SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549_____________________________________

**FORM 10-QSB**

|   |        | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE |
|--------|--------|---------------------------------------------------------|
|   |   | SECURITIES EXCHANGE ACT OF 1934                         |
|   |   | For the quarterly period ended June 30, 2006.           |

OR

|   |        | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE |
|--------|--------|----------------------------------------------------------|
|   |   | SECURITIES EXCHANGE ACT OF 1934                          |
|        |        | For the transition period from __________ to __________  |
|   |   |                                                     |

Commission File Number 0-24926

**CECIL BANCORP, INC**.(Exact name of registrant as specified in its charter)

| Maryland                        | 52-1883546             |
|---------------------------------|------------------------|
| (State or other jurisdiction of | (I.R.S. Employer       |
| incorporation or organization)  | Identification Number) |

| 127 North Street, Elkton, Maryland      | 21921-5547 |
|-----------------------------------------|------------|
| (Address of principal executive office) | (Zip Code) |

Registrant’s telephone number, including area code: (410) 398-1650

Indicate by check mark whether the issuer (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 | NO |
|-----|----|

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

| YES | NO |
|-----|----|

APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

1,821,139

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CECIL BANCORP INC. AND SUBSIDIARIES

CONTENTS

|           |                        |                                                              |  PAGE |
|----------------|-----------------------------|-------------------------------------------------------------------|------------|
|                |                        |                                                                   |            |
| PART I.        | FINANCIAL INFORMATION  |                                                              |
|           |                        |                                                              |       |
|           | ITEM 1.                     | Financial Statements (unaudited)                                  |       |
|           |                        |                                                              |       |
|           |                        | Consolidated Balance Sheets -                                     |       |
|           |                        | June 30, 2006 and December 31, 2005                               | 3          |
|           |                        |                                                              |       |
|           |                        | Consolidated Statements of Income and Comprehensive Income        |       |
|           |                        | for the Three and Six Months Ended June 30, 2006 and 2005         | 4-5        |
|           |                        |                                                              |       |
|           |                        | Consolidated Statements of Cash Flows                             |       |
|           |                        | for the Six Months Ended June 30, 2006 and 2005                   | 6          |
|           |                        |                                                              |       |
|           |                        | Notes to Consolidated Financial Statements                        | 7-9        |
|           |                        |                                                              |       |
|           |                        |                                                              |       |
|           |                        |                                                              |       |
|           | ITEM 2.                     | Management’s Discussion and Analysis of Financial Condition |       |
|           |                        | and Results of Operations                                         | 10-17      |
|           |                        |                                                              |       |
|           | ITEM 3.                     | Controls and Procedures                                           | 17         |
|           |                        |                                                              |       |
| PART II.       | OTHER INFORMATION      |                                                              |
|           |                        |                                                              |       |
| SIGNATURES     |                        |                                                              |       |
|           |                        |                                                              |       |
| CERTIFICATIONS |                        |                                                              |       |
|           |                        |                                                              |       |

Page 2

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| PART I. | Financial Information |
|---------|-----------------------|

**CECIL BANCORP, INC. AND SUBSIDIARIES**ITEM 1: FINANCIAL STATEMENTSCONSOLIDATED BALANCE SHEETS(dollars in thousands)

|                                                                                                                                            |   | June 30,2006 |        |  December 31,2005 |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------|-------------|------------------------|--------|
|                                                                                                                                                 |        |              |             |                        |        |  |  |
|                                                                                                                                            |   |         | (Unaudited) |                   |   |   |   |
| ASSETS:                                                                                                                                         |   |         |        |                   |   |   |   |
| Cash and due from banks                                                                                                                         |   | $            | 1,585       |                   | $      | 1,317 |   |
| Interest bearing deposits with banks                                                                                                            |   |         | 281         |                   |   | 4,378 |   |
| Investment securities:                                                                                                                          |   |         |        |                   |   |   |   |
| Securities    available-for-sale at fair value                                                                                                  |   |         | 2,202       |                   |   | 2,187 |   |
| Securities    held-to-maturity (fair value of $3,735 in 2006 and 2005)                                                                          |   |         | 3,735       |                   |   | 3,735 |   |
| Restricted investment securities – at cost                                                                                                 |   |         | 2,451       |                   |   | 2,607 |   |
| Loans receivable                                                                                                                                |   |         | 264,454     |                   |   | 235,045 |   |
| Less:    allowance for loan losses                                                                                                              |   |         | (1,767      | )                      |   | (1,738 | ) |
|                                                                                                                                                 |        |              |             |                        |        |  |  |
| Net    loans receivable                                                                                                                         |   |         | 262,687     |                   |   | 233,307 |   |
| Other real estate owned                                                                                                                         |   |         | 385         |                   |   | 385 |   |
| Premises and equipment – net of accumulated depreciation                                                                                   |   |         | 9,240       |                   |   | 9,253 |   |
| Accrued interest receivable                                                                                                                     |   |         | 1,253       |                   |   | 1,146 |   |
| Goodwill                                                                                                                                        |   |         | 2,182       |                   |   | 2,182 |   |
| Other intangible assets                                                                                                                         |   |         | 186         |                   |   | 154 |   |
| Bank owned life insurance                                                                                                                       |   |         | 5,769       |                   |   | 5,030 |   |
| Other assets                                                                                                                                    |   |         | 1,883       |                   |   | 1,444 |   |
|                                                                                                                                                 |        |              |             |                        |        |  |  |
|                                                                                                                                            |   |         |        |                   |   |   |   |
| TOTAL    ASSETS                                                                                                                                 |   | $            | 293,839     |                   | $      | 267,125 |   |
|                                                                                                                                                 |        |              |             |                        |        |  |  |
| LIABILITIES:                                                                                                                                    |   |         |        |                   |   |   |   |
| Deposits                                                                                                                                        |   | $            | 221,213     |                   | $      | 198,207 |   |
| Other liabilities                                                                                                                               |   |         | 2,283       |                   |   | 2,062 |   |
| Guaranteed    preferred beneficial interest in junior subordinated debentures                                                                   |   |         | 10,000      |                   |   | — |   |
| Advances from Federal Home Loan Bank of Atlanta                                                                                                 |   |         | 37,418      |                   |   | 44,914 |   |
|                                                                                                                                                 |        |              |             |                        |        |  |  |
|                                                                                                                                            |   |         |        |                   |   |   |   |
| Total liabilities                                                                                                                               |   |         | 270,914     |                   |   | 245,183 |   |
|                                                                                                                                                 |        |              |             |                        |        |  |  |
|                                                                                                                                            |   |         |        |                   |   |   |   |
| STOCKHOLDERS’ EQUITY:                                                                                                                     |   |         |        |                   |   |   |   |
| Common      stock, $.01 par value; authorized 4,000,000 shares, issued and outstanding    1,803,298 shares in 2006 and 1,768,082 shares in 2005 |   |         | 18          |                   |   | 18 |   |
| Additional paid in capital                                                                                                                      |   |         | 11,172      |                   |   | 10,578 |   |
| Retained earnings                                                                                                                               |   |         | 11,773      |                   |   | 11,372 |   |
| Accumulated other comprehensive loss, net                                                                                                       |   |         | (38         | )                      |   | (26 | ) |
|                                                                                                                                                 |        |              |             |                        |        |  |  |
|                                                                                                                                            |   |         |        |                   |   |   |   |
| Total    stockholders’ equity                                                                                                             |   |         | 22,925      |                   |   | 21,942 |   |
|                                                                                                                                                 |        |              |             |                        |        |  |  |
|                                                                                                                                            |   |         |        |                   |   |   |   |
| TOTAL    LIABILITIES AND STOCKHOLDERS’ EQUITY                                                                                             |   | $            | 293,839     |                   | $      | 267,125 |   |
|                                                                                                                                                 |        |              |             |                        |        |  |  |

See accompanying notes to consolidated financial statements.

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**CECIL BANCORP, INC. AND SUBSIDIARIES**CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (UNAUDITED)(dollars in thousands, except per share data)

