company and the Bank. A total of 95,000 shares have been reserved for this plan. 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. In May 2004, 67,500 options were granted under this plan with a retroactive effective date of August 18, 2003.



The Advisory Directors Stock Option Plan is for the benefit of advisory directors of the Company. A total of 25,000
shares have been reserved for this plan. Stock options will be granted at an exercise price equal to or greater than the fair market value of the common stock on the date of grant. As of June 30, 2004, no stock options have been granted under this
plan.



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MARCO COMMUNITY BANCORP, INC. AND SUBSIDIARY



Notes to Condensed Consolidated Financial Statements (Unaudited),
Continued



|6. | Stock Compensation Plans, Continued
|-- | -----------------------------------



A summary of the employees and directors plans is as follows:



|                                         |  |                |  |                                     |      |                                          |      |                      |        
|---------------------------------------- |  | -------------- |  | ----------------------------------- | ---- | ---------------------------------------- | ---- | -------------------- | -------
|                                         |  | NumberofShares |  | Rangeof PerShareOptionExercisePrice |      | Weighted- Average Per ShareExercisePrice |      | AggregateOptionPrice
|The Employees Plan:                     |  |                |  |                                     |      |                                          |      |                      |        
|                                         |  |                |  |                                    
|Options outstanding at December 31, 2003 |  |               |  | $                                   |     |                                          |     |                      |       
|Options granted                          |  | 78,000         |  |                                     | 9.00 |                                          | 9.00 |                      | 702,000
|                                         |  |                |  |                                     |      |                                          |      |                      |        
|Options outstanding at June 30, 2004     |  | 78,000         |  | $                                   | 9.00 |                                          | 9.00 |                      | 702,000
|                                         |  |                |  |                                     |      |                                          |      |                      |        
|The Directors Plan:                     |  |                |  |                                     |      |                                          |      |                      |        
|                                         |  |                |  |                                    
|Options outstanding at December 31, 2003 |  |               |  | $                                   |     |                                          |     |                      |       
|Options granted                          |  | 67,500         |  |                                     | 9.00 |                                          | 9.00 |                      | 607,500
|                                         |  |                |  |                                     |      |                                          |      |                      |        
|Options outstanding at June 30, 2004     |  | 67,500         |  | $                                   | 9.00 |                                          | 9.00 |                      | 607,500
|                                         |  |                |  |                                     |      |                                          |      |                      |        



The weighted-average
remaining contractual life of the outstanding stock options at June 30, 2004 was 9.2 years.



These options are exercisable as follows:



|                         |  |                 |  |                                |     
|------------------------ |  | --------------- |  | ------------------------------ | ----
|Year Ending December 31, |  | Numberof Shares |  | Weighted-AverageExercise Price
|2004                     |  | 23,900          |  | $                              | 9.00
|2005                     |  | 29,100          |  |                                | 9.00
|2006                     |  | 29,100          |  |                                | 9.00
|2007                     |  | 29,100          |  |                                | 9.00
|2008                     |  | 29,100          |  |                                | 9.00
|2009                     |  | 5,200           |  |                                | 9.00
|                         |  |                 |  |                                |     
|                         |  | 145,500         |  | $                              | 9.00
|                         |  |                 |  |                                |     



Statement of Financial
Accounting Standards (SFAS) No. 123, Accounting for Stock-Based Compensation, as amended by SFAS No. 148 Accounting for Stock-Based Compensation Transition and Disclosure,(collectively, SFAS No. 123), encourages all
entities to adopt a fair value based method of accounting for employee stock compensation plans, whereby compensation cost is measured at the grant date based on the value of the award and is recognized over the service period, which is usually the
vesting period. However, it also allows an entity to continue to measure compensation cost for those plans using the intrinsic value based method of accounting prescribed by Accounting Principles Board Opinion No. 25, Accounting for Stock Issued
to Employees(APB No. 25), whereby compensation cost is the excess, if any, of the quoted market price of the stock at the grant date (or other measurement date) over the amount an employee must pay to acquire the stock. The
Company accounts for their stock option plans under the recognition and measurement principles of APB No. 25.