|                                                                          |   | Three Months Ended June 30, |   |  Six Months Ended June 30, |   |
|-------------------------------------------------------------------------------|--------|-----------------------------|--------|---------------------------------|--------|
|                                                                               |        |                             |        |                            |        |  |  |
|                                                                          |   | 2006                        |   |  2005                      |   |  2006 |   |  2005 |   |
|                                                                               |        |                             |        |                                 |        |  |  |  |  |  |  |  |  |
| INTEREST INCOME:                                                              |   |                        |   |                            |   |   |   |   |   |   |   |   |   |
| Interest    and fees on loans                                                 |   | $                           | 4,954  |                            | $      | 3,433 |   | $ | 9,476 |   | $ | 6,538 |   |
| Interest    on investment securities                                          |   |                        | 67     |                            |   | 44 |   |   | 128 |   |   | 80 |   |
| Dividends    on FHLB and FRB stock                                            |   |                        | 27     |                            |   | 26 |   |   | 58 |   |   | 49 |   |
| Other    interest-earning assets                                              |   |                        | 11     |                            |   | 5 |   |   | 24 |   |   | 14 |   |
|                                                                               |        |                             |        |                                 |        |  |  |  |  |  |  |  |  |
| Total      interest income                                                    |   |                        | 5,059  |                            |   | 3,508 |   |   | 9,686 |   |   | 6,681 |   |
|                                                                               |        |                             |        |                                 |        |  |  |  |  |  |  |  |  |
|                                                                          |   |                        |   |                            |   |   |   |   |   |   |   |   |   |
|                                                                          |   |                        |   |                            |   |   |   |   |   |   |   |   |   |
| INTEREST EXPENSE:                                                             |   |                        |   |                            |   |   |   |   |   |   |   |   |   |
| Interest    expense on deposits                                               |   |                        | 1,849  |                            |   | 949 |   |   | 3,452 |   |   | 1,730 |   |
| Guaranteed    preferred beneficial interest in junior subordinated debentures |   |                        | 166    |                            |   | — |   |   | 179 |   |   | — |   |
| Interest    expense on advances from FHLB                                     |   |                        | 337    |                            |   | 332 |   |   | 755 |   |   | 623 |   |
|                                                                               |        |                             |        |                                 |        |  |  |  |  |  |  |  |  |
|                                                                          |   |                        |   |                            |   |   |   |   |   |   |   |   |   |
| Total    interest expense                                                     |   |                        | 2,352  |                            |   | 1,281 |   |   | 4,386 |   |   | 2,353 |   |
|                                                                               |        |                             |        |                                 |        |  |  |  |  |  |  |  |  |
|                                                                          |   |                        |   |                            |   |   |   |   |   |   |   |   |   |
| NET INTEREST INCOME                                                           |   |                        | 2,707  |                            |   | 2,227 |   |   | 5,300 |   |   | 4,328 |   |
|                                                                          |   |                        |   |                            |   |   |   |   |   |   |   |   |   |
| PROVISION FOR LOAN LOSSES                                                     |   |                        | 155    |                            |   | 30 |   |   | 215 |   |   | 60 |   |
|                                                                               |        |                             |        |                                 |        |  |  |  |  |  |  |  |  |
|                                                                          |   |                        |   |                            |   |   |   |   |   |   |   |   |   |
| NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES                           |   |                        | 2,552  |                            |   | 2,197 |   |   | 5,085 |   |   | 4,268 |   |
|                                                                               |        |                             |        |                                 |        |  |  |  |  |  |  |  |  |
|                                                                          |   |                        |   |                            |   |   |   |   |   |   |   |   |   |
| NONINTEREST INCOME:                                                           |   |                        |   |                            |   |   |   |   |   |   |   |   |   |
| Checking    account fees                                                      |   |                        | 137    |                            |   | 115 |   |   | 255 |   |   | 217 |   |
| ATM    fees                                                                   |   |                        | 28     |                            |   | 27 |   |   | 47 |   |   | 42 |   |
| Commission    income                                                          |   |                        | 18     |                            |   | 36 |   |   | 20 |   |   | 50 |   |
| Gain    on sale of loans                                                      |   |                        | 20     |                            |   | 30 |   |   | 55 |   |   | 64 |   |
| Income    from bank owned life insurance                                      |   |                        | 47     |                            |   | 56 |   |   | 89 |   |   | 103 |   |
| Other                                                                         |   |                        | 36     |                            |   | 12 |   |   | 98 |   |   | 23 |   |
|                                                                               |        |                             |        |                                 |        |  |  |  |  |  |  |  |  |
| Total    noninterest income                                                   |   |                        | 286    |                            |   | 276 |   |   | 564 |   |   | 499 |   |
|                                                                               |        |                             |        |                                 |        |  |  |  |  |  |  |  |  |
|                                                                          |   |                        |   |                            |   |   |   |   |   |   |   |   |   |
| NONINTEREST EXPENSE:                                                          |   |                        |   |                            |   |   |   |   |   |   |   |   |   |
| Salaries    and employee benefits                                             |   |                        | 1,203  |                            |   | 984 |   |   | 2,370 |   |   | 1,830 |   |
| Occupancy    expense                                                          |   |                        | 135    |                            |   | 93 |   |   | 300 |   |   | 209 |   |
| Equipment    and data processing expense                                      |   |                        | 200    |                            |   | 182 |   |   | 412 |   |   | 350 |   |
| Other                                                                         |   |                        | 299    |                            |   | 300 |   |   | 686 |   |   | 564 |   |
|                                                                               |        |                             |        |                                 |        |  |  |  |  |  |  |  |  |
| Total    noninterest expense                                                  |   |                        | 1,837  |                            |   | 1,559 |   |   | 3,768 |   |   | 2,953 |   |
|                                                                               |        |                             |        |                                 |        |  |  |  |  |  |  |  |  |
|                                                                          |   |                        |   |                            |   |   |   |   |   |   |   |   |   |
| INCOME BEFORE INCOME TAXES                                                    |   |                        | 1,001  |                            |   | 914 |   |   | 1,881 |   |   | 1,814 |   |
|                                                                          |   |                        |   |                            |   |   |   |   |   |   |   |   |   |
| INCOME TAX EXPENSE                                                            |   |                        | 374    |                            |   | 335 |   |   | 702 |   |   | 668 |   |
|                                                                               |        |                             |        |                                 |        |  |  |  |  |  |  |  |  |
|                                                                          |   |                        |   |                            |   |   |   |   |   |   |   |   |   |
| NET INCOME                                                                    |   | $                           | 627    |                            | $      | 579 |   | $ | 1,179 |   | $ | 1,146 |   |
|                                                                               |        |                             |        |                                 |        |  |  |  |  |  |  |  |  |

See accompanying notes to consolidated financial statements.

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**CECIL BANCORP, INC. AND SUBSIDIARIES**CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (UNAUDITED)(dollars in thousands, except per share data)

(Continued)

|                                                                         |   | Three Months Ended June 30, |   | Six Months Ended June 30, |   |
|------------------------------------------------------------------------------|--------|-----------------------------|--------|---------------------------|--------|
|                                                                              |        |                             |        |                      |        |  |  |
|                                                                         |   |  2006                  |   |  2005                |   |  2006 |   |  2005 |   |
|                                                                              |        |                             |        |                           |        |  |  |  |  |  |  |  |  |
|                                                                         |   |                        |   |                      |   |   |   |   |   |   |   |   |   |
| NET INCOME                                                                   |   | $                           | 627    |                      | $      | 579 |   | $ | 1,179 |   | $ | 1,146 |   |
|                                                                         |   |                        |   |                      |   |   |   |   |   |   |   |   |   |
| OTHER COMPREHENSIVE INCOME                                                   |   |                        |   |                      |   |   |   |   |   |   |   |   |   |
| Unrealized    (losses) gains on investment securities, net of deferred taxes |   |                        | (5     | )                         |   | 2 |   |   | (12 | ) |   | (8 | ) |
|                                                                              |        |                             |        |                           |        |  |  |  |  |  |  |  |  |
|                                                                         |   |                        |   |                      |   |   |   |   |   |   |   |   |   |
| TOTAL COMPREHENSIVE INCOME                                                   |   | $                           | 622    |                      | $      | 581 |   | $ | 1,167 |   | $ | 1,138 |   |
|                                                                              |        |                             |        |                           |        |  |  |  |  |  |  |  |  |
|                                                                         |   |                        |   |                      |   |   |   |   |   |   |   |   |   |
|                                                                         |   |                        |   |                      |   |   |   |   |   |   |   |   |   |
|                                                                         |   |                        |   |                      |   |   |   |   |   |   |   |   |   |
| Earnings per common share – basic                                       |   | $                           | 0.34   |                      | $      | 0.34 |   | $ | 0.65 |   | $ | 0.68 |   |
|                                                                              |        |                             |        |                           |        |  |  |  |  |  |  |  |  |
|                                                                         |   |                        |   |                      |   |   |   |   |   |   |   |   |   |
|                                                                         |   |                        |   |                      |   |   |   |   |   |   |   |   |   |
| Earnings per common share – diluted                                     |   | $                           | 0.34   |                      | $      | 0.34 |   | $ | 0.65 |   | $ | 0.68 |   |
|                                                                              |        |                             |        |                           |        |  |  |  |  |  |  |  |  |
|                                                                              |   |                        |   |                      |   |   |   |   |   |   |   |   |   |
|                                                                              |   |                        |   |                      |   |   |   |   |   |   |   |   |   |
| Dividends paid per common share                                              |   | $                           | 0.05   |                      | $      | 0.05 |   | $ | 0.10 |   | $ | 0.10 |   |
|                                                                              |        |                             |        |                           |        |  |  |  |  |  |  |  |  |

See accompanying notes to consolidated financial statements.

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**CECIL BANCORP, INC. AND SUBSIDIARIES**CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)(dollars in thousands)

|                                                                                                              |   | For the Six Months Ended June 30, |    |
|-------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------|---------|
|                                                                                                              |   |                                   |    |
|                                                                                                              |   | 2006                              |    | 2005 |   |
|                                                                                                                   |        |                                   |         |  |  |  |  |
| CASH FLOWS FROM OPERATING ACTIVITIES:                                                                             |   |                              |    |   |   |   |   |
| Net    income                                                                                                     |   | $                                 | 1,179   |   | $ | 1,146 |   |
| Adjustments    to reconcile net income to net cash provided by operating activities:                              |   |                              |    |   |   |   |   |
| Depreciation    and amortization                                                                                  |   |                              | 167     |   |   | 141 |   |
| Provision    for loan losses                                                                                      |   |                              | 215     |   |   | 60 |   |
| Gain    of sale of loans                                                                                          |   |                              | (55     | ) |   | (64 | ) |
| Loss    on disposal of premises and equipment                                                                     |   |                              | 1       |   |   | 11 |   |
| Increase    in cash surrender value of bank owned life insurance                                                  |   |                              | (89     | ) |   | (102 | ) |
| Excess    servicing rights                                                                                        |   |                              | (46     | ) |   | (28 | ) |
| Reinvested    dividends on investments                                                                            |   |                              | (45     | ) |   | (22 | ) |
| Origination    of loans held for sale                                                                             |   |                              | (3,408  | ) |   | (2,237 | ) |
| Proceeds    from sales of loans held for sale                                                                     |   |                              | 3,426   |   |   | 2,277 |   |
| Net    change in:                                                                                                 |   |                              |    |   |   |   |   |
| Accrued    interest receivable and other assets                                                                   |   |                              | (538    | ) |   | 10 |   |
| Other    liabilities                                                                                              |   |                              | 221     |   |   | 72 |   |
|                                                                                                                   |        |                                   |         |  |  |  |  |
| Net    cash provided by operating activities                                                                      |   |                              | 1,028   |   |   | 1,264 |   |
|                                                                                                                   |        |                                   |         |  |  |  |  |
|                                                                                                              |   |                              |    |   |   |   |   |
| CASH FLOWS FROM INVESTING ACTIVITIES:                                                                             |   |                              |    |   |   |   |   |
| Purchases    of investment securities available-for-sale                                                          |   |                              | —  |   |   | (38 | ) |
| Purchases    of investment securities held-to-maturity                                                            |   |                              | (3,670  | ) |   | (3,454 | ) |
| Net    redemption (purchase) of stock in Federal Home Loan Bank                                                   |   |                              | 156     |   |   | (246 | ) |
| Proceeds      from sales, maturities, calls and principal payments of investment securities    available-for-sale |   |                              | 10      |   |   | 15 |   |
| Proceeds      from maturities, calls and principal payments of investment securities    held-to-maturity          |   |                              | 3,750   |   |   | 3,500 |   |
| Net    increase in loans                                                                                          |   |                              | (29,557 | ) |   | (29,473 | ) |
| Purchases    of bank owned life insurance                                                                         |   |                              | (650    | ) |   | (650 | ) |
| Deposit    on commercial property                                                                                 |   |                              | —  |   |   | (1,936 | ) |
| Purchases    of premises and equipment – net                                                                 |   |                              | (222    | ) |   | (908 | ) |
|                                                                                                                   |        |                                   |         |  |  |  |  |
| Net    cash used in investing activities                                                                          |   |                              | (30,183 | ) |   | (33,190 | ) |
|                                                                                                                   |        |                                   |         |  |  |  |  |
|                                                                                                              |   |                              |    |   |   |   |   |
| CASH FLOWS FROM FINANCING ACTIVITIES:                                                                             |   |                              |    |   |   |   |   |
| Net    increase in deposits                                                                                       |   |                              | 23,006  |   |   | 30,394 |   |
| Net      increase in guaranteed preferred beneficial interest in junior subordinated    debentures                |   |                              | 10,000  |   |   | — |   |
| Proceeds    from issuance of common stock                                                                         |   |                              | —  |   |   | 40 |   |
| Net    (decrease) increase in advances from Federal Home Loan Bank                                                |   |                              | (7,496  | ) |   | 1,728 |   |
| Payments    of cash dividends                                                                                     |   |                              | (184    | ) |   | (163 | ) |
|                                                                                                                   |        |                                   |         |  |  |  |  |
| Net    cash provided by financing activities                                                                      |   |                              | 25,326  |   |   | 31,999 |   |
|                                                                                                                   |        |                                   |         |  |  |  |  |
|                                                                                                              |   |                              |    |   |   |   |   |
| (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS                                                                  |   |                              | (3,829  | ) |   | 73 |   |
| CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                                                                  |   |                              | 5,695   |   |   | 4,234 |   |
|                                                                                                                   |        |                                   |         |  |  |  |  |
| CASH AND CASH EQUIVALENTS AT END OF PERIOD                                                                        |   | $                                 | 1,866   |   | $ | 4,307 |   |
|                                                                                                                   |        |                                   |         |  |  |  |  |
|                                                                                                              |   |                              |    |   |   |   |   |
| Supplemental disclosure of cash flows information:                                                                |   |                              |    |   |   |   |   |
| Cash    paid for income taxes                                                                                     |   | $                                 | 1,300   |   | $ | 603 |   |
|                                                                                                                   |        |                                   |         |  |  |  |  |
| Cash    paid for interest                                                                                         |   | $                                 | 4,445   |   | $ | 2,307 |   |
|                                                                                                                   |        |                                   |         |  |  |  |  |

See accompanying notes to consolidated financial statements.

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**CECIL BANCORP, INC. AND SUBSIDIARIES**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2006 AND 2005

| 1. | GENERAL |
|----|---------|

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
| In      the opinion of the Company, the accompanying unaudited consolidated financial      statements contain all adjustments (consisting of only normal recurring      adjustments) necessary to present fairly the financial position as of June      30, 2006 and the results of its operations and cash flows for the three      and six months ended June 30, 2006 and 2005. These statements are condensed      and therefore do not include all of the information and footnotes required      by accounting principles generally accepted in the United States of America      for complete financial statements. The statements should be read in conjunction      with the consolidated financial statements and footnotes included in the      Company’s Annual Report on Form 10-KSB for the year ended December      31, 2005. The results of operations for the three and six months ended      June 30, 2006 are not necessarily indicative of the results to be expected    for the full year. |

|   |                            |
|--------|---------------------------------|
| 2.     | FINANCIAL STATEMENT PREPARATION |

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
| The      preparation of financial statements in conformity with accounting principles      generally accepted in the United States of America requires management      to make estimates and assumptions that affect the reported amounts of assets      and liabilities and disclosures of contingent assets and liabilities at      the date of the financial statements and the reported amounts of revenues      and expenses during the reporting period. Estimates are used when accounting      for uncollectible loans, depreciation and amortization, intangible assets,      employee benefit plans, and contingencies, among others. Actual results    could differ from those estimates. |

|   |               |
|--------|--------------------|
| 3.     | EARNINGS PER SHARE |

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
| Basic      earnings per common share are computed by dividing net income available      to common stockholders by the weighted average number of shares of common      stock outstanding during the period. Diluted earnings per share are computed      after adjusting the denominator of the basic earnings per share computation      for the effects of all dilutive potential common shares outstanding during      the period. The dilutive effects of options, warrants, and their equivalents      are computed using the “treasury stock” method. For the three      and six months ended June 30, 2006 and 2005, there were no options excluded      from the diluted earnings per share calculation. All earnings per share      calculations have been adjusted to give retroactive effect to the 1% stock      dividends approved by the Board of Directors on December 20, 2005, March    14, 2006, and May 23, 2006. |

|   |                                             |   |                                 |      |                         |   |
|--------|--------------------------------------------------|--------|--------------------------------------|-----------|------------------------------|--------|
|   |                                             |   | Three Months Ended  June    30, |      | Six Months Ended    June 30, |   |
|        |                                                  |        |                                      |           |                         |        |  |  |
|   |                                             |   | 2006                                 |      |  2005                   |   |  2006 |   |  2005 |   |
|        |                                                  |        |                                      |           |                              |        |  |  |  |  |  |  |  |  |
|   | Basic:                                           |   |                                 |      |                         |   |   |   |   |   |   |   |   |   |
|   | Net income available to common      stockholders |   | $                                    | 627,000   |                         | $      | 579,000 |   | $ | 1,179,000 |   | $ | 1,146,000 |   |
|        |                                                  |        |                                      |           |                              |        |  |  |  |  |  |  |  |  |
|   |                                             |   |                                 |      |                         |   |   |   |   |   |   |   |   |   |
|   | Average common shares outstanding                |   |                                 | 1,821,331 |                         |   | 1,687,328 |   |   | 1,821,331 |   |   | 1,687,316 |   |
|        |                                                  |        |                                      |           |                              |        |  |  |  |  |  |  |  |  |
|   |                                             |   |                                 |      |                         |   |   |   |   |   |   |   |   |   |
|   | Basic earnings per common share                  |   | $                                    | 0.34      |                         | $      | 0.34 |   | $ | 0.65 |   | $ | 0.68 |   |
|        |                                                  |        |                                      |           |                              |        |  |  |  |  |  |  |  |  |
|   |                                             |   |                                 |      |                         |   |   |   |   |   |   |   |   |   |
|   | Diluted:                                         |   |                                 |      |                         |   |   |   |   |   |   |   |   |   |
|   | Net income available to common      stockholders |   | $                                    | 627,000   |                         | $      | 579,000 |   | $ | 1,179,000 |   | $ | 1,146,000 |   |
|        |                                                  |        |                                      |           |                              |        |  |  |  |  |  |  |  |  |
|   |                                             |   |                                 |      |                         |   |   |   |   |   |   |   |   |   |
|   | Average common shares outstanding                |   |                                 | 1,821,331 |                         |   | 1,687,328 |   |   | 1,821,331 |   |   | 1,687,316 |   |
|   | Stock option adjustment                          |   |                                 | 2,396     |                         |   | 4,158 |   |   | 2,494 |   |   | 4,389 |   |
|        |                                                  |        |                                      |           |                              |        |  |  |  |  |  |  |  |  |
|   |                                             |   |                                 |      |                         |   |   |   |   |   |   |   |   |   |
|   | Average common shares outstanding – diluted |   |                                 | 1,823,727 |                         |   | 1,691,486 |   |   | 1,823,825 |   |   | 1,691,705 |   |
|        |                                                  |        |                                      |           |                              |        |  |  |  |  |  |  |  |  |
|   |                                             |   |                                 |      |                         |   |   |   |   |   |   |   |   |   |
|   | Diluted earnings per common share                |   | $                                    | 0.34      |                         | $      | 0.34 |   | $ | 0.65 |   | $ | 0.68 |   |
|        |                                                  |        |                                      |           |                              |        |  |  |  |  |  |  |  |  |

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| 4. | FAIR VALUE ACCOUNTING FOR STOCK PLANS |
|----|---------------------------------------|