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MARCO COMMUNITY BANCORP, INC. AND SUBSIDIARY



Notes to Condensed Consolidated Financial Statements (Unaudited),
Continued



|6. | Stock Compensation Plans, Continued
|-- | -----------------------------------



The following table illustrates the assumptions used in calculating the grant-date fair value and the effect on net loss and basic and diluted loss per
share for the stock options granted in 2004 as if the Company had applied the fair value recognition provisions of SFAS No. 123 to stock-based employee compensation. For purposes of proforma disclosure, the estimated fair value is included in
expense in the period vesting occurs ($ in thousands, except per share amounts):



|                                          |  |                                        |  
|----------------------------------------- |  | -------------------------------------- | -
|                                          |  | Three andSix Months EndedJune 30, 2004 |  
|Assumptions:                              |  |                                        |  
|Weighted-average risk-free rate of return |  | 4.80                                   | %
|Annualized dividend yield                 |  |                                       |  
|Expected life of options granted          |  | 10 years                               |  
|Expected stock volatility                 |  |                                       |  



|                                                                                                                                        |  |                                 |      |   |                               |      |  
|--------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------- | ---- | - | ----------------------------- | ---- | -
|                                                                                                                                        |  | Three Months EndedJune 30, 2004 |      |   | Six Months EndedJune 30, 2004 |     
|Grant-date fair value of options issued during the period                                                                               |  | $                               | 490  |   |                               | 490  |  
|                                                                                                                                        |  |                                 |      |   |                               |      |  
|Weighted-average grant-date fair value per option of options issued during the period                                                   |  | $                               | 3.37 |   |                               | 3.37 |  
|                                                                                                                                        |  |                                 |      |   |                               |      |  
|Net loss, as reported                                                                                                                   |  | $                               | (130 | ) |                               | (295 | )
|                                                                                                                                        |  |                                
|Deduct: Total stock-based employee compensation determined under the fair value based method for all awards, net of related tax
benefit |  |                                 | (162 | ) |                               | (162 | )
|                                                                                                                                        |  |                                 |      |   |                               |      |  
|                                                                                                                                        |  |                                
|Proforma net loss                                                                                                                       |  |                                 | (292 | ) |                               | (457 | )
|                                                                                                                                        |  |                                 |      |   |                               |      |  
|                                                                                                                                        |  |                                
|Basic loss per share:                                                                                                                   |  |                                 |      |   |                               |      |  
|As reported                                                                                                                             |  | $                               | (.10 | ) |                               | (.23 | )
|                                                                                                                                        |  |                                 |      |   |                               |      |  
|Proforma                                                                                                                                |  | $                               | (.22 | ) |                               | (.35 | )
|                                                                                                                                        |  |                                 |      |   |                               |      |  
|Diluted loss per share:                                                                                                                 |  |                                 |      |   |                               |      |  
|As reported                                                                                                                             |  | $                               | (.10 | ) |                               | (.23 | )
|                                                                                                                                        |  |                                 |      |   |                               |      |  
|Proforma                                                                                                                                |  | $                               | (.22 | ) |                               | (.35 | )
|                                                                                                                                        |  |                                 |      |   |                               |      |  



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MARCO COMMUNITY BANCORP, INC. AND SUBSIDIARY



Review by Independent Registered Public Accounting Firm



Hacker, Johnson & Smith PA, independent registered public accounting firm, have made a limited review of the financial data as of June 30, 2004, and for the three- and six-months ended June 30, 2004, the three
months ended June 30, 2003 and for the period from January 28, 2003 (date of incorporation) to June 30, 2003 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.