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
| The      Company adopted the provisions of Statement of Financial Accounting Standards      (“SFAS”) No. 123(R), *Share-Based Payment*, under the      prospective method on January 1, 2006. Among other things, SFAS 123(R)      eliminates the ability to account for stock-based compensation using Accounting      Principles Board (“APB”) No. 25 and requires such transactions      to be recognized as compensation cost in the income statement based on    their fair value on the date of grant. |

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
| Prior      to January 1, 2006, the Company accounted for its stock-based compensation      plan based on the intrinsic value method set forth in APB Opinion No. 25, *Accounting      for Stock Issued to Employees*, and related interpretations. Compensation      expense for stock options is generally not recognized if the exercise price      of the option equals or exceeds the fair market value of the stock on the      date of the grant. The exercise price for all options granted was equal      to the market price of the common stock at the date of the grant, and accordingly,    no compensation expense related to options was recognized. |

|                                                                                                                                                                                                                                                                                                                   |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
| The      Company has not granted any options during the three and six months ended      June 30, 2006 and 2005. All outstanding options have been fully vested      since January 1, 2005. A summary of the Company’s stock option activity,    and related information for the periods indicated is as follows: |

|   |                                 |   |                                |   |                                 |   |         |
|--------|--------------------------------------|--------|-------------------------------------|--------|--------------------------------------|--------|--------------|
|   |                                 |   |  Six months endedJune 30, 2006 |   |  Year ended December 31, 2005   |
|   |                                 |   |                                     |        |                                 |        |              |
|   |                                 |   |  Shares                        |   |  Weighted-AverageExercise Price |   |  Shares |   |  Weighted-AverageExercise Price |
|        |                                      |   |                                     |        |                                      |        |              |   |  |  |  |  |  |
|   | Outstanding at beginning of period   |   |                                | 10,143 |                                 | $      | 10.64        |   |   | 10,143 |   | $ | 10.64 |
|   | Granted                              |   |                                | — |                                 |   | —       |   |   | — |   |   | — |
|   | Exercised                            |   |                                | — |                                 |   | —       |   |   | — |   |   | — |
|   | Canceled/expired                     |   |                                | (1,668 | )                                    |   | 5.34         |   |   | — |   |   | — |
|        |                                      |        |                                     |        |                                      |        |              |  |  |  |  |  |  |
|   |                                 |   |                                |   |                                 |   |         |   |   |   |   |   |   |
|   | Outstanding at end of period         |   |                                | 8,475  |                                 | $      | 11.70        |   |   | 10,143 |   | $ | 10.64 |
|        |                                      |        |                                     |        |                                      |        |              |  |  |  |  |  |  |
|   |                                 |   |                                |   |                                 |   |         |   |   |   |   |   |   |
|   | Options exercisable at end of period |   |                                | 8,475  |                                 | $      | 11.70        |   |   | 10,143 |   | $ | 10.64 |
|        |                                      |        |                                     |        |                                      |        |              |  |  |  |  |  |  |

The following table summarizes information about stock options outstanding at June 30, 2006:

|   |             |   |   | Options Outstanding and Exercisable |   |
|--------|------------------|--------|--------|-------------------------------------|--------|
|   |             |   |   |                                     |   |
|   | Exercise  Price  |   |   | Number  Outstanding                 |   |   | Remaining  Life(Years) |   |
|   |                  |   |   |                                     |   |   |  |   |
|   |   5.34 |   |   |    539               |   |   | 0.3 |   |
|   | 12.13            |   |   | 7,936                               |   |   | 2.8 |   |

|   |                                                                       |
|--------|----------------------------------------------------------------------------|
| 5.     | GUARANTEED PREFERRED BENEFICIAL INTEREST IN JUNIOR SUBORDINATED DEBENTURES |

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
| In      March 2006, the Company formed a wholly-owned subsidiary, Cecil Bancorp      Capital Trust I (the “Trust”). On March 23, 2006, the Trust      sold $10.0 million of trust preferred securities in a private placement.      The Trust used the proceeds to purchase $10.3 million of the Company’s      30-year junior subordinated debentures. The trust preferred securities      and the junior subordinated debentures bear interest at a fixed rate of      6.51% for five years and then at a variable rate, which resets quarterly,      of 3-month LIBOR plus 1.38%. Interest is cumulative and payable quarterly      in arrears. The trust preferred securities and the junior subordinated      debentures mature March 23, 2036 and are callable at par after five years.      The trust preferred securities, classified on the balance sheet as “guaranteed      preferred beneficial interest in junior subordinated debentures”,      qualify as Tier 1 capital for regulatory purposes, subject to applicable      limits. The Company used the proceeds to increase the regulatory capital    of the Bank and for other corporate purposes. |

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| 6. | RECENT ACCOUNTING PRONOUNCEMENTS |
|----|----------------------------------|

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
| SFAS      No. 154, “Accounting Changes and Error Corrections, a Replacement      of APB Opinion No. 20 and FASB Statement No. 3.” SFAS 154 establishes,      unless impracticable, retrospective application as the required method      for reporting a change in accounting principle in the absence of explicit      transition requirements specific to a newly adopted accounting principle.      Previously, most changes in accounting principle were recognized by including      the cumulative effect of changing to the new accounting principle in net      income of the period of the change. Under SFAS 154, retrospective application      requires (i) the cumulative effect of the change to the new accounting      principle on periods prior to those presented to be reflected in the carrying      amounts of assets and liabilities as of the beginning of the first period      presented, (ii) an offsetting adjustment, if any, to be made to the opening      balance of retained earnings (or other appropriate components of equity)      for that period, and (iii) financial statements for each individual prior      period presented to be adjusted to reflect the direct period-specific effects      of applying the new accounting principle. Special retroactive application      rules apply in situations where it is impracticable to determine either      the period-specific effects or the cumulative effect of the change. Indirect      effects of a change in accounting principle are required to be reported      in the period in which the accounting change is made. SFAS 154 carries      forward the guidance in APB Opinion 20 “Accounting Changes,” requiring      justification of a change in accounting principle on the basis of preferability.      SFAS 154 also carries forward without change the guidance contained in      APB Opinion 20 for reporting the correction of an error in previously issued      financial statements and for a change in an accounting estimate. SFAS 154      is effective for accounting changes and corrections of errors made in fiscal      years beginning after December 15, 2005. The adoption of SFAS 154 did not    significantly impact the Company’s financial statements. |

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
| In      February 2006, the FASB issued SFAS No. 155, “Accounting for Certain      Hybrid Financial Instruments,” and amendment of SFAS No. 133 and      SFAS No. 140. This statement permits fair value re-measurement for any      hybrid financial instrument that contains an embedded derivative that otherwise      would require bifurcation. It establishes a requirement to evaluate interests      in securitized financial assets to identify interests that are freestanding      derivatives or that are hybrid financial instruments that contain an embedded      derivative requiring bifurcation. In addition, SFAS 155 clarifies which      interest-only strips and principal-only strips are not subject to the requirements      of Statement 133. It also clarifies that concentrations of credit risk      in the form of subordination are not embedded derivatives. SFAS 155 amends      Statement 140 to eliminate the prohibition on a qualifying special-purpose      entity from holding a derivative financial instrument that pertains to      a beneficial interest other than another derivative financial instrument.      This Statement is effective for all financial instruments acquired or issued      after the beginning of an entity’s first fiscal year that begins      after September 15, 2006. The Company is evaluating the impact, if any,    of the adoption of this Statement on its financial results. |

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
| In      March 2006, the FASB issued SFAS No. 156, “Accounting for Servicing      of Financial Assets.” This Statement amends SFAS No. 140, “Accounting      for Transfers and Servicing of Financial Assets and Extinguishments of      Liabilities,” and requires that all separately recognized servicing      assets and servicing liabilities be initially measured at fair value, if      practicable, and permits the entities to elect either fair value measurement      with changes in fair value reflected in earnings or the amortization and      impairment requirements of SFAS No. 140 for subsequent measurement. The      subsequent measurement of separately recognized servicing assets and servicing      liabilities at fair value eliminates the necessity for entities that manage      the risks inherent in servicing assets and servicing liabilities with derivatives      to qualify for hedge accounting treatment and eliminates the characterization      of declines in fair value as impairments or direct write-downs. This Statement      is effective as of the beginning of an entity’s first fiscal year      that begins after September 15, 2006. The Company is evaluating the impact,    if any, of the adoption of this Statement on its financial results. |

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**CECIL BANCORP, INC. AND SUBSIDIARIES**ITEM 2: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIALCONDITION AND RESULTS OF OPERATIONS

FOR THE THREE AND SIX MONTH PERIODS ENDED JUNE 30, 2006 AND 2005

**Forward-Looking Statements**. This Management’s Discussion and Analysis of financial condition and results of operations and other portions of this report include forward-looking statements such as: statements of the Company’s goals, intentions, and expectations; estimates of risks and of future costs and benefits; assessments of loan quality and of possible loan losses; and statements of the Company’s ability to achieve financial and other goals. These forward-looking statements are subject to significant uncertainties because they are based upon: future interest rates, market behavior, and other economic conditions; future laws and regulations; and a variety of other matters. Because of these uncertainties, the actualfuture results may be materially different from the results indicated by these forward-looking statements. In addition, the Company’s past growth and performance do not necessarily indicate its future results.

You should read this Management’s Discussion and Analysis of the Company’s consolidated financial condition and results of operations in conjunction with the Company’s unaudited consolidated financial statements and the accompanying notes.