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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 Subsidiary (the Company)
as of June 30, 2004, the related interim condensed consolidated statements of operations for the three and six months ended June 30, 2004, the three months ended June 30, 2003 and for the period from January 28, 2003 (date of incorporation) to June
30, 2003 and the statements of changes in stockholders equity and cash flows for the six-months ended June 30, 2004 and for the period from January 28, 2003 (date of incorporation) to June 30, 2003. These interim 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, 2003, and the related consolidated
statements of operations, changes in stockholders equity and cash flows for the period from January 28, 2003 (date of incorporation) to December 31, 2003 (not presented herein); and in our report dated January 30, 2004, 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, 2003, 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                
|July 13, 2004                 



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MARCO COMMUNITY BANCORP, INC. AND SUBSIDIARY



Item 2. Managements Discussion and Analysis

of Financial Condition and Results of Operations



Comparison of June 30, 2004 and December 31, 2003



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) (collectively the Company). The Holding Companys only business is the ownership and operation of the Bank.
The Bank is a Florida state- chartered commercial bank and its deposits are insured by the Federal Deposit Insurance Corporation. The Bank commenced operations on August 18, 2003.



Liquidity and Capital Resources



The Companys primary source of cash during the six months ended June 30, 2004 was from net deposit inflows of $53.4 million. Cash was used primarily
to purchase federal funds of $7.0 million, originate loans, net of principal repayments totaling $42.8 million and to purchase premises and equipment of $1.3 million. At June 30, 2004, the Company had outstanding commitments to originate loans
totaling $2.7 million. At June 30, 2004, the Bank exceeded its regulatory liquidity requirements.



Off-Balance Sheet Arrangements and Aggregate Contractual Obligations



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 commitments to extend credit and 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 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 commitments to extend
credit and 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.



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.



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MARCO COMMUNITY BANCORP, INC. AND SUBSIDIARY



Item 2. Managements Discussion and Analysis

of Financial Condition and Results of Operations, Continued



Off-Balance Sheet Arrangements and Aggregate Contractual Obligations, Continued



Unused lines of credit and commitments to extend 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 June 30, 2004 follows:



|                             |  |                |           
|---------------------------- |  | -------------- | ----------
|                             |  | ContractAmount
|Commitments to extend credit |  | $              | 2,660,000 
|                             |  |                |           
|Unused lines of credit       |  | $              | 15,426,000
|                             |  |                |           



Management believes
that the Company has adequate resources to fund all of its commitments and that substantially all its existing commitments will be funded in 2004.



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MARCO COMMUNITY BANCORP, INC. AND SUBSIDIARY



Results of Operations



Three Months Ended June 30, 2004



General. Net losses for the three months ended June 30, 2004 and 2003 were $130,000 and $120,000,
respectively. The Bank commenced operations on August 18, 2003. At June 30, 2004, the Company had not achieved the asset size necessary to operate profitably.



Interest Income.Interest income was $673,000 for the three months ended June 30, 2004. The average balance of loans was $49.0 million
with an average yield earned of 5.18% during the three months ended June 30, 2004. The average balance of other interest earning assets was $12.4 million with an average yield earned of 1.28% during the three months ended June 30, 2004.



Interest Expense.Interest expense on interest bearing
deposits was $205,000, prior to the capitalization of interest, for the three months ended June 30, 2004. The average balance on deposits was $50.7 million with an average rate paid of 1.62% during the three months ended June 30, 2004. Interest
expense of $24,000 was capitalized on the construction of a permanent banking facility which opened in June of 2004.



Provision for Loan Losses.The provision for loan losses was $298,000 for the three months ended June 30, 2004. The allowance for loan
losses is $712,000 at June 30, 2004. While management believes that its allowance for loan losses is adequate as of June 30, 2004, future adjustments to the Companys allowance for loan losses may be necessary if economic conditions differ
substantially from assumptions used in making the initial determination.



Noninterest Income.Noninterest income was $10,000 for the three months ended June 30, 2004. Noninterest income consists of service charges and fees.