**General**

Cecil Bancorp, Inc. (the “Company”) is the holding company for Cecil Federal Bank (“Cecil Federal” or the “Bank”). The Company is a bank holding company subject to regulation by the Federal Reserve System. The Bank is a community-oriented Maryland chartered commercial bank, is a member of the Federal Reserve System and the Federal Home Loan Bank (“FHLB”) of Atlanta, and is an Equal Housing Lender. Its deposits are insured by the Savings Association Insurance Fund (“SAIF”) of the Federal Deposit Insurance Corporation (“FDIC”). The Bank commenced operations in 1959 as a Federal savings and loan association. On October 1, 2002, the Bank convertedfrom a stock federal savings bank to a commercial bank. Its deposits have been federally insured up to applicable limits, and it has been a member of the FHLB system since 1959. 

Cecil Federal conducts its business though its main office in Elkton, Maryland, and branches in Elkton, North East, Rising Sun, Cecilton, Aberdeen, Conowingo, and Havre de Grace, Maryland.

Cecil Federal’s business strategy is to operate as an independent, community-oriented commercial bank dedicated to real estate, commercial, and consumer lending, funded primarily by retail deposits. Cecil Federal has sought to implement this strategy by (1) continuing to emphasize residential mortgage lending through the origination of adjustable rate mortgage loans while increasing its commercial and consumer lending portfolios; (2) investing in adjustable rate and short-term liquid investments; (3) controlling interest rate risk exposure; (4) maintaining asset quality; (5) containing operating expenses; and (6) maintaining “well capitalized” status. Cecil Federal offers a full range of brokerage and investment services througha relationship with Community Bankers Securities, LLC. 

**Asset/Liability Management**

The ability to maximize net interest income is largely dependent upon the achievement of a positive interest rate spread (the difference between the weighted average interest yields earned on interest-earning assets and the weighted average interest rates paid on interest-bearing liabilities) that can be sustained during fluctuations in prevailing interest rates. The Company’s asset/liability management policies are designed to reduce the impact of changes in interest rates on its net interest income by achieving a favorable relationship between the maturities or repricing dates of its interest-earning assets and interest-bearing liabilities. The Bank’s lending policy emphasizes the origination of one-year, three-year, or five-yearadjustable rate mortgage loans, adjustable rate commercial loans and lines of credit, and short-term consumer loans. The Bank is currently originating residential mortgage loans for sale in the secondary market through the Federal Home Loan Mortgage Corporation. Management has been monitoring the retention of fixed rate loans through its asset/liability management policy.

**Comparison of Financial Condition at June 30, 2006 and December 31, 2005**

The Company’s assets increased by $26.7 million, or 10.0%, to $293.8 million at June 30, 2006 from $267.1 million at December 31, 2005 primarily as a result of increases in loans receivable, bank-owned life insurance, and other assets. This increase was funded by increases in deposits and the guaranteed preferred beneficial interest in junior subordinated debentures and a decrease in cash and cash equivalents, partially offset by a decrease in advances from the Federal Home Loan Bank of Atlanta. Cash and due from banks increased by $268,000, or 20.4%, to $1.6 million at June 30, 2006 from $1.3 million at December 31, 2005. Interest-bearing deposits decreased by $4.1 million, or 93.6%, to $281,000 at June 30, 2006 from $4.4 million atDecember 31, 2005 primarily to fund growth in the loan portfolio and to repay advances from the Federal Home Loan Bank of Atlanta. Restricted investment securities, which consist of Federal Home Loan and Federal Reserve Bank stock, decreased $156,000 during this period as a result of the decrease in advances from the Federal Home Loan Bank of Atlanta. 

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The loans receivable portfolio increased by $29.4 million, or 12.5%, to $264.5 million at June 30, 2006 from $235.0 million at December 31, 2005, primarily as a result of increased marketing efforts of our business development and loan departments. During the period, we realized a $9.3 million (10.8%) increase in one-to-four family residential mortgages, a $20.6 million (45.5%) increase in commercial real estate loans, and a $4.2 million (6.2%) increase in commercial business loans, the majority of which are secured by real estate, offset in part by a $4.9 million (29.6%) decrease in construction loans. The allowance for loan losses increased by $29,000, or 1.7%, during the period (see “Analysis of Allowancefor Loan Losses” below). 

Bank owned life insurance increased by $739,000, or 14.7%, to $5.8 million at June 30, 2006 from $5.0 million at December 31, 2005 due to an additional investment of $650,000, as well as an increase of $89,000 in the cash surrender value. Other assets increased $439,000 to $1.9 million at June 30, 2006 from $1.4 million at December 31, 2005 due to the payment of the final capital call for the Company’s investment in Triangle Capital Partners, as well as an increase in prepaid income taxes after payments of $1.3 million during the period.

The Company’s liabilities increased $25.7 million, or 10.5%, to $270.9 million at June 30, 2006 from $245.2 million at December 31, 2005. Deposits increased $23.0 million, or 11.6%, to $221.2 million at June 30, 2006 from $198.2 million at December 31, 2005. This increase was mainly due to marketing campaigns and product specials focused on local core funding. Increases in certificates of deposit (up $26.1 million, or 21.1%) were partially offset by decreases in NOW accounts (down $2.3 million, or 17.9%), money market certificates (down $1.5 million, or 19.7%), and money market accounts (down $1.2 million, or 18.6%). The $10.0 million in guaranteed preferred beneficial interest in junior subordinated debentures were issued in March 2006(see note 5 to the consolidated financial statements). Advances from the Federal Home Loan Bank of Atlanta decreased $7.5 million, or 16.7%, to $37.4 million at June 30, 2006 from $44.9 million at December 31, 2005. The Company was able to reduce its advances as a result of the increase in deposits and the issuance of the debentures. Other liabilities increased $221,000, or 10.7%, to $2.3 million at June 30, 2006 from $2.1 million at December 31, 2005, primarily due to an increase in the Company’s supplemental executive retirement plan liability, partially offset by the payment of the Company’s contribution to the 401(k) profit sharing plan, as well as a decrease in accrued interest on advances from the Federal Home Loan Bank of Atlanta. 

The Company’s stockholders’ equity increased by $983,000, or 4.5%, to $22.9 million at June 30, 2006 from $21.9 million at December 31, 2005. The increase was primarily the result of net income of $1.2 million, partially offset by the Company’s regular dividend of $0.10 per share, or $184,000, for the six months ended June 30, 2006. 

**Comparison of Results of Operations for the Three Months Ended June 30, 2006 and 2005**

Net income for the three month period ended June 30, 2006 increased $48,000, or 8.3% to $627,000 as compared to net income for the same period in 2005 of $579,000. This increase was primarily the result of increases in net interest income and noninterest income, partially offset by increases in the provision for loan losses, noninterest expense, and income tax expense. Basic and diluted earnings per share were both $0.34 for the second quarter of 2006 and 2005. The earnings per share calculations have been adjusted to give retroactive effect to the 1% stock dividends approved by the Board of Directors on December 20, 2005, March 14, 2006 and May 23, 2006. The annualized return on average assets and annualized returnon average equity were 0.89% and 11.01% respectively, for the three-month period ended June 30, 2006. This compares to an annualized return on average assets and annualized return on average equity of 1.05% and 12.06% respectively, for the same period in 2005. 

Net interest income, the Company’s primary source of income, increased 21.6%, or $480,000, to $2.7 million for the three months ended June 30, 2006, from $2.2 million over the same period in 2005. The weighted average yield on interest earning assets increased to 7.77% for the three months ended June 30, 2006 from 6.86% for the three months ended June 30, 2005. The weighted average rate paid on interest bearing liabilities increased to 3.92% for the three months ended June 30, 2006 from 2.77% for the three months ended June 30, 2005. The weighted average yield earned and the weighted average rate paid increased due to the increase in general market rates. The weighted average rate paid on interest bearingliabilities has increased more rapidly, as the Company has increased rates on deposits to gain market share. As a result, the net interest margin decreased to 4.16% for the three months ended June 30, 2006 as compared to 4.35% for the same period in 2005. 

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Interest and fees on loans increased by $1.5 million, or 44.3%, to $5.0 million for the three months ended June 30, 2006 from $3.4 million for the three months ended June 30, 2005. The increase is attributable to an increase in the average balance outstanding and the weighted-average yield. The average balance outstanding increased by $56.4 million, or 29.1%, to $250.4 million for the three months ended June 30, 2006 from $194.0 million for the three months ended June 30, 2005. The weighted-average yield increased to 7.91% for the three months ended June 30, 2006 from 7.08% for the three month periods ended June 30, 2005. 

Interest on investment securities increased $23,000, or 52.3%, to $67,000 for the three months ended June 30, 2006 from $44,000 for the three months ended June 30, 2005. The average balance outstanding increased $155,000 for the three months ended June 30, 2006 over the three months ended June 30, 2005. The weighted-average yield increased to 4.55% for the three months ended June 30, 2006 from 3.02% for the three months ended June 30, 2005.

Dividends on Federal Reserve and Federal Home Loan Bank stock increased to $27,000 for the three months ended June 30, 2006 from $26,000 for the three months ended June 30, 2005. The average balance outstanding decreased $322,000, or 14.2%, to $1.9 million for the three months ended June 30, 2006 from $2.3 million for the three months ended June 30, 2005. The weighted-average yield increased to 5.69% for the three months ended June 30, 2006 from 4.62% for the three months ended June 30, 2005.

Interest on other earning assets increased $6,000, or 120.0%, to $11,000 for the three months ended June 30, 2006 from $5,000 for the three months ended June 30, 2005. The average balance outstanding decreased $291,000, or 11.2%, to $2.3 million for the three months ended June 30, 2006 from $2.6 million for the three months ended June 30, 2005. The weighted-average yield increased to 1.84% for the three months ended June 30, 2006 from 0.81% for the three months ended June 30, 2005.