Noninterest Expenses.Total noninterest expense was $414,000
for the three months ended June 30, 2004. The large components of noninterest expense consists of $187,000 of employee compensation and benefits, $44,000 of occupancy and equipment expenses, and $84,000 of other expenses.



Income Taxes.Income tax benefit for the three months ended
June 30, 2004 was $79,000 or 37.6%.



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MARCO COMMUNITY BANCORP, INC. AND SUBSIDIARY



Six Months Ended June 30, 2004



General. Net losses for the six months ended June 30, 2004 and
for the period from January 28, 2003 (date of incorporation) to June 30, 2003, were $295,000 and $132,000, respectively. The Bank commenced operations on August 18, 2003. At June 30, 2004, the Company had not achieved the asset size necessary to
operate profitably.



Interest Income.Interest
income was $1,025,000 for the six months ended June 30, 2004. The average balance of loans was $36.7 million with an average yield earned of 5.20% during the six months ended June 30, 2004. The average balance of other interest earning assets was
$13.2 million with an average yield earned of 1.07% during the six months ended June 30, 2004.



Interest Expense. Interest expense on interest bearing deposits was $305,000, prior to the capitalization of interest, for the six months
ended June 30, 2004. The average balance on deposits was $39.8 million with an average rate paid of 1.54% during the six months ended June 30, 2004. Interest expense of $43,000 was capitalized on the construction of a permanent banking facility
which opened in June of 2004.



Provision for Loan
Losses.The provision for loan losses was $476,000 for the six months ended June 30, 2004. The allowance for loan losses is $712,000 at June 30, 2004. While management believes that its allowance for loan losses is adequate as of June 30,
2004, future adjustments to the Companys allowance for loan losses may be necessary if economic conditions differ substantially from assumptions used in making the initial determination.



Noninterest Income.Noninterest income was $14,000 for the six
months ended June 30, 2004. Noninterest income consists of service charges and fees.



Noninterest Expenses.Total noninterest expense was $774,000 for the six months ended June 30, 2004. The large components of noninterest expense consists of $381,000 of employee compensation and
benefits, $89,000 of occupancy and equipment expenses, and $138,000 of other expenses.



Income Taxes.Income tax benefit for the six months ended June 30, 2004 was $178,000 or 37.6%.



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MARCO COMMUNITY BANCORP, INC. AND SUBSIDIARY



Item 3. Controls and Procedures



|a. | Evaluation of disclosure controls and procedures. The Company maintains 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 their
evaluation of those controls and procedures performed within 90 days of the filing date of this report, the Chief Executive and Chief Financial officers of the Company concluded that the Companys disclosure controls and procedures were
adequate.
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|b. | Changes in internal controls. The Company made no significant changes in its internal controls or in other factors that could significantly affect these controls subsequent
to the date of the evaluation of those controls by the Chief Executive and Chief Financial officers.
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



PART II. OTHER INFORMATION



Item 1. Legal Proceedings



There are no material
pending legal proceedings to which Marco Community Bancorp, Inc. and Subsidiary is a party or to which any property is subject.



Item 4. Submission of Matters to a Vote of Security Holders



On May 17, 2004, the Company held its Annual Meeting of Shareholders. At the Annual Meeting, the following proposals were considered and acted upon:



PROPOSAL I. To elect the following directors:



|                      |  |         |  |         
|--------------------- |  | ------- |  | --------
|                      |  | FOR     |  | WITHHELD
|Joel M. Cox           |  | 986,818 |  | 0       
|Bruce G. Fedor        |  | 981,818 |  | 5,000   
|Jamie B. Greusel      |  | 986,068 |  | 750     
|Robert A. Marks       |  | 986,818 |  | 0       
|Stephen A. McLaughlin |  | 986,818 |  | 0       
|E. Terry Skone        |  | 986,818 |  | 0       
|Richard Storm, Jr.    |  | 986,818 |  | 0       