Interest on deposits increased $900,000, or 94.8%, to $1.8 million for the three months ended June 30, 2006 from $949,000 for the three months ended June 30, 2005. The average balance outstanding on interest-bearing deposits increased $55.1 million, or 37.0%, to $204.1 million for the three months ended June 30, 2006 from $149.0 million for the three months ended June 30, 2005. The weighted-average rate paid on interest-bearing deposits increased to 3.62% for the three months ended June 30, 2006 from 2.55% for the three months ended June 30, 2005. Interest expense on the guaranteed preferred beneficial interest in junior subordinated debentures issued in March 2006 was $166,000. The average balance for the threemonths ended June 30, 2006 was $10.0 million and the weighted-average rate was 6.65%. Interest expense on advances from the Federal Home Loan Bank of Atlanta increased $5,000, or 1.5%, to $337,000 for the three months ended June 30, 2006 from $332,000 for the three months ended June 30, 2005. The average balance outstanding decreased $10.5 million, or 28.9%, to $25.8 million for the three months ended June 30, 2006 from $36.3 million for the three months ended June 30, 2005. The weighted average rate increased to 5.21% for the three months ended June 30, 2006 from 3.66% for the three months ended June 30, 2005. 

Noninterest income increased 3.6%, or $10,000, for the three months ended June 30, 2006, over the same period in 2005. Checking account fees increased $22,000, or 19.1%, to $137,000 for the three months ended June 30, 2006 from $115,000 for the three months ended June 30, 2005, primarily due to growth in the deposit portfolio. Commission income decreased $18,000, or 50.0%, to $18,000 for the three months ended June 30, 2006 from $36,000 for the three months ended June 30, 2005. Gain on sale of loans decreased 33.3% to $20,000 for the three months ended June 30, 2006 from $30,000 for the three months ended June 30, 2005. Income from bank owned life insurance decreased 16.1% to $47,000 for the three months ended June30, 2006 from $56,000 for the three months ended June 30, 2005 due to a decrease in rates being paid by the insurance carriers. Other income increased $24,000 to $36,000 for the three months ended June 30, 2006 from $12,000 for the three months ended June 30, 2005. This increase was primarily due to an increase in income from the Company’s investments in Triangle Capital Partners and Maryland Title Center, as well as an increase in rental income after the purchase of a commercial property in July 2005 that is used as a loan and operations facility.

Noninterest expense increased 17.8%, or $278,000, to $1.8 million for the three months ended June 30, 2006, from $1.6 million over the same period in 2005. Salaries and employee benefits increased 22.3% to $1.2 million for the three months ended June 30, 2006 from $984,000 for the three months ended June 30, 2005. This is attributable to the hiring of additional employees to staff the new branches, as well as increased sales and administrative staff, annual merit increases, and an increase in the supplemental executive retirement plan expense. Occupancy expense increased $42,000, or 45.2%, to $135,000 for the three months ended June 30, 2006, as compared to $93,000 for the same period in 2005 due to the increaseddepreciation, maintenance, and utilities expenses for the new branches and the operations facility that were placed in service during the third and fourth quarters of 2005. Equipment and data processing expense increased $18,000, or 9.9%, to $200,000 for the three months ended June 30, 2006 from $182,000 for the three months ended June 30, 2005. This increase is attributable to an increase in fees for the Company’s data service provider. 

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Income tax expense for the three-month periods ended June 30, 2006 and 2005 was $374,000 and $335,000, respectively, which equates to effective rates of 37.4% and 36.7% respectively.

**Comparison of Results of Operations for the Six Months Ended June 30, 2006 and 2005**

Net income for the six month period ended June 30, 2006 increased $33,000, or 2.9%, to $1.2 million as compared to net income for the same period in 2005 of $1.1 million. This increase was primarily the result of increases in net interest income and noninterest income, partially offset by increases in the provision for loan losses, noninterest expense, and income tax expense. Basic and diluted earnings per share both decreased 4.4% to $0.65 for the six-month period ended June 30, 2006 as compared to $0.68 for the same period in 2005. The earnings per share calculations have been adjusted to give retroactive effect to the 1% stock dividends approved by the Board of Directors on December 20, 2005, March 14, 2006 andMay 23, 2006. The annualized return on average assets and annualized return on average equity were 0.85% and 10.33% respectively, for the six-month period ended June 30, 2006. This compares to an annualized return on average assets and annualized return on average equity of 1.07% and 12.10% respectively, for the same period in 2005. 

Net interest income, the Company’s primary source of income, increased 22.5%, or $972,000, to $5.3 million for the six months ended June 30, 2006, from $4.3 million over the same period in 2005. The weighted-average yield on interest earning assets increased to 7.59% for the six months ended June 30, 2006 from 6.74% for the six months ended June 30, 2005. The weighted-average rate paid on interest bearing liabilities increased to 3.74% for the six months ended June 30, 2006 from 2.63% for the six months ended June 30, 2005. The net interest margin was 4.15% for the six months ended June 30, 2006 as compared to 4.37% for the same period in 2005. 

Interest and fees on loans increased by $2.9 million, or 44.9%, to $9.5 million for the six months ended June 30, 2006 from $6.5 million for the six months ended June 30, 2005. The increase is attributable to increases in the average balance outstanding and the weighted-average yield. The average balance outstanding increased by $57.0 million to $244.1 million for the six months ended June 30, 2006 from $187.1 million for the six months ended June 30, 2005. The weighted-average yield increased to 7.76% for the six months ended June 30, 2006 from 6.99% for the six months ended June 30, 2005. 

Interest on investment securities increased $48,000, or 60.0%, to $128,000 for the six months ended June 30, 2006 from $80,000 for the six months ended June 30, 2005. The average balance outstanding increased $153,000 for the six months ended June 30, 2006 over the six months ended June 30, 2005. The weighted-average yield increased to 4.35% for the six months ended June 30, 2006 from 2.79% for the six months ended June 30, 2005.

Dividends on Federal Reserve and Federal Home Loan Bank stock increased $9,000 to $58,000 for the six months ended June 30, 2006 from $49,000 for the six months ended June 30, 2005. The average balance outstanding decreased $73,000, or 3.3%, to $2.1 million for the six months ended June 30, 2006 from $2.2 million for the six months ended June 30, 2005. The weighted-average yield increased to 5.52% for the six months ended June 30, 2006 from 4.46% for the six months ended June 30, 2005.

Interest on other earning assets increased $10,000, or 71.4%, to $24,000 for the six months ended June 30, 2006 from $14,000 for the six months ended June 30, 2005. The average balance outstanding decreased $174,000, or 5.5%, to $3.0 million for the six months ended June 30, 2006 from $3.2 million for the six months ended June 30, 2005. The weighted-average yield increased to 1.57% for the six months ended June 30, 2006 from 0.88% for the six months ended June 30, 2005.

Interest on deposits increased $1.7 million, or 99.5%, to $3.5 million for the six months ended June 30, 2006 from $1.7 million for the six months ended June 30, 2005. The average balance outstanding on interest-bearing deposits increased $55.6 million, or 39.0%, to $198.0 million for the six months ended June 30, 2006 from $142.4 million for the six months ended June 30, 2005. The weighted-average rate paid on interest-bearing deposits increased to 3.49% for the six months ended June 30, 2006 from 2.43% for the six months ended June 30, 2005. Interest expense on the guaranteed preferred beneficial interest in junior subordinated debentures issued in March 2006 was $179,000. The average balance for the six monthsended June 30, 2006 was $5.1 million and the weighted-average rate was 7.04%. Interest expense on advances from the Federal Home Loan Bank of Atlanta increased $132,000, or 21.2%, to $755,000 for the six months ended June 30, 2006 from $623,000 for the six months ended June 30, 2005. The average balance outstanding decreased $5.1 million, or 14.1%, to $31.2 million for the six months ended June 30, 2006 from $36.3 million for the six months ended June 30, 2005. The weighted-average rate increased to 4.84% for the six months ended June 30, 2006 from 3.43% for the six months ended June 30, 2005. 

Noninterest income increased 13.0%, or $65,000, for the six months ended June 30, 2006, over the same period in 2005. Checking account fees increased $38,000, or 17.5% to $255,000 for the six months ended June 30, 2006 from $217,000 for the six months ended June 30, 2005 due to the growth in deposits. Commission income decreased $30,000, or 60.0%, to $20,000 for the six months ended June 30, 2006 from $50,000 for the six months ended June 30, 2005. Income from bank owned life insurance decreased $14,000, or 13.6%, to $89,000 for the six months ended June 30, 2006 from $103,000 for the six months ended June 30, 2005 due to a decrease in rates being paid by the insurance carriers. Other income increased $75,000 to$98,000 for the six months ended June 30, 2006 from $23,000 for the same period in 2005, primarily due to an increase in income from the Company’s investments in Triangle Capital Partners and Maryland Title Center, as well as an increase in rental income after the purchase of a commercial property in July 2005 that is used as a loan and operations facility.

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Noninterest expense increased 27.6%, or $815,000, for the six months ended June 30, 2006, over the same period in 2005. Salaries and employee benefits increased 29.5% to $2.4 million for the six months ended June 30, 2006 from $1.8 million for the six months ended June 30, 2005. This is attributable to the hiring of additional employees to staff the new branches, as well as increased sales and administrative staff, annual merit increases, and an increase in the supplemental executive retirement plan expense. Occupancy expense increased $91,000, or 43.5%, to $300,000 for the six months ended June 30, 2006 from $209,000 for the six months ended June 30, 2005 due to the increased depreciation, maintenance, and utilitiesexpenses for the new branches and the operations facility that were placed in service during the third and fourth quarters of 2005. Equipment and data processing expense increased by $62,000, or 17.7%, to $412,000 for the six months ended June 30, 2006 from $350,000 for the six months ended June 30, 2005. Other expense increased by $122,000, or 21.6%, to $686,000 for the six months ended June 30, 2006 from $564,000 for the six months ended June 30, 2005, primarily due to increases in legal fees, audit services, loan collection expense, and real estate taxes.