PROPOSAL II. The
approval of the 2003 Employees Incentive Stock Option and Limited Rights Plan;



|        |  |         |  |                           
|------- |  | ------- |  | --------------------------
|FOR     |  | AGAINST |  | ABSTAIN OR BROKER NON-VOTE
|993,488 |  | 0       |  | 11,500                    



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MARCO COMMUNITY BANCORP, INC. AND SUBSIDIARY



Item 4. Submission of Matters to a Vote of Security Holders, Continued



PROPOSAL III. The approval of the 2003 Directors
Stock Option and Limited Rights Plan;



|        |  |         |  |                           
|------- |  | ------- |  | --------------------------
|FOR     |  | AGAINST |  | ABSTAIN OR BROKER NON-VOTE
|987,988 |  | 6,450   |  | 14,772                    



PROPOSAL IV. The
approval of the 2003 Advisory Board Members Stock Option and Limited Rights Plan;



|        |  |         |  |                           
|------- |  | ------- |  | --------------------------
|FOR     |  | AGAINST |  | ABSTAIN OR BROKER NON-VOTE
|979,166 |  | 9,400   |  | 17,022                    



PROPOSAL V. The
ratification of the appointment of Hacker, Johnson & Smith, P.A., as the independent auditors for the Company for the fiscal year ending December 31, 2004;



|        |  |         |  |                           
|------- |  | ------- |  | --------------------------
|FOR     |  | AGAINST |  | ABSTAIN OR BROKER NON-VOTE
|993,488 |  | 0       |  | 11,500                    



PROPOSAL VI. To
adjourn the Annual Meeting to solicit additional proxies in the event that there are not sufficient votes to approve any one or more of the Proposals;



|        |  |         |  |                           
|------- |  | ------- |  | --------------------------
|FOR     |  | AGAINST |  | ABSTAIN OR BROKER NON-VOTE
|989,916 |  | 1,250   |  | 13,822                    



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MARCO COMMUNITY BANCORP, INC. AND SUBSIDIARY



Item 6. Exhibits and Reports on Form 8-K



|(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-KSB which was filed with the Securities and Exchange Commission on March 29, 2004 and those denominated with (c) were filed with the Companys Form SB-2 SEC No.
333-117877 which was filed with the Securities and Exchange Commission on August 2, 2004.



|            |  |                                                                                                                                              
|----------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------
|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.                                                                                                      
|            | 
|(a) 4.1     |  | Specimen Common Stock Certificate                                                                                                            
|            | 
|(a) 4.2     |  | 2003 Warrant Plan                                                                                                                            
|            | 
|(a) 4.3     |  | Specimen Warrant Certificate                                                                                                                 
|            | 
|(b) 10.1    |  | Letter Agreement with Michael A. Micallef                                                                                                    
|            | 
|(c) 10.2    |  | Letter Agreement with Thomas M. Whelan                                                                                                       
|            | 
|31.1        |  | Certification of Chief Executive Officer required by Rule 13a-14(a)/15d-14(a) under the Exchange Act                                         
|            | 
|31.2        |  | Certification of Chief Financial Officer required by Rule 13a-14(a)/15d-14(a) under the Exchange Act                                         
|            | 
|32.1        |  | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of Sarbanes-Oxley Act of 2002
|            | 
|32.2        |  | 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



|(b) | Reports on Form 8-K.There were no reports on Form 8-K filed during the three months ended June 30, 2004.
|--- | --------------------------------------------------------------------------------------------------------



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MARCO COMMUNITY BANCORP, INC. AND SUBSIDIARY



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: August 13, 2004 |  | By:                           |  | /s/ Richard Storm, Jr.                     
|                      |  |                               |  | Richard Storm, Jr., Chief Executive Officer
|                      |  |                              
|Date: August 13, 2004 |  | By:                           |  | /s/ Thomas M. Whelan                       
|                      |  |                               |  | Thomas M. Whelan, Senior Vice President and
|                      |  |                               |  | Chief Financial Officer                    



19