Income tax expense for the six-month periods ended June 30, 2006 and 2005 was $702,000 and $668,000, respectively, which equates to effective rates of 37.3% and 36.8% respectively.

**Loans Receivable**

The Company’s lending activities are predominantly conducted in Cecil and Harford Counties in the State of Maryland. The following table shows the composition of the loan portfolio at the indicated dates.

|                                               |   | June 30,2006 |                   | December 31,2005 |   |
|----------------------------------------------------|--------|--------------|------------------------|------------------|--------|
|                                                    |        |              |                        |             |        |  |
|                                               |   |         |                   |             |   |   |   |
|                                               |   | Amount       |                   | %                |   | Amount |   | % |   |
|                                                    |        |              |                        |                  |        |  |  |  |  |  |  |  |  |
|                                               |   |         | (Dollars in thousands) |             |
| Type of Loan                                       |   |         |                   |             |   |   |   |   |   |   |   |   |   |
| Real estate loans:                                 |   |         |                   |             |   |   |   |   |   |   |   |   |   |
| Construction    loans                              |   | $            | 11,553                 |             |   | 4.37 | % | $ | 16,414 |   |   | 6.98 | % |
| One-    to four-family residential and home equity |   |         | 95,638                 |             |   | 36.16 |   |   | 86,334 |   |   | 36.73 |   |
| Multi-family    residential                        |   |         | 4,529                  |             |   | 1.71 |   |   | 4,523 |   |   | 1.93 |   |
| Land                                               |   |         | 3,144                  |             |   | 1.19 |   |   | 3,477 |   |   | 1.48 |   |
| Commercial                                         |   |         | 65,948                 |             |   | 24.94 |   |   | 45,338 |   |   | 19.29 |   |
|                                               |   |         |                   |             |   |   |   |   |   |   |   |   |   |
| Commercial business loans*                         |   |         | 71,459                 |             |   | 27.02 |   |   | 67,277 |   |   | 28.62 |   |
|                                               |   |         |                   |             |   |   |   |   |   |   |   |   |   |
| Consumer loans:                                    |   |         |                   |             |   |   |   |   |   |   |   |   |   |
| Automobile    loans                                |   |         | 1,479                  |             |   | 0.56 |   |   | 1,265 |   |   | 0.54 |   |
| Deposit    account loans                           |   |         | 1,617                  |             |   | 0.61 |   |   | 1,447 |   |   | 0.61 |   |
| Personal    loans                                  |   |         | 9,087                  |             |   | 3.44 |   |   | 8,970 |   |   | 3.82 |   |
|                                                    |        |              |                        |                  |        |  |  |  |  |  |  |  |  |
| Gross    loans                                     |   |         | 264,454                |             |   | 100.00 | % |   | 235,045 |   |   | 100.00 | % |
|                                                    |        |              |                        |                  |        |  |  |  |  |  |  |  |  |
|                                               |   |         |                   |             |   |   |   |   |   |   |   |   |   |
| Less: allowance for loan losses                    |   |         | (1,767                 | )                |   |   |   |   | (1,738 | ) |   |   |   |
|                                                    |        |              |                        |                  |   |   |  |  |  |  |  |  |  |
|                                               |   |         |                   |             |   |   |   |   |   |   |   |   |   |
| Net    loans                                       |   | $            | 262,687                |             |   |   |   | $ | 233,307 |   |   |   |   |
|                                                    |        |              |                        |                  |   |   |  |  |  |  |  |  |  |

|  * | Commercial business loans above    include loans primarily for business purposes that are secured by real estate. |
|---------|-------------------------------------------------------------------------------------------------------------------|

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| **Nonperforming Assets** |
|--------------------------|

Management reviews and identifies loans and investments that require designation as nonperforming assets. Nonperforming assets are: loans accounted for on a non-accrual basis, loans past due by 90 days or more but still accruing, restructured loans, and other real estate (assets acquired in settlement of loans). The following table sets forth certain information with respect to nonperforming assets.

| *(Dollars in thousands)*                                     |   | June 30,  2006 |   | December 31,  2005 |   |
|--------------------------------------------------------------|--------|----------------|--------|--------------------|--------|
|                                                              |   |                |   |                    |   |
| Non-accrual loans and leases                                 |   | $              | 2,535  |               | $      | 2,818 |   |
| Loans and leases 90 days or more past due                    |   |           | 19     |               |   | 18 |   |
| Restructured loans and leases                                |   |           | 0      |               |   | 0 |   |
|                                                              |        |                |        |                    |        |  |  |
| Total nonperforming loans and leases                         |   |           | 2,554  |               |   | 2,836 |   |
| Other real estate owned, net                                 |   |           | 385    |               |   | 385 |   |
|                                                              |        |                |        |                    |        |  |  |
| Total nonperforming assets                                   |   | $              | 2,939  |               | $      | 3,221 |   |
|                                                              |        |                |        |                    |        |  |  |
| Nonperforming loans and leases to total loans and leases     |   |           | 0.97   | %                  |   | 1.21 | % |
| Nonperforming assets to total assets                         |   |           | 1.00   |               |   | 1.21 |   |
| Allowance for loan losses to non-performing loans and leases |   |           | 69.19  |               |   | 61.28 |   |

**Analysis of Allowance for Loan Losses**

The Bank records provisions for loan losses in amounts necessary to maintain the allowance for loan losses at the level deemed appropriate. The allowance for loan losses is provided through charges to income in an amount that management believes will be adequate to absorb losses on existing loans that may become uncollectible, based upon evaluations of the collectibility of loans and prior loan loss experience. The allowance is based on careful, continuous review and evaluation of the credit portfolio and ongoing, quarterly assessments of the probable losses inherent in the loan portfolio. The Bank employs a systematic methodology for assessing the appropriateness of the allowance, which includes determination of aspecific allowance, a formula allowance, and an unallocated allowance. During the first six months of 2006, there were no changes in the Bank’s methodology for assessing the appropriateness of the allowance.

Specific allowances are established in cases where management has identified significant conditions or circumstances related to a credit that management believes indicate the probability that a loss may be incurred in an amount different from the amount determined by application of the formula allowance. 

The formula allowance is calculated by applying loss factors to corresponding categories of outstanding loans and leases, excluding loans for which specific allocations have been made. Allowances are established for credits that do not have specific allowances according to the application of these credit loss factors to groups of loans based upon (a) their credit risk grading, for loans categorized as substandard or doubtful either by the Bank in its ongoing reviews or by bank examiners in their periodic examinations, or (b) by type of loans, for other credits without specific allowances. These factors are set by management to reflect its assessment of the relative level of risk inherent in each grade or category ofloans, based primarily on the credit risk factors employed by bank examiners at their most recent periodic examination of the Bank. Bank regulatory examinations usually occur each year. In these examinations, the examiners review the credit portfolio, establish credit risk ratings for loans, identify charge offs, and perform their own calculation of the allowance for loan losses. The use of these credit risk factors based primarily upon periodic examinations is intended to provide a self-correcting mechanism to reduce differences between estimated and actual observed losses. 

The unallocated allowance is based upon management’s evaluation of various conditions that are not directly measured in the determination of the specific and formula allowances. These conditions may include the nature and volume of the loan portfolio, overall portfolio quality, and current economic conditions that may affect the borrowers’ ability to pay. In addition to these conditions, management has identified land acquisition and development loans, as well as construction speculation loans, as higher risk due to economic factors. Additionally, management has identified commercial business loans as higher risk based on the change in the nature and the volume of the portfolio over the last severalperiods. Therefore, management has allocated additional reserves to these two pools of loans over and above the specific and formula allowances. 

Determining the amount of the allowance for loan losses requires the use of estimates and assumptions, which is permitted under accounting principles generally accepted in the United States of America. Actual results could differ significantly from those estimates. While management uses available information to estimate losses on loans, future additions to the allowance may be necessary based on changes in economic conditions. In addition, as noted above, federal and state financial institution examiners, as an integral part of their examination process, periodically review the Bank’s allowance for loan losses, and may require the Bank to recognize additions to the allowance based on their judgments aboutinformation available to them at the time of their examination. 

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Management determined that the appropriate allowance for loan losses at June 30, 2006 was $1.8 million, (0.67% of total loans), an increase of $29,000 (1.7%) from the $1.7 million allowance (0.74% of total loans) at December 31, 2005. Annualized net charge-offs for the first six months of 2006 were 0.15% of average loans, as compared to 0.04% of average loans for the year 2005. The provision for loan losses required for the first six months of 2006 and 2005 was $215,000 and $60,000, respectively. 

A summary of activity in the allowance is shown below.

|                                                                           |   |   | Six Months EndedJune 30, 2006 |   |   | Twelve Months EndedDecember 31, 2005 |   |
|--------------------------------------------------------------------------------|--------|--------|-------------------------------|--------|--------|--------------------------------------|--------|
|                                                                                |        |        |                               |        |        |                                      |        |
|                                                                           |   |   | (In    thousands)             |   |
|                                                                           |   |   |                          |   |   |                                 |   |
| Balance at beginning of period                                                 |   | $      | 1,738                         |   | $      | 1,189                                |   |
|                                                                                |        |        |                               |        |        |                                      |        |
|                                                                           |   |   |                          |   |   |                                 |   |
| Loans charged-off:                                                             |   |   |                          |   |   |                                 |   |
| Residential    real estate mortgage loans                                      |   |   | (35                           | )      |   | (5                                   | )      |
| Commercial                                                                     |   |   | (121                          | )      |   | (29                                  | )      |
| Consumer                                                                       |   |   | (71                           | )      |   | (86                                  | )      |
|                                                                                |        |        |                               |        |        |                                      |        |
| Total charge-offs                                                              |   |   | (227                          | )      |   | (120                                 | )      |
|                                                                                |        |        |                               |        |        |                                      |        |
| Recoveries:                                                                    |   |   |                          |   |   |                                 |   |
| Residential    real estate mortgage loans                                      |   |   | 0                             |   |   | 0                                    |   |
| Commercial                                                                     |   |   | 0                             |   |   | 0                                    |   |
| Consumer                                                                       |   |   | 41                            |   |   | 44                                   |   |
|                                                                                |        |        |                               |        |        |                                      |        |
| Total recoveries                                                               |   |   | 41                            |   |   | 44                                   |   |
|                                                                                |        |        |                               |        |        |                                      |        |
| Net charge-offs                                                                |   |   | (186                          | )      |   | (76                                  | )      |
|                                                                                |        |        |                               |        |        |                                      |        |
| Provision for loan losses                                                      |   |   | 215                           |   |   | 625                                  |   |
|                                                                                |        |        |                               |        |        |                                      |        |
| Balance at end of period                                                       |   | $      | 1,767                         |   | $      | 1,738                                |   |
|                                                                                |        |        |                               |        |        |                                      |        |
| Net    charge-offs to average loans outstanding during the period (annualized) |   |   | 0.15                          | %      |   | 0.04                                 | %      |
| Allowance for loan losses to loans                                             |   |   | 0.67                          | %      |   | 0.74                                 | %      |
| Allowance for loan losses to nonperforming loans                               |   |   | 69.19                         | %      |   | 61.28                                | %      |

**Analysis of Deposits**

The following table sets forth the dollar amount of deposits in the various types of accounts offered by Cecil Federal at the dates indicated.

|                        |   |  Balance at  June 30,2006 |    |    %Deposits |   |  Balance at  December 31,2005 |   |  %  Deposits |    |
|-----------------------------|--------|--------------------------------|---------|-------------------|--------|------------------------------------|--------|-------------------|---------|
|                             |        |                                |         |                   |        |                                    |        |                   |         |  |  |  |  |
|                        |   | (Dollars in thousands)    |    |
| Regular checking            |   | $                              | 17,896  |              |   | 8.09                               | %      | $                 | 17,133  |   |   | 8.64 | % |
| NOW accounts                |   |                           | 10,700  |              |   | 4.84                               |   |              | 13,039  |   |   | 6.58 |   |
| Passbook                    |   |                           | 11,567  |              |   | 5.23                               |   |              | 11,361  |   |   | 5.73 |   |
| Statement savings           |   |                           | 8,202   |              |   | 3.71                               |   |              | 7,764   |   |   | 3.92 |   |
| Money market                |   |                           | 5,126   |              |   | 2.32                               |   |              | 6,295   |   |   | 3.18 |   |
| Holiday club                |   |                           | 241     |              |   | 0.11                               |   |              | 59      |   |   | 0.03 |   |
| Certificates of Deposit     |   |                           | 149,735 |              |   | 67.68                              |   |              | 123,610 |   |   | 62.36 |   |
| IRA Certificates of Deposit |   |                           | 11,536  |              |   | 5.21                               |   |              | 11,215  |   |   | 5.66 |   |
| Money Market Certificates   |   |                           | 6,210   |              |   | 2.81                               |   |              | 7,731   |   |   | 3.90 |   |
|                             |        |                                |         |                   |        |                                    |        |                   |         |  |  |  |  |
|                        |   | $                              | 221,213 |              |   | 100.00                             | %      | $                 | 198,207 |   |   | 100.00 | % |
|                             |        |                                |         |                   |        |                                    |        |                   |         |  |  |  |  |

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**Capital Adequacy**

     Capital adequacy refers to the level of capital required to sustain asset growth and to absorb losses. The Board of Governors of the Federal Reserve System ("Federal Reserve"), which is the Company’s principal federal regulator, has established requirements for total and tier 1 (core) risk-based capital and tangible capital. The following table sets forth applicable capital ratios of the Bank as of June 30, 2006 and 2005 and the capital ratios of the Company as of June 30, 2005. As of June 30, 2006, since the Company has assets that total less than $500 million, the capital adequacy requirements do not apply on a consolidated basis.

|                             |   |   |                 |   |   |                 |   | Regulatory Minimums |                      |
|----------------------------------|--------|--------|----------------------|--------|--------|----------------------|--------|---------------------|---------------------------|
|                             |   |   |                 |   |   |                 |   |                     |                      |
|                             |   |   |  2006    Actual |   |   |  2005    Actual |   |                |  Well    Capitalized |   |   |  Adequately    Capitalized |   |
|                             |   |        |                      |   |        |                      |   |                     |                           |   |  |  |   |
| Total risk-based capital ratio:  |   |   |                 |   |   |                 |   |                |                      |   |   |   |   |
| Consolidated                     |   |   |                 |   |   | 10.32                | %      |                | N/A                       |   |   |  8.00 | % |
| The    Bank                      |   |   | 12.75                | %      |   | 10.13                | %      |                | 10.00                     | % |   | 8.00 | % |
| Tier 1 risk-based capital ratio: |   |   |                 |   |   |                 |   |                |                      |   |   |   |   |
| Consolidated                     |   |   |                      |   |   | 9.63                 | %      |                | N/A                       |   |   | 4.00 | % |
| The    Bank                      |   |   | 8.46                 | %      |   | 9.45                 | %      |                | 6.00                      | % |   | 4.00 | % |
| Tangible capital ratio:          |   |   |                 |   |   |                 |   |                |                      |   |   |   |   |
| Consolidated                     |   |   |                 |   |   | 7.75                 | %      |                | N/A                       |   |   | 4.00 | % |
| The    Bank                      |   |   | 7.32                 | %      |   | 7.71                 | %      |                | 5.00                      | % |   | 4.00 | % |

As of June 30, 2006 and 2005, the Bank exceeded all applicable capital requirements to be classified as a well capitalized institution under the rules promulgated by the Board of Governors of the Federal Reserve System. Designation as a well capitalized institution under these regulations does not constitute a recommendation or endorsement of the Bank’s regulators.

Item 3. Controls and Procedures

|   | Cecil Bancorp’s management, under the supervision and with the participation of its Chief Executive Officer and its Chief Financial Officer, evaluated as of the last day of the period covered by this report, the effectiveness of the design and operation of the Company’s disclosure controls and procedures, as defined in Rule 13a-15 under the Securities Exchange Act of 1934. Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective. There were no significant changes in the Company’s internal controls over financial reporting (as defined in Rule 13a-15 under the Securities Act of 1934) during the quarter ended June 30,2006, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| PART II. |   | Other Information:                                            |
|----------|--------|---------------------------------------------------------------|
|     |   |                                                          |
| Item 1.  |   | Legal Proceedings -                                           |
|     |   |                                                          |
|     |   | Not Applicable                                                |
|     |   |                                                          |
| Item 2.  |   | Unregistered Sale of Equity Securities    and Use of Proceeds |
|     |   |                                                          |
|     |   | Not Applicable                                                |
|     |   |                                                          |
| Item 3.  |   | Defaults Upon Senior Securities -                             |
|     |   |                                                          |
|     |   | Not Applicable                                                |
|     |   |                                                          |
| Item 4.  |   | Submission of Matters to a Vote of    Security Holders -      |
|     |   |                                                          |

The Annual Meeting of Stockholders of Cecil Bancorp, Inc. was held on May 17, 2006, at 9:00 a.m. at the Bentleys Restaurant, Elkton, Maryland, for the purpose of electing three members of the board of directors. Proxies for the meeting were solicited pursuant to Section 14(a) of the Securities Exchange Act of 1934 and there was no solicitation in opposition to management’s solicitations.

All of management’s nominees for directors as listed in the proxy statement were elected with the following vote:

|                            | Shares  Voted“For” | Shares “Withheld” |   |
|---------------------------------|--------------------------------|-------------------------------|--------|
|                            |                                |                               |   |
| To serve for a two-year term:   |                           |                          |   |
| Mark W. Saunders                | 1,419,533                      | 8,044                         |   |
| To serve for a three-year term: |                           |                          |   |
| Mary B. Halsey                  | 1,424,702                      | 2,875                         |   |
| Thomas L. Vaughan, Sr.          | 1,424,257                      | 3,320                         |   |

     Other directors continuing in office following the annual shareholders’ meeting were Donald F. Angert, Matthew G. Bathon, Robert L. Johnson, and Charles F. Sposato.

| Item 5. |   | Other Information - |                                   |
|---------|--------|---------------------|----------------------------------------|
|    |   | Not Applicable      |                                   |
|    |   |                |                                   |
| Item 6. |   | Exhibits -          |                                   |
|    |   |                |                                   |
|    |   | Exhibit 31(a),(b)   | Rule 13a-14(a)/15d-14(a) Certification |
|    |   | Exhibit 32(a),(b)   | 18 U.S.C. Section 1350 Certification   |

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

|                  |                         | CECIL BANCORP, INC.                        |
|-----------------------|------------------------------|--------------------------------------------|
|                  |                         |                                       |
| Date: August 11, 2006 | By: /s/ Mary B. Halsey       |
|                       |                              |                                            |
|                  |                         | Mary B. Halsey                             |
|                       |                         | President and Chief Executive Officer      |
|                  |                         |                                       |
| Date: August 11, 2006 | By: /s/ Robert Lee Whitehead |
|                       |                              |                                            |
|                  |                         | Robert Lee Whitehead                       |
|                       |                         | Vice President and Chief Financial Officer |

